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IN THE HIGH COURT OF DELHI
HIMA KOHLI, SUBRAMONIUM PRASAD, JJ.
Prudent ARC Limited – Petitioner
Versus
Sidha Neelkanth Paper Industries and Others – Respondents
W.P. (C) No. 6060 of 2020
Decided On : 22-12-2020
Advocate Appeared:
For the Petitioners: Rajeeve Mehra, Abu John Mathew, Madhusudan, Manubhav Anand.
For the Respondents: Muneesh Malhotra, Achin Mittal, Manpreet Kaur, Aditya Malhotra, Ratan K. Singh.
Headnote:
The court held that the requirement of pre-deposit under Section 18 of the SARFAESI Act is mandatory and cannot be waived by the DRAT. The amount of debt due for the purposes of Section 18 is the amount claimed by the secured creditor in its notice issued under Section 13(2) of the Act, and any future interest need not be taken into consideration. The interest component shall be ignored only for the purposes of Section 18 of the Act. Any amount that has been repaid by the borrower and/or recovered by a secured creditor after filing of the petition under Section 17, shall stand to the benefit of the borrower while computing the “amount of debt due” under the second proviso to Section 18 of the SARFAESI Act, 2002.
Fact of the Case:
The respondent No. 1/principal borrower had approached the respondent No. 5/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, respondent No. 5/Andhra Bank sanctioned Open Cash Credit (in short “OCC”) limit for a sum of Rs. 15.5 crores in favour of the respondent No. 1. Immovable properties were mortgaged by the guarantors and by the respondent No. 1 to secure this cash credit facility. After taking over the existing cash credit facility, a further ad-hoc OCC limit to the tune of Rs. 3 crores, due to the Standard Chartered Bank, was cleared by the respondent No. 5/Andhra Bank.
Finding of the Court:
The court held that the requirement of pre-deposit under Section 18 of the SARFAESI Act is mandatory and cannot be waived by the DRAT. The amount of debt due for the purposes of Section 18 is the amount claimed by the secured creditor in its notice issued under Section 13(2) of the Act, and any future interest need not be taken into consideration. The interest component shall be ignored only for the purposes of Section 18 of the Act. Any amount that has been repaid by the borrower and/or recovered by a secured creditor after filing of the petition under Section 17, shall stand to the benefit of the borrower while computing the “amount of debt due” under the second proviso to Section 18 of the SARFAESI Act, 2002.
Issues: Whether the requirement of pre-deposit under Section 18 of the SARFAESI Act is mandatory and can be waived by the DRAT.
Ratio Decidendi: The court held that the requirement of pre-deposit under Section 18 of the SARFAESI Act is mandatory and cannot be waived by the DRAT. The amount of debt due for the purposes of Section 18 is the amount claimed by the secured creditor in its notice issued under Section 13(2) of the Act, and any future interest need not be taken into consideration. The interest component shall be ignored only for the purposes of Section 18 of the Act. Any amount that has been repaid by the borrower and/or recovered by a secured creditor after filing of the petition under Section 17, shall stand to the benefit of the borrower while computing the “amount of debt due” under the second proviso to Section 18 of the SARFAESI Act, 2002.
Final Decision: The court allowed the petition and disposed of it in terms of the aforesaid conclusion, with no orders as to costs.
JUDGMENT :
SUBRAMONIUM PRASAD, J.
1. The judgment and order dated 11.03.2020, passed by the learned DRAT, Delhi in Appeal No. 467/2019, filed by M/s Sidha Neelkanth Paper Industries Pvt. Ltd. (the respondent No. 1 herein) has been challenged in the instant writ petition. By the impugned judgment, the learned DRAT has waived the requirement of 50% pre-deposit of the amount due to the Bank under the second proviso to Section 18 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short “the SARFAESI Act”). Aggrieved by the said order, the petitioner has filed the present petition.
FACTS OF THE CASE
2. A glance at the relevant facts and sequence of events leading to passing of the impugned order, is necessary. The respondent No. 1/principal borrower had approached the respondent No. 5/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, respondent No. 5/Andhra Bank sanctioned Open Cash Credit (in short “OCC”) limit for a sum of Rs. 15.5 crores in favour of the respondent No. 1. Immovable properties were mortgaged by the guarantors and by the respondent No. 1 to secure this cash credit facility. After taking over the existing cash credit facility, a further ad-hoc OCC limit to the tune of Rs. 3 crores, due to the Standard Chartered Bank, was cleared by the respondent No. 5/Andhra Bank.
3. However, respondent No. 1, failed to make prompt re-payment to the respondent No. 5/Andhra Bank and as a result, its account was declared as a Non Performing Asset (in short “NPA”). A notice dated 10.05.2013, was issued by the respondent No. 5/Andhra Bank under Section 13(2) of the SARFAESI Act, calling upon the respondent No. 1 to pay the outstanding amount of Rs. 16,61,91,174.67/- (Rupees sixteen crores sixty one lakh ninety one thousand one hundred seventy four rupees and sixty seven paise only), payable as on 27.04.2013. The said payment was to be made within 60 days from the date of receipt of the notice. Objections thereto were raised by the respondents No. 1 to 3 under Section 13(3A) of the Act, but we do not propose to go into the same as they are not relevant for the purposes of deciding the present petition.
4. 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 respondent No. 5/Andhra bank that took over possession of one of the mortgaged properties, being property bearing No. 170 Deepali Pitampura, Delhi-110034. Respondents No. 2 and 3/Mr. Ram Niwas Gupta and Mrs. Saroj Jindal filed S.A. No. 264/2013 before the DRT-III, challenging the measures taken by the respondent No. 5/Andhra Bank under Section 13(4) of the SARFAESI Act.
5. On 25.07.2013, a conditional interim stay was granted by the DRT-III and the applicants in S.A. No. 264/2013 were directed to deposit a sum of Rs. 2 crores within a period of 30 days from the date of the said order. The 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 per cent of the proposed sale consideration.
6. Since the respondent No. 1/borrower failed to comply with the order of the DRT-III, 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 DRT-III and the appeal preferred before the DRAT were both dismissed. Thereafter, the owners of the properties filed W.P. (C) No. 10734/2015 before the High Court which was dismissed as withdrawn on 17.02.2016.
7. Two writ petitions were filed by the borrower and the owners of the property, registered as W.P. (C) No. 6725/2016 and W.P. (C) No. 7611/2016 which prima facie appeared to be tactics to somehow delay the auction proceedings. These petitions were ultimately withdrawn.
8. Respondent No. 5/Andhra Bank obta
