Dismissed

Shri Ravinder Kant Batra v. Pegasus Assets Re-Construction Pvt.

DRAT2 Sept 2022MISC APPEAL/79/2022

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal held that Section 18 of the SARFAESI Act mandates a pre-deposit for entertaining an appeal. Rejecting the appellants' request to waive this condition based on existing FDRs, the Tribunal dismissed the appeal for lack of court-entertainment due to non-compliance with the statutory proviso.

What did the court decide?

Appeal dismissed as not entertainable due to non-payment of pre-deposit; appellants granted liberty to revive appeal after depositing 50%.

Shri Ravinder Kant Batra versus Pegasus Assets… — Banking and Recovery | DRAT (2022)

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DEBTS RECOVERY APPELLATE TRIBUNAL, DELHI

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Misc. Appeal No. 79/2022 Arising out of S.A. No. 140/2022 (DRT-III, Delhi)

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Shri Ravinder Kant Batra & Ors. Vs Peagasus ARC Pvt. Ltd.

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02.09.2022 Hon’ble Mr. Justice Brijesh Sethi

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Present: Mr. Deepak Dhingra, Ld. counsel for appellants

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Mr. Dinkar Singh, Ld. counsel for respondent no.1

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This matter has been taken up by me through Video Conferencing.

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This appeal has been filed by the appellants against the order dated 19.05.2022 passed by the learned DRT-III, Delhi, rejecting the prayer of the appellants to restrain the respondent FI/Receiver from taking over the possession of the property in question. Appellants are stated to be LRs of the mortgagor/borrower. Therefore, for the entertainment of the appeal, appellants have to cross the hurdle of pre-deposit as envisaged by second proviso to Section 18 of the SARFAESI Act.

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The learned counsel for appellants states that an amount of Rs.55 lacs is lying with the respondent no.2, Allahabad Bank, the original lender of the financial facility to the borrowers, which is also assignor of the debts to respondent no.1 ARC and this amount along with interest thereon if taken into consideration, the appellants need not deposit any amount as pre-deposit as it is more than 50% of the amount demanded by the respondent ARC under Section 13(2) of the SARFAESI Act.

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Appellants have also filed an application seeking complete waiver of the pre-deposit on the ground that FDRs worth Rs. 5 crore are lying with respondent no.1, which is far more than the NPA amount, and, therefore, there is no need of appellants complying with the condition of pre-deposit.

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During the hearing before this Tribunal on 18.07.2022, the learned counsel for appellants after taking instructions from his clients made a statement that FDR worth Rs.11 crores was lying with Allahabad Bank (now Indian Bank), Mayapuri Branch, Delhi and they are ready to pay total outstanding amount to respondent, which is Rs.7 crores approx. (yet to be finally calculated and details of the same are yet to be given by learned counsel for the respondent) and rest

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-: 2 :-

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of the amount will be kept with DRT-III, till final disposal of respective O.A., S.A. and counter-claim. On this, notice was issued to Mr. SandeepBhutani, Chief Manager, Allahabad Bank (Indian Bank), Mayapuri Branch, Delhi to appear before this Tribunal along with record of respective FDRs in the name of appellant as well as in the name of respondent no.2 to 4. Pursuant to the notice issued, Mr. Bhutani along with counsel Mr. A.K. Jain appeared on 21.07.2022. Learned counsel Mr. A.K. Jain made a statement on that date that these FDRs in question could not be released at present as they had been detained because of court orders.

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Be that as it may, section 18 of the SARFAESI Act is clear and unambiguous and states that appeal cannot be entertained without payment of pre-deposit. It runs as under:-

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“18. Appeal to Appellate Tribunal- (1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under Section 17, may prefer an appeal along with such fee, as may be prescribed to an Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal.

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Provided that different fees may be prescribed for filling an appeal by the borrower or by the person other than borrower;

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Provided further that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less:

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Provided also that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent. of debt referred in the second proviso.

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(2) Save as otherwise provided in this Act, the Appellate Tribunal shall, as for as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder.

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Thus, unless and until the appellant complies with the condition of predeposit, this Tribunal cannot entertain the appeal. What to speak of this Tribunal, the Hon’ble Supreme Court has in Kotak Mahindra Bank Pvt. Ltd. vs. Ambuj A Kasliwal & Ors , Civil Appeal No.538/2021, decided on 16.02.2021, has

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-: 3 :-

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observed that even the Hon’ble High Court does not have the power to waive the pre-deposit in its entirety, nor can it exercise discretion, which is against the mandatory requirement of the statutory provisions : The relevant paras of the said judgment is re-produced as under:-

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“14. Therefore, in the facts and circumstances arising herein, when further amount is due and payable in discharge of the decree/recovery certificate issued by the DRT in favour of the appellant/Bank, the High Court does not have the power to waive the pre-deposit in its entirety, nor can it exercise discretion which is against the mandatory requirement of the statutory provision as contained in Section 21, which is extracted above. In all cases fifty per cent of the decretal amount i.e. the debt due is to be deposited before the DRTAT as a mandatory requirement, but in appropriate cases for reasons to be recorded the deposit of at least twenty-five per cent of the debt due would be permissible, but not entire waiver. Therefore, any waiver of pre-deposit to the entire extent would be against the statutory provisions and, therefore, not sustainable in law. The order of the High Court is, therefore, liable to be set aside.

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15. It is noticed that this Court while considering an analogous provision contained in Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI for short) relating to pre-deposit in order to avail the remedy of appeal has expressed a similar opinion in the case of Narayan Chandra Ghosh vs. UCO Bank and Others (2011) 4 SCC 548, which reads as hereunder:-

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7. Section 18(1) of the Act confers a statutory right on a person aggrieved by any order made by the Debts Recovery Tribunal under Section 17 of the Act to prefer an appeal to the Appellate Tribunal. However, the right conferred under Section 18(1) is subject to the condition laid down in the second proviso thereto. The second proviso postulates that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less. However, under the third proviso to the subsection, the Appellate Tribunal has the power to reduce the amount, for the reasons to be recorded in writing, to not less than twenty

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-: 4 :-

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five per cent of the debt, referred to in the second proviso. Thus, there is an absolute bar to entertainment of an appeal under Section 18 of the Act unless the condition precedent, as stipulated, is fulfilled. Unless the borrower makes, with the Appellate Tribunal, a pre deposit of fifty per cent of the debt due from him or determined, an appeal under the said provision cannot be entertained by the Appellate Tribunal. The language of the said proviso is clear and admits of no ambiguity.

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8. It is well settled that when a Statute confers a right of appeal, while granting the right, the Legislature can impose conditions for the exercise of such right, so long as the conditions are not so onerous as to amount to unreasonable restrictions, rendering the right almost illusory. Bearing in mind the object of the Act, the conditions hedged in the said proviso cannot be said to be onerous. Thus, we hold that the requirement of pre deposit under subsection (1) of Section 18 of the Act is mandatory and there is no reason whatsoever for not giving full effect to the provisions contained in Section 18 of the Act. In that view of the matter, no court, much less the Appellate Tribunal, a creature of the Act itself, can refuse to give full effect to the provisions of the Statute. We have no hesitation in holding that deposit under the second proviso to Section 18(1) of the Act being a condition precedent for preferring an appeal under the said Section, the Appellate Tribunal had erred in law in entertaining the appeal without directing the appellant to comply with the said mandatory requirement.

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9. The argument of learned counsel for the appellant that as the amount of debt due had not been determined by the Debts Recovery Tribunal, appeal could be entertained by the Appellate Tribunal without insisting on predeposit, is equally fallacious. Under the second proviso to sub section (1) of Section 18 of the Act the amount of fifty per cent, which is required to be deposited by the borrower, is computed either with reference to the debt due from him as claimed by the secured creditors or as determined by the Debts Recovery Tribunal, whichever is less. Obviously, where the amount of debt is yet to be determined by the Debts Recovery Tribunal, the borrower, while preferring appeal, would be liable to deposit fifty per cent of the debt due from him as claimed by the secured creditors.

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-: 5 :-

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Therefore, the condition of predeposit being mandatory, a complete waiver of deposit by the appellant with the Appellate Tribunal, was beyond the provisions of the Act, as is evident from the second and third provisos to the said Section. At best, the Appellate Tribunal could have, after recording the reasons, reduced the amount of deposit of fifty per cent to an amount not less than twenty five per cent of the debt referred to in the second proviso. We are convinced that the order of the Appellate Tribunal, entertaining appellant's appeal without insisting on predeposit was clearly unsustainable and, therefore, the decision of the High Court in setting aside the same cannot be flawed.” ( emphasis supplied )

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In the application filed by the appellants for waiver of the condition of predeposit, the only ground pleaded by the appellants is that FDR worth Rs.5 crore is lying with respondent no.1, and no other grounds has been urged by the appellants. This is an appeal against an order passed on an I.A. in S.A. filed by the appellants. The issues regarding FDRs lying with respondent can be gone into only once the appeal is entertained. As per notice under Section 13(2) of the SARFAESI Act, the amount demanded by the respondent was more than Rs.2.82 crores. Appellants have to make pre-deposit of 50% of this amount. After the issuance of this notice, if any amount has been paid by the appellants or recovered by the respondents, only that can be take into account while calculating the amount of pre-deposit. Since the appellants have not made any pre-deposit, the instant appeal is liable to be dismissed as not entertainable. It is dismissed as such. Appellants are, however, given liberty to approach this Tribunal with an application for revival of the appeal as and when they make the pre-deposit of 50%.

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(CHAIRPERSON)

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-pk

Shri Ravinder Kant Batra v. Pegasus Assets Re-Construction Pvt.

Case brief

What is this about?

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Shri Ravinder Kant Batra v. Pegasus Assets Re-Construction Pvt.

Case brief

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What did the court decide?

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