Allowed

M S Green Teak India Pvt. Ltd. v. Bank of Baroda

DRAT17 Nov 2022REGULAR APPEAL/167/2022

Case brief

AI extract

What is this about?

The DRAT held that no pre-deposit is required under Section 18 of the SARFAESI Act when auction proceeds exceed the debt due and are credited to the borrower. The Tribunal restrained the bank from taking possession pending the appeal, listing matter for 20.12.2022.

What did the court decide?

Pre-deposit waived; bank restrained from taking physical possession of the property until the next hearing date.

M S Green Teak India Pvt. Ltd. versus Bank of Baroda — Banking and Recovery | DRAT (2022)

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DEBTS RECOVERY APPELLATE TRIBUNAL,

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DELHI

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Appeal No.167/2022 Arising out of S.A.No.203/2022(DRT, Jaipur)

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M/s Green Teak (India) Pvt. Ltd. Vs Bank of Baroda & Others.

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17.11.2022 Hon’ble Mr. Justice Brijesh Sethi

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Present: Mr. Sanjeev Bhandari, Ld. Counsel for appellant.

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Ms. Praveena Gautam, Ld. Counsel for respondent no.1 bank.

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Mr. Deepak Tyagi, Ld. Counsel for auction purchaser.

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Order (Oral)

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

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I.A. No. 618/2022

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Vide this order I shall dispose of an application filed on behalf of the appellant under Section-18 of the SARFAESI Act for waiver of mandatory pre-deposit in an appeal filed against the impugned order dated 03.09.2022 passed by Ld. DRT-Jaipur vide which the application of the appellant under Section 17 of SARFAESI Act was dismissed.

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The Ld. Counsel for the respondent no.1 bank Ms. Praveena Gautam and Ld. Counsel for auction purchaser Mr. Deepak Tyagi have submitted that the appeal cannot be entertained since the appellant has not made pre-deposit, as per mandate of Section 18 of the SARFAESI Act.

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The Ld. Counsel for the appellant states that the bank is going to take physical possession of the property in question today itself and as per information received by him, the bank officials along with Court Receiver are present in police station and therefore, he prays that an order restraining the bank/Court Receiver from taking the possession be passed immediately; failing which his appeal will become infructuous.

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The Ld. Counsel for the respondents have vehemently opposed the said prayer and stated that since appeal cannot be entertained for want of predeposit no such order can be passed by this Tribunal.

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In view of the above submissions, let this Tribunal first decide the question whether the appellant has to make the pre-deposit as per Section-18 of the SARFAESI Act or not?

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The Ld. Counsel for the appellant has argued that appellant is not required to make pre-deposit for the reason that the property in question has been auctioned and sold for an amount of Rs.5,59,83,000/- on 19.04.2022 . The respondent bank has admitted that an excess amount of Rs.1.61 crores (i.e. the amount which is the excess of the debt after sale of the property in question) has been credited to the account of the appellant. This fact is also clear from the letter dated 06.09.2022. This fact is also not disputed by the respondent no.1 bank.

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I have gone through the Section-18 (1) of the Securitization Act 2002 which deals with the pre-deposit and runs as under:-

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“ 18 . Appeal to Appellate Tribunal(1)Any person aggrieved, by any

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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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The Ld. Counsel for appellant has however submitted that appellant is not required to deposit the pre-deposit amount and has relied upon the following judgments :-

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(i) Prudent SRC Limited vs. Sidha Neelkanth Paper Industries and others: 2020 SCC OnLine Del 1641

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(ii) Virender Pal vs. Canara Bank 2019 SCC OnLine Del 7661

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The Ld. Counsel for the appellant has submitted that it is a well settled law that amount realized by way of auction sale is to be deducted from the debt due. He further states that since in the present appeal, the sale has fetched more amount than the debt due and the

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same also stands appropriated by the bank, therefore, the appellant is not required to make pre-deposit.

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Ld. Counsel for respondent no.1 on the other hand has submitted that the appellant is required to make pre-deposit and amount fetched by sale of secured assets cannot be deducted from the „debt due‟ or adjusted towards pre-deposit and cannot be considered to be an amount fully and finally recovered. In this regard, she has relied upon the following judgments:-

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(i) “Narayan Chandra Ghosh vs. UCO Bank (2011) 4 SCC 548:”

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This Tribunal has perused the above judgment. The said judgment deals with the position of law regarding pre-deposit, but it nowhere deals with a situation when there is no claimed amount due from the borrower. In the present appeal, the bank has credited excess amount in the account of the appellant/borrower, as such, no amount is due from him/appellant. This fact is admitted by the bank vide its letter dated 06.09.2022 where it is stated that after recovery of bank dues, remaining amount is available in appellant account. This judgment, therefore, does not help the respondent bank.

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(ii) “Union Bank of India vs. Rajat infrastructure Private Limited:” (2020) 3 SCC 770

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The aforesaid judgment also deals with the position of law regarding pre-deposit only, but it nowhere deals with a situation when there is no claimed amount due from the borrower. In the aforesaid case, the auction

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purchaser‟s money was never appropriated. In the aforesaid case, the bank had challenged the order of the High Court as the High court had relegated the petitioner to approach the DRAT without pre-deposit. Perusal of para No.15 of the judgment reveals that time was given to deposit the sale amount to the auction purchaser meaning thereby that entire sale consideration was not paid and the debt was still due from the borrower.

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Whereas in the present appeal as stated above, the bank in its letter dated 06.09.2022 has stated that amount realized from sale of secured assets stands appropriated and remaining amount is credited to appellant‟s account. This judgment, therefore, does not help the respondent bank.

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(iii) “Kotak Mahindra Bank Private Limited vs. Ambuj K. Kasliwal:” (2021) SCC 549

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This Tribunal has perused the above judgment. Perusal of paras no.15 to 17 of the judgment clearly indicates that the amount was still due to be paid. The said paras run as follows.

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“ 15. The extracted portion indicates that the High Court has proceeded at a tangent while adverting to the aspect of recovery made towards the loan amount from the land acquisition compensation payable to Respondent 3. The conclusion appears to be that the receipt of the compensation amount even though was before passing of the decree, would wipe out the decretal amount of Rs.145 crores with interest at 9 per cent per

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annum, though it has not been expressly stated so. Per contra, the DRAT by it order dated 27.02.2019 while directing the pre-deposit of fifty per cent of the amount had taken note of the fact that if the decretal amount as ordered by the DRT is taken into consideration and the amount received by the Bank towards the compensation amount is credited, the balance of the decretal amount payable by Respondents 1 to 3 would work out to Rs.68,18,92,841/- (Rupees sixtyeight crores, eighteen lakhs, ninety-two thousand, eight hundred and forty-one). It is in that view, the DRAT has ordered pre-deposit of fifty per cent of the said amount which still remains to be a debt due. On that aspect, though the ultimate correctness of the actual amount due is a matter for calculation to be made in the execution proceedings, for the present, for the purpose of predeposit if the decree/recovery certificate issued by the DRT is taken into consideration the position is clear that even if the amount of compensation is appropriated, either before or after the decree, there would still be outstanding amount payable which would be the subject-matter of the appeal in DRAT, apart from the fact that the appellant Bank in their appeal are claiming the entire amount which has fallen due since the terms of settlement were not adhered to.

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16. Thus, when prima facie it was taken note of by the DRAT that further amount was due and the pre-deposit was ordered, without finding fault with such conclusion the High Court was not justified in settling aside the orders passed by the DRAT. As noted from the extracted portion of the order

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passed by the High Court, all that the High Court has concluded is that the benefit of the receipt of Rs.152,81,07,159/- (Rupees one hundred fifty-two crores, eightyone lakhs, seven thousand, one hundred and fifty-nine( as against the decretal amount cannot be denied though it was received before passing of the final judgment. Such conclusion in any event could not have tilted the balance in favour of Respondents 1 and 2 to waive the entire predeposit, unless the High Court had rendered a categorical finding that the entire decretal amount stands satisfied from such receipt and there was no debt due which in any event was beyond the scope of consideration in a petition of the present nature. On the receipt of the amount credited a compensation and, having further noted the debt is still due, has directed the pre-deposit limited to that extent.

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17. 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 DRAT 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-

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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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Perusal of the above judgment clearly reveals that DRAT had observed that even if the amount received by the bank towards compensation is credited, the balance amount of the decretal amount payable by the respondents no. 1 to 3 would work out to Rs.68,18,92,481/-. The DRAT had thereafter directed to deposit 50% of the said amount as pre-deposit. It is in such circumstances, that the Hon‟ble Supreme Court in para no. 17 had observed that further amount is due and payable in discharge of the decree/recovery certificate issued by the DRT and therefore the Hon‟ble High Court could not have waived the pre-deposit. Whereas in the present appeal, the bank vide its letter dated 06.09.2022 has confirmed that amount realized from sale of secured assets stands appropriated and excess amount stands credited to the account of the appellant.

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(iv) “Dr. Yashwant Singh vs. Encore ARC:” 2022 SCC online del 2382

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Para 4 of the above judgment makes it clear that principal amount claimed was disputed and, thus, there was amount due from the borrower. However, as discussed above, in the present appeal sale proceeds were appropriated and remaining excess amount was credited to the account of the appellant.

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Ld. Counsel for the respondent no.1 bank has next relied upon the following judgment:

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“Shivalik Fibres (P) Limited vs. Punjab National Bank” High Court of Himachal Pradesh. 2019 SCC OnLine HP 961;

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Ld. Counsel for the respondent no.1 has relied upon paras 19, to 21 of the said judgment which run as follows:-

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“ 19. As seen from paragraph 22 of the judgment of the Delhi High court in Srishti Arogyadham‟s case, the Supreme Court already clinched the issue in Indian Bank v. Blue Jaggers Estates Limited, (2010) 8 SCC 129. But the Delhi High Court distinguished the said judgment on the ground that in the case before the Supreme Court, the sale had not been confirmed and that therefore, it was in a nebulous stage.

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20. But with great respect, we do not think that such a distinction is plausible. No borrower accepts before the Appellate Tribunal that his right of redemption is already lost due to the confirmation of sale or the issue of a sale certificate and its registration. So long as it is contended by the borrower/guarantor that his right of redemption is not lost and he is entitled to have the sale certificate set aside by the Appellate Tribunal, the money recovered by the bank through the auction, is not a money fully and finally recovered.

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21. Therefore, we are of the considered view that the Appellate Tribunal was right in demanding from the petitioner, the payment of 50% of the amount as per the second proviso to sub-section (1) of Section 18 of the SARFAESI Act, As a result, we see no merits in the writ

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petition. Hence, it is dismissed, so also the pending applications, if any.”

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The Ld. Counsel for respondent no.1 has submitted that as per the above judgment, the appellant is required to make the pre-deposit as per Section 18 of the SARFAESI Act.

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This Tribunal is of the opinion that the above judgment does not help the respondents for the reason that the Hon‟ble Delhi High Court has categorically held in the matter of “Prudent SRC Limited vs. Sidha Neelkanth Paper Industries” (supra) that the secured creditor cannot insist that debtor should deposit, the pre-deposit amount in full with the Appellate Tribunal, since the amount recovered from the sale of the secured assets of the borrower has to be deducted from the „debt due‟. In para 64 of the judgment, it is held that in case, the amount recovered from the auction of the secured asset is more than the debt due, there was no need for the borrower to make any pre-deposit. The relevant paras of the judgment are quoted below for ready reference:-

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“ 64. On the other hand, in Sristhi Arogyadham Pvt. (supra) and in Poonam Manshani (supra), two Division Benches of this court have taken the view that the borrower must be given the benefit of the amount recovered through the sale of the secured asset. In Sristhi Arogyadham (supra), noting that the amount recovered from the auction of the secured asset was more than the debt due, the court held that there was no need for the borrower to make any deposit in the facts of that case.

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65. We are in complete agreement with the view taken by coordinate Benches of this court,

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while respectfully disagreeing with the view expressed by Bombay High Court in the matter of Eskays Construction Pvt. Ltd (supra). In our opinion, the secured creditor cannot insist that for making a pre-deposit with the Appellate Tribunal, the amounts recovered from the sale of a secured asset of the borrower should be excluded. The borrower ought to be given the benefit of the amount recovered from the sale of the secured asset while computing benefit of the amount recovered from the sale of the secured asset while computing the “amount of debt due”, for the purpose of entertaining the appeal, as contemplated in the second proviso to Section 18 of the SARFAESI Act, 2002.”

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Ld. Counsel for respondent no.1 bank has however relied upon the judgment of “Indian Bank vs. Blue Jaggers Estates Limited” passed by Hon’ble Supreme Court of India; 2010 (8) SCC 129.

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This Tribunal has perused the above judgment and is of the opinion that the same is clearly distinguishable on the ground that in the said case though the property in question was put to auction but applicant was not able to realize the amount. Whereas, in the present appeal, the amount recovered by sale of secured asset is more than the debt due and moreover, it also stands appropriated by the bank and this fact is clear from letter dated 06.09.2022 which contemplates that the amount of auction sale stands appropriated and excess amount (i.e. the amount which is more than the debt) of Rs.1.61 crores has been credited to the account of the appellant. Moreover, the above judgment ( Indian Bank vs. Blue Jaggers Estates Limited (supra)) was considered by the Hon‟ble Delhi High Court in “Srishti Arogyadham’s Pvt. Ltd. vs. Punjab

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National Bank and Others” 2018 SCC OnLine del 127 and it has distinguished the same on the ground that though the mortgaged property was put to auction but the bank had not been able to realize the amount as sale was yet to be confirmed. The relevant para no.22 of the said judgment runs as under:

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“ 22. The DRAT in the impugned order has referred to the judgment of the Supreme Court in Indian Bank vs. Blue Jaggers Estates Ltd. reported n 2010 (3) Banker’s Journal 9 (SC) wherein a similar issue arose before the Supreme Court in the said case, it has come on the record that even though, the mortgaged property was put to auction, the appellant i.e. Indian Bank had not been able to realize the amount because the sale was yet to be confirmed by the Appellate Tribunal. In fact, the Supreme Court rejected the contention raised on behalf of the respondent i.e. Blue Jaggers Estate Ltd. by stating that the sale was yet to be confirmed by the Appellate Tribunal as per the directions of the High Court.” (emphasis supplied )

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However, so far as present appeal is concerned, as discussed earlier, not only the amount recovered from auction is more than the debt due but the said amount has also been appropriated and the excess amount even stands credited to appellant‟s account.

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In view of the above discussions, the judgment cited by the Ld. Counsel for respondent no.1 bank does not help her in support of her contentions.

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The Ld. Counsel for auction purchaser has relied upon the following judgments in support of his contention that amount realized by the bank by way of

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sale of secured asset cannot be used by the borrower towards pre-deposit:-

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(i) “Eskays Construction Pvt Ltd vs. Soma Papers & Industries Ltd” Bombay High Court : Decided on 30.11.2016.

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(ii) “Vasanji Asaria Mamania vs. M/s Kalyani Exporters & Ors” Bombay High Court: Decided on 09.06.2015 W.P. No. 2414 of 2013 along with W.P. No. 2512 of 2013.

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So far as judgment of “Vasanji Asaria Mamania vs. M/s Kalyani Exporters & Ors” (supra) is concerned, the same is prior in time than the judgment of “ Eskays Construction Pvt. Ltd vs. Soma Papers & Industries Ltd” (supra). The issue raised in “Vasanji Asaria Mamania vs. M/s Kalyani Exporters & Ors” regarding pre-deposit was also discussed in “Eskays Construction Pvt. Ltd vs. Soma Papers & Industries Ltd” .

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In the above judgments, the Hon‟ble Bombay High Court has held that the money realized by the respondent bank from the sale of the secured asset cannot be used by the borrower towards pre-deposit under Section 18 of the Act.

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This Tribunal has gone through the above judgments and is of the opinion that the above issue has been settled by the Hon‟ble Delhi High Court in

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“Prudent ARC Limited vs. Sidha Neelkanth Paper Industries and others” (supra) wherein, it has been categorically held that borrower ought to be given the benefit of the amount recovered from the sale of the secured asset while computing the amount of “debt due”.

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In view of the above discussion, this Tribunal is of the opinion that the contention of the Ld. Counsels for respondents that the present appeal is not maintainable for want of pre-deposit cannot be accepted.

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In the present appeal, since the property was auctioned and sold for a sum of Rs.5,59,83,000/- which is in excess of the debt due and the amount stands appropriated by the bank and excess amount of Rs.1.61 crores has been credited to the account of the appellant, this Tribunal is of the opinion that there is no requirement of pre-deposit for entertaining the present appeal.

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In view of the above discussion, and the law laid down by the Hon‟ble High Court in “Prudent ARC Limited vs. Sidha Neelkanth Paper Industries and others” (supra), the present appeal can be entertained by this Tribunal without insisting upon pre-deposit. Since, the possession is scheduled for today, in the interest of justice, the respondent bank is restrained from taking physical possession of the property in question till the next date of hearing when the appeal will be heard on merit. The Ld. Counsel for the respondent bank is requested to convey to its officials as well as the Ld. Receiver not to take physical possession of the property in question till the next date of hearing.

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This Tribunal was inclined to hear the matter on a short date i.e. 06.12.2022, however, Ld. Counsel for the respondent bank has prayed that the matter may be listed for 20.12.2022.

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In view of the above request of the Ld. Counsel for respondent no.1 bank i.e. Bank of Baroda, list the matter for 20.12.2022 for final arguments. In the meanwhile, let reply of the main appeal be filed within two weeks by the respondents and rejoinder, if any, within one week thereafter, by the appellant.

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(CHAIRPERSON)

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M S Green Teak India Pvt. Ltd. v. Bank of Baroda

Case brief

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M S Green Teak India Pvt. Ltd. v. Bank of Baroda

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