Dismissed

Ms Tersus Disinfectant Solution Private Limited v. Union Bank of India and Anr.

DRAT13 Apr 2023

Case brief

AI extract

What is this about?

The Appellate Tribunal rejected the appellant's application for waiver of pre-deposit in an appeal against a sale order under the SARFAESI Act. Relying on recent Supreme Court precedents, the court held that the mandatory pre-deposit requirement under Section 18 cannot be waived, even if the bank already recovered partial dues from asset sales.

What did the court decide?

Application for waiver of pre-deposit dismissed; appellant directed to make pre-deposit of 50% of debt due.

Ms Tersus Disinfectant Solution Private Limited versus Union… — Company and Corporate | DRAT (2023)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Diary No. 496 of 2021

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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13.04.2023

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M/s. Tersus Disinfectant Solution Private Limited … Appellant -Vs-

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Union Bank of India & 3 Others ... Respondents

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Mr. Nemani Srinivas, Learned Counsel for the Appellant

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Mr. Pankaj Kumar Mukherjee, Learned Counsel for Respondent No. 1/Bank

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THE APPELLATE TRIBUNAL :

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I.A. 376 of 2021

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Application for waiver from making pre deposit.

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As per notice under Section 13 (2) of the SARFAESI Act 2002 and an amount of Rs.5,15,91,901.34p was shown as due as on 16^th September, 2015. Learned Counsel submits that four immoveable properties of the secured assets have been sold and a sum of Rs.1,44,14,888.00, towards sale proceeds, has been received by the Bank which is nearly 28% of the demanded dues. Learned Counsel further submits that Respondent Bank is still having secured asset worth Rs.75.00 lac with them and hence prays for exemption from making pre deposit.

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Learned Counsel for Respondent opposes the prayer and submits that as on date Rs.10,05,75,127.42p is the debt due.

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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 :

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“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.”

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In the cited judgment Hon’ble Apex Court has also relied on the judgment of Narayan Chandra Ghosh Vs. UCO Bank [(2011) 4 SCC

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548] wherein it was held that :

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“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:

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“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.” “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

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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.”

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Appellant cannot take advantage of the auction sale of the secured assets.

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In view the mandatory provisions of Section 18 (1) of the SARFAESI Act 2002, I do not find any ground for waiver from making pre deposit. Further as the law laid down in M/s Sidha Neelkanth Paper Industries Private Limited (supra) Appellant is to make pre deposit for hearing of the appeal.

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Accordingly, I.A. 376 of 2021 is dismissed.

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Appellant is directed to make pre deposit equivalent to 50% of the debt due as on date, Rs.10,05,75,127.42p, within a period of eight weeks; failing which the appeal shall stand dismissed. If the pre deposit is made within the stipulated period, appeal be registered by supplying regular appeal number.

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List on 30^th June, 2023 for further orders.

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(Anil Kumar Srivastava,J) Chairperson

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Dated 13^th April, 2023 06/ac

Ms Tersus Disinfectant Solution Private Limited v. Union Bank of India and Anr.

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Ms Tersus Disinfectant Solution Private Limited v. Union Bank of India and Anr.

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