Partly allowed

Rajendra Singh v. Central Bank of India and Anr.

DRAT29 May 2023

Case brief

AI extract

What is this about?

The Appellate Tribunal waived the requirement for the appellant to deposit a further amount as pre-deposit to maintain an appeal under the SARFAESI Act. The court held that the amount claimed in the demand notice is relevant for the pre-deposit calculation, especially when it is less than the DRT's decree amount, and granted relaxation due to the property's already executed sale.

What did the court decide?

The remaining amount of the pre-deposit was waived, and the appeal was allowed to proceed without further deposit.

Rajendra Singh versus Central Bank of India and Anr. — Banking and Recovery | DRAT (2023)

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Appeal Dy. No. 870/2022

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Rajendra Singh Vs. Authorized Officer, Central Bank of India & Anr.

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Present: Shri S. K. Gupta, counsel for the appellant, Shri Himanshu Tiwari, counsel for the respondent-Bank, Shri Awadesh Tiwari, counsel for the respondent-auction purchaser,

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ORDER

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(Date of Pronouncement : 29.05.2023)

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The application for waiver was heard and reserved vide order dated 26.04.2023 of this Tribunal.

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The present appeal has been filed u/s 18 of the SARFAESI Act against the judgment dated 22/09/2022 passed by the DRT Ranchi, whereby the S.A. No. 32/2018 filed by the appellant was dismissed.

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The brief facts of the present case are that the appellant is one of the partners of M/s Bhaskar Electric Company, which was granted credit facilities by the respondent bank through its partners Smt. Sushma Devi including the appellant. In order to secure the said credit facilities, Smt. Sushma Devi and the appellant stood as guarantors along with other guarantor Shri Vinay Kumar Singh and Smt. Sushma Devi and the appellant also created equitable mortgage over their properties. The loan was not repaid in terms of the loan agreement, therefore, the account was classified as NPA by the respondent bank 31/03/2004 and the outstanding dues of the bank was Rs. 1,47,48,616.37.

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It appears that the respondent bank filed an O.A. No. 4/2006 for recovery of Rs. 1,87,03,430.37 plus interest in the month of January, 2006. During the pendency of the same, the respondent-bank issued demand notice dated 05/05/2007 u/s 13(2) of the SARFAESI Act for Rs. 2,25,66,305.36 along with interest followed by possession notice dated 03/08/2007 u/s 13(4) of the said Act.

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It transpires that the borrower-firm filed S.A No. 18/2007 on 13/09/2007 before the Tribunal below, which was allowed vide order dated 21/10/2010 and the entire process of the bank was set aside and bank was directed to proceed afresh in accordance with law. Accordingly, a fresh demand notice dated 23/02/2011 was issued by the respondent- bank u/s 13(2) of the SARFAESI Act for a sum of Rs 2,82,31,947 along with interest. The possession notice u/s 13(4) of the SARFAESI Act was issued on 25/08/2011 and physical possession was taken on 22/10/2013 pursuant to the order dated 21/09/2013 passed u/s 14 of the said Act.

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It is averred that the borrower-firm moved an application before the Tribunal below in pending O.A. seeking direction for the Bank to accept the balance amount of OTS along with interest for the delayed period, which was directed to be heard at the time of final hearing of the O.A vide order dated 05/12/2023, but the same was challenged by the borrower by filing Writ C No. 7425/2013 before the Hon’ble High Court and the Hon’ble High Court had granted status quo order

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over the properties in question vide order dated 07/01/2014. The said order was challenged by the Bank before the hon’ble Division Bench, in which the borrower was directed to deposit Rs. 1.00 crore on or before 16/12/2014, otherwise the interim order passed by single Bench shall stand vacated. Thereafter, the borrower moved an application for extension of time, which was rejected and the Writ petition was also dismissed on 25/02/2015.

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It is further averred that the respondent-Bank issued e- auction notice dated 08/02/2015 scheduling the auction of the property in question on 20/03/2015 which could not be materialized for want of the bidder whereas in the said notice the reserve price was fixed to Rs 2.00 crore. Therefore the respondent-Bank issues another sale notice dated 11/01/2018 fixing the date of auction on 16/02/2018. The property was sold for a sum of Rs. 1,74,37,000/- and the sale certificate was issued and sale deed was also executed in favour of respondent no. 2- Auction Purchaser on 23/02/2018. In the mean time, the O.A No. 4/2006 filed by the respondent-Bank was decided/decreed by the Tribunal below vide order dated 10/09/2015 whereby the claim of the bank was decreed for Rs. 1,87,03,430.37 along with future and pendentelite interest @ 10% p.a. Accordingly the recovery certificate was issued and execution proceedings were started.

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It also transpires that the borrower firm challenged the sale notice dated 11/01/2018, demand notice dated

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23/02/2011, and possession notice dated 25/08/2011 by filing the S.A. No. 13/2018 on 16/02/2018 which was dismissed by the Tribunal below vide order dated 27/02/2018. The said order was challenged by the borrower-firm through its partner Smt. Sushma Devi by filing Appeal Serial No. 31/2018 before this Appellate Tribunal which was dismissed vide order dated 10/04/2019.

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It also appears that after ending of the litigation, another partner of the borrower firm i.e. appellant challenged the sale certificate dated 23/02/2018 issued pursuant to auction sale notice dated 11/01/2018 held on 16/02/2018 by filing the S.A. No. 32/2018, which was dismissed by the Tribunal below vide impugned order dated 22/09/2022. Being aggrieved by the said order the present appeal has been filed.

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Learned counsel for the appellants has drawn attention of this court to the second proviso of section 18 of the SARFAESI Act, which provides that no appeal shall be entertained, unless the borrower has deposited with the Appellate Tribunal 50% of the amount due as claimed by the secured creditor or as determined by the DRT, ‘whichever is less’. The emphasis has been made on the wording “whichever is less”.

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Learned counsel for the appellant has further drawn attention of this court to section 13(3) of the SARFAESI Act, which stipulates that the notice referred to under sub section (2) shall give details of the amount payable

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by the borrower and the secured assets intended to be enforced by the secured creditor in the event of nonpayment of secured debts by the borrower. It is thus argued that the notice under section 13(2) of the SARFAESI Act shall give the details of the amount due payable by the borrower, therefore, the learned counsel has referred to page no. 126 of the paper book, which is notice issued by the Bank under section 13(2) of the SARFAESI Act and has argued that the Bank, while giving the said notice, has specified the amount due against the appellant, which was Rs. 2,82,31,947/- as on 23.02.2011 i.e. the date of the demand notice.

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The learned counsel for the appellant has also referred to the judgment dated 10.09.2015 passed by the Tribunal below, whereby the O.A. no. 4/2006 instituted by the Bank was allowed and the recovery certificate was issued to the tune of Rs. 1,87,03,430.37 along with 10% interest from 11.09.2005 till full recovery is made. It is thus contended that the debt which was sought to be recovered is Rs. 2,82,31,947/- as per demand notice under section 13 (2) of the SARFAESI Act, out of which more than 25% of the said amount has already been deposited by the appellant. In support of his contention, the learned counsel for the appellant has relied upon a judgment passed by the Hon’ble Apex Court in Narayan Chandra Ghosh Vs. UCO Bank and Ors, 2011 (4) SCC 548 and has referred to para 10 of the said judgment with regard to the debt due as specified in the notice under section 13 (2) of the SARFAESI Act.

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The learned counsel for the appellant has further relied upon the judgment passed by the Hon’ble Supreme Court in M/s Sidha Neelkanth Paper Industries Pvt. Ltd. and Anr. Vs. Prudent ARC Ltd. and others, 2023 (1) ALT 93 and has referred to Para 17 of the said judgment, wherein the Hon’ble Apex Court has held that the borrower has to deposit 50% of the amount of debt due as claimed by the Bank/financial institution/assignee along with interest as claimed in the notice under section 13 (2) of the SARFAESI Act. It is thus argued that so far as the appellant is concerned, the amount due is the amount as mentioned in the demand notice under section 13 (2) dated 23.02.2011 filed at page No. 126 of the paper book.

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Learned counsel for the respondent-Bank has referred to its reply to the Waiver Application, which contains the detail of debt due and the amount of interest @ 10% with quarterly rest, therefore, the argument raised by the appellant with regard to debt due is not correct. The learned counsel has drawn attention of this Court to Para 8 of the demand notice dated 23.02.2011 given to the appellant, which is at page No. 127 of the paper book, which contains a clear citation to the effect that if the entire outstanding amount together with contractual rate of interest are not fully satisfied, then the Bank shall proceed with against the appellant. It is thus argued that the contractual rate of the interest shall apply, therefore, the argument of the appellant that the rate of the interest has not been specified is incorrect.

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It has been lastly contended by the respondent-bank that the amount of pre-deposit is to be made before the Tribunal and not to be made anywhere by the appellant, therefore, the amount, which has been deposited by the appellant with the Bank, will have no consequence, therefore, unless the appellant makes pre-deposit before the this Tribunal, the Appeal is not maintainable. Hence, the appellant may be directed to deposit 50% of the amount as claimed in the recovery certificate.

¶24

Considered the arguments of the learned counsels for the parties and perused the record.

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It is undisputed that the demand notice u/s 13(2) of the SARFAESI Act was issued by the bank for a sum of Rs. 2,82,31,947/on 23/02/2011 and the original application filed by the bank in the year 2006 was decreed on 10/09/2015 for a sum of Rs. 1,87,03,430.37 along with interest @ 10% p.a., which is stated to be at present Rs. 8.17 crore. It is contended that the appellant has deposited Rs. 78.00 lakh plus Rs 10.00 lakh after issuance of the said demand notice. The main question in the present case is as to what amount is relevant for the purpose of making the pre deposit towards maintaining the appeal filed u/s 18 of the SARFAESI Act.

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As per section 18 of the said Act the appellant is required to deposit 50% of the debt due as claimed by the secured creditor or determined by the Tribunal below “whichever is less ”.

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It is to be seen that in earlier appeal serial no. 31/2018 this Tribunal has taken the view that when the amount has been determined by the Tribunal below on 10/09/2015 in the original application filed by the bank then the amount claimed by the secured creditor in the demand notice has lost its significance and the amount which was due at the time of filing of appeal is relevant. The situation prevalent at that time has now been changed in view of the latest judgment passed by the Hon’ble Apex Court in case of M/s Sidha Neelkanth Paper Industries Pvt. Ltd. & Anr Vs. Prudent ARC Ltd & Ors, 2023(1) Scale 479. Prior to the said judgment, the Hon’ble High Court as well as the Apex Court in various cases had held that the amount realized from the auction sale was to be considered towards pre-deposit, therefore, the interest component was being taken into consideration at the time of deciding the pre deposit amount, but in view of the judgment as referred to above, the same cannot be considered towards pre deposit, if the sale is under challenge. The O.A. was filed in the year 2006 and decreed in the year 2015, but the demand notice was issued in the year 2011. The present appeal is filed u/s 18 of the SARFAESI Act and as per second proviso of it, the appellant is required to deposit 50% of the amount of debt due from him as claimed by the secured creditor or determined by the DRT, whichever is less . In this regard, the Hon’ble Supreme Court in Narayan Chandra Ghosh Vs. UCO Bank & Ors. (supra) has held that the amount of 50% which is required to be deposited by the borrower, is computed either with reference to the debt due from the appellant

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as claimed by secured creditor or as determined by the Debt Recovery Tribunal, whichever is less . The Hon’ble Supreme Court has further held in its latest judgment passed in M/s Sidha Neelkanth Paper Industries Ltd.(Supra) held that the borrower has to deposit 50% of the amount of “debt due” as claimed by the bank/financial institution/assignee along with interest as claimed in the notice u/s 13(2) of the SARFAESI Act.

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In these circumstances, I am of the view that the amount claimed by the secured creditor in the demand notice is relevant for the purpose of making pre deposit for maintaining the appeal, as the amount decreed by the Tribunal below in the Original Application is more than the amount claimed by the bank in the demand notice. In the present case, the appellant has already deposited a sum of Rs. 88.00 lakh with the respondent bank after issuance of demand notice for Rs. 2,82,31,947/-, which is more than 30% of the demand raised by the Bank. It is also worthwhile to say that the property of the appellant has already been sold, sale certificate has been issued and sale deed has also been executed in favour of the auction purchaser. Therefore, the appellant deserves some relaxation.

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In view of the aforesaid facts and circumstances of the case, it would be appropriate to waive rest of the amount of pre deposit. Accordingly, the appellant is not required to deposit any further amount towards pre deposit for maintaining the appeal. Consequently, the waiver application is allowed.

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List this case on 02/08/2023 for reply.

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Justice R.D. Khare Chairperson

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VN Giri

Rajendra Singh v. Central Bank of India and Anr.

Case brief

What is this about?

What did the court decide?

Rajendra Singh v. Central Bank of India and Anr.

Case brief

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