Back
SUPREME COURT OF INDIA
KURIAN JOSEPH, ROHINTON FALI NARIMAN, JJ.
Axis Bank – Appellant
Versus
SBS Organics Private Limited And Another – Respondents
Civil Appeal No. 4379 of 2016 (Arising out of SLP (C) No. 13861/2015)
Decided On : 22-04-2016
(2004) 4 SCC 311 – Relied upon
AIR 2009 Guj. 98 – Referred
(b) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) – Section 18 – After determination u/s 17, aggrieved person entitled to appeal u/s 18 – Appeal can be preferred by remitting prescribed fee – However to make the Tribunal entertain the appeal deposit of 50% of the amount of debt due from him as claimed by the secured creditors or determined by the DRT, whichever is less is mandatory – This deposit is neither secured asset nor a secure debt – Therefore, on disposal of the appeal, either on merits or on withdrawal, or on being rendered infructuous, on a prayer of the appellant for refund of the pre-deposit, the same has to be allowed and the pre-deposit has to be returned to the appellant – The pre-deposit, on the request of the secured creditor and with the consent of the depositors, Appellate Tribunal can appropriate the pre-deposit towards the liability of the borrower, or adjust the amount towards the dues – Section 13(10) of the read with Rule 11 of The Security Interest (Enforcement) Rules, 2002. (Para 19, 22)
AIR 1968 SC 488 – Relied upon
(c) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) – Section 18 – Pre-deposit – Bank has no lien on the pre-deposit u/s 18 – Pre-deposit is not with Bank but with the Tribunal – Secondly it is not bailment – Section 171, Indian Contract Act, 1872 not attracted. (Para 23, 24)
(d) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) – Section 18 – First respondent already sought withdrawal of appeal – There is no order of appropriation nor attachment of the pre-deposit – Therefore the deposit is liable to be returned to first respondent. (Para 25)
Facts of the case:
An appeal under Section 18 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’) before the Debt Recovery Appellate Tribunal (‘DRAT’) can be entertained only if the borrower deposits fifty per cent of the amount in terms of the order passed by the Debt Recovery Tribunal (‘DRT’) under Section 17 of the Act or fifty per cent of the amount due from the borrower as claimed by the secured creditor, whichever is less. The Appellate Tribunal may reduce the amount to twenty five per cent. What is the fate of such deposit on the disposal of the appeal is the question arising for consideration in this case.
The first respondent, being a borrower and aggrieved by the steps taken by the secured creditor, filed Securitisation Application No. 152 of 2010 before the Debt Recovery Tribunal, Ahmedabad. Though, initially an interim relief was granted, the same was vacated by order dated 20.01.2011. Therefore, the first respondent moved the Debt Recovery Appellate Tribunal, Mumbai under Section 18 of the SARFAESI Act. In terms of the proviso under Section 18, the first respondent made a deposit of Rs.50 lakhs before the Appellate Tribunal. During the pendency of the appeal before the DRAT, Securitisation Application itself came to be finally disposed of before the Debt Recovery Tribunal at Ahmedabad, setting aside the sale. Realising that the appeal did not survive thereafter, the first respondent sought permission to withdraw the same and also for refund of the deposit of Rs. 50 lakhs. Permission was granted, however, making it subject to the disposal of the appeal. As the appeal itself was being withdrawn, the first respondent moved the High Court of Gujarat at Ahmedabad by way of Writ Petition (Special Civil Application), aggrieved by the observation that the withdrawal would be subject to the result of the appeal. The same was disposed of by order dated 05.03.2015 by the learned Single Judge, setting aside the said condition and permitting the first respondent herein to withdraw the amount unconditionally. Aggrieved, the appellant-Bank filed an intra-Court appeal. That appeal was dismissed.
Finding of the Court:
The pre-deposit being neither secure asset nor secure debt must be returned after the disposal or withdrawal of the appeal.
Result: Appeal dismissed.
JUDGMENT :
Kurian, J.
Leave granted.
2. An appeal under Section 18 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘SARFAESI Act’) before the Debt Recovery Appellate Tribunal (hereinafter referred to as ‘DRAT’) can be entertained only if the borrower deposits fifty per cent of the amount in terms of the order passed by the Debt Recovery Tribunal (hereinafter referred to as ‘DRT’) under Section 17 of the Act or fifty per cent of the amount due from the borrower as claimed by the secured creditor, whichever is less. The Appellate Tribunal may reduce the amount to twenty five per cent. What is the fate of such deposit on the disposal of the appeal is the question arising for consideration in this case.
3. Being a pure legal issue, it may not be necessary for us to refer to the factual position in detail. The first respondent, being a borrower and aggrieved by the steps taken by the secured creditor, filed Securitisation Application No. 152 of 2010 before the Debt Recovery Tribunal, Ahmedabad. Though, initially an interim relief was granted, the same was vacated by order dated 20.01.2011. Therefore, the first respondent moved the Debt Recovery Appellate Tribunal, Mumbai under Section 18 of the SARFAESI Act. In terms of the proviso under Section 18, the first respondent made a deposit of Rs.50 lakhs before the Appellate Tribunal. During the pendency of the appeal before the DRAT, Securitisation Application itself came to be finally disposed of before the Debt Recovery Tribunal at Ahmedabad, setting aside the sale. Realising that the appeal did not survive thereafter, the first respondent sought permission to withdraw the same and also for refund of the deposit of Rs. 50 lakhs. Permission was granted, however, making it subject to the disposal of the appeal. As the appeal itself was being withdrawn, the first respondent moved the High Court of Gujarat at Ahmedabad by way of Writ Petition (Special Civil Application), aggrieved by the observation that the withdrawal would be subject to the result of the appeal. The same was disposed of by order dated 05.03.2015 by the learned Single Judge, setting aside the said condition and permitting the first respondent herein to withdraw the amount unconditionally. Aggrieved, the appellant-Bank filed an intra-Court appeal. That appeal was dismissed by order dated 01.04.2015 by a Division Bench, and thus aggrieved, the Bank has come up in appeal before this Court.
4. Heard learned Senior Counsel Shri C.U. Singh appearing for the appellant-Bank and learned Counsel Vipul Jai appearing for the respondents.
5. The learned Senior Counsel appearing for the appellant-Bank submits that the first respondent has no right to get back the deposit made by it as a pre-condition for entertaining the appeal. The said amount has to be set off against the dues of the first respondent, which has actually been quantified and for which, Section 13 recovery steps have been permitted. It is submitted that the appellant-Bank has to secure the entire debt by proceeding against the secured assets, and therefore, the deposit is liable to be appropriated by the Bank. Reference is also made to Section 13(10) of the SARFAESI Act and Rule 11 of The Security Interest (Enforcement) Rules, 2002, which read as follows:
“13(10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower.”
“11. Procedure for Recovery of shortfall of secured debt.-
(1) An application for recovery of balance amount by any secured creditor pursuant to sub-section (10) of section 13 of the Act shall be presented to the Debts Recovery Tribunal in the form annexed as Appendix VI to these rules by the aut
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
