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IN THE HIGH COURT OF BOMBAY
Nitin Jamdar, Abhay Ahuja, JJ.
Vipin Aggarwal - Appellant
Versus
Indian Overseas Bank - Respondent
Writ Petition No. 15562 of 2022
Decided On : 23-01-2023
SARFAESI Act - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Sections 2(f), 18(1) - The court discussed the provisions of the SARFAESI Act, particularly focusing on the definitions of 'borrower' and the requirements for pre-deposit under Section 18. The court interpreted that the obligation to deposit is on the borrower as defined, and the amounts paid by others cannot be appropriated towards this requirement unless the borrower accepts the sale. This interpretation influenced the court's decision to uphold the DRAT's order requiring the petitioner to make a pre-deposit.
Fact of the Case:
The petitioner, a co-owner and guarantor of a mortgaged property, challenged a DRAT order requiring a pre-deposit of Rs.15 crore for an appeal against the sale of the property due to the borrower's default. The property was sold after the borrower defaulted, and a One Time Settlement (OTS) was later proposed but not fully executed, leading to the current dispute regarding the pre-deposit requirement.
Finding of the Court:
The court found that the DRAT's order was justified, as the petitioner could not distance himself from the OTS while seeking to benefit from the sale proceeds. The court upheld the requirement for the petitioner to make the pre-deposit as mandated by the SARFAESI Act.
Issues: Whether the petitioner is entitled to credit the amount paid under the OTS towards the pre-deposit requirement and whether the DRAT erred in its order regarding the pre-deposit.
Ratio Decidendi: The court held that the definition of 'borrower' under the SARFAESI Act does not allow for amounts paid by others to be credited towards the borrower's pre-deposit obligation unless the borrower accepts the sale. The petitioner’s attempt to challenge the sale while seeking to benefit from the sale proceeds was inconsistent.
Final Decision: The writ petition was rejected, affirming the DRAT's order requiring the petitioner to make the pre-deposit.
JUDGMENT/ORDER
1. The Petitioner is aggrieved by the order dtd. 29/11/2022 passed by the Debts Recovery Appellate Tribunal at Mumbai (DRAT) directing the Appellant to pay a sum of Rs.15.00 crore as pre-deposit within three weeks on or before 20/12/2022, in default, the Appeal to stand dismissed without further reference to the Tribunal.
2. The Petitioner is the brother of one Mr. Ramesh Aggarwal and the co-owner of a property named Lavkush, Road No.8, 60 Hatkesh Society, Vile Parle (West), Mumbai - 400049 (hereinafter referred to as the "subject property") which property was mortgaged as security to the Indian Overseas Bank being Respondent no.1 herein for certain credit facilities granted by the Bank to the Respondent no.2 Hooghly Ship Breakers Limited, who was the borrower. Petitioner was the guarantor and mortgagor, along with his brother.
3. The outstanding balance from the borrower to the Bank, as on 28/2/2021, was Rs.43, 44, 11, 258.38, and adding interest at the rate of 13.90 %, the balance as on 21/6/2022 totals to Rs.51, 34, 88, 389.00.
4. As the borrower defaulted in repayment, the Bank initiated an action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and issued a sale notice dtd. 6/3/2021, putting the subject property on sale scheduled on 24/3/2021. The Respondent bank sold the subject property to Respondents no.4 to 6 herein on 24/3/2021 and received Rs.30, 28, 00, 000.00The Petitioner filed an application challenging the said sale notice. However, vide order dtd. 25/3/2021, the Tribunal rejected ad- interim relief, which was challenged before this Court and thereafter before the Supreme Court. However, neither this Court nor the Supreme Court has granted any relief to the Petitioner with respect to the auction sale.
5. A One Time Settlement (OTS) proposal was moved by the brother of the Petitioner -Respondent no.3 on 2/7/2021, which is after the sale of the subject property on 24/3/2021. The Bank accepted the OTS proposal and agreed to settle the debt subject to payment of Rs.13.10 crore in addition to the amount recovered pursuant to the auction sale. The OTS proposal was accepted subject to the following three conditions :
(ii) Peaceful possession of the subject property was to be handed over to the auction purchaser without any demur.
(iii) No Dues Certificate to be issued consequent to full payment of the amount agreed upon and after peaceful transfer of physical possession of the subject property to the auction purchaser.
6. On 30/7/2021, a sum of Rs.13.10 crore in terms of the OTS was deposited; however, the peaceful physical possession of the subject property has not been handed over. Even the pending cases have not been withdrawn.
7. The Petitioner filed Waiver Application on 8/7/2022 under the SARFAESI Act seeking complete waiver of the mandatory pre-deposit under the second proviso to Sec. 18(1) of the SARFAESI Act and in the alternative to reduce the amount to the minimum of 25% by the exercise of discretion under the third proviso to Sec. 18(1) of the SARFAESI Act.
8. The DRAT vide order dtd. 1/9/2022 directed the Petitioner to deposit Rs.15.00 crore in two installments towards compliance of pre-deposit under Sec. 18 of the SARFAESI Act. Being aggrieved by the aforesaid order, the Petitioner filed Writ Petition No.10896 of 2022 before the Bombay High Court, and a Division Bench of this Court vide order dtd. 14/9/2022 disposed of the Petition setting aside the impugned order dtd. 1/9/2022 and remanding mater to the DRAT giving liberty to the petitioner to file an additional affidavit.
9. Pursuant to the order of this Court, the Petitioner filed an additional affidavit dtd. 27/9/2022 in the DRAT. According to the Petitioner, there was no debt due in the books of the Respondent bank against the borrower company in view of the OTS. He, therefore, submits that th
The obligation to make a pre-deposit under the SARFAESI Act is strictly on the borrower, and amounts paid by others cannot be appropriated towards this requirement unless the borrower accepts the sal....
Non-borrowers cannot be subjected to pre-deposit requirements under Section 18 of the SARFAESI Act, confirming strict adherence to statutory definitions.
Pre-deposit under Section 18 of the SARFAESI Act is a mandatory requirement for maintaining an appeal before the Appellate Tribunal, and it cannot be completely waived even in the face of financial h....
The amount paid by the auction purchaser cannot be adjusted against the debt due for the purpose of calculating the amount of pre-deposit, as per the settled legal principle established by the Suprem....
The main legal point established in the judgment is that the provision relating to pre-deposit under Section 18 of the SARFAESI Act applies to both interlocutory and main application orders, and ther....
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