Partly allowed

Mr.C.R.Narasimhan v. State Bank of India

Madras HC30 Oct 2017WP/25809/2017

Case brief

AI extract

What is this about?

The High Court held that the pre-deposit requirement under the SARFAESI Act is mandatory but exercisable discretion allows reduction. The Court quashed an order for 50% deposit, directing payment of 25% due to prima facie fraud, allowing the appellate appeal to proceed.

What did the court decide?

Impugned order set aside; petitioner directed to remit 25% of the amount claimed instead of 50%; Registrar to process appeal.

Mr.C.R.Narasimhan Vs State Bank of India — Banking and Recovery | Madras HC (2017)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED : 30/10/2017

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THE HONOURABLE Mr.JUSTICE S.MANIKUMAR AND THE HONOURABLE Mr.JUSTICE R.SURESHKUMAR

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W.P.No.25809 of 2017

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and

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W.M.P.No.27237 of 2017

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Mr.C.R.Narasimhan ...Petitioner

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State Bank of India

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rep. by its Branch Manager Rountana Branch - Anna Nagar (previously known as State Bank of Saurashtra). ..Respondent

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Prayer: Writ petition filed under Article 226 of the Constitution of India praying for issuance of a writ of certiorari to call for the records leading to the passing of the impugned order, dated 5/9/2017 passed by the Hon'ble Debt Recovery Appellate Tribunal, Chennai, in I.A.No.320 of 2016 in A.I.R.No.314 of 2016 and quash the same.

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For Petitioner... Mrr.V.Chandrakanthan and Mr.V.Johnson Yuvaraj For Respondent ... Mr.CPR.Kamaraj

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O R D E R (Order of the Court was made by S.MANIKUMAR, J)

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Borrower has filed the instant writ petition, for a writ of certiorari, to quash the order, dated 5/9/2017, made in I.A.No.320 of 2016 (waiver petition) in A.I.R.No.314 of 2016, on the file of the Debt Recovery Appellate Tribunal.

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Going through the material on record and the supporting affidavit to the writ petition, on 6^th October 2017, we passed the following order:-

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“Perusal of the order, dated 27/9/2017, passed by a Hon'ble Division Bench of this Court shows that on the submission of the learned counsel that by way of sale of the

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property in May 2017, Bank has recovered a sum of Rs.4,76,000/- and taking note of the conditional order, made in I.A.No.320 of 2016, petition filed for waiver, directing the petitioner, to make a deposit of Rs.5 lakhs, this Court has directed the petitioner, to pay the remaining amount of Rs.24,000/-, before the Debt Recovery Appellate Tribunal, Chennai, on or before 4/10/2017.

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Mr.V.Chandrakanthan, learned counsel for the petitioner submitted that the above said amount of Rs.24,000/-, has been deposited with the Registrar, Debt Recovery Appellate Tribunal, Chennai.

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O.A.No.184 of 2014 filed by the Bank has been allowed, for recovery of Rs.13.61 lakhs. Against which, appeal in A.I.R.No.314 of 2016, has been filed, before the Debt Recovery Appellate Tribunal, Chennai.

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Perusal of the order impugned before us shows that though the Tribunal, as per third provisio to Section 18 of the Act, is empowered to order pre-deposit, to the extent of 25% of the amount determined, but not less than 25%, there is no explanation, as to why the Tribunal has not exercised its jurisdiction, on the averments made by the writ petitioner, as regards forgery committed by the Bank officials and that a criminal case has been investigated.

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Having regard to the submission of the learned counsel for the petitioner that a sum of Rs.3,50,000/- (Rupees Three lakhs and fifty thousand only), would be paid to the Bank, towards discharge of liabilities, we direct the petitioner, to make payment of the said sum, within three weeks from today.

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Post on 30/10/2017.”

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Thus, it is listed today.

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Mr.CPR.Kamaraj, learned counsel for the respondent has

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entered appearance, on behalf of the State Bank of India/respondent.

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Inviting the attention of this Court to the charge sheet, dated 30/12/2009, Mr.V.Johnson Yuvaraj, learned counsel for the petitioner submitted that the following persons, viz., (i). Mr.T.Karthik Prakash, Proprietor, M/s.Ess Kay Construction, (ii). Mr.S.Arun Kumar, Proprietor, M/s. Radha Foundations,

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(iii). Mr.S.Sekar, Proprietor, M/s. Tick Constructions and (iv). Pinki Battacharya, Branch Manger of erstwhile State Bank of Saurashtra, Anna Nagar, (now acquired by State Bank of India and now known as Round Tana branch) have colluded together and dishonestly and fraudulently cheated not only the Bank and borrowers like the petitioner, and when CBI, Economic Offences Wing, Chennai, had investigated, a complaint made by State Bank of India, dated 11/2/2009, and filed a charge sheet against the above said persons, the Tribunal, ought to have considered the said aspect and accordingly, granted waiver to pre-deposit. He further submitted that petitioner has been defrauded and not liable to pay the sum of Rs.13.61 lakhs, as directed by the Debt Recovery Appellate Tribunal - I, Chennai, in O.A.No.184 of 2014.

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Mr.V.Johnson Yuvaraj, learned counsel for the petitioner further submitted that as per the directions of this Court, dated 6^th October 2017, a sum of Rs.3,50,000/-, was deposited with the Registrar of the Debt Recovery Appellate Tribunal, in A.I.R.No.314 of 2016, on 25/10/2017. It is also the submission of the learned counsel for the petitioner that though a request was made to the Debt Recovery Appellate Tribunal, Chennai, for reference of the matter to the Mediation and Conciliation Centre, same was not acceded.

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Mr.CPR.Kamaraj, learned counsel for the Bank acknowledges the deposit made by the writ petitioner. He further submitted that before the Debt Recovery Appellate Tribunal, Chennai, submission was made for withdrawal of the writ petition.

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Heard the learned counsel for the parties and perused the material available on record.

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Section 18 of the SARFAESI Act, 2002, reads thus:“Appeal to Appellate Tribunal – (1) Any person aggrieved, by any order made by the Debts Recovery Tribunal (under Section 17, may prefer an appeal along with such fee, as may be prescribed) to the Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal:

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[Provided that different fees may be prescribed for filing an appeal by the borrower or by the person other than the borrower]

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[Provided further that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent, of the amount of debt due from him, as claimed by the secured creditors or

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determined by the Debts Recovery Tribunal, whichever is less:

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Provided also that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent of debt referred to in the second proviso]

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(2) Save as otherwise provided in this Act, the Appellate Tribunal shall as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder.”

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In Narayan Chandra Ghosh vs. Uco Bank & Ors. reported in AIR 2011 SC 1913, the question posed before the Hon'ble Apex Court was, whether the requirement of the pre-deposit under Section 18(1) is mandatory or not? Going through Section 18 of the SARFAESI Act, 2002 and the provisos therein, the Hon'ble Apex court, at paragraph No.8 of the said judgment, held as follows:

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"8. Section 18(1) of the Act confers a statutory right on a person aggrieved by any order made by the Debts Recovery Tribunal under Section 17 of the Act to prefer an appeal to the Appellate Tribunal. However, the right conferred under Section 18(1) is subject to the condition laid down in the second proviso thereto. The second proviso postulates 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 Debts Recovery Tribunal, whichever is less. However, under the third proviso to the sub-section, the Appellate Tribunal has the power to reduce the amount, for the reasons to be recorded in writing, to not less than twenty-five percent of the debt, referred to in the second proviso. Thus, there is an absolute bar to entertainment of an appeal under Section 18 of the Act unless the condition precedent, as stipulated, is fulfilled. Unless the borrower makes, with the Appellate Tribunal, a predeposit of fifty percent of the debt due from him or determined, an appeal under the said provision cannot be entertained by the Appellate Tribunal. The language of the said proviso is clear and admits of no ambiguity. It is well-settled that when a statute confers a right of appeal, while granting the right, the Legislature can impose conditions for

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the exercise of such right, so long as the conditions are not so onerous as to amount to unreasonable restrictions, rendering the right almost illusory. Bearing in mind the object of the Act, the conditions hedged in the said proviso cannot be said to be onerous. Thus, we hold that the requirement of pre-deposit under sub-section (1) of Section 18 of the Act is mandatory and there is no reason whatsoever for not giving full effect to the provisions contained in Section 18 of the Act. In that view of the matter, no court, much less the Appellate Tribunal, a creature of the Act itself, can refuse to give full effect to the provisions of the Statute. We have no hesitation in holding that deposit under the second proviso to Section 18(1) of the Act being a condition precedent for preferring an appeal under the said Section, the Appellate Tribunal had erred in law in entertaining the appeal without directing the appellant to comply with the said mandatory requirement."

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Earlier, considering the submission of the learned counsel for the petitioner that a sum of Rs.4,76,000/-, had already been recovered and taking note of the conditional order made in I.A.No.320 of 2016, petition filed for waiver, to make deposit of Rs.5 lakhs, a Hon'ble Division Bench of this Court had directed the petitioner, to pay the remaining amount of Rs.24,000/-, before the Debt Recovery Appellate Tribunal, Chennai, on or before 4/10/2017. The said amount has been deposited. However, on 6^th October 2017, we further directed the petitioner to deposit a sum of Rs.3,50,000/-, which has been done by way of a Demand Draft, drawn on the Indian Bank, in favour of the Registrar, Debt Recovery Appellate Tribunal, Chennai. Property has been sold. Bank is stated to have recovered a sum of Rs.4,76,000/-. The petitioner has remitted a sum of Rs.3,74,000/-(inclusive of the deposit of Rs.24,000/- as stated supra). At the instance of State Bank of India, Rajaji Salai, the Superintendent of Police, Central Bureau of Investigation, Economic Offence Wing, Chennai, has laid a charge sheet, as stated supra.

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Considering the totality of the case and bona fide of the petitioner, in complying with the directions of this Court and in the light of the third proviso to Section 18 of the Act, 2002, which empowers the Tribunal, to order pre-deposit, to the extent of 25% of the amount determined, but not less than 25% of the amount claimed or determined, whichever is less, this Court is of the view, suffice to direct the petitioner alleged to have been defrauded for which there is a prima facie evidence, to remit only 25% of the amount, instead of pre-deposit of Rs.5 lakhs, as directed by the Tribunal.

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When discretion is conferred on the Tribunal, there is no reason as to why the Tribunal has not exercised its jurisdiction, more particularly, when acts of fraud and forgery committed by the Bank official and others, have been pointed out.

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In the light of the above discussion, we are of the view that remittance of a sum of Rs.3,74,000/-, with the Registrar, Debt Recovery Appellate Tribunal, Chennai, would satisfy the third proviso, to Section 18 of the SARFAESI Act, 2002, to entertain the appeal in AIR No.324 of 2016. Proceeding, dated 5/9/2017, of the Debt Recovery Appellate Tribunal, Chennai, ordering pre-deposit is sustained with the modification of a sum, slightly more than 25% of the amount claimed in O.A.No.184 of 2014, on the file of the Debt Recovery Tribunal - I, which the petitioner has remitted with the Registrar, Debt Recovery Appellate Tribunal, Chennai.

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In view of the above, writ petition is partly allowed, and the impugned order, dated 5/9/2017, is set aside, as above. Registrar, Debts Recovery Appellate Tribunal, is directed to process the appeal, in AIR No.314 of 2016 and assign regular appeal number, if the appeal is otherwise in order.

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Though in the instant writ petition, Mr.V.Chandrakanthan, learned counsel for the petitioner seeks for a reference to the Mediation and Conciliation Centre, or the Lok Adalat, as the case may be, for amicable settlement of the dispute between the petitioner and the Bank towards the discharge of debt, it is open to the writ petitioner, to make a request on the appeal being entertained. If any such request is made, taking into consideration the entire facts, Debt Recovery Appellate Tribunal, Chennai is directed to pass suitable orders. No costs. Consequently, the connected Miscellaneous Petition is closed.

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mvs.

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The Branch Manager State Bank of India Rountana Branch - Anna Nagar (previously known as State Bank of Saurashtra).

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1 cc to Mr. Kamaraj, Advocate sR.76530
+ 1 cc to Mr.S. Benazir, Advocate Sr.76766
W.P.No.25809 OF 2017
CS-IV
EU(14/11/2017 )

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Mr.C.R.Narasimhan v. State Bank of India

Case brief

What is this about?

What did the court decide?

Mr.C.R.Narasimhan v. State Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

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