Gujarat High Court Case Information System Print SCA/15547/2011 13/ 13 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 15547 of 2011 [ENTITY] & 2 - Petitioner(s) Versus [ENTITY] & 2 - Respondent(s) Appearance : MR [ENTITY], SR. ADVOCATE WITH MR [ENTITY] for Petitioner(s) : 1 - 3. MR [ENTITY] for Respondent(s) : 1, MR RS SANJANWALA, SR. ADVOCATE WITH MR [ENTITY] for Respondent(s) : 2, None for Respondent(s) : 3, CORAM : HONOURABLE THE ACTING CHIEF JUSTICE MR. [ENTITY] and HONOURABLE MR.JUSTICE [ENTITY] Date : 18/10/2011 ORAL ORDER
(Per : HONOURABLE MR.JUSTICE [ENTITY])
1. This writ petition under [SECTION] of the [ACT] has been preferred by borrower challenging order dated 22nd September, 2011 passed by Debts Recovery Appellate Tribunal, Mumbai (At Kolkata) in [CASE NUMBER] preferred under [SECTION] of the [ACT] (for short 'SARFAESI Act'), whereby, the petitioners herein, as appellants, have been directed to pay an amount of Rs.5 crores (Rupees five crores) by way of pre-deposit. The Appellate Tribunal has directed the petitioners to deposit this amount by 2nd November, 2011, failing which, the appeal preferred by the petitioners would not be entertained.
2. Facts relevant for the purpose of deciding this petition can be summarized as under :
2.1 The petitioners preferred [CASE NUMBER] before the Debts Recovery Tribunal-II, Ahmedabad (for short 'DRT') under [SECTION] of the [ACT]. The record reveals that DRT heard the matter on interim relief in [CASE NUMBER] along with [CASE NUMBER] filed by M/s. Vakharia Traders and M/s. K.J. Tex Pvt. Ltd. and Application Exh. R/19 and similar other applications in other two securitisation applications. DRT by common order dated 06.07.2011 rejected the prayer for interim relief. Petitioners challenged the order dated 06.07.2011 passed by DRT by filing [CASE NUMBER] before this Court and this Court, vide order dated 08.08.2011, relegated the petitioners to the statutory remedy of appeal under [SECTION] of the [ACT].
Petitioners preferred an appeal being [CASE NUMBER] before the Debts Recovery Appellate Tribunal, Mumbai (for short 'DRAT') against order dated 06.07.2011 under [SECTION] of the [ACT] along with miscellaneous applications for stay and for waiver of deposit.
2.2 Before the DRAT, the petitioners took stand that they are third parties. The petitioners submitted that they have not borrowed or availed of any facility from the respondent bank nor the petitioners are the guarantors nor the petitioners through themselves or through their father have mortgaged the land / property bearing Survey No. 389-A/1-2-3 paiki to the respondent bank received by way of request under the Will dated 29.07.1982 made by one [ENTITY] and the family arrangement dated 03.08.1994 as well. Their contention before the Appellate Tribunal was that for the aforesaid reasons, respondent bank has not issued notice under [SECTION] of the [ACT] to the petitioners. The alleged notice dated 08.09.2004 and 25.10.2004 has been addressed to K.J. Vakharia & Co. with a copy inter alia to others including the beneficiary under the Will of late Smt. [ENTITY] calling upon them to make payment in view of the guarantee agreement executed by late Smt. [ENTITY], whereas, the alleged mortgage dated 17.05.1989 has nothing to do with the property belonging to late Smt. [ENTITY].
2.3 These contentions of the petitioners herein did not find favour with the Appellate Tribunal and the Appellate Tribunal negatived the vociferous contention of the petitioners that they are not borrowers within the meaning as defined under [SECTION] of the [ACT] and therefore, second and third proviso to [SECTION] would not be applicable so far as the petitioners are concerned.
2.4 Firstly, it would be expedient to quote one paragraph of the order passed by DRT-II, Ahmedabad so far as status of the present petitioners is concerned. The same reads as under :
"These are the discrepancies sought to be made capital for disproving the mortgage. But we are required to see the facts in totality. The whole transaction is required to be looked into. It is not in dispute that the Applicants' father and his brother Shri [ENTITY] had filed the [CASE NUMBER] for permission to create mortgage of the minor's property. The application is allowed by the Court of Jt. District Judge in its order dated 01.01.1992; the copy of which is placed on record. Then it is the contention from the applicants that this permission is subsequent to the alleged creation of mortgage. However, as it prima facie appears that the father of the Applicants and Shri [ENTITY] has obtained the permission and has created mortgage for the minors and for their benefit. Therefore, it is difficult to believe that there is no security interest."
2.5 This finding of the DRT-II was considered by DRAT and DRAT in its order dated 22nd September, 2011 recorded the following findings :
"After considering all these facts and circumstances and having regard to the materials available on record, I am afraid, I cannot accept the contention as made on behalf of the appellant. In the considered view of this Tribunal, so far the property under reference in the appeal is concerned, the present appellant cannot just wash their hands off and they certainly come within the meaning of 'borrowers'. Accordingly, they are liable to make pre-deposit under [SECTION] of the [ACT]. Mr. [ENTITY] insists that nothing specific has been pleaded in the application under [SECTION] of the [ACT] so as to justify reduction of any amount and according to him, the appellants must be made to pay at least fifty per cent of the amount as claimed in the notice.
After taking into consideration all relevant facts and circumstances, I think interest of justice will be best served if the appellants are directed to pay an amount of Rs.5 crores (Rupees five crores) by way of pre-deposit. The said amount must be aid by 2.11.2011. This matter be listed under the heading 'for order' on 4.11.2011. Needless to mention, in the event of failure to make such deposit, the instant appeal will not be entertained."
3. We have heard learned senior advocate Mr. [ENTITY] appearing with learned advocate Mr. [ENTITY] for the petitioners, learned advocate Mr. [ENTITY] appearing for respondent No.1 Bank and learned senior advocate Mr. [ENTITY] with learned advocate Mr. [ENTITY] appearing for respondent No.2.
4. Learned counsel for the petitioners vehemently submitted that [SECTION] of the [ACT] provides for an appeal to Appellate Tribunal and any person aggrieved by any order made by DRT under [SECTION] can prefer an appeal under [SECTION]. He would submit that the words 'any person' would suggest that he can be a person other than a borrower. Learned counsel further submitted that the second proviso to [SECTION] would come into play only if the appeal is preferred by a borrower. He submitted that the petitioners herein are not borrowers. He further submitted that when an appeal is being preferred under [SECTION] of the [ACT] and when the Appellate Tribunal is called upon to decide on the issue of pre-deposit, the Appellate Tribunal would be well within its jurisdiction to adjudicate at that stage as to whether the appellant preferring an appeal under [SECTION] is a borrower or a person other than a borrower. In substance, the contention is to the effect that if an appellant raises a contention that if he is not a borrower than the Appellate Tribunal can not say that the appeal will not be entertained unless fifty per cent or twenty five per cent as the case may be of the amount of debt due is deposited as a condition precedent to entertaining the appeal.
5. Thus, the short question for consideration is whether the Appellate Tribunal has the jurisdiction to adjudicate the issue as to whether the appellant is a borrower or not at the stage of deciding application for waiver of pre-deposit so as to make the second and third proviso to [SECTION] come into play. To put it differently whether an appeal can be entertained without a pre-deposit on a limited issue as to whether the appellant is a borrower or any other aggrieved person other than a borrower ?
6. We are afraid to accept this broad contention as canvassed by the learned counsel for the petitioners. The language of [SECTION] is plain and unambiguous. [SECTION] which provides for appeal to the Appellate Tribunal reads as under :
Appeal to Appellate Tribunal. (1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under [SECTION], may prefer an appeal along with such fee, as may be prescribed to an 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."
7. [SECTION] Clause (1) of the [ACT] confers a statutory right on a person aggrieved by any other order made by a DRT under [SECTION] of the Act to prefer an appeal to the Appellate Tribunal. However, the right conferred under [SECTION] is subject to the condition laid down in the second proviso thereto. The second proviso postulates that no appeal shall be entertained unless a 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 DRT, whichever is less. However, under the third proviso to the sub-section, the Appellate Tribunal has the power to reduce the amount, for the reasons to be recorded in writing, to not less than twenty-five per cent of the debt, referred to in the second proviso. Thus, there is an absolute bar to the entertainment of the appeal under [SECTION] of the Act unless the condition precedent, as stipulated, is fulfilled.
8. Any adjudication on the issue as to whether the appellant is a borrower within the meaning as defined under [SECTION] of the Act at that stage will amount to entertaining an appeal ignoring or circumventing the mandatory nature of second and third proviso to [SECTION]. We are of the view with all humility at our command that this issue as to whether the appellant is a borrower or not and more particularly when it is a disputed question of fact raised before the tribunal and rejected cannot be gone into unless and until the appeal is entertained. While deciding an application of pre-deposit, this question cannot be determined in our humble view because it will have a far reaching effect and would render the entire object of the Act more particularly [SECTION] illusory.
9. We are in complete agreement with the findings recorded by Appellate Tribunal in its impugned order dated 22.09.2011, wherein, the Appellate Tribunal has rightly observed that how far the Appellate Tribunal can go into this aspect at this stage.
10. We may quote with profit a ruling of the Hon'ble Supreme Court in the case of [PRECEDENT].
In paragraph 8, Hon'ble Supreme Court held as under :
8. It is well-settled that when a Statute confers a right of appeal, while granting the right, the Legislature can impose conditions for the exercise of such right, so long as the conditions are not so onerous as to amount to unreasonable restrictions, rendering the right almost illusory. Bearing in mind the object of the Act, the conditions hedged in the said proviso cannot be said to be onerous. Thus, we hold that the requirement of pre-deposit under [SECTION] of the Act is mandatory and there is no reason whatsoever for not giving full effect to the provisions contained in [SECTION] of the Act. In that view of the matter, no court, much less the Appellate Tribunal, a creature of the Act itself, can refuse to give full effect to the provisions of the Statute. We have no hesitation in holding that deposit under the second proviso to [SECTION] of the Act being a condition precedent for preferring an appeal under the said Section, the Appellate Tribunal had erred in law in entertaining the appeal without directing the appellant to comply with the said mandatory requirement."
10.1 In paragraph 9, Hon'ble Supreme Court held as under :
'9. Therefore, the condition of pre-deposit being mandatory, a complete waiver of deposit by the appellant with the Appellate Tribunal, was beyond the provisions of the Act, as is evident from the second and third proviso to the said Section. At best, the Appellate Tribunal could have, after recording the reasons, reduced the amount of deposit of fifty per cent to an amount not less than twenty five per cent of the debt referred to in the second proviso. We are convinced that the order of the Appellate Tribunal, entertaining appellant's appeal without insisting on pre-deposit was clearly unsustainable and, therefore, the decision of the High Court in setting aside the same cannot be flawed."
11. In a very recent pronouncement of the Hon'ble Supreme Court in the case of Indian Bank versus M/s.
reported in AIR 2010 SC 2980, the Hon'ble Supreme Court in paragraph 17 observed as under :
The Court cannot lose sight of the fact that the bank is a trustee of public funds. It cannot compromise the public interest for benefitting private individuals. Those who take loan and avail financial facilities from the bank are duty bound to repay the amount strictly in accordance with the terms of the contract. Any lapse in such matters has to be viewed seriously and the bank is not only entitled but duty bound to recover the amount by adopting all legally permissible methods. The Parliament enacted the Act because it was found that legal mechanism available till then was wholly insufficient for recovery of the outstanding dues of banks and financial institutions. Reference in this connection deserves to be made to the judgments of this Court in [PRECEDENT] (supra), [PRECEDENT] and [PRECEDENT] [Civil Appeal arising out of [CASE NUMBER] - decided on 26.7.2010]."
12. In the above view of the matter and for the reasons recorded in the judgment, we do not find any error must less an error of law said to have been committed by DRAT in passing the impugned order dated 22nd September, 2011 directing the petitioners to deposit the amount of Rs.5 crores (Rupees five crores) as against total amount of debit due to the tune of Rs.52 crores and odd by way of pre-deposit before entertaining the appeal warranting any interference at our hands in this petition. The petition is, therefore, rejected with no order as to costs.
13. Before parting, we may take notice of a request being made by learned counsel appearing for the petitioners. Learned counsel submitted that the Appellate Tribunal has in the present appeal passed an order directing the petitioners to deposit a sum of Rs.5 crores (Rupees five crores) as a pre-deposit as contemplated under [SECTION] of the Act. He would submit that the present case, be considered to be sufficient compliance of the requirement of [SECTION] of the [ACT] for all the appeals filed / to be filed by Harish Vakharia Group against the common order of the DRT dated 06.07.2011. We may only say that this request can be made before the DRAT, Mumbai (at Kolkata) and DRAT shall consider this request in accordance with law.
[A.L. Dave, Actg.CJ.] Sd/-
[J.B. PARDIWALA, J.] #MH Dave