Partly allowed

Maruti Steels Limited v. Indian Bank (Allahabad Bank)

DRAT14 Feb 2023

Case brief

AI extract

What is this about?

The Tribunal addressed applications for waiver of pre-deposit requirements for appeals against SARFAESI orders. While referring to a recent Supreme Court judgment excluding auction proceeds from pre-deposit calculations unless accepted by the borrower, the Tribunal allowed the appellants to relax the 50% requirement to 35% based on undisputed recovery, ordering a specific adjusted deposit within t

What did the court decide?

Appellants directed to deposit Rs. 4,79,41,557/- as pre-deposit (35% of demand adjusted for prior deposits) within two months to maintain appeals; cases listed on 17.04.2023.

Maruti Steels Limited versus Indian Bank (Allahabad Bank) — Banking and Recovery | DRAT (2023)

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Appeal Dy. No. 570/2022

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M/s Maruti Steel Tubes & Ors. Vs. Indian Bank & Ors.

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Appeal Dy. No. 569/2022

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Maruti Steel Ltd. & Ors. Vs. Indian Bank & Ors.

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Present: Shri V. K. Shukla, counsel for the appellants, Shri Sandeep Arora, counsel for the respondent-Bank, None for the other respondents,

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ORDER

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(Date of Pronouncement : 14.02.2023)

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The applications for waiver were heard and reserved vide order dated 07.12.2022 of this Tribunal.

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These two applications for waiver filed in the above mentioned appeals are being decided by this common order, as both the appeals have been filed against the same order.

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The essential facts taken from Appeal Dy. No. 570/2022 are that the respondent-Bank sanctioned a term loan of Rs. 3.52 crores and cash credit limit of Rs. 6.00 crores to the appellants. The appellants-borrowers did not repay the loan in terms of the agreement, therefore,, the respondent-Bank classified the accounts as NPA and the demand notice dated 09.05.2016 was issued under section 13(2) of the SARFAESI Act demanding a sum of Rs. 16,61,18,736.57, copy of which has been appended at page no. 199 of the paper book. Upon failure to deposit the amount, the possession notice under section 13(4) of the SARFAESI Act, 2002 was issued and published by the Bank in the newspapers on

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23.12.2016, copy of which has been appended at page no. 218 of the paper book.

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It appears that the appellants had filed the S.A. No. 293/2020 challenging the sale notices dated 17.08.2020, 04.02.2020 and for direction to the FIrespondent-No.2 to consider the representation dated 04.07.2016 under section 13(3-A) of the SARFAESI ACT and the OTS dated 27.06.2019 filed by them with the Bank. In the said, S.A.-appellants had later-on filed an amendment application dated 29.09.2021 for incorporating the facts with regard to sale notice dated 17.08.2020, 12.11.2020, 06.01.2021, 20.10.21, 23.09.2021 and for permission to array the new parties as well as the sale certificates pursuant to the sale notice dated 04.02.2020 and the sale certificate dated 11.03.2020.

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It also appears that the S.A. No. 261/2021 had been filed by the respondent No. 3- Auction Purchaser challenging the letter dated 10.05.2021, by which the 25% amount deposited by the Auction Purchaser pursuant to the auction sale notice dated 28.01.2021 was forfeited by the respondent No. 1-Bank and the auction sale notice dated 24.09.2021, pursuant to which the respondent No. 4 was declared highest bidder. The aforesaid Securitization Applications, one filed by the appellants and another filed by the respondent no. 3- auction purchaser were decided by the Tribunal below vide common order impugned. Being aggrieved by the

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said order, the appellants have filed both the present appeals.

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Learned counsel for the appellants submits that as against the demand notice dated 09.05.2016 under section 13(2) of the SARFAESI Act, 2002 for Rs. 16,61,18,736.57, a sum of Rs. 2.56 crores has been recovered from the auction sale of the property belonging to the appellants and the appellants also deposited Rs. 77.00 lacs pursuant to the order of the Tribunal below and further Rs. 35.00 lacs along with OTS proposal. The learned counsel further submits that in addition to these amounts, an amount of Rs. 1.26 crores has also been recovered by the bank from the auction sale of the commercial property of the appellant. Apart from the said amounts, an amount of Rs. 64.00 lacs has also been received by the bank from the subsequent auction purchaser M/s Syncom Exim Pvt. Ltd. As such, a total sum of Rs. 5.58 crores has been recovered by the respondent-Bank against the demand of Rs. 16,61,18,736.57, which is approximately 35% of the said demand. It is, therefore, prayed that the rest 15% of the amount due may be waived and the appeal may be heard on merits.

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Learned counsel for the respondent-Bank submits that no appeal shall be entertained unless the borrower has deposited with the appellate Tribunal 50% of the amount of debt due from him. The learned counsel further submits that in view of the third proviso of section 18, this Tribunal has power to reduce the pre-

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deposit amount, for the reason to be recorded in writing not less than 25% of the debt referred to in the second proviso, hence the discretion of this Appellate Tribunal is not an absolute one but limited. The learned counsel further submits that as on date, a total sum of Rs. 47,08,03,368.50 is due against the appellants and the appellants have only deposited Rs. 77.00 lacs, which is kept in no lien account, therefore, the total liability against the appellants as on date is Rs. 47,08,03,368.50 after giving the adjustment of amount deposited by the appellants. With regard to the amount deposited by the respondent no. 4-auction purchaser namely M/s Simcon Exim Pvt. Ltd., the learned counsel submits that the appellants cannot claim any benefit over such amount, as the same has already been refunded to the said auction purchaser on 17.08.2022 along with the interest @ 5%. Therefore, the appellant may be directed to deposit 50% of the amount of Rs. 47,08,03,368.50 for making the appeal maintainable.

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Having heard the learned counsels for the parties and considering the material available on record, it is undisputed that against the demand notice for Rs. 16,61,18,736.57, the respondent-Bank has received a sum of Rs. 2.56 crores from respondent no. 3, Rs. 1.26 crores, Rs. 64.00 crores from respondent no. 4 towards auction sale of the properties belonging to the appellants. In addition to it, the appellants have also deposited Rs. 77.00 lacs pursuant to the order of the Tribunal below and Rs. 35.00 lacs along with OTS proposal. As such a total sum of Rs. 5.58 crores has

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been received by the respondent-Bank, but the money recovered from the auction sale of the property cannot be taken into consideration toward pre-deposit, because the said sale is under challenge in the present appeals. It would be a different matter, if the sale is accepted/confirmed by the borrower, therefore, the borrower cannot be permitted to take advantage of the sale proceeds realized from the auction of the property in question to fulfill the condition of pre-deposit for maintaining the appeal in view of the judgment passed by the Hon’ble Apex Court in Civil Appeal No. 8969/2022- M/s Sidha Neelkanth Paper Industries Pvt. Ltd. and Anr. Vs. Prudent ARC Ltd & Ors, decided on 05.01.2023.

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Prior to the recent judgment passed by the Hon’ble Supreme Court as referred to above, the auction sale proceeds were being taken into account while deciding the application for waiver of pre-deposit in view of the earlier judgments passed by the Hon’ble Apex Court as well as the Hon’ble High Courts against the amount payable to the Banks/FI as on date and not against the amount mentioned in the demand notice. Since the sale amount is not being considered towards pre-deposit, therefore, the amount mentioned in the demand notice i.e. Rs. 16,61,18,736.57 is relevant for pre-deposit.

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Since there appears to be some substance in the appeals, therefore, I am of the view that some relaxation should be given to the appellants. Accordingly, the appellants are required to deposit 35%

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of the demanded amount, which comes to be Rs. 5,81,41,557.60 towards pre-deposit for maintaining the appeal. After issuance of demand notice, the appellants have deposited Rs. 77.00 lacs and Rs. 35.00 lacs, total Rs. 102.00 lacs, so after giving adjustment of the said amount, the appellants are required to deposit Rs. 4,79,41,557/-.

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In view of the above, the appellants are directed to deposit Rs. 4,79,41,557/- as pre deposit for maintaining the appeal within two months from the date of this order in the form of demand draft favouring the Registrar of this Appellate Tribunal prior to the next date fixed. On receiving the same, the Registrar of this Appellate Tribunal shall keep the same in the shape of FDR in the Nationalized Bank for a period of one year in auto renewal scheme. If the said amount is not deposited by the appellants within the time as stipulated above, the appeal shall stand dismissed as not maintainable for want of pre-deposit without reference to this court. If the deposit is made, then list this case on 17.04.2023 for compliance. Accordingly, both the applications for waiver filed by the appellants stand disposed off.

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Justice R.D. Khare Chairperson

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VN Giri

Maruti Steels Limited v. Indian Bank (Allahabad Bank)

Case brief

What is this about?

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Maruti Steels Limited v. Indian Bank (Allahabad Bank)

Case brief

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