Sree Jeya Soundharam Textile Mills Pvt. Ltd. vs Canara Bank, Rep. by its Manager Tirupur

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2019 Supreme(Mad) 782

IN THE HIGH COURT OF JUDICATURE AT MADRAS
VIJAYA K. TAHILRAMANI, M. DURAISWAMY, JJ.
Sree Jeya Soundharam Textile Mills Pvt. Ltd. and Others – Appellants
Versus
Canara Bank, Rep. by its Manager Tirupur and Others – Respondents
C.R.P. (NPD) No. 1492 of 2017, C.R.P. (PD) No. 792 of 2019, W.P. Nos. 7511, 17121 of 2014, 12777, 14257, 17725, 23369, 24962, 25817, 30072, 30073, 33456 of 2017, 14257, 33972 of 2018, C.M.P. Nos. 6991 of 2017, 5195, 5198 of 2019, W.M.P. No. 13633, 19222, 24464, 26338, 27250, 27251, 30771, 30772 of 2017, 16847, 36946, 39450 of 2018, M.P. No. 1 of 2014
Decided On : 11-04-2019

Advocates Appeared:
Mukunth, C.S.K. Sathish, Sarvabhauman, Raghunathan, T.S. Gopalan, A. Thiagarajan, V. Raghavachari, P. Sreenivasalu, K.V. Bhashyam Chari, S. Mohan R. Munusamy, K.J. Parthasarathy, G.R. Lakshmanan, V. Srimathi, E. Rajesh, F.B. Benjamin George, K. Gowtham Kumar, Samy, Dhruva, M. Himavanth, Saikrishnan, Sai Bharath, Ilan, K.A. Ramakrishnan, M.L. Ganesh, B. Raviraja, Jayesh B. Dolia, M. Damodharan, M.V. Swaroop, Guberan, Rank, S. Sethuraman.

Headnote:
Constitution of India, 1950 - Article 226 - Registration Act - Section 17(1)(c) - Transfer of Property Act - Section 58(f) and 59 - Debts Recovery Appellate Tribunal (Procedure) Rules, 1994 - Rule 8(2) - Recovery of Debts and Bankruptcy Act, 1993 - Section 21, 19 , 20 and 36 - SARFAESI Act - Section 2 (1)(f), 2(1)(zf) , 17 and 18 – Debts - Financial assistance - Petitioners submitted that as per provisions of Section 18 of SARFAESI Act and Section 21 of Recovery of Debts and Bankruptcy Act it is only borrower or guarantor who should make pre-deposit for preferring an appeal against order passed by Debts Recovery Tribunal under Section 17 of SARFAESI Act or under Section 19 of Recovery of Debts and Bankruptcy Act - Learned counsel appearing for petitioners submitted that petitioners are neither borrowers nor guarantors, therefore they are not liable to make any pre-deposit - Learned counsel appearing for respective petitioners relied upon 2nd proviso to Section 18 of SARFAESI Act wherein it has been stated that no appeal shall be entertained unless borrower has deposited with Appellate Tribunal 50% of amount of debt due from him and as per 3rd proviso said amount may be reduced to not less than 25% of debt referred to in 2nd proviso – Held, petitioner has challenged the order dated whereby the Debt Recovery Appellate Tribunal granted time to the petitioner for filing an application for waiver of pre-deposit - In view of observations made in this judgment petitioner should file waiver application before Appellate Tribunal and on filing of application Appellate Tribunal shall decide same on merits following principles laid down in this judgment - In case Tribunal does not reduce amount of deposit to some extent it is expected of Tribunal to allow appellant a reasonable time to make deposit or amount of deposit to extent it has been reduced as case may be and appellant shall make deposit as ordered within time so allowed by Tribunal and it is only after compliance with such order on part of appellant that appeal can be entertained - If amount is deposited as a pre-condition for availing statutory remedy of appeal and appeal is disposed of same has to be refunded as Institution would hold it as in Trust and therefore cannot be a matter for claim by the petitioner - Writ Petition in W.P. No of is disposed of - Civil Revision Petition filed by alleged tenant in C.R.P. (PD) No of stands dismissed - Consequently connected miscellaneous petitions are closed.

ORDER :

1. The issue involved in all these matters is “whether a person, who is neither a borrower nor a guarantor, is liable to make the pre-deposit for preferring an appeal under Section 18 of the SARFAESI Act or under Section 21 of the Recovery of Debts and Bankruptcy Act, 1993.”

2. It is not in dispute that as per Section 18 of the SARFAESI Act a borrower or a guarantor is liable to make a pre-deposit of 50% of the amount of debt due from him as claimed by the secured creditor or as determined by the Debts Recovery Tribunal, whichever is less, for entertaining an appeal before the Debt Recovery Appellate Tribunal, as against the order passed by the Debts Recovery Tribunal under Section 17 of the SARFAESI Act, provided, the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than 25% of debt due from the borrower as claimed by the secured creditor or as determined by the Debts Recovery Tribunal.

3. As per Section 21 of the Recovery of Debts and Bankruptcy Act, 1993, when an appeal is preferred by any person, from whom the debt is due to a Bank or a Financial Institution or a consortium of Banks or Financial Institutions, such appeal shall not be entertained by the Debt Recovery Appellate Tribunal, unless such person has deposited, with the Appellate Tribunal, 50% of the amount of debt so due from whom as determined by the Tribunal under Section 19 of the Recovery of Debts and Bankruptcy Act. The Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to be deposited by such amount which shall not be less than 25% of the amount of such debt so due to be deposited under Section 21 of the Act. Prior to 01.09.2016, the Appellate Tribunal was given powers to waive or reduce the pre-deposit amount. With effect from 01.09.2016, the said provision was amended by giving powers to the Appellate Tribunal to reduce the amount to be deposited which shall not be less than 25% of the amount due from the borrower or the guarantor.

4. Since the issue involved in all the above Writ Petitions and the Civil Revision Petitions relates to pre-deposit, it would be appropriate to extract the following Sections from the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (in short “SARFAESI” Act) and Recovery of Debts and Bankruptcy Act, 1993:

(i) Section 18 of the “SARFAESI” Act:

(2) The amount of fee payable shall be as follows:

Appeal to Appellate Tribunal:-

1. Any person aggrieved, by any order made by the Debts Recovery Tribunal under section 17, may prefer an appeal alongwith such fee, as may be prescribed to the Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal:

Provided that different fees may be prescribed for filing an appeal by the borrower or by the person other than the borrower:

Provided further that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less:

Provided also that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent of debt referred to in the second proviso.

(2) Save as otherwise provided in this Act, the Appellate Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder.

(ii) Section 2 (1)(f) of the SARFAESI Act:

"borrower" means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institutio

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2019 Supreme(Mad) 782

Cases Referred (7)