THE HON'BLE SRI JUSTICE N.V. RAMANA & THE HON'BLE SRI JUSTICE P. DURGA PRASAD WRIT PETITION NO :18504 of 2011 Dated: 7.9.2011 Between: Indian Bank, Nellore ..Petitioner And M/s Harshini Educational Society, rep., by its Secretary, Ramji Nagar, Nellore District. ..Respondent This Court made the following: THE HON'BLE SRI JUSTICE N.V. RAMANA & THE HON'BLE SRI JUSTICE P. DURGA PRASAD W.P.No.18504 of 2011 ORDER: (Per Hon’ble Sri Justice N.V. Ramana) Challenging the order dated 1.6.2011 passed by the Debts Recovery Appellate Tribunal, Chennai in M.A (SA) No.208 of 2011, the present writ petition is filed by the Bank. The brief facts of the case are as follows: The respondent secured the loan amount from the petitioner- Bank under SOD and Term Loan limits by mortgaging the property viz., Plot No.20, Sy.No.840, Ramjinagar, Nellore Bit II Stone House Pet, Nellore admeasuring 55 Ankanams or 440 sq. yards with a building thereon and subsequently, he failed to discharge the same. According to the petitioner-Bank, the respondent is liable to pay a sum of Rs.38,04,521-89 ps., under SOD and Rs.18,49,339-85 ps., under the Term Loan availed by D. Niranjan Babu, who is the Secretary and Correspondent of the respondent and thus, the total liability under both the loan accounts is Rs.56,53,861-74 ps., as on 7.1.2011. The petitioner-Bank after following the procedure brought the said property for sale for realization of the total liability, and the auction is scheduled to be held on 3.6.2011. Challenging the same, the respondent filed SA No.98 of 2011 on the file of the DRT Visakhapatnam and also filed I.A.No.200 of 2011 seeking stay of all further proceedings pursuant to the auction notice. The DRT, Visakhapatnam passed orders in the stay application directing the respondent herein to deposit 40% of the outstanding dues with the Bank before the date of auction sale. It was also observed by the DRT that if the respondent fails to deposit 40% and deposits only 25% of the outstanding dues, the Bank is at liberty to proceed with sale but not to confirm the sale, and if the respondent fails to deposit even 25%, the Bank is at liberty to proceed in accordance with law. The Counsel for the respondent voluntarily offered to pay 25% of the dues before the DRT, Visakhapatnam, in the meanwhile, the respondent filed MA(SA) No.208 of 2011 before the Appellate Tribunal, Chennai. The Appellate Tribunal, Chennai passed the impugned order modifying the order passed by the DRT, Visakhapatnam as follows: “The appellant is directed to deposit Rs.5,00,000/- into the loan account before 3 pm., on 3.6.2011 and upon such deposit of the said amount by the appellant, the Authorized Officer shall stand restrained from in any way proceeding any further under the provisions of the SARFAESI Act in any manner. In the event of non-deposit of the said amount, the Authorized Officer shall be at liberty to proceed further with the proposed auction sale.” Questioning the above order, the Bank filed the present writ petition. Heard the learned Counsel on either side and perused the material on record. Learned Counsel for the petitioner-Bank contended that the order impugned herein is contrary to section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. He submits that as provided in 3rd Proviso to Section 18 of the Act, discretion is vested in the Appellate Tribunal to 'reduce the amount' for the reasons to be recorded in writing, but then it is provided that it cannot be reduced less than 25% of the debt referred to in the 2nd Proviso to Section 18 of the Act and that the order impugned herein is beyond the jurisdiction of the Appellate Tribunal. Section 18 of the Act reads as under: “Appeal to Appellate Tribunal –(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under Section 17, 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 percent 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 and rules made thereunder.” As per the above provision, no appeal shall be entertained unless the borrower deposits 50% of the amount due and the Appellate Tribunal may reduce the condition of deposit to the extent of 25% depending on the facts and circumstances of the case. In view of this provision, the appellate Tribunal cannot entertain the appeal without there being such deposit irrespective of the secured asset, agricultural properties or non-agricultural properties. In view of the fact that the appellate Tribunal entertained the appeal contrary to Section 18 of the Act, we are of the considered view that the order impugned is liable to be set aside. Apart from that, it is also relevant to note that this Court initially granted interim stay and on the vacate stay petition filed by the respondent viz., WVMP NO.3012 of 2011, this Court on 24.8.2011 directed the respondent-institution to deposit an amount of Rs.5,00,000/- on or before 2.9.2011 and also directed the Bank to go ahead with the auction, but however, not to confirm the auction. Today, it is represented that the respondent-organization has not complied with the interim order. In view of the above facts and circumstances of the case and in view of the fact that the appellate Tribunal entertained the appeal contrary to the provisions of Section 18 of the Act and in the absence of any discretionary power conferred on the Appellate Tribunal to grant relaxation of deposit of the amount of debt due from the respondent as provided under the Act, the order impugned herein is set aside. In the result, the writ petition is allowed. No order as to costs. __________________ Justice N.V. Ramana DATE: 7.9.2011 ____________________ Justice P. Durga Prasad nn THE HON'BLE SRI JUSTICE N.V. RAMANA & THE HON'BLE SRI JUSTICE P. DURGA PRASAD W.P.No.18504 of 2011 (Order delivered by the Hon’ble Sri Justice N.V. Ramana) 7.9.2011 Nn