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2024 Supreme(Online)(KER) 22980
HIGH COURT OF KERALA
N. NAGARESH, J
DILLENS.T.D – Appellant
Versus
THE AUTHORISED OFFICER, SOUTH INDIAN BANK LTD – Respondent
OP (DRT) 123/2024
The judgment confirms that under the SARFAESI Act, appeals to the DRAT are contingent upon a mandatory pre-deposit, ensuring creditors receive due compliance before adjudication.
Headnote:
Securitisation - Loan Default - SARFAESI Act Section 18 - The court analyzed the provisions under the SARFAESI Act, particularly focusing on the requirement for pre-deposits before appeals can be entertained and the discretionary powers of the Appellate Tribunal, ultimately influencing its decision to dismiss one petition while allowing another with a time extension.
Fact of the Case:
The petitioners, husband and wife, sought to challenge orders from the Debts Recovery Appellate Tribunal related to their failure to maintain loan payments to South Indian Bank, which initiated coercive recovery actions under the SARFAESI Act.
Finding of the Court:
The court found that the DRAT had acted within its legal powers by requiring a pre-deposit under Section 18(1) of the SARFAESI Act and upheld the amount ordered as it was just and warranted by the petitioners' outstanding debt.
Issues: The primary issues were the legality of the DRAT's order requiring a pre-deposit and whether the petitioners had a valid claim to challenge the order without adhering to this requirement.
Ratio Decidendi: The court established that under Section 18(1) of the SARFAESI Act, no appeal shall be entertained without a pre-deposit of 50% of the claimed debt, which enforces compliance as a prerequisite to adjudication.
Final Decision: OP(DRT) No.123/2024 is dismissed; OP(DRT) No.147/2024 is allowed with time granted for pre-deposit.
The petitioners, who are husband and wife, availed financial facilities from the South Indian Bank Limited.
In OP(DRT) No.123/2024, the petitioners seek to set aside Ext.P16 order of the Debts Recovery Appellate Tribunal, Chennai in waiver application IA No.108/2024 in AIR (SA) No.158/2024. In OP(DRT) No.147/2024, the petitioners seek to set aside Ext.P4 order of the Debts Recovery Appellate Tribunal, Chennai in IA No.211/2024 in IA No.108/2024.
2. The pleadings in the OP(DRT) would indicate that the petitioners had availed substantial amount as financial advance/loan and failed to maintain the loan account. The petitioners failed to maintain the loan account to the satisfaction of the Bank. The Bank therefore initiated coercive proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 . The petitioners thereupon filed SA No.303/2021 before the Debts Recovery Tribunal-II, Ernakulam. In the meanwhile, the Bank obtained Ext.P2 order from the Chief Judicial Magistrate's Court, Thrissur under Section 14 of the SARFAESI Act whereby the Chief Judicial Magistrate's Court appointed an Advocate Commissioner to take physical possession of the property mortgaged by the petitioners. The petitioners filed Ext.P3 IA No.1503/2022 in SA No.303/2021 seeking to stay Section 14 proceedings.
3. The Debts Recovery Tribunal directed the petitioners to deposit an amount of ₹150 lakhs and directed the Bank to defer dispossession as per Ext.P4 order dated 06.07.2022. The Debts Recovery Tribunal-II heard the stay petition again on 11.01.2024 and dismissed the same as per Ext.P8 order. The petitioners filed Ext.P9 appeal before the Debts Recovery Appellate Tribunal, Chennai.
The petitioners also filed a stay petition along with the appeal.
The petitioners also filed Ext.P11 waiver application IA No.108/2024. As the DRAT did not take up the waiver application, the petitioners filed IA No.109/2024 seeking to take up Ext.P11 waiver application on an urgent basis.
4. The DRAT allowed IA No.109/2024 and took up IA No.108/2024 for hearing on 08.03.2024. In IA No.108/2024, the DRAT ordered to make a deposit of ₹2,34,63,756/- on or before 22.03.2024 as per Ext.P16 order dated 08.03.2024. In Ext.P16 order, the DRAT made it clear that on the failure to deposit the amount before the stipulated date, the appeal will stand rejected.
5. The petitioner states that while passing Ext,P16 order, the DRAT, Chennai did not consider the fact that the Bank had already appropriated more than 50% of the amount demanded in Ext.P1 demand notice. Therefore, the direction to remit a sum of ₹2,34,63,756/- is highly arbitrary and unsustainable.
6. While OP(DRT) No.123/2024 was pending, the petitioners filed IA No.211/2024 before the DRAT to enlarge the time for pre-deposit. The said IA was dismissed as per Ext.P4 order dated 26.03.2024. Hence, the petitioners have filed OP(DRT) No.147/2024 seeking to set aside Ext.P4 order of the DRAT in IA No.211/2024.
7. The Standing Counsel entered appearance on behalf of the Bank and resisted the OP(DRT), filing counter affidavit. On behalf of the Bank, the Standing Counsel submitted that Ext.P1 demand notice dated 31.05.2021 was issued to the petitioners seeking payment of the outstanding amount of ₹6,08,57,404.08 together with future interest. The petitioners submitted objection. The objection was disposed of by the Bank. As the petitioners failed to discharge the liability, the Bank issued possession notice dated 02.11.2021.
8. Subsequently, the Bank initiated Section 14 proceedings and the Advocate Commissioner issued notice dated 16.03.2022 to the petitioners seeking vacant possession of the secured assets. The Bank filed OA No.673/2023 before the Debts Recovery Tribunal-II, Ernakulam for recovery of ₹4,49,29,314.80 together with interest from 03.11.2023.
9. When the petitioners approached the Appellate Tribunal, the Appellate Tribunal passed Ext.P16 order directing to deposit
