Disposed

S Jayaram Chowdary v. State Bank of India

DRAT13 Feb 2023

Case brief

AI extract

What is this about?

The Appellate Tribunal dismissed the appellant's prayer for a full waiver of pre-deposit regarding Section 18 of the SARFAESI Act, citing Supreme Court precedents that barred using sale proceeds for pre-deposit when challenging the sale. The Tribunal fixed the pre-deposit at 40% of the debt.

What did the court decide?

Appellant directed to make pre-deposit of 40% of Rs. 64,46,19,344/- within six weeks; otherwise appeal stands dismissed.

S Jayaram Chowdary versus State Bank of India — Banking and Recovery | DRAT (2023)

¶20

“13. As per Section 2(ha) of the SARFAESI Act, “debt” shall have the same meaning assigned to it in clause (g) of Section 2 of the Act 1993. As per section 2(g) of the Act 1993, “debt” means any liability inclusive of interest which is claimed as due from any person….., by a bank or a 17 financial institution during the course of any business activity undertaken by the bank or the financial institution, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on the date of the application. That the “debt” means any liability inclusive of interest. As per Section 18 of the SARFAESI Act, any person aggrieved, by any order made by the DRT under section 17, may prefer an appeal within thirty days to an appellate Tribunal (DRAT) from the date of receipt of the order of DRT. Second proviso to section 18 provides that no appeal shall be entertained unless the “borrower” has deposited with the Appellate Tribunal fifty percent of the amount of “debt due” from him, as claimed by the secured creditors or determined by the DRT, whichever is less and only and only then, an appeal under Section 18 of the SARFAESI Act is permissible against the order passed by the DRT under Section 17 of the SARFAESI Act. Under Section 17, the scope of enquiry is limited to the steps taken under Section 13(4) against the secured assets. Therefore, whatever amount is mentioned in the notice under Section 13(2) of the SARFAESI Act, in case steps taken under Section 13(2)/13(4) against the secured assets are under challenge 18 before the DRT will be the ‘debt due’ within the meaning of proviso to Section 18 of the SARFAESI Act. In case of challenge to the sale of the secured assets, the amount mentioned in the sale certificate will have to be considered while determining the amount of pre-deposit under Section 18 of the SARFAESI Act. However, in a case where both are under challenge, namely, steps taken under Section 13(4) against the secured assets and also the auction sale of the secured assets, in that case, the “debt due” shall mean any liability (inclusive of interest) which is claimed as due from any person, whichever is higher.”

¶27

creditors or as determined by the DRT, whichever is less. There is also a discretion granted to the DRAT to reduce this amount to 25% provided it finds adequate reasons for doing so and gives reasons, that are recorded in writing. If this deposit is not made, then the DRAT has no jurisdiction to entertain the appeal of the borrower. The crucial words “debt due from him” have to be interpreted consistent with the object and purpose sought to be achieved by the SARFAESI Act. Unless the debt due is secured, the borrower cannot be allowed the luxury of litigation. If that is permitted, the secured creditors would be engaged in a continuous and futile litigation. On a plain reading of the section, it is clear that the DRAT has no power or jurisdiction to reduce the deposit amount to less than 25%. This is ex-facie clear from the plain and unambiguous language of Section 18 of the SARFAESI Act.” That thereafter the Bombay High Court considered the submission on behalf of the borrower that as the bank had already sold the secured assets for a consideration that fully secured their claim and therefore there was no requirement for the borrower to deposit any amount as contemplated under Section 18 of the SARFAESI Act. The Bombay High Court did not accept the said submission by observing that it would 22 be ludicrous to suggest that the money realised by the bank from sale of the secured assets could be used by the borrower to fulfil the condition of pre-deposit under Section 18. The Bombay High Court has observed that it would be a different matter if the sale is accepted and confirmed by the borrower. The Bombay High Court further observed that the borrower cannot be permitted to use the sale proceeds received from the sale of the subject properties to be adjusted/given credit for in the application for waiver of deposit and at the very same time challenge the sale of very same subject properties. The said decision of the Bombay High Court has been confirmed by this Court as the special leave petition preferred impugning the same, has been dismissed. Even otherwise, we are in full agreement with the view taken by the Bombay High Court in the case of Eskays Construction Pvt. Ltd. (supra). We are of the firm opinion and view that in a case where the borrower challenges the auction sale, thereafter it will not be open for the borrower to pray to use the sale proceeds received from the sale of the secured properties to be adjusted/given credit in an application for waiver of pre-deposit.”

S Jayaram Chowdary v. State Bank of India

Case brief

What is this about?

What did the court decide?

Issues for consideration

Cases cited

Parties & counsel

Coram

Case details

All orders in this case

Similar cases

Smt N Deepa versus Union Bank of India

National Commodities Mangt. versus Union Bank of India

National Commodities Mangt. versus Union Bank of India

Bank of Baroda versus Ms S R Nirman Pvt. Ltd. and Anr.

S Jayaram Chowdary v. State Bank of India

Case brief

What is this about?

What did the court decide?

Issues for consideration

Cases cited

Parties & counsel

Coram

Case details

All orders in this case

Similar cases

Smt N Deepa versus Union Bank of India

National Commodities Mangt. versus Union Bank of India

National Commodities Mangt. versus Union Bank of India

Bank of Baroda versus Ms S R Nirman Pvt. Ltd. and Anr.

What the court decided

A compact analysis

Statutes considered

Shankar Sharma versus Corporation Bank and Ors.

Juloori Veereshalingam Ch Trst versus the Registrar Drt 1 Hyderabad and Ors.