Partly allowed

Virat Crane Industries Ltd. v. Stressed Assets Stabilistation Fund and Ors.

DRAT5 Jun 2023REGULAR APPEAL/81/2023

Case brief

AI extract

What is this about?

The Tribunal condoned the delay in filing the appeal against the order in O.A. 13 of 2003 but dismissed the application for waiver of pre-deposit, directing the appellant to deposit 50% of the debt due.

What did the court decide?

Application No. 254 of 2019 allowed for condonation of delay. Application No. 255 of 2019 dismissed; appellant directed to make 50% pre-deposit within four weeks.

Virat Crane Industries Ltd. versus Stressed… — Contract and Commercial Disputes | DRAT (2023)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Diary No. 183 of 2019

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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05.06.2023	M/s. Virat Crane Industries Limited ... Appellant -Vs- Stressed Assets Stabilisation Fund & 4 Others .. Respondents
	Ms. Poetry Dutta, Learned Counsel for the Appellant
	Mr. Mukul Banerjee, representing Mr. Ajay Gaggar, Learned Counsel for Respondents
	Mr. Laxman Kumar Behera,
	Learned Counsel for the
	Respondents No. 3, 4 and 5

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THE APPELLATE TRIBUNAL :

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Application No. 254 of 2019

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Application for condonation of delay of 143 days in preferring the appeal. Objection filed by the Respondents. Heard the Learned Counsel for the parties. Perused the record.

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A supplementary affidavit is filed by Appellant on 5^th December, 2022. No counter is filed.

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It appears that the O.A. was decided on 7^th January, 2019. Thereafter, an application for setting aside the order dated 7^th January, 2019 was filed by the Appellant which was dismissed on 25^th June, 2019. Feeling aggrieved, appeal is filed against the order dated 7^th January, 2019.

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Learned Counsel for the Appellant submits that there is delay of 143 days in preferring the appeal which was not intentional as an application for setting aside the order dated 7^th January, 2019 was filed.

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As far as maintainability of this appeal is concerned, it can be looked into at the time of hearing of the appeal.

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Learned Counsel for the Respondent opposes the prayer and submits that the main intention of the Appellant is to linger the proceedings. Even in the O.A. all the technical issued were raised by the Appellant.

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Going through the record and considering the submissions made by the Appellant, I find the ground sufficient for condoning the delay in filing the appeal. The application, being Application No. 254 of 2019, is allowed by condoning the delay in filing the appeal. Appeal be registered by supplying regular appeal number.

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Application No. 255 of 2019

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This is an application filed by Appellant for waiver from making pre deposit.

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Learned Counsel for the Appellant submits that against a compromise proposal an amount of Rs.2,35,00,000.00 has been deposited by the Appellant and the Appellant may be permitted to deposit the remaining amount after giving some time.

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Learned Counsel for the Respondent opposes the prayer and submits that no amount was deposited by the

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Appellants as far as O.A. is concerned. Further it is submitted that the alleged agreement failed and the amount alleged to have been deposited is lying in the ‘No Lien Account”. Appellant cannot take advantage of that.

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Appeal is preferred against an order passed in O.A. 13 of 2003 by the Learned DRT. Provisions of Section 21 of the Recovery of Debts And Bankruptcy Act, 1993 are mandatory in nature. Section 21 of the RDB Act reads as under :

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21. Deposit of amount of debt due, on filing

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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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As far as amount of settlement, if any, is concerned, Learned Counsel for the Respondent submits that the same is in the “No Lien Account”. Hence, as far as pre deposit is concerned as per the Respondent as on 28^th February, 2023, an amount of Rs.28,32,02,323.00 is due which may have enhanced further. However, keeping in view the facts and circumstances of the case and the law laid down 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 :

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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 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: “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

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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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In view the mandatory provisions of Section 21 of the Recovery of Debts And Bankruptcy Act, 1993 and 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, Application No. 255 of 2019 is dismissed. Appellant is directed to make pre deposit equivalent to 50% of the debt due as on date, Rs.28,32,02,323.00, within a period of four weeks.

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List on 4^th August, 2023 for further orders.

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(Anil Kumar Srivastava,J) Chairperson

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Dated 05^th June, 2023 03/ac

Virat Crane Industries Ltd. v. Stressed Assets Stabilistation Fund and Ors.

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Virat Crane Industries Ltd. v. Stressed Assets Stabilistation Fund and Ors.

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