Allowed

Sri Dharani Enterprises v. Icici Bank Limited

DRAT9 Feb 2023

Case brief

AI extract

What is this about?

In an application challenging a pre-deposit order under the SARFAESI Act, the Deputy Chairperson of DRAT Kolkata condoned the delay in filing the appeal. Regarding the waiver or reduction of the pre-deposit, the court held that while full waiver is not permissible, the deposit can be reduced to 40% of the debt due considering the appellant's financial problems, to be deposited within four weeks.

What did the court decide?

I.A. No. 412 of 2022 was allowed to condone delay; I.A. No. 413 of 2022 disposed of directing payment of 40% of debt due.

Sri Dharani Enterprises versus Icici Bank Limited — Company and Corporate | DRAT (2023)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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(Dy. No. 618 of 2022)

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(Arising out of M.A. No. 10 of 2018 in O.A. No.414 of 2013 in DRT Visakhapatnam)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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09.02.2023

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Sri Dharani Enterprises … Appellant -VsICICI Bank Ltd. ….Respondents Mr. N. Srinivas, Learned Counsel for the Appellant Ms. Ishita Ghosh, Learned Counsel, Ms. Shreyasi Sen, Learned Counsel for the Respondent

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THE APPELLATE TRIBUNAL :

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I.A. No. 412 of 2022 application for condonation of delay under Section 5 of the Limitation Act in filing the Appeal. Learned Counsel submits that the delay was not intentional. I found the ground to be sufficient. Accordingly, I.A. No. 412 of 2022 is allowed. Delay in filing the Appeal is condoned.

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I.A. No. 413 of 2022 application for waiver from making pre deposit under Section 21 of the RDDBFI Act, 1993.

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O.A. was filed for adjudication of debt of Rs.29,38,212.52/- which was allowed exparte. Appellant

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filed an application for setting aside the exparte order which was dismissed. Feeling aggrieved, Appellant preferred this Appeal. As per the impugned order, an amount of Rs. 9 lacs was deposited with the Bank. Learned Counsel for the Respondent submits that as on date an amount of Rs.1,59,05,247.52/-is due which includes interest in accordance with the judgment of the Ld. DRT.

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In the recent case of M/s Sidha Neelkanth Paper Industries Private Limited & Anr Vs. Prudent ARC Limited & Ors [2022 Live Law (SC) 11] delivered on 5^th January, 2023 it has specifically been 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 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,

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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.

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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 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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Learned Counsel for the Appellant submits that Bank has already recovered an amount of Rs.9 lacs from the Appellant. It is further submitted that Appellant is facing financial problems. Hence predeposit may be waived.

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As per the law laid down by the Hon’ble Apex Court, pre-deposit is a mandatory condition as has been held in the said case (supra). Discretion lies with the Appellate Tribunal to reduce the amount from 50% to 25%.

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Keeping in view the submission made by the Learned Counsel for the Appellant that the Appellant is facing financial problems, I find it appropriate that an amount equivalent to 40% of the debt due along with accrued interest i.e.Rs.1,59,05,247.52/- be deposited by the Appellant as a pre deposit within a period of four weeks failing which Appeal shall stand dismissed.

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List on 24^th April, 2023 for hearing of Appeal. In the meantime, Respondent may file the opposition within four weeks with copy to the Appellant who may file rejoinder within two weeks thereafter. I.A. No. 413 of 2022 is accordingly disposed of.

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(Anil Kumar Srivastava,J) Chairperson

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Dated 9^th February, 2023 6/tp

Sri Dharani Enterprises v. Icici Bank Limited

Case brief

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Sri Dharani Enterprises v. Icici Bank Limited

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