Bombay High Court
M/S. Narayana Farm Produce Pvt. ... vs The Bank Of Maha., Nagpur on 16 December, 2015
Bench: V.A. Naik
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
: NAGPUR BENCH : NAGPUR.
WRIT PETITION NO. 5818 OF 2015
M/s NARAYANA FARM PRODUCE PVT. LTD., NAGPUR AND OTHERS
VERSUS
THE BANK OF MAHARASHTRA, NAGPUR
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Office Notes, Office Memoranda of Court's or Judge's Order
Coram, appearances, Court's Orders
or directions and Registrar's order
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Mr. M. Datta, Advocate with Mr. N.A. Chawhan, Advocate for petitioners
Mr. M. N. Phadke, Advocate for the respondent.
CORAM : SMT. VASANTI A. NAIK and
PRASANNA B. VARALE, JJ.
DATE : DECEMBER 16, 2015.
By this petition, the petitioners impugn the order of the
Debts Recovery Appellate Tribunal, dated 19.08.2015, rejecting
the application filed by the petitioners seeking waiver of the
pre-deposit in the circumstances of the case. In the alternative,
the petitioners challenge the provisions of Section 18 of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (hereinafter
referred to as 'the Securitisation Act' for the sake of brevity)
pertaining to the pre-deposit for entertainment of an appeal
under Section 18 as ultra-vires, illegal, unconstitutional,
arbitrary and against the principles of natural justice. The
petitioners seek a direction to the Debts Recovery Appellate
Tribunal to entertain and decide the appeal filed by the
petitioners without insisting for the pre-deposit.
The petitioners had secured a loan from the respondent-
bank and since, there was a default in payment of the same,
the respondent-bank initiated action against the petitioners
under the provisions of the Securitisation Act. The petitioners
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had mortgaged nine properties of which two were located at
Kerala and seven at Nagpur. The petitioners were served with
a notice under Section 13(2) of the Securitisation Act on
20.08.2013. The respondent-bank proceeded against the
properties situated at Nagpur under Section 13(4) of the Act on
22.11.2013. The petitioners filed an appeal against the action,
under Section 17 of the Securitisation Act and sought an
interim direction restraining the respondent-bank from selling
the properties. The notice under Section 13(4) of the Act in
respect of the properties located at Karala was also issued on
30.08.2014. An application was made by the petitioners before
the Debts Recovery Tribunal for inclusion of the properties at
Kerala in the appeal that was filed under Section 17 of the
Securitization Act. The application filed by petitioners was
dismissed by the Tribunal on 01.10.2014 on the ground that
the Tribunal does not have jurisdiction over the properties
located at Kerala. A review petition filed by the petitioners was
dismissed. On 23.02.2015, the petitioners filed an appeal
before the Debts Recovery Appellate Tribunal at Mumbai.
Along with the appeal, the petitioners had filed an application
for waiver of the pre-deposit in the circumstances of the case.
According to the petitioners, since, the pre-deposit could be
directed only against a final money decree and not against the
interim/ interlocutory order, the petitioners were not required
to make the pre-deposit under Section 18 of the Securitisation
Act. The application of the petitioner was dismissed by the
Debts Recovery Appellate Tribunal by the order dated
19.08.2015 on the ground that the appellants were not entitled
to seek waiver of the pre-deposit and the Appellate Tribunal
did not have jurisdiction to permit waiver. The petitioners
have impugned the order of the Debts Recovery Appellate
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Tribunal and in the alternative have challenged the provisions
of Section 18 of the Securitisation Act that mandate the pre-
deposit while filing the appeal.
Shri Datta, the learned counsel for the petitioners
submitted that in the circumstances of the case, the Appellate
Tribunal ought to have held that it was not necessary for the
petitioners to make the pre-deposit as required under the
provisions of Section 18 of the Securitization Act. It is
submitted that pre-deposit would be necessary only when an
appeal is filed against the finally adjudicated orders of the
Debts Recovery Tribunal under Section 17 of the Securitisation
Act. It is stated that pre-deposit would not be necessary when
an appeal is filed against an interlocutory order. It is
submitted that the judgment, dated 16.11.2010 in Writ Petition
No. 8915/2010 holding that the pre-deposit would not be
required in an appeal challenging an interlocutory order,
would not apply to the case like the one in hand. It is
submitted that in the decided case, there was a direction by the
Debts Recovery Tribunal to pay a sum of Rs. 1.78 Crores within
a period of four weeks and the said order was challenged
before the Appellate Tribunal. It is submitted that in the
instant case, the petitioners are merely challenging the order
refusing to include two of the mortgaged properties that were
located at Kerala, on the ground of absence of territorial
jurisdiction. It is submitted that the assets of the petitioners
are taken away and the amount due and payable to the
respondent-bank is duly secured and protected. It is submitted
that in the circumstances of the case, the condition of pre-
deposit would be onerous and would render the right of appeal
under Section 18 of the Act, illusory. It is submitted that in the
alternative, this Court may hold that the provisions of Section
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18 of the Securitisation Act are arbitrary and violative of the
provisions of the Constitution of India as they render the
remedy of the appeal, illusory. It is stated that there is no
determination of the amount that is due and payable to the
bank and the assets are secured in view of the action under the
provisions of Section 13 of the Act. It is submitted that in the
circumstances of the case, when the application of the
petitioner for inclusion of the mortgaged properties located at
Kerala is rejected by the Tribunal, the condition to make the
pre-deposit would render the remedy of appeal, illusory. The
learned counsel relied on the judgments of the Hon'ble
Supreme Court, reported in 1980 (Supp) SCC 574, (Seth Nand
Lal and another .vs. State of Haryana and others) ; (1975) 2
SCC 175 (Anant Mills Co. Ltd. .vs. State of Gujrat and others) ;
and (2004) 4 SCC 311 (Mardia Chemicals Ltd. And others .vs.
Union of India and others) to substantiate his submission.
On the other hand, Shri Phadke, the learned counsel for
the respondent-bank supported the order of the Appellate
Tribunal. It is submitted that the question whether the pre-
deposit could be waived in a case where an appeal is filed
against the interlocutory order, was considered by this Court
and it is held in the judgment, dated 16.11.2010 in Writ
Petition No. 8915/2010 that the condition of pre-deposit would
also apply where an appeal is filed against an interlocutory
order, passed by the Debts Recovery Tribunal. It is stated that
this Court relied on the judgment in the case of Nashik
Merchant's Co-operative Bank Ltd. .vs. Aditya Hotels Pvt. Ltd.
while holding so. It is submitted that it is held in the
judgment reported in 2012 (2) Mh.L.J. 472 in the case of
Godavari Laxmi Cooperative Bank Ltd. .vs Union of India and
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others, that the Appellate Tribunal cannot waive the mandatory
condition of pre-deposit before entertaining an appeal under
Section 18 of the Securitisation Act. It is submitted that the
Hon'ble Supreme Court has held in the judgment reported in
(2011) 4 SCC 548 in the case of Narayan Chandra Ghosh .vs.
Uco Bank and others that the requirement of pre-deposit under
sub-section 1 of Section 18 of the Securitisation Act is
mandatory and there is no reason whatsoever for not giving
full effect to the provisions contained in Section 18 of the Act.
It is submitted that the validity of the provisions of Section 18
(1) of the Securitisation Act, pertaining to the condition of pre-
deposit were challenged before the Delhi High Court and the
Delhi High Court in the judgment reported in AIR 2006 Delhi
96 in the case of R.V. Saxena .vs. U.O.I. & others, has upheld
the validity of the said provisions. It is submitted that the same
issue again fell for consideration before the Delhi High Court
and by a judgment, dated 18.05.2010 in Writ Petition No.
3401/2010, the Delhi High Court has held that the imposition
of the condition of pre-deposit cannot be said to be onerous. It
is stated that in the circumstances of the case, this Court may
dismiss the writ petition.
On hearing the learned counsel for the parties and on a
perusal of the judgments referred to herein above, we find no
merit in the case of the petitioners. We do not find any
illegality, whatsoever, in the order of the Debts Recovery
Appellate Tribunal, dated 19.08.2015, directing the petitioners
to make the pre-deposit to the extent of 25%. The Appellate
Tribunal did not have jurisdiction to waive the condition of
pre-deposit. In view of the third Proviso to Section 18 of the
Securitisation Act, it could have reduced the security deposit to
the extent of not less than 25% of the debt referred to in the
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second Proviso. The Appellate Tribunal, therefore, rightly held
that the condition precedent of making the pre-deposit for
filing an appeal under Section 18 of the Securitisation Act was
mandatory and a complete waiver of the pre-deposit was not
envisaged by the provisions of Section 18 of the Securitisation
Act. The object of the Securitisation Act is to enable the bank
and the financial institutions to realise the long term assets and
to take possession of the securities, sell them and reduce non-
performing assets by adopting measures for recovery or
reconstruction. It is held by the Hon'ble Supreme Court in the
judgments reported in AIR 1999 SC 1818 and AIR 1988 SC
2010 that the right to appeal is neither an absolute right nor an
ingredient of natural justice and it is well settled that the right
to appeal is a statutory right and it can be circumscribed by the
conditions in the grant. The Hon'ble Supreme Court has
consistently held, as could be found from the judgments
reported in AIR 1988 SC 2010 ; (1975) 2 SCC 175 and (1993)
1 SCC 22 that the right to appeal being a statutory right, the
same could be made conditional or qualified. By referring to
the aforesaid judgments and the other judgments rendered by
the Hon'ble Supreme Court from time to time, the Delhi High
Court has upheld the validity of the provisions of Section 18(1)
of the Securitisation Act, that refer to the condition of pre-
deposit. Also, the Hon'ble Supreme Court has in the case of
Mardia Chemicals Ltd. And others .vs. Union of India, reported
in (2004) 4 SCC 311, upheld the validity of the provisions of
the Securitisation Act, except the provision of appeal under
Section 17 thereof, where a condition of pre-deposit of 75%
amount was made. As rightly submitted on behalf of the
respondent-bank, the Hon'ble Supreme Court has held in the
judgment reported in (2011) 4 SCC 548 that the condition of
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pre-deposit under Section 18(1) of the Securitisation Act is
mandatory and there is no reason whatsoever for not giving
full effect to the provisions contained therein. While holding
so, the Hon'ble Supreme Court was bearing in mind, the object
of the Securitisation Act and therefore, it was observed that the
conditions hedged in the said Proviso cannot be said to be
onerous. The Hon'ble Supreme Court observed in the said
reported judgment that it is well settled that when a statute
confers a right of appeal, while granting the right, the
legislature can impose conditions for the exercise of such right.
We do not find that the condition of making the pre-deposit to
the extent of 25% while filing an appeal against an
interlocutory order would render the right, almost illusory. In
our view, considering the object of the Securitisation Act, it
cannot be said that the condition of the pre-deposit for
entertainment of the appeal under Section 18 of the
Securitisation Act is onerous or arbitrary. We humbly follow
the judgments of the Hon'ble Supreme Court referred to
hereinabove and also the judgment in the case of Mardia
Chemicals Pvt. Ltd. .vs. Union of India, reported in (2004) 4 SCC
311, where the Hon'ble Supreme Court had held that the
provisions of appeal under Section 17 of the Securitisation Act
were unconstitutional and the condition of pre-deposit was bad
in law as it was imposed while approaching the adjudicatory
authority of the first instance and not in appeal. We are
considering a case where the petitioners have challenged an
interlocutory order of the Debts Recovery Tribunal refusing to
include the properties located at Kerala on the ground of
territorial jurisdiction. Since, making of the pre-deposit is
mandatory even while filing appeals against interlocutory
orders, we do not find any reason to grant the relief sought by
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the petitioners. We do not find any merit in the challenge of
the petitioners either to the provisions of Section 18(1) of the
Securitisation Act requiring the making of pre-deposit or the
order of the Debts Recovery Appellate Tribunal, directing the
petitioners to deposit 25% of the amount due.
In the result, we dismiss the writ petition with no order
as to costs.
JUDGE
ig JUDGE
Diwale
