Allowed

Smt Vemula Vyjanthi v. The Authorized Officer SBI

DRAT21 Mar 2023

Case brief

AI extract

What is this about?

The court allowed an application seeking condonation of delay in filing an appeal under the Limitation Act, citing illness and administrative issues. The court dismissed an application for waiver of pre-deposit under the SARFAESI Act, holding that sale proceeds cannot be adjusted against the deposit requirement when the sale itself is challenged in appeal.

What did the court decide?

Condonation of delay in filing the appeal allowed subject to payment of costs. Application for waiver of pre-deposit dismissed; appellant directed to deposit 50% of debt due.

Smt Vemula Vyjanthi versus The Authorized Officer… — Contract and Commercial Disputes | DRAT (2023)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Appeal Dy No. 115 of 2022

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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21.03.2023

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Smt. Vemula Vyjanthi & Anr.

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… Appellant

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-Vs-

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State Bank of India & Ors.

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… Respondents

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Mr. N. Srinivas, ld. Counsel for the appellant.

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Mr. D. Chakraborty, ld. Counsel with Ms. S. Pal, ld. Counsel for the respondent.

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THE APPELLATE TRIBUNAL :

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I.A. 76 of 2022

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I.A. 76 of 2022 is filed by the appellant u/s 5 read with

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Section 14 of the Limitation Act praying for condonation of delay in preferring the appeal. Opposition filed by the respondent is taken on record.

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Impugned order was passed by learned DRT on 09.01.2019 whereby S.A. was dismissed. Present appeal was filed on 28.04.2022.

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It is stated in the I.A. filed u/s 5 of the Limitation Act along with supplementary affidavit filed today that after passing the impugned order appellant got ill for about two months. Thereafter, since no Chairperson was posted in the DRAT, Kolkata, it was tedious task for the appellant to take up the matter at DRAT, Allahabad, holding charge of DRAT, Kolkata. He preferred a Writ Petition being number 14020 of 2019 before the Hon’ble High Court at Telengana on 05.07.2019. Ultimately the

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writ petition was dismissed on 09.11.2021 with the observation that dismissal of the writ petition would not preclude the

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petitioner for availing remedy of filing appeal u/s 18 of the SARFAESI Act subject to limitation. Thereafter, instant appeal was filed on 28.04.2022.

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Learned counsel for the appellant submits that as far as period from 09.11.2021 to 28.04.2022 it is covered under the judgement of Hon’ble Apex Court in Suo Motu Writ Petition No. 03 of 2020 dated 10.01.2022 wherein period from 15.03.2020 to 28.02.2022 was exempted with further exemption of 90 days from 01.03.2022. Accordingly, this period of delay is exempted under the judgement cited above.

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As far as delay from 09.01.2019 to 05.07.2019 is concerned, two fold arguments are advanced by the learned counsel for the appellant. Firstly, the appellant was ill for two months and secondly, it was tedious for her to file appeal before DRAT, Kolkata as there no Chairperson was posted. Hence, she was advised to file writ petition before Hon’ble High Court at Telengana.

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Learned counsel for the respondent has placed reliance upon two judgements, one delivered by Hon’ble Rajasthan High Court in Hassan Chand & Sons Vs. H.H.Maharaja Shri Gaj Singh reported in 1961 SCC OnLine Raj 125 and second by Hon’ble Apex Court in Suryachakra Power Corporation Ltd. Vs. Electricity Department, Port Blair & Ors. reported in (2016) 16 SCC 152. Hon’ble Apex Court in Suryachakra Power Corporation case (supra) has held that ‘good faith’ is the basic

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principle for extending the benefit of limitation under the provision of Section 14 of the Limitation Act. ‘Due Diligence’ should also be the relevant factor for extending the benefit of limitation. Learned counsel submits that these two factors are wanting in the present case.

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As far as benefit of Section 14 of the Limitation Act is concerned writ petition was filed on 05.07.2019 before the Hon’ble Telengana High Court. It is admitted fact that no Chairperson was posted in DRAT, Kolkata during that period. Hence, the appellant was advised to file writ petition. Although in the affidavit in Para 12 it is stated that it was tedious task for the appellant to take up the matter at DRAT, Allahabad who was holding charge of DRAT, Kolkata, but that statement could not be interpreted as stated in the application. For extension of limitation period, two factors are to be looked into, ‘due diligence’ and ‘good faith’. Appellant was pursuing the litigation. It cannot be said that appellant was not diligent enough to pursue the matter. Appellant file writ petition before Hon’ble Telengana High Court, although she may not have advised properly, but this could not be the ground for rejecting the application filed u/s 5 of the Limitation Act.

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Having considered the submission made by the parties and gone through the records, I find that provision of Section 14 of the Limitation Act should be extended in favour of the appellant. Accordingly, I find ground explained in the I.A. to be sufficient in

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condoning the delay in filing the appeal. Accordingly, I.A. 76 of 2022 is allowed subject to payment of costs quantified at Rs.5,000/- (Rupees Five thousand) to be deposited in the account of State Legal Services authorities failing which the appeal shall stand dismissed.

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I.A. 75 of 2022

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I.A. 75 of 2022 is filed by the appellant u/s 18(1) of the SARFAESI Act praying for waiver from making pre-deposit.

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Learned counsel for the appellant submits that demanded due was Rs.27.59 lakhs whereas respondent bank has appropriated Rs.48.00 lakhs from sale proceeds which may be adjusted from the mandatory pre-deposit amount. Learned counsel for the respondent submits that debt due as on date along with interest is Rs.61,08,518/-.

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Hon’ble Apex Court in a recent judgement 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 judgement 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

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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 judgement Hon’ble Apex Court has also relied on the judgement 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 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

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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 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 of the law laid down by the Hon’ble Apex Court the

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submission of the learned counsel for the appellant cannot be accepted.

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Having considered the submissions made by the parties and in view of the ratio of the judgement of Hon’ble Apex Court instant I.A. is liable to be dismissed. Accordingly, appellant is directed to deposit 50 per cent of Rs.61,08,518/- within six weeks from today failing which appeal shall stand dismissed.

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List on 05.07.2023 for further order.

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(Anil Kumar Srivastava,J) Chairperson

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Dated: 21 March, 2023 03/pkb

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Smt Vemula Vyjanthi v. The Authorized Officer SBI

Case brief

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Smt Vemula Vyjanthi v. The Authorized Officer SBI

Case brief

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