Dismissed

Ms Krishnarjuna Paraboiled Rice Mills P Ltd. v. Andhra Pradesh State Financial Corporation

DRAT24 Mar 2023

Case brief

AI extract

What is this about?

This was an in-camera application seeking waiver of the mandatory pre-deposit required to file an appeal under Section 18(1) of the SARFAESI Act. The bench quashed the application citing Supreme Court precedents mandating a 50% deposit or a 25% reduced deposit with written reasons. The appeal remains pending with the direction to deposit 50% of the claimed debt due by the next listing.

What did the court decide?

Appellants directed to deposit 50% of the claimed debt due by the next date of listing or the appeal shall stand dismissed.

Ms Krishnarjuna Paraboiled Rice Mills P Ltd. versus Andhra… — Banking and Recovery | DRAT (2023)

¶1

IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

¶2

Diary No. 14 of 2023

¶3

THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

¶4

24.03.2023	M/s. Krishnarjuna Paraboiled Rice Mills Private Limited & 2 Others … Appellants -Vs- Andhra Pradesh State Financial Corporation & Another … Respondents
	Mr. Rabichandran, Sr. Advocate
	with Mr. Debraj De and Ms. Sagarika Koneru, Learned Counsel for Appellants
	Mr. Nemani Srinivas, Learned
	Counsel for the Respondent
	No.1/Caveator

¶5

THE APPELLATE TRIBUNAL :

¶6

I.A. 10 of 2023

¶7

This is an application praying for making mandatory pre deposit under Section 18 (1) of the SARFAESI Act 2002.

¶8

Learned Counsel for the Appellant has raised certain grounds regarding merits of the matter at the stage of waiver. Paragraph 5 of the application relates to the provisions of Rule 9(4) of the SARFAESI Act and in paragraph 6 prayer for waiving mandatory court fee has been made.

¶9

Provisions of 18 (1) of the Act are mandatory in nature as has been held by the Hon’ble Apex Court in a recent judgment delivered on 5^th January, 2023 in the case of M/s Sidha Neelkanth Paper Industries Private Limited & Another Vs. Prudent ARC Limited & Ors [2022 LiveLaw (SC) 11] has specifically observed and held in paragraph 13 of the judgment that :

¶10

¶11

“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.”

¶12

In the cited judgment Hon’ble Apex Court has also relied on the judgment of Narayan Chandra Ghosh Vs. UCO Bank [(2011) 4 SCC 548] wherein it was held that :

¶13

¶14

“Thereafter, the Bombay High Court considered in detail Section 18. After considering the decision of this Court in the case of Narayan Chandra Ghosh v. UCO Bank, (2011) 4 SCC 548, it was observed and held that provisions of Section 18, more particularly the second and the 21 third proviso thereto are mandatory in nature and that the DRAT has no power to grant full waiver of deposit. In paragraph 16, it is observed as under:

¶15

“16. Section 18(1) clearly stipulates, any person aggrieved by any order made by the DRT under Section 17, may prefer an appeal to the DRAT within 30 days from the date of receipt of the order of the DRT. The 2 nd proviso to Section 18(1) stipulates that no appeal shall be entertained by the DRAT unless the borrower has deposited with it 50% of the amount of debt due from him, as claimed by the secured creditors or as determined by the DRT, whichever is less. The 3rd proviso to Section 18(1) gives a discretion to the DRAT to reduce the aforesaid amount to not less than 25%, provided the DRAT gives reasons for the same which are to be recorded in writing. What becomes clear from the aforesaid provisions is that there is a jurisdictional bar from entertaining an appeal filed by the borrower from an order passed under Section 17, unless the borrower deposits 50% of the amount of debt due from him, as claimed by the secured 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.”

¶16

“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

¶17

¶18

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.”

¶19

Learned Counsel for the Respondent submits that demanded due was Rs. 7,09,09,002.00 as on 31^st August, 2015 and the present due as on 31^st December, 2022 is Rs.21,70,73,780.00 inclusive of interest.

¶20

Having considered the submission as well as the ground taken in the application for waiver, I do not find any ground for waiver from making pre deposit. Accordingly, I.A. 10 of 2023, is dismissed.

¶21

Appellants are directed to deposit 50% of Rs.21,70,73,780.00 by the next date of listing; failing which the appeal shall stand dismissed.

¶22

List on 20^th June, 2023 for further orders.

¶23

(Anil Kumar Srivastava,J) Chairperson

¶24

Dated: 24^th March, 2023 06/ac

Ms Krishnarjuna Paraboiled Rice Mills P Ltd. v. Andhra Pradesh State Financial Corporation

Case brief

What is this about?

What did the court decide?

Ms Krishnarjuna Paraboiled Rice Mills P Ltd. v. Andhra Pradesh State Financial Corporation

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

All orders in this case

Similar cases

Alluri Vijaya Kumar versus Canara Bank

Kalyan Educational Society versus Punjb National Bank

Rousanara Begum Islam Anr. Anr. versus PNB & Ors.

Central Bank of India versus Mr K Prasnna Kumar Reddy

Shri Vikas Kucheria and Ors. versus Idbi Bank

Sri Subir Bhattacharya and Anr. versus State Bank of India and Ors.