Sony Mony Developers Pvt. Ltd. And Ors vs Asset Care And Reconstrcution ...
2024 Latest Caselaw 2519 Bom

Bombay High Court

Sony Mony Developers Pvt. Ltd. And Ors vs Asset Care And Reconstrcution ... on 29 January, 2024

Author: B. P. Colabawalla

Bench: B. P. Colabawalla

     2024:BHC-AS:4952-DB


                                                                                         7-ASWP-797-2024.doc



                                     IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                                  CIVIL APPELLATE JURISDICTION

                                                  WRIT PETITION NO. 797 OF 2024

                        Sony Mony Developers Pvt Ltd & Ors                                  ...Petitioners
                                   Versus
                        Asset Care & Reconstruction Enterprises & Anr                       ...Respondents


                            Mr. Mayur Khandeparkar, a/w Ayush Kothari, Munaf Virjee &
                            Akash Agarwal, i/b AMR Law & Raj Dani, Advocates for the
                            Petitioners.
                            Mr. Nitin Thakkar, Senior Advocate, a/w T.N. Tripathi, i/b T.N.
                            Tripathi & Co., Advocates for Respondent No.1.
                            Mr. Cyrus Ardeshir, Advocate for Respondent No.2.

                                            CORAM         : B. P. COLABAWALLA &
                                                              SOMASEKHAR SUNDARESAN, JJ.

                                            DATE          : JANUARY 29, 2024

                       PC :

1. The above Writ Petition is filed challenging the order dated

17th January 2024 passed by the DRAT in Interim Application No. 33 of

2024 in Appeal No. (D) 81 of 2024. This Interim Application was filed

seeking a waiver of deposit as contemplated under the 2 nd proviso to

Section 18(1) of the Securitization and Reconstruction of Financial Digitally

ASHWINI signed by ASHWINI JANARDAN Assets and Enforcement of Security Interest Act, 2002 (for short JANARDAN VALLAKATI VALLAKATI Date:

2024.02.01 07:09:06 +0530 "SARFAESI Act, 2002"). The learned DRAT, after hearing the parties,

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directed the Petitioners herein (the Appellants before the DRAT) to

deposit a total sum of Rs.35 Crores as a condition precedent for

entertaining their Appeal. The DRAT, in the impugned order, recorded

that the Appellants undertake to deposit a sum of Rs.10.25 Crores on or

before 19th January 2024 by 2:30 pm., and if the said deposit was made

within the stipulated time, dispossession of the Appellants (the

Petitioners herein) from the secured asset shall stand deferred till the

next date. The DRAT further directed that the balance amount of

Rs.24.75 Crores would be paid in two installments in the following

manner :

Numbers of Instalments Payment on or before 1st Instalment Rs.10,00,00,000/- 02.02.2024

2nd Instalment Rs.14,75,00,000/- 16.02.2024

The DRAT ordered that in default, the Appeal shall stand dismissed, without any further reference to the Court.

2. Mr. Khandeparkar, the Learned Counsel appearing on behalf

of the Petitioners, assailed the aforesaid order of the DRAT on two basic

grounds. The first ground was that the amount payable to the 1 st

Respondent-ARC, was not the amount of Rs. 84 Crores as recorded in

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the impugned order, but approximately a sum of Rs.49 Crores. He

submitted that this figure has been arrived at on the basis of what is

mentioned in the 13(2) notice issued by the 1 st Respondent-ARC on 24th

April 2019. He submitted that if one takes this figure into account, then

the maximum amount that would be required to be deposited by the

Petitioners would be a sum of Rs.25 Crores, and if the same is reduced

to 25%, the same would come to approximately Rs.12.5 Crores.

Mr.Khandeparkar, in support of this submission, relied upon the

provisions of the 2nd proviso to Section 18(1) of the SARFAESI Act as

well as a decision of the Hon'ble Supreme Court in the case of Sidha

Neelkanth Paper Industries Private Limited and Another vs. Prudent

ARC Limited and Others (2023) SCC OnLine SC 12. Mr. Khandeparkar

submitted that this judgment, and more particularly paragraph 34

thereof, makes it clear that whatever amount is mentioned in the

Section 13(2) notice would be the "debt due", in case steps taken under

Sections 13(2) / 13(4) against the secured assets are under challenge

before DRT. He submitted that once this is the law laid down by the

Hon'ble Supreme Court, the DRAT was completely incorrect in directing

the Petitioners to deposit a sum of Rs.35 Crores which would be more

than 50% of the amount mentioned in the securitization notice.

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3. The second argument/ground canvassed by Mr.

Khandeparkar was that in any case, the impugned order is passed on 17 th

January 2024 and the Petitioners were directed to deposit a sum of

Rs.10.25 Crores on or before 19th January 2024 which period in any

event is way to short, especially considering the amount involved. For all

these reasons, Mr. Khandeparkar submitted that the impugned order

ought to be set aside and the matter be remanded back to the DRAT for

a fresh consideration of the Waiver Application (Interim Application

No. 33 of 2024) filed by the Petitioners herein.

4. We have heard Mr. Khandeparkar at some length. We are

unable to agree with the submissions canvassed by him. Firstly, we

must note that in the facts of the present case when the Waiver

Application was being argued, a reply was filed by the first Respondent-

ARC in which its specifically took up the contention that the amount due

from the Petitioners, as on 16 th January 2024, was a sum of

Rs.84,81,20,881/-. This in fact has been recorded even in the impugned

order. We find that this amount was not disputed as the figure to be

taken for determining the amount of pre-deposit as contemplated under

Section 18 of the SARFAESI Act. In fact, since possession was to be

taken on 19th January 2024, the Petitioners themselves undertook to the

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DRAT that they would deposit a sum of Rs.10.25 Crores or on before 19 th

January 2024 so that they would not be dispossessed from the secured

assets. Once this is the case, we find that it is now too late in the day for

the Petitioners to contend that the amount on which the pre-deposit

ought to have been calculated should have been Rs.49 Crores and not

Rs.84 Crores as mentioned in the impugned order.

5. This apart, we find that even in law the aforesaid argument is

unsustainable. As rightly submitted by Mr. Thakkar, the Learned Senior

Counsel appearing on behalf of the 1st Respondent-ARC, the 2nd proviso

to Section 18(1), and which is really germane for our purposes, inter alia

stipulates that no Appeal shall be entertained unless the borrower has

deposited with the DRT 50% of the amount of "debt due" from him as

claimed by the secured creditors, or determined by the DRT, whichever

is less. He submitted that the 3 rd proviso gives power to the DRAT to

reduce the deposit amount from 50% to 25% provided reasons for the

same are recorded in writing by the DRAT. As stipulated in the 3 rd

proviso, the DRAT has no power to reduce the amount of deposit less

than 25% of the debt referred to in the 2 nd proviso. We are in agreement

with the submission of Mr. Thakkar that the word 'debt' has been

defined under the SARFAESI Act under Section 2(h)(a) and which

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stipulates that it shall have the same meaning that is assigned to it in

clause (g) of Section 2 of the Recovery of Debts and Bankruptcy Act,

1993 (for short "RDB Act"). The word 'debt' is defined in Section 2(g) of

the RDB Act to mean any liability (inclusive of interest) which is claimed

as due from any person by a Bank or a financial institution during the

course of any business activity undertaken by the said Bank or financial

institution under any law for the time being in force, in cash or

otherwise, whether secured or unsecured, or assigned, or whether

payable under the decree or order of any Civil Court or any arbitration

award or otherwise or under a mortgage subsisting on, and legally

recoverable on the date of the application.

6. We are of the considered view that on an ex facie reading of

the said definition it is clear that the word 'debt' has been given an

extremely wide meaning and means any liability inclusive of interest

which is claimed as due from any person by a Bank or a financial

institution. On a plain reading of the 2 nd proviso to Section 18(1) of the

SARFAESI Act, r/w the definition of the word 'debt' as defined in

Section 2(g) of the RDB Act, it is clear that before an Appeal can be

entertained by the DRAT, the borrower has to deposit 50% of the

amount of "debt due" from him as claimed by the secured creditor or as

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determined by the DRT whichever is less. If there is no determination of

the debt by the DRT (as in the present case), then the borrower would

have to deposit 50% of the amount of "debt due" from him as claimed by

the secured creditor. The provision on a plain reading does not in any

way exclude taking into consideration future interest that is accrued on

the debt owed by the borrower to the secured creditor. In fact, the

definition to the word 'debt' means any liability (inclusive of interest)

which is claimed as due from any person by a Bank or a financial

institution. Therefore, if the claim made by the secured creditor in the

Section 13(2) notice includes future interest (as in the present case), the

same would certainly be included in the amount of "debt due" from the

borrower to the secured creditor as contemplated under the 2 nd proviso

to Section 18(1) of the SARFAESI Act. We, therefore, find no

justification in the statute to hold that it is only the figure that is

mentioned in the 13(2) notice that is to be taken into consideration, and

not the future interest accrued on the said sum, whilst determining the

deposit amount under the 2nd proviso to Section 18(1) of the

SARFAESI Act. The amount of deposit would have to be determined on

the basis of the amount of the "debt due" by the borrower to the secured

creditor on the date when the Appeal is filed in the DRAT. This would

not only include the amount mentioned in the Section 13(2) notice but

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also interest accrued thereon till the date of filing of the Appeal under

Section 18 of the SARFAESI Act. We find that this issue is no longer res

integra and is covered by a decision of a Division Bench of this Court to

which one of us was a party (B.P. Colabawalla, J.) in the case of MRB

Roadconst.. Pvt. Ltd. vs. Rupee Co-Op. Bank (2016 (3) Mh.L.J. 589).

The relevant portion of this decision reads thus:

"18. On a plain reading of the 2nd proviso to section 18(1) of the SARFAESI Act read with the definition under the word "debt" as defined in section 2(g) of the RDDB Act, it is clear that before an appeal can be entertained by the DRAT, the borrower has to deposit 50% of the amount of debt due from him as claimed by the secured creditors or as determined by the DRT whichever is less. If there is no determination of the debt by the DRT under the provisions of the RDDB Act, then the borrower would have to deposit 50% of the amount of debt due from him as claimed by the secured creditors. The provision on a plain reading does not in any way exclude taking into consideration the future interest that is accrued on the debt owed by the borrower to the secured creditor. In fact, the definition of the word "debt" means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution. Therefore, if the claim made by the secured creditor in the section 13(2) notice includes future interest, the same would certainly be included in the "amount of the debt due" from the borrower to the secured creditor as contemplated under the 2nd proviso to section 18(1) of the SARFAESI Act. There is therefore no justification to hold that it is only the figure that is mentioned in the section 13(2) notice that is to be taken into consideration and not the future interest accrued on the said sum, whilst determining the deposit amount under the 2nd proviso to section 18 of the SARFAESI Act. The amount of deposit would have to be determined on the basis of the amount of debt

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due by the borrower to the secured creditor on the date when the appeal is filed in DRAT. This would not only include the amount mentioned in the section 13(2) notice but also interest accrued thereon till the date of filing of the appeal under section 18 of the SARFAESI Act. To our mind, this is the only interpretation that is possible of the 2nd proviso to section 18 of the SARFAESI Act. If we were to accept the contention of the petitioner that the amount to be deposited by the borrower [under the 2nd proviso to section 18(1)] would be only on the basis of the sum/figure as mentioned in the section 13(2) notice and not the interest accrued thereon after the date of the said notice, the same would be violating the plain language of the statute. To interpret the 2nd proviso to section 18(1) in this fashion, to our mind, would clearly violate the plain and unambiguous language of the said section.

19. We must mention here that after the issuance of the notice under section 13(2) and before the appeal is filed in the DRAT under section 18 of the SARFAESI Act, if the borrower has made any part payment of the debt due to the secured creditors, then credit for the same would have to be given to the borrower and for the purposes of deposit under the 2nd proviso to section 18(1), the reduced amount (after giving credit) would have to be taken into consideration for determining the amount required to be deposited by the borrower. This is simply because on the date of filing of the appeal, the debt due to the secured creditor would be reduced after giving credit for the amount already paid."

7. This now only leaves us to deal with the decision of the

Hon'ble Supreme Court in the case of Sidha Neelkanth Papers

Industries Private Limited (supra). Mr. Khandeparkar laid tremendous

stress on paragraph 34 of the said decision to contend that only the

amount mentioned in the 13(2) notice is the amount that is to be taken

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into consideration for the purposes of calculating the pre-deposit. For

the sake of the convenience paragraph 34 of the decision of the Hon'ble

Supreme Court in Sidha Neelkanth Papers Industries Private Limited

(supra) is reproduced hereunder:

"34. 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. 2nd 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, 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 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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8. We are afraid that Mr. Khandeparkar reads the aforesaid

paragraph totally out of context. When one reads this decision in its

entirety, it leaves no manner of doubt that the amount that has to be

deposited by the borrower would be the amount together with interest

on the date of the filing of the Appeal. If we were to interpret the

decision of the Hon'ble Supreme Court in the way Mr. Khandeparkar

wants us to, it would run counter to the express language of Section 18

of the SARFAESI Act. We, therefore, find that the reliance placed by Mr.

Khandeparkar on the decision of the Hon'ble Supreme Court in Sidha

Neelkanth Papers Industries Private Limited (supra) is wholly

misplaced. The aforesaid judgment, when read as a whole does not

mandate that where only the 13(2) notice and/or 13(4) measure is

challenged without challenging the sale notice, only the amount

mentioned in the 13(2) notice would be the figure which would be taken

into consideration for determining the pre-deposit. In any event, in the

facts of the present case, even otherwise, we find that in the

Securitization Application filed by the Petitioners herein, they had in

fact challenged the sale notice published by the 1st Respondent-ARC.

Merely because by the time the Securitization Application came to be

decided the sale did not fructify makes little difference. Once this is the

case, we find that there is no merit in the aforesaid argument of Mr.

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Khandeparkar.

9. As far as his argument regarding the shortage of time to

deposit the amount is concerned, we find that this argument cannot lie

in the mouth of the Petitioners at all. As mentioned earlier, possession

of the secured asset was to be taken on 19 th January 2024. Since the

Petitioners did not want to be dispossessed from the secured asset, they

undertook to the Court that they would deposit Rs.10.25 Crores on or

before 19th January 2024 by 2:30 pm. It is because of this undertaking,

and to ensure that the Petitioners are not dispossessed on that given

date, that time of two days was granted to the Petitioners to deposit the

amount of Rs.10.25 Crores. This is more so when we take into account

that the impugned order of the DRT was passed on 5th July 2023 and the

period to challenge the said order expired on 5th August 2023 (under

Section 18(1) of the SARFAESI Act). The Advocate Commissioner

already appointed under an order under Section 14 of the SARFAESI

Act issued a notice dated 29th December 2023 to the Petitioners for

taking physical possession of the secured asset on 19th January 2024. It

is only thereafter that the Petitioners woke up from their slumber and

filed the Appeal on 14th January 2024 and moved the DRAT on their

Waiver Application which was heard on 17 th January 2024. We,

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therefore, find that there was absolutely nothing wrong when the DRAT

granted two days to deposit the amount of Rs.10.25 Crores or on before

19th January 2024 in order to ensure that they are not dispossessed from

the secured asset.

10. Lastly, despite this whole discussion, we put it to Mr.

Khandeparkar whether his client is in a position to deposit a sum of

Rs.25 Crores (being approximately 50% of Rs. 49 Crores). He, on taking

instructions from his clients, fairly stated that he is not in a position to

deposit the said amount.

11. In view of the forgoing discussion, we find no merit in the

above Writ Petition. It is accordingly dismissed. However, there shall be

no order as to costs.

12. We have been informed that the Petitioners are desirous of

making an One Time Settlement ("OTS") proposal to the 1st Respondent-

ARC. We may clarify that this order shall not in any way prejudice the

OTS proposal the Petitioners wish to make to the 1 st Respondent-ARC. If

any such OTS is made, the 1st Respondent-ARC is free to consider the

same uninfluenced by this order.

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13. This order will be digitally signed by the Private Secretary/

Personal Assistant of this Court. All concerned will act on production by

fax or email of a digitally signed copy of this order.

[ SOMASEKHAR SUNDARESAN, J.] [ B. P. COLABAWALLA, J.]

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