M/S Akash Ganga Airlines Ltd. ... vs Debt Recovery Appellate Tribunal ...
2015 Latest Caselaw 1766 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 

 									A.F.R.
 

 
 						         Judgment reserved  on 07.08.2015.
 
 						         Judgment delivered on 12.08.2015.
 

 
 				Writ Petition No. 3973 (MS) of 2015. 
 

 
M/S Akash Ganga Airlines Ltd.   		..........................Petitioner. 
 

 
 						Versus 
 

 
Debt Recovery Appellate Tribunal,
 
Allahabad and others. 				.....................Respondents.
 

 
 					       ----------------
 

 

 
Hon'ble Rajan Roy,J.

This writ petition has been filed challenging the order dated 01.07.2015 passed by the Debts Recovery Appellate Tribunal, Allahabad rejecting the application of the petitioners for waiver of the statutory deposit under Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short SARFAESI Act, 2002).

Considering the issues involved, the facts need not be stated in detail. Suffice it to say that the petitioners were granted three different loans on 25.08.2010, namely cash limit for a sum of Rs.5.70 crores, term loan of one crore and bank guarantee for a sum of rupees three crores by respondent no. 2. The petitioners did not repay the loan to the bank and all the three loan accounts of the petitioners were declared as non-performing assets (NPA) on 30.11.2011. The respondent-bank thereafter issued a demand notice under Section 13 (2) of the SARFAESI Act, 2002 on 05.06.2012 to the petitioners for a sum of Rs.5,88,34,840/- plus interest and expenses with effect from 01.11.2011 and since no amount was paid by the petitioners as per the demand notice the respondent-bank initiated recovery proceedings under Section 13 (4) of the SARFAESI Act, 2002. A notice under the said provision was issued to the petitioners on 22.11.2012.

The petitioners filed a securitisation application no. 7 of 2013 before the learned Debts Recovery Tribunal, Lucknow under Section 17 of the SARFAESI Act, 2002 challenging the possession notice dated 22.11.2012 issued by the respondent but the same was dismissed vide order dated 15.09.2014. During pendency of the proceedings under Section 17 auction of the secured assets was conducted on 26.03.2014 for recovery of the amount due from the petitioner. Since no bid came up, therefore, the bank exercising its powers under Section 13 (5A) and (5B) of the SARFAESI Act, 2002 confirmed the bid in its favour and 25% of the bid amount was deposited immediately by the purchaser i.e. respondent-bank and the remaining amount was deposited on 03.04.2014 and sale certificate was issued. Being aggrieved by the said order dated 15.09.2014 the petitioners filed appeal before the Debts Recovery Appellate Tribunal (hereinafter referred to as DRAT) which was numbered as Appeal SR No. 273 of 2014 under Section 18 of the SARFAESI Act, 2002 along with waiver application.

Initially the petitioners had filed an application for waiver of 50% of the statutory amount and permission to pay 25% under proviso to Section 18 of the SARFAESI Act, 2002. Subsequently another application was filed seeking complete waiver on the ground that consequent to the auction during pendency of the proceedings under Section 17 of the SARFAESI Act, 2002 an amount more than the amount due from the petitioners-appellants had already been realized. It is this application which has been dismissed by the DRAT vide order dated 01.07.2015 with the observation that complete waiver is impermissible. Accordingly it directed the petitioners-appellants to deposit 35% of the amount as per demand notice for a sum of Rs.5,88,34,840.00.

The contention of the learned counsel for the petitioner is that once an amount more than the amount due from the petitioners-appellants has already been realized on the basis of the sale/auction of the secured assets then there is no question of any deposit under Section 18 of the SARFAESI Act, 2002 and insistence thereon by the DRAT apart from being illegal is also inequitable and unjust. The said deposit is to be made when the amount due remains unpaid and not when it has already been realized. In this regard he relied upon a judgment of this Court in the case of Gopal Ji Gupta Vs. DRAT, Allahabad & others, reported in 2013(2) DRTC 773 (Alld) and a judgment of Punjab and Haryana High Court in the case of S. R. Forging Ltd. & another V. UCO Bank & others, reported in [2013(1) D.R.T.C. 734 (P&H)]. He also relied upon a decision of the Supreme Court in Civil Appeal Nos. 2074-2078 of 2011 Persn Medicinal Plants Pvt. Ltd. and another V. Indian Bank and others, decided on 25.02.2011.

On the other hand Sri Lalit Shukla, learned counsel for the bank while admitting the factum of sale/auction of the secured assets having already taken place, the same having been purchased by the respondent-bank itself, the sale having been confirmed and possession thereof having been taken, submitted that the plea of the petitioners cannot be accepted in view of decision of the Supreme Court in the case of Indian Bank V. M/S Blue Jaggers Estates Ltd. and others, reported in 2010(3) Bankers' Journal 9 (Supreme Court) and Narayan Chandra Ghosh V. UCO Bank & others, reported in AIR 2011 Supreme Court 1913 and Indian Bank Vs. Debt Recovery Appellate Tribunal and others, reported in (2011)BC 514 (B).

I have heard learned counsel for the parties and perused the record.

The facts in this case are not in dispute. Against a demand notice of Rs.5,88,34,840.00 the sale of the secured assets has taken place and the same have been sold for a sum of Rs.8,71,58,030.00 in favour of the respondent-bank itself. Not only the sale has been confirmed but the property has also been transferred and possession handed over to the respondent-bank. The question herein is as to whether in these circumstances the petitioners-appellants are still under an obligation to pay an amount equal to 35% of Rs. 5,88,34,840.00 under Section 18 of the SARFAESI Act, 2002 or not. Section 18 of the SARFAESI Act, 2002 reads as under:--

"18. 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 an Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal.

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

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 determined by the debts Recovery Tribunal, whichever is less:

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.

(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 the Banks and Financial Institutions Act, 1993 (51 of 1993), and rules made thereunder."

The second proviso to Section 18 clearly provides that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal "50% of the amount of debt due from him" as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less. The third proviso to Section 18 provides that the "appellate tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than 25% of debt" referred to in the second proviso. Thus the amount to be deposited under the said provisos is between 25% and 50% of the amount of debt due from the appellant as claimed by the secured creditor or determined by the Debt Recovery Tribunal, whichever is less. In the instant case on the rejection of the application of the petitioners under Section 17 of the SARFAESI Act, 2002 the amount demanded by the secured creditors i.e. Rs.5,88,34,840.00 plus interest and expenses with effect from 01.11.2011 became due from the petitioners-appellants. Being aggrieved by the determination by the Debts Recovery Tribunal the petitioners filed an appeal under Section 18 of the SARFAESI Act, 2002. Initially an application for permission to deposit 25% of the amount due was filed. Subsequently an application for complete waiver was filed on the ground that the amount more than the amount due had already been realized.

On a bare reading of the provisos to Section 18 of the SARFAESI Act, 2002 it is evident that percentage of deposit required to be made by the appellant is to be calculated on the basis of the "amount of debt due from him". If the amount of debt, which was originally due from him either as claimed by the secured creditors or as determined by the Debts Recovery Tribunal, has already been realized by adopting the measures as mentioned under Section 13 of the SARFAESI Act, 2002, or an mount more than the due amount has already been realized, should the appeal of such appellant be not entertained and the deposit of the amount as mentioned in the provisos to Section 18 be insisted upon in such a situation?

As far as the decision of the Supreme Court in the case of Narayan Chandra Ghosh (supra) is concerned there can be no dispute about the proposition laid down therein and the said judgment is binding upon the courts but in the Court's humble view the said principle will not apply where there is no amount due from the appellants as referred to hereinabove or when more than the due amount has already been realized. A perusal of the judgment in Narayan Chandra Ghosh case (supra) does not reveal that the factual situation as has arisen in this case existed in the said case.

As far as the case of Indian Bank V. M/S Blue Jaggers Estates Ltd. and others (supra) is concerned the facts of the said case were to some extent similar to the facts of the present case, as appears from a perusal of para 13 thereof. However, it is relevant to consider the statement made by the counsel for the appellant appearing therein, as recorded in para 14, to the effect that though the mortgaged properties were put to auction the appellant had not been able to realize the amount because the sale was yet to be confirmed by the appellate tribunal. Now in this light if we read para 18 of the said judgment we find that the Supreme Court rejected the contention as regards para 13 for the reason that the sale on the basis of which it was said that an amount more than the amount due had been realized, had not been confirmed by the appellate tribunal and, therefore, the bank had not been able to realize the amount because as per the direction of the High court in the said case the auction of the mortgaged properties was subject to confirmation by the appellate tribunal. In the said case though the sale had taken place, as in this case, but the same had not been confirmed and the appellant-bank had not been able to reap the benefits of the sale/auction on account of it not being confirmed. In the present case though no counter affidavit has been filed, Sri Lalit Shukla, learned counsel for the Bank, has stated on the basis of instructions, that not only the auction/sale has taken place but the same has also been confirmed and the possession of the property has also been taken, therefore, the factual position existing in this case is materially different and it would be unjust to apply the ratio of the aforesaid judgments to the facts of the present case.

It is not out of place to mention here that one of the judgments relied upon by DRAT while dismissing the application of the petitioners was rendered by a Division Bench of Madras High Court on 16th June, 2010 in Writ Petition No. 17016 of 2009 and Civil Revision No. 2467 of 2009 wherein also the Division Bench of the said High Court had taken the view that the deposit to be made under proviso to Section 18 was mandatory and it declined to give credit of the amount deposited by the auction purchaser to the guarantor. An S.L.P. was filed before the Supreme Court against the said judgment which on being converted into Civil Appeal No. 2074-2078 of 2011 (Persn Medicinal Plants Pvt. Ltd. and another V. Indian Bank and others (supra) was decided on 25.02.2011. The Supreme Court took note of a letter dated 13.12.2010 sent by the Chief Manager, Indian Bank to the Director of the appellant-company wherein it was indicated that as against the amount of Rs.3467.89 lakhs due to the Bank an amount of Rs.5525.00 lakhs had been realized on the sale proceeds of the properties which had been put to sale. Thereafter it took note of the submission of learned counsel for the Bank that if the Bank is allowed to appropriate this amount then he had no objection to the appeal of the appellant being heard on merit at DRAT. Consequently the Supreme Court ordered that the Indian Bank would be at liberty to appropriate the amount which is already with the Bank, however, it shall be subject to the final decision of the appeal by the DRAT and further directed the DRAT to hear and dispose of the appeal on all the three questions of law. The judgment of the Supreme Court referred to hereinabove is quoted as under:--

" 1. Leave granted.

2. We have heard the learned counsel fore the parties.

3. These appeals emanate from the judgment and orders dated 16th June, 2010 passed by the High Court of Judicature at Madras in Writ Petition No. 17016/2009 and Civil Revision No. 2467 of 2009 and M.P. Nos. 1 & 2 of 2009 in Civil Revision No. 2467 of 2009 by which, while allowing the writ petition and the civil revision petition, the High Court has set aside the order passed by the Debts Recovery Appellate Tribunal("DRAT").

4. Our attention has been drawn to a letter dated 13.12.2010 sent by the Chief Manager, Indian Bank, to the Director of the Appellant Company, the relevant portion of which reads as under:

As regards the liabilities, we wish to state that the amount due as on 30.11.2010 is Rs.3467.89 Lakhs after appropriation of a sum of Rs.410.00 Lakhs collected after filing of suit and Rs.5525.00 Lakhs being the sale proceeds of property said above.

5. Learned Solicitor General submits that if the Bank is allowed to appropriate this amount, then he has no objection to the appeal if the Appellant being heard on merit by the DRAT. We direct that the Indian Bank would be at liberty to appropriate the amount which is already with the Bank, however, this would be subject to the final decision of the appeal by the DRAT.

6. In the facts and circumstances of this case, we direct the DRAT to hear and dispose of the appeal on all questions of law, as expeditiously as possible, in any even, within two months from the date of the communication of this order.

7. These appeals are accordingly disposed of, leaving the parties to bear their own respective costs."

Though no principle of law has been laid down by the Supreme Court in the said judgment but considering the aforesaid facts and observations as also the discussion made hereinabove, it clearly indicates that in a given situation where an amount more than the amount due from the borrower/guarantor had already been realized by auction sale which stands confirmed and the possession of the property also had been handed over to the Bank which is utilizing the same or is utilizing the property having purchased the same in the said auction, insistence on the deposit referred to under proviso to Section 18 would be contrary to the legislative intent as also the express provision as is evident from the use of the words "50% of the amount of debt due from him".

A similar view has been taken by a Division Bench of the Punjab and Haryana High Court in similar fact situation in the case of S.R.Forging Ltd. & another V. UCO Bank & others, reported in 2013 (1) DRTC 734 (P&H), para 3 of which reads as under:--

"3. At this stage, we find that out of total due amount of Rs.18.24 crores, Rs.17.75 crores have been received by the Bank in a public auction. Therefore, the deposit of 50% of the amount due prior to sale from the petitioner would be wholly unjustified. The proviso to Sec. 18 of the Act restricts the entertainment of the Appeal unless the borrower deposits 50% of the amount of the debt claimed by the secured creditors. Once rs.17.75 crores have been received by the secured creditors, that is more than 50% of the debt due from the petitioners, the purpose of the proviso stands satisfied."

In view of the above discussion the impugned order is quashed. The DRAT is directed to reconsider the application for waiver in the light of the aforesaid observations and decide the same within one month from the date a certified copy of this order is produced before it.

The writ petition is partly allowed.

12.08.2015.

Shakir.