IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 21.11.2008 Coram: THE HONOURABLE MR.JUSTICE S.J.MUKHOPADHAYA AND THE HONOURABLE MR.JUSTICE V.DHANAPALAN Writ Petition No.20255 of 2008 & M.P.No.1 of 2008 Ind Bank Housing Limited, Corporate Office, rep. by its Company Secretary and Authorised Officer, Ind Bank Housing Limited, Corporate Office, No.480, Anna Salai, Nandanam, Chennai-35. .. Petitioner vs. 1. The Debts Recovery Appellate Tribunal, No.55, Ethiraj Salai, Chennai-600 008. 2. M.Jayaram 3. Jagan Mohan Rao, 4. M/s.Shristi Estates and Investments Pvt. Ltd., Rep. by its Managing Director Mr.V.Subbaiah, No.66, Luz Church Road, Mylapore, Chennai-600 004. .. Respondents Writ Petition filed under Article 226 of the Constitution of India, praying for issuance of a Writ of Certiorari, calling for the records pertaining to the order dated 28.7.2008 passed in IN (SA). No.338 of 2008 on the file of the Debts Recovery Appellate Tribunal, Chennai, the first respondent herein (against the order dated 26.3.2008 passed in S.A.No.169 of 2007 on the file of the Debts Recovery Tribunal-2, Chennai) and quash the same. For Petitioner : Mr.Jayesh B.Dolia for M/s.Aiyar & Dolia For Respondents : Mr.B.Kumar, Senior Counsel for M/s.G.Govindarajan for RR-2 & 3 https://hcservices.ecourts.gov.in/hcservices/ Order S.J.Mukhopadhaya,J The Writ Petition has been preferred by Ind Bank Housing Limited (hereinafter referred to as 'the Bank') against the common interim order dated 28.7.2008 passed by the Debts Recovery Appellate Tribunal (for short, 'the DRAT'), Chennai in I.A.No.796 and 797 of 2008 in IN(SARFAESI).No.338 of 2008. 2. By the said common interim order dated 28.7.2008, the DRAT while holding that the liability of the second respondent herein, namely M.Jayaram (one of the guarantors) is yet to be decided ultimately on merits, passed a conditional interim order of stay on deposition of Rs.50 lakhs in two equal instalments, each at Rs.25 lakhs, first one payable on or before 2.9.2008 and the second one payable on or before 6.10.2008 with further order that if the second respondent herein fails to comply with the above conditions, the proceedings in IN (SA).No.338 of 2008 stands disposed of without any further reference to the DRAT. On such deposit, the writ petitioner- Bank was directed by the DRAT to keep the said amount in an interest earning no-lien account, until further orders. 3. While the writ petitioner-Bank took plea that the DRAT cannot waive the amount below 25% of the claim amount, according to the second respondent-guarantor, the DRAT has jurisdiction to decide the 'prima-facie' claim and can pass conditional order of interim stay. 4. From the pleadings/records, it appears that the second and third respondents (guarantors) are the owners of 68.25 cents of land(s) comprised in S.No.68/5 situated at No.10, Five Furlong Road, Guindy, Velacherry Village, Chennai-32. Originally, they approached fourth respondent-M/s.Shristi Estates and Investments Private Limited, by its Managing Director Mr.V.Subbaiah (builder) for joint development of the land(s) in question by promoting the same into residential flat(s) at the ratio of 60:40, i.e. 60% built-up area to be shared by the builder and the balance 40% built-up area to be the shared by the owners (i.e. guarantors). To that extent, a Memorandum of Understanding was reduced into writing on 13.12.1993, pursuant to which the possession of the land(s) has also been handed over to the builder. 5. Fourth respondent-builder availed of the financial assistance from the writ petitioner-Bank by way of project loan. According to the writ petitioner-Bank, the account of fourth respondent-borrower having become a 'non-performing asset' (for short, 'the NPA'), the Bank issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (for short, 'the NPA Act'), calling upon the second, third and fourth respondents (guarantors/borrower) to pay the due amount(s) as on 28.2.2006, viz., Rs.15,72,47,661/-. Respondents 2, 3 and 4 (guarantors/borrower) having failed to pay the due amount(s), the Bank initiated action u/s 13(4) of the NPA Act, for taking the https://hcservices.ecourts.gov.in/hcservices/ possession of the secured asset(s), on 20.7.2006 and showing the intention of sale, on 5.8.2006. 6. Second respondent (one of the guarantors) filed Application (appeal) under Section 17 of the NPA Act before the Debts Recovery Tribunal (for short, 'the DRT')-I, Chennai, and by order dated 10.8.2006, the DRT-I, in S.A.SR.No.1449 of 2006, passed ex-parte interim order, without any condition of payment. 7. In the meantime, 13 persons who have purchased the flat(s) from the builder (fourth respondent0, also preferred application(s) (appeal(s)) u/s 17 of the NPA Act, before the DRT-I, Chennai. 8. The application (appeal) preferred by second respondent herein and the application(s)(appeal(s) ) preferred by the above said 13 purchasers, were subsequently transferred to DRT-2, Chennai. 9. The appeal(s) preferred by 13 purchasers of the flat(s), was disposed of with a direction to them to deposit their respective amount(s) with the Bank, with their previous alleged payment being made to fourth respondent-builder (borrower). Accordingly, the writ petitioner-Bank recovered a sum of Rs.1,77,19,902/- as on 31.7.2008. 10. The appeal preferred by the second respondent (guarantor) u/s 17 of the NPA Act, was numbered as SARFAESI Appeal No.169 of 2007, was dismissed by the DRT-2, Chennai on 26.3.2008, against which, second respondent-M.Jayaram, preferred appeal u/s 18(1) of the NPA Act before the DRAT, Chennai; the DRAT, by the impugned conditional interim order of stay on 28.7.2008, directed to pay Rs.50 lakhs in two equal instalments (supra). 11. It was submitted on behalf of the writ petitioner-Bank that fourth respondent-borrower was able to protract the proceedings for about two years without making any payment to the Bank, though huge public money is involved in this case, viz., to an extent of Rs.1,018.58 lakhs and the proportionate share of respondents 2 and 3-guarantors, is 40% of the amount. 12. The case of second and third respondents (guarantors) is that they have executed a "Power of Attorney" on 17.10.1994, appointing fourth respondent (borrower--builder) as their 'Agent' to deal with the land(s) in all respects and to give the same as a collateral security for the project loan to the tune of Rs.2 crores, to be availed of by the builder. After Rs.2 crores loan was granted in favour of the builder, who was permitted to draw a sum of Rs.75 lakhs, which the builder drew from the Bank and on the same day, the builder deposited the amount with the Bank as a margin money, for availing of the loan of Rs.4 crores purportedly to start a spinning industry or some such project(s). This is totally against the norms of the writ petitioner-Bank, as the loan of Rs.2 crores was granted on a mortgage, expressly, for the development of the property(ies) in question by constructing the residential flat(s), but the builder (fourth respondent) invested Rs.75 lakhs for some other purpose. The writ petitioner-Bank having gone into a deep slumber for more than a decade, has chosen to wake up only subsequently, by initiating action against respondents 2 and 3 (guarantors) for their https://hcservices.ecourts.gov.in/hcservices/ 40% share alone and thereafter chose to include 60% share of fourth respondent (builder), for initiating action under the provisions of the NPA Act. According to respondents 2 and 3, there is a collision between the Bank and the borrower (builder). 13. Learned Senior Counsel appearing for respondents 2 and 3 (guarantors) submitted that, in fact, without deciding the debt(s) due to the Bank, the DRAT cannot pass the impugned order under the second proviso to Section 18(1) of the NPA Act. It was also submitted that 13 flat owners of the subject property(ies), who were allegedly the purchasers from the builder (fourth respondent- borrower), without even obtaining any 'no objection' from the writ petitioner-Bank, preferred appeal(s) u/s 17 of the NPA Act, before the DRT-2 and the DRT-2, directed them to pay the amount @ Rs.2,000/- per square feet and the Bank was also directed to execute the sale certificate. It is further submitted on behalf of respondents 2 and 3 that the DRAT has not properly appreciated the facts and the DRAT should have waived the pre-deposit, instead of asking respondents 2 and 3 to deposit a sum of Rs.50/- lakhs towards pre-deposit. No such order could have been passed by the DRAT, there being a dispute as to the quantum to be apportioned between the guarantors and builder and the amount allegedly payable by the guarantors. It is only after the determination of the liability of respondents 2 and 3, on merits, such order of pre-deposit could have been passed by the DRAT. 14. In the counter affidavit filed in this Writ Petition, the details of extent of the flat(s) in question, the amount(s) payable by the flat owner(s), 40% of the due amount(s) as may be calculated after adjusting the aforesaid amount(s), etc., have been shown, but according to us, those details are not required to be determined for considering the issue in question. 15. We have heard the learned counsel appearing for the parties and noticed their rival contentions. 16. A Division Bench of this Court, in the case of "Indian Bank and others vs. M/s.Hamosons Apparels Private Ltd and others", vide common order dated 18.11.2008 in W.P.Nos.3958, 3959 and 5172 of 2008 and 17009 of 2007 and C.R.P(PD) Nos.1519 and 3301 of 2007, held that in all cases, irrespective of the fact whether application under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 has been filed by the secured creditor/Bank or filed and determined or filed and pending, the aggrieved person is to pay the pre-deposit amount under the second proviso to Section 18(1) of the NPA Act, even for the interim order passed by the DRT, or against the order of rejection for not grant of interim order or for any other relief, if the appeal is filed under Section 18 of the NPA Act, the aggrieved person is to pay the pre-deposit amount under the second proviso to Section 18(1) of the NPA Act, on the basis of the claim made by the secured credit/Bank, if the amount due has not been determined by the DRT. 17. In view of the aforesaid decision of the Division Bench of this Court, in the case of "Indian Bank and others", the stand taken https://hcservices.ecourts.gov.in/hcservices/ by the petitioner-Bank that the DRAT ought not to have passed the impugned order under the second proviso to Section 18(1) of the NPA Act, without prior determination of the debt amount due to the secured creditor/Bank, cannot be accepted, and the same is rejected. 18. So far as 60% share of the builder (borrower) (i.e. fourth respondent herein) and 40% share of the owners (guarantors) (i.e. Respondents 2 and 3 herein) of the property(ies) in question, is concerned, it is only an agreement/arrangement (Memorandum of Understanding), between the parties in regard to their respective share(s) for the purpose of developing the secured property(ies) in question and the same being an internal arrangement between them, the writ petitioner-Bank is no way concerned with the same. What is mortgaged with the Bank (writ petitioner) is only the secured asset (s) (land(s)) in question, which allegedly belong to the owners (respondents 2 and 3 herein). Therefore, the writ petitioner-Ind Bank Housing Limited, is not concerned as to whether the secured asset(s) are developed or being developed or not developed, as the loan was granted to the borrower (fourth respondent) on the basis of the valuation of the property(ies) which have not been developed while granting loan to the borrower. 19. Under Section 13(2) of the NPA Act, it is always open for the secured creditor (Bank) to give notice to person(s) who have acquired any of the secured asset(s) from the borrower(s) and from whom any money is due or may become due to the borrower(s) and if not satisfied with reply, may proceed under Section 13(4) of the NPA Act. 20. In the present case on hand, both the builder (fourth respondent-borrower) and the owners (respondents 2 and 3-guarantors) of the secured asset(s), come within the definition of "borrower" u/s 2(f) of the NPA Act and hence, it is open for the DRT/DRAT to ask such person(s) (13 flat owners in the present case) to pay such amount(s) due to the secured creditor (Bank) as the payment(s) towards the secured debt(s). 21. In the aforesaid background, it is not even necessary for the writ petitioner-Bank to ask respondents 2 and 3 to pay the amount(s) to the extent of 40% of their share, nor was it necessary for the DRAT to calculate the amount(s) of pre-deposit u/s 18(1) of the NPA Act, on the basis of 40% share of respondents 2 and 3; if such calculation has been done on the basis of 40% share of respondents 2 and 3, it is to their advantage. It was open for the writ petitioner-Bank to give notice for the total claim amount(s) due to the writ petitioner-Bank, both to the borrower and to the guarantors for taking common action u/s 13(4) of the NPA Act in regard to the secured asset(s) in question; in such a case, it is also open for the DRAT to calculate the amount(s) of pre-deposit u/s 18(1) of the NPA Act, on the basis of the total claim as was made by the writ petitioner-Bank. https://hcservices.ecourts.gov.in/hcservices/ 22. The Writ Petition is dismissed being devoid of merits, with the aforesaid observations, with no order as to costs. The Miscellaneous Petition is closed. sd/- Asst.Registrar /true copy/ Sub Asst.Registrar cs To The Presiding Officer, Debts Recovery Appellate Tribunal, Chennai. + 1 c.c. to Mr. G. Govindarajan, Advocate. S.R.No.65130. Order in Writ Petition No.20255 of 2008 KU (CO) GSK 26.11.2008. https://hcservices.ecourts.gov.in/hcservices/