IMPORTANT POINT
Appeal – Requirement of statutory pre-deposit – In a case where borrower challenges auction sale, thereafter it will not be open for borrower to pray to use sale proceeds received from sale of secured properties to be adjusted/given credit in an application for waiver of pre-deposit – Borrower has to deposit 50% of amount of “debt due” as claimed by bank/financial institution/assignee along with interest as claimed in notice under Section 13(2) of SARFAESI Act and borrower is not entitled to claim adjustment/appropriation of amount realised by selling secured properties and deposited by auction purchaser when auction sale is also under challenge.

JUDGMENT :

M.R. Shah, J.

1. As common questions of law and fact arise in this group of appeals, namely, interpretation of Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the ‘SARFAESI Act’), all these appeals are decided and disposed of together by this common judgment and order.

2. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 22.12.2020 passed by the High Court of Delhi at New Delhi in Writ Petition (Civil) No. 6060/2020, both, the borrower as well as the secured creditor have preferred Civil Appeal Nos. 8969 and 8970 of 2022.

3. Civil Appeal Nos. 8972, 8973 and 8974 of 2022 have been preferred against the common impugned judgment and order dated 12.04.2022 passed by the High Court of Madhya Pradesh, Bench at Indore in respective Writ Petition Nos. 5494/2021, 5470/2021 and 5478/2021, by which the High Court has dismissed the said writ petitions preferred by the original writ petitioners – auction purchasers and has confirmed the orders passed by the Debt Recovery Appellate Tribunal, Allahabad (for short, ‘DRAT’), by which the DRAT while entertaining the appeals under Section 18 of the SARFAESI Act held that the borrower is not liable to deposit 50% of the amount of debt as the secured property has been sold and the amount is realised as the same was paid by the auction purchasers and is to be appropriated towards the amount liable to be deposited as pre-deposit under Section 18 of the SARFAESI Act.

Factual aspects in Civil Appeal Nos.8969 & 8970 of 2022:

4. That the appellant in Civil Appeal No. 8969/2022 – Sidha Neelkanth Paper Industries Private Limited (hereinafter referred to as the ‘principal borrower’) approached the Andhra Bank for sanction of credit facility and in the year 2008, it had approached Standard Chartered Bank for taking over the debt taken by it. In the year 2010, the Andhra Bank sanctioned open cash credit limit for a sum of Rs. 15.5 crores in favour of the principal borrower. Immovable properties were mortgaged by the guarantors and by the borrower to secure the said cash credit facility. After taking over the existing cash credit facility, a further ad-hoc open cash credit to the tune of Rs. 3 crores, due to the Standard Chartered Bank, was cleared by the Andhra Bank.

4.1 Since, the principal borrower failed to make the repayment to the Andhra Bank, its account was declared as a Non Performing Asset (NPA). A notice dated 10.05.2013 was issued by the Andhra Bank under Section 13(2) of the SARFAESI Act, calling upon the borrower to pay the outstanding amount of Rs. 16,61,91,174.67 (Rupees sixteen crores sixty one lakhs ninety one thousand one hundred seventy four and paise sixty seven only), payable as on 27.04.2013. Objections thereto were raised by the principal borrower under Section 13(3A) of the SARFAESI Act. Since the amount demanded was not paid under Section 13(2) of the SARFAESI Act, measures under Section 13(4) of the SARFAESI Act were initiated by the Bank and possession of one of the mortgaged properties, being property bearing No. 170, Deepali, Pitampura, Delhi-110034 was taken. An Appeal was filed being SA No. 264/2013 by respondent Nos. 2 & 3 herein challenging the measures taken by the Andhra Bank under Section 13(4) of the SARFAESI Act.

4.2 On 25.07.2013, a conditional interim stay was granted by the Debt Recovery Tribunal-III (for short, ‘DRT’) and the applicants in SA No. 264/2013 were directed to deposit a sum of Rs. 2 crores within a period of 30 days. The said applicants were also directed to bring a better buyer in respect of the properties in question within a period of 60 days along with 10% of the proposed sale consideration. Since the borrower failed to comply with the order of the DRT, the mortgaged properties were put to auction. Attempts made by the owners of the property to challenge the proposed auction failed inasmuch as the application moved before