Dismissed

Ms Vibha Agrotech Limited And Others v. Punjab National Bank

DRAT22 Mar 2023

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal held that the mandatory pre-deposit requirement under Section 21 of the RDB Act applies even to appeals filed against orders dismissing applications to set aside ex parte decrees. Consequently, the waiver application was rejected.

What did the court decide?

Applicant's application for waiver from making pre-deposit dismissed with direction to deposit 50% of the dues within four weeks or face dismissal of the appeal.

Ms Vibha Agrotech Limited And Others versus Punjab National… — Banking and Recovery | DRAT (2023)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Appeal Diary No. 88 of 2023

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(Arising out of M.A. 62 of 2022 in O.A. 845 of 2017 in DRT-II, Hyderabad)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA

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CHAIRPERSON

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22.03.2023	M/s. Vibha Agrotech Limited & 2 Others … Appellants
	-vs-
	Punjab National Bank & 11Others … Respondents
	Mr. Nemani Srinivas, Learned
	Counsel for Appellants

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Mr. Pankaj Kumar Mukherjee, Learned Counsel for Respondent Bank

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THE APPELLATE TRIBUNAL :

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I.A. 66 of 2023

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An application under Section 21 of the Recovery of Debts And Bankruptcy Act, 1993 for waiver from making pre-deposit.

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Opposition filed by Respondent Bank is taken on record.

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Heard the Learned Counsel for the parties and perused the record.

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An ex parte order was passed by the Learned Debts Recovery Tribunal-II, Hyderabad against the Appellant, who was the first Respondent in O.A. No. 845 of 2017, for Rs.1,09,59,10,769.15 on 11^th May, 2018. M.A. 62 of 2022 was filed by the Appellants under Section 5 of the Limitation Act to condone the delay of 1586 days delay in filing M.A. I.R. No. 1346 of 2022 for setting aside the ex parte order

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dated 11^th May, 2018 which was dismissed by the Learned DRT vide order dated 9^th January, 2023.

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Aggrieved by the impugned order, Appellant preferred the appeal with an application for waiver from making pre deposit.

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Learned Counsel for the Appellant submits that the application, being M.A. 62 of 2022, being an interlocutory application, provisions of Section 21 of the Recovery of Debts And Bankruptcy Act, 1993 will not be applicable in appeal filed against the impugned order hence waiver from making pre deposit be granted.

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Learned Counsel for Respondent submits that an amount of Rs.1,51,96,23,562.00 is due as on 31^st January, 2023 against the Appellant. It is further submitted that an ex parte decree was passed against the Appellant wherein the debt due was determined. Application is not an interlocutory application. It is an application under Section 5 of the Limitation Act alongwith application for setting aside the ex parte order passed in O.A. Since, application under Section 5 of the Limitation Act is dismissed, consequently, application for setting aside the ex parte order also stands dismissed being time barred. Hence it is a final order. Accordingly, Appellant is not entitled for any relief.

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Learned Counsel for the Appellant has placed reliance upon a judgment passed by the Hon’ble High Court at Allahabad in Writ C. No. 1634 of 2019 (Jai Gopal Kansal & Another -vs- Indian Bank) wherein it was held that the

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appeal against an order dismissing an application, under Section 104 read with Order XLIII Rule 1 (d), was a misc. appeal, wherein provisions of pre deposit will not be applicable. Reliance was also placed in a judgment passed by the Hon’ble High Court at Calcutta in Sutapa Chatterjee & Another -vs- UCO Bank, reported in 2013 (2) Cal. LT 272.

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In M/s. Vinay Container Services Private Limited Limited & Others -vs- Axis Bank Limited Bank, reported in AIR 2011 Bom 37 a Division Bench of the Hon’ble Bombay High Court in para 13 held as under :

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“13. For the aforesaid reasons, we hold that the requirement of pre-deposit under sub- section (1) of Section 18 of the Act would also apply where an appeal is filed before the Appellate Tribunal against an interlocutory order passed by the Debts Recovery Tribunal under Section 17 of the Act. The power of the Tribunal to pass an interlocutory order is ancillary to its jurisdiction under Section 17 in view of the judgment of the Supreme Court in Mardia Chemicals Limited (supra). The provisions of Section 18(2) cannot be so interpreted to mean that an interlocutory order passed by the Tribunal is not referable to the provisions of Section 17. Indeed, it is in the context of proceedings under Section 17 that the Tribunal assumes jurisdiction and it is in aid of that jurisdiction that the Tribunal can pass an interlocutory order. This position is consistent with the judgment of a Division Bench of this Court in Nashik Merchant's Co-operative Bank Ltd. v. Aditya Hotels Pvt. Ltd., 2009 (4) Bom CR 734 (2009) (3) AIR Bom CR 687).”

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In A. P. Varghese -vs- Chief Manager, (Authorised Officer), Vijaya Bank, reported in AIR Online 2019 Ker 755, Division Bench of The Hon’ble Kerala High Court in para 7 has held as under :

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“7. Statute does not distinguish an interim order or a final order made in the SARFAESI application filed under Section 17 of the Act. Section 18 starts with an opening sentence that any person aggrieved, by any order by the Debt Recovery Tribunal, shall make a pre-deposit of 50% of the debt referred to in 2nd proviso to Section 18 of the Act. An order passed in an interim application is also falls within the ambit of Section 18 of the Act.”

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The Hon’ble Apex Court in Civil Appeal No. 8969 of 2022 delivered on 5^th January, 2023 in the case of M/s Sidha Neelkanth Paper Industries Private Limited & Another Vs. Prudent ARC Limited & Others 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

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“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 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

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25%. This is ex-facie clear from the plain and unambiguous language of Section 18 of the SARFAESI Act.”

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“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 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.”

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As far as distinction between a final order and an interlocutory order is concerned, Section 18 of the SARFAESI Act or Section 21 of the Recovery of Debts Due To Banks And Financial Institutions Act, 1993 nowhere makes out any distinction rather the words used under Section 18 of the Act are as under:

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“18. Appeal to Appellate Tribunal

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(1) Any person aggrieved, by any order made by the Debts

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Recovery Tribunal [under section 17, may prefer an appeal alongwith such fee, as may be prescribed] to the Appellate

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Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal.”

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Likewise Sections 20 and 21 of the Recovery of Debts And

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Bankruptcy Act, 1993 reads as under:

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“ 20. Appeal to the Appellate Tribunal

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(1) Save as provided in sub-section (2), any person aggrieved by an order m deemed to have been made, by a Tribunal under this Act, may prefer an appeal to an Appellate Tribunal having jurisdiction in the matter.

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(2) No appeal shall lie to the Appellate Tribunal from an order made by a Tribunal with the consent of the parties.

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(3) Every appeal under sub-section (1) shall be filed within a period of [thirty days] from the date on which a copy of the order made, or deemed to have been made by the Tribunal is received by him and it shall be in such form and be accompanied fee as may be prescribed.

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(4) On receipt of an appeal under sub-section (1) [or under sub-section (1) of Section 181 of the Insolvency and Bankruptcy Code, 2016], the Appellate Tribunal may after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.

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(5) The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned Tribunal.

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(6) The appeal filed before the Appellate Tribunal under subsection dealt with by it as expeditiously as possible and endeavour shall be made by of the appeal finally within six months from the date of receipt of the appeal.

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21. Deposit of amount of debt due, on filing appeal

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Where an appeal is preferred by any person from whom the amount of financial debt is due to a bank or a financial institution or a consortium of banks or financial institutions, such appeal shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal [fifty percent] of the amount of debt so due from him as determined by the Tribunal under section 19.”

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The provisions does not make any distinction between

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the final order or an interlocutory order. Even in the case of Narayan Chandra Ghosh (supra) and M/s Sidha Neelkanth

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Paper Industries Private Limited (supra) the Hon’ble Apex Court has not make any distinction between a final order or interlocutory order as far as pre deposit is concerned.

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In the present case, an ex parte decree was passed wherein debt was determined. No doubt, Appellant filed an application for setting aside the ex parte order along with an application under Section 5 of the Limitation Act. Learned Debts Recovery Tribunal did not find any ground for condonation of delay and accordingly dismissed the same.

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As far as pre deposit is concerned, as has been discussed earlier, no distinction can be made between a final order or an interlocutory order in case of pre deposit. Accordingly, I am of the view that mandatory provisions of Sections 21 of the Act would be applicable in this case as far as pre deposit is concerned. Accordingly, I.A. 66 of 2023 is dismissed.

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As per the Respondent Bank an amount equal to Rs.1,51,96,23,562.00, including interest, was due as on 31^st January, 2023. Accordingly, Appellant is hereby directed to deposit 50% of this amount within a period of four weeks; failing which the appeal shall stand dismissed.

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List on 25^th April, 2023 for further orders.

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(Anil Kumar Srivastava,J) Chairperson

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Dated: 22^nd March, 2023 02/ac

Ms Vibha Agrotech Limited And Others v. Punjab National Bank

Case brief

What is this about?

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Ms Vibha Agrotech Limited And Others v. Punjab National Bank

Case brief

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