Disposed

Nandini Industries India Pvt. Ltd. v. State Bank of India

DRAT22 Mar 2023REGULAR APPEAL/20/2022

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal at Kolkata disposed of an interim application seeking waiver of the pre-deposit requirement. Relying on the Supreme Court in Sidha Neelkanth Paper Industries, the court held that the borrower must deposit 50% of the updated debt amount, including interest, and prior payments cannot be adjusted.

What did the court decide?

Appellants directed to deposit Rs. 145,48,17,454.00 within four weeks as pre-deposit; application disposed of.

Nandini Industries India Pvt. Ltd. versus State Bank of India — Banking and Recovery | DRAT (2023)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Appeal No. 20 of 2022

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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22.03.2023 M/s. Nandini Industries India Private Limited & 4 Others … Appellants -VsState Bank of India .. Respondent

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Mr. Nemani Srinivas, Learned Counsel for the Appellants

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Mr. Ajay Gaggar with Mr. Mukul Banerjee, Learned Counsel for Respondent

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THE APPELLATE TRIBUNAL :

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I.A. 534 of 2019

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Application for waiver from pre deposit filed by Appellants under Section 18 (1) of the SARFAESI Act 2002 (hereinafter referred to as “Act”). It is submitted that the Appellants challenged the Possession Notice dated 29^th September, 2015. It is submitted that under Section 13 (2) of the Act, notice of demand for Rs.96,52,25,791.00 was made wherein an amount of Rs.34,11,32,924.00 was received by the Bank on 9^th April, 2015 from M/s. Desatec and as such, this amount is to be adjusted towards mandatory pre deposit. 2. Opposition filed by the Bank states that an amount of Rs.34,11,32,924.00 was received on 17^th April, 2015 and an amount of Rs.2.00 lac on 31^st December, 2022. It is submitted that the Appellants have challenged the notice, under Section 13 (4) of the Act, which was issued on

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29^th September, 2015, hence cause of action arose on that date; any deposit made prior to it could not be adjusted against the pre deposit. A supplementary affidavit was filed by the Bank wherein following details are submitted:

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Amount Demanded Under Section 13(2) of the SARFAESI Act –

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Rs. 96,62,25,791.00

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Add: Interest @17.70% contractual rate a) *For the period 06.09.2014 to 17.04.2015

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Rs.10,07,48,944.41

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b) *For the period 18.04.2015 to 31.12.2022 -

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Rs.212,22,99,974.58 c) *For the period 01.01.2023 to 28.02.2023 Rs. 8,14,93,122.03 ----------------------Total- Rs.230,45,42,041.02 3. Total: (1+2) Rs.327,07,67,832.02 4. Less: Amount Received from 06.09.2014 to 28.02.2023: #Date Amount 17.04.2015 Rs. 34,11,32,924.00 31.12.2022 Rs. 2,00,00,000.00 -----------------------Total Rs. 36,11,32,924.00 Rs. 36,11,32,924.00 5. Total Amount Recoverable as on 28.02.2023. Rs.290,96,34,908.02 50% of the above amount Rs.145,48,17,454.00

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Accordingly, Learned Counsel for the Respondent submits that Appellant has to make 50% of Rs.290,96,34,908.02 as pre deposit.

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3. Heard the Learned Counsel for the parties and perused the record. Appellant has challenged 13 (4) Notice dated

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29^th September, 2015. Any deposit made prior to it could not be adjusted towards pre deposit as cause of action has arisen after issuance of notice under Section 13 (4) of the Act.

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4. Learned Counsel for Respondent opposes the prayer and submits that provisions of Section 18 of the Act are mandatory in nature wherein pre deposit is to be made by the Applicant. There is no distinction between an interlocutory and a final order. Accordingly, the application is liable to be dismissed.

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5. 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

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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 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

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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.”

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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 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

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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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6. In view of the law laid down by the Hon’ble Apex Court in M/s Sidha Neelkanth Paper Industries Private Limited (supra) Appellant has to deposit the up-dated amount, including interest, as pre deposit to an extent of 50%.

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7. In the present case, Appellant has challenged the notice under Section 13 (4) of the Act thereafter, i.e. as on date an amount of Rs.290,96,34,908.02 is due which includes interest. Accordingly, the Appellant is liable to pay amount equal to 50% of the amount, i.e. Rs.145,48,17,454.00, as pre deposit.

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Accordingly, I.A. 534 of 2019 is disposed of. Appellants should deposit the amount within four weeks.

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List on 27^th April, 2023 for further orders.

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(Anil Kumar Srivastava,J) Chairperson

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Dated: 22^nd March, 2023 03/ac

Nandini Industries India Pvt. Ltd. v. State Bank of India

Case brief

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Nandini Industries India Pvt. Ltd. v. State Bank of India

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