IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 9.08.2010 Coram: The Hon'ble Mr.Justice D.MURUGESAN AND The Hon'ble Mr.Justice M.SATHYANARAYANAN Writ Petition No.12795 of 2010 and M.P.No.1 of 2010 M/s. Velaar Engineering Works Pvt. Ltd. rep. by its Managing Director A.C.Vadhivelu, F.85, SIPCOT Industrial Park, Kattrambakkam, Sriperumbudur Taluk, Kancheepuram District. .... Petitioner Versus 1. The Debts Recovery Appellate Tribunal, 4th Floor, Indian Bank Circle Office, 55, Ethiraj Salai, Chennai 600 002. 2. The Debts Recovery Tribunal, Spencer Towers, V Floor, 770-A, Anna Sallai, Chennai 600 008. 3. The Authorized Officer/Chief Manager Indian Bank, Circle Office, No.510/511, Gandhi Road, Kancheepuram – 631 501. 4. Indian Bank, Valasaravakkam Branch, No.118-119, Indra Nagar, Arcot Road, Chennai- 600 087. 5. The Authorized Officer/Chief Manager, Indian Bank, Circle Office, No.26/27, 4th Floor, East Wing, Raheja Towers, M.G. Road, Bangalore – 560 001. ... Respondents Writ petition filed under Article 226 of the Constitution of India, for the issuance of writ of certiorarified mandamus to call for the entire records relating to the impugned order dated https://hcservices.ecourts.gov.in/hcservices/ 17.3.2010 of the first Respondent made in I.A.No.86 of 2010 in IN (SA) 10 of 2010, quash the same and direct the Respondents 1 to 5 to hear the said appeal on merits without insisting on pre- deposit. For Petitioner ..Mr.G.Rajagopalan, Senior Advocate for M/s. G.N.Sridharan For Respondents ..Mr.V.Lakshminarayanan for R3-R5. R1 & R2 - Tribunal. ORDER M.SATHYANARAYANAN, J The petitioner challenges the impugned order dismissing his application for waiver of pre-deposit in SARFAESI Appeal, passed by the Debts Recovery Appellate Tribunal, Chennai, by filing this writ petition. 2. The facts leading to the filing of this writ petition briefly stated are as follows:- The petitioner company availed financial assistance and in view of the non-payment, the account was declared as Non Performing Asset, on 30.9.2008. The 4th Respondent Bank initiated recovery proceedings under SARFAESI Act and the third Respondent has issued a notice dated 26.12.2008, under Section 13(2) of the SARFAESI Act. Subsequently, possession notice in respect of the commercial property of the petitioner company was issued on 4.3.2009 and also on the same date, in respect of the residential property of the deponent of the affidavit, notice was also issued. On 9.3.2009, possession notice in respect of the factory premises of the petitioner company was also issued. 3. According to the 4th Respondent Bank, on the date of issuance of Section 13(2) notice under SARFAESI Act, the mortgagors and guarantors were due and payable a sum of Rs.3,87,58,986/-. After complying with the formalities, the Authorized Officer viz., the 5th Respondent took possession of the mortgaged assets at Bangalore on 4.3.2009. The 3rd Respondent had taken possession of the factory premises and building admeasuring 1 Acre comprised in Survey No.727 part, bearing Plot No.F-85, SIPCOT Industrial Estate, Kattrambakkam, Sriperumbudur Taluk, Kancheepuram District on 9.3.2009. 4. The Authorized Officer proceeded further and issued publication for sale in respect of the properties at Bangalore on 12.5.2009 and in respect of the above said properties situated at Sriperumbudur, sale notice was issued on 29.5.2009. https://hcservices.ecourts.gov.in/hcservices/ 5. The petitioner herein filed SARFAESI Appeal No.88 of 2009 before the second Respondent challenging the legality of the said sale notice and the appeal was allowed and consequently the above said sale notices were quashed. The 4th Respondent initiated fresh proceedings by issuing a notice dated 05.01.2010 and publication was also effected in vernacular language and English News Dailies on 07.01.2010. In pursuant to the above said sale notices, tender-cum-auction was conducted on 17.02.2010. The property at Sriperumbudur was sold for a sum of Rs.2,03,00,000/- and since the auction purchaser had deposited the entire amount, sale was confirmed on 08.04.2010 and auction purchaser was also issued with a sale certificate and possession was also handed over to them on 18.06.2010. 6. The Debts Recovery Tribunal-III, Chennai, while allowing the SARFAESI appeal No.88 of 2009 on 13.11.2009, had quashed only the sale notices and not the possession notices. Therefore, the petitioner herein filed Miscellaneous Appeal challenging the said portion of the order along with the application for condonation of delay and also for waiver of pre- deposit contemplated under Section 18 of the SARFAESI Act. 7. The first Respondent Appellate Tribunal vide order dated 17.03.2010, made in I.A.No.86 of 2010 in IN(SA) 10 of 2010, which has been filed for waiver of pre-deposit, has passed an order directing the petitioner herein to deposit a sum of Rs.90 lakhs on or before 05.04.2010 with liberty to the Bank to proceed further with the auction in the event of non-deposit. The Tribunal also directed to list the said application on 07.04.2010. The petitioner aggrieved by the above said order, has filed this writ petition. 8. Mr.G.Rajagopalan, learned senior counsel appearing for the petitioner would submit that admittedly, possession of the assets are in the hands of the 4th Respondent and therefore, the petitioner cannot be directed to deposit huge sum of Rs.90 lakhs by way of pre-deposit. It is further submitted by the learned senior counsel appearing for the petitioner that S.A.No.88 of 2009 was decided in favour of the petitioner on 13.11.2009 but unfortunately, the possession notices have not been quashed by the Tribunal which necessitated the petitioner to file Miscellaneous Appeal before the first Respondent Appellate Tribunal and therefore, taking into consideration the said fact, the requirement of pre-deposit should have been waived by the Appellate Tribunal. It is also submitted by the learned senior counsel appearing for the petitioner that the requirement of pre- deposit will arise only in the event of determination of the amount by the Debt Tribunal under Section 19(1) of the SARFAESI https://hcservices.ecourts.gov.in/hcservices/ Act and the said vital aspect has not been taken into consideration by the first Respondent Appellate Tribunal while passing the impugned order. On merits, the learned senior counsel appearing for the petitioner would contend that the assets of very high value, have been sold for a low sum and the reserved price has also been fixed at abysmally low value in order to suit somebody. It is further contended by the learned senior counsel appearing for the petitioner this Court in exercise of jurisdiction under Article 226 of the Constitution of India and in the facts and circumstances of the present case, is having power to waive the pre-deposit completely and therefore, prayed for allowing of this writ petition seeking waiver of pre-deposit. 9. In support of the said submission, the learned senior counsel appearing for the petitioner placed reliance upon the following judgment: AIR 2009 Orissa page 147 (DB) – Swastik Agency and two others vs. State Bank of India, Main Branch and three others. 10. Per contra, Mr.V.Lakshminarayanan, learned counsel appearing for the Respondents 3 to 5, had drawn the attention of this Court to the averments made in the counter affidavit and would submit that under 2nd proviso to sub-section (1) of Section 18 of the SARFAESI Act, no appeal can be entertained unless 25% of the amount claimed by the Bank or determined is deposited with Debt Recovery Appellate Tribunal and even though the 25% of the amount works out to Rs.1,17,000/-, the first Respondent/Appellate Tribunal directed the petitioner to deposit a sum of Rs.90 lakhs only. Since the exercise of discretion by the first Respondent/Appellate Tribunal has been done by due application of mind and subjective satisfaction, the impugned order cannot be subjected to judicial review in exercise of jurisdiction under Article 226 of the Constitution of India, according to the learned counsel appearing for the Respondents 3 to 5. On merits of the case, it is contended by the learned counsel appearing for the Respondents 3 to 5, that the valuation of the properties at the time of sanction of loan was Rs.1,73,00,000/-, in respect of the property at Sriperumbudur Taluk and in the auction, the said property had fetched a sum of Rs.2,03,00,000/-. It is also submitted that the valuation have been done in a scientific manner and the petitioner having sought for extension of time for making pre-deposit, cannot turn around and say that the Tribunal has no jurisdiction to pass an order. Therefore, for the said reasons, the learned counsel appearing for the Respondents 3 to 5, prayed for dismissal of the writ petition. 11. The learned counsel appearing for the Respondents 3 to 5 in support of his submissions, placed reliance upon the common https://hcservices.ecourts.gov.in/hcservices/ orders dated 16.6.2010 made in W.P.No.17016 of 2009, C.R.P.(PD) 2467 of 2009 etc., passed by a Division Bench of this Court. 12. A Division Bench of this Court in the order dated 1.12.2009, made in W.P.No.21486 and 22218 of 2009, had taken a view that the Appellate Tribunal is empowered to waive and reduce the amount under the third proviso to sub-section 1 of Section 18 of the SARFAESI Act, but such amount cannot be reduced below 25% of the Debt as referred under the second proviso. 13. The petitioner has also filed a supplementary affidavit stating that subsequently, an order under Section 14(2) of the SARFAESI Act was passed by the first Respondent and pursuant to the said order the District Magistrate and District Collector has also passed an order enabling the Tahsildar, Kancheepuram to assist the 4th Respondent to take possession of the factory and even as per the records, possession of the secured asset is not established. Therefore, the possession notices are per se illegal and invalid and so also the fresh sale notices. 14. This Court has carefully considered the submissions made by the learned counsel appearing on either side and also perused the materials available on record in the form of typed set of documents and also the decisions relied on by them. 15. The issues arise for determination in this writ petition are:- (i) Whether the Debts Recovery Appellate Tribunal has got power to waive the pre-deposit at the time of entertaining the appeal? (ii) To what relief, the parties are entitled to? 16. In AIR 2009 Orissa page 147 (DB) – Swastik Agency and two others vs. State Bank of India, Main Branch and three others, challenge was made by the borrower for quashing the auction sale conducted by M/s. State Bank of India in pursuant to the sale notice. A Division Bench of Orissa High Court after elaborately considering the decision of the Hon’ble Supreme Court of India, has held that in the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold and this can be achieved only when there is maximum public participation of the process of sale and everybody has an opportunity of making an offer. Therefore, the legal obligation is cast upon the authority is that the property to be sold in such a manner that it may fetch best price. It is further held that when the statute provides for a particular procedure, the authority has to follow the same and it cannot be permitted to act in contravention of the same and to uncontroverted legal position that where a statute requires to do a certain thing in a https://hcservices.ecourts.gov.in/hcservices/ certain way, the thing must be one in that way or not at all. It is further held that when the action of the State or its instrumentalities is not as per the rule or regulations and supported by the statute, the Court must exercise its jurisdiction to declare such an act to be illegal and invalid. 17. On the facts of the case, the Division Bench of the Orissa High Court held that the Respondent Bank therein, has failed to comply with the statutory requirements of the publication of possession notice and auction notice in vernacular language and thereby, rendering statutory requirements as farce. Citing the said reason, the sale was quashed. 18. In our opinion, the said judgment is not applicable to the facts of the present case, for the reason that initially, challenge was made to sale notices as well as possession notices issued by the Authorized Officer in S.A.No.88 of 2009 and the Debts Recovery Appellate Tribunal has quashed the sale notices. The petitioner herein aggrieved by the non-quashment of possession notices, had filed further appeal before the Debt Recovery Appellate Tribunal with an application for condonation of delay and for waiver of pre-deposit. In the interregnum, auction took place and the auction purchaser was also put in possession of the property. 19. It is relevant to extract Section 18 of the SARFAESI Act which is as follows:- “ 18 (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 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 https://hcservices.ecourts.gov.in/hcservices/ writing, reduce the amount to not less than twenty-five per cent of debt referred to in the second proviso.” 20. Second proviso of sub-section (1) of Section 18 of the SARFAESI Act mandates that Appellate Tribunal shall not entertain the appeal, unless the borrower has deposited fifty per cent of the amount due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less. The third proviso to sub-section (1) of Section 18 contemplates 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. The submission made by the learned senior counsel appearing for the petitioner that since no adverse order has been passed by the second Respondent against the petitioner, the question of pre-deposit under sub- section (1) of Section 18 of the SARFAESI Act does not arise for consideration, in our considered opinion lacks merit and substance. As held in AIR 2009 Orissa page 147 (DB), quoted by the learned senior counsels appearing for the petitioner that when the statute provides for particular procedure, it is to be done in that way or not at all. 21. Second proviso to sub-section (1) of Section 18 of the SARFAESI Act mandates the petitioner to deposit 50% of the amount of debt due from him and also vests discretion with the Appellate Tribunal to reduce the same but not less than 25% of the debt referred to under the second proviso to sub-section (1) of Section 18 of the SARFAESI Act. As per the counter affidavit, at the time of issuance of notice under Section 13(2) of the SARFAESI Act, on 26.12.2008, the mortgagors and guarantors were due and payable a sum of Rs.3,87,58,986/-. The petitioner and guarantors are due and payable a sum of Rs.470.64 lakhs as on 17.3.2010. It is further stated in the counter the properties at Sriperumbudur Taluk had fetched a sum of Rs.2.03 Crores in the public auction sale, and the petitioner is due and payable a huge sum of money. 22. In the light of the stand taken by the Respondent Bank, it cannot be contended by the petitioner that in the absence of any adverse order, it is not liable to deposit any amount. In fact the quantification of the amount due and payable by the petitioner and the guarantors, had already been done while initiating the action under SARFAESI Act, as stated in the counter affidavit filed by the Respondents/Bank. 23. It is to be pointed out at this juncture, under the second proviso to sub-section (1) of Section 18 of the SARFAESI Act, the first Respondent Appellate Tribunal is not vested with any discretion, except to reduce to the extent of deposit of 25% https://hcservices.ecourts.gov.in/hcservices/ of the amount claimed by the Bank or determined by the Debts Recovery Tribunal. As rightly pointed out by the learned counsel appearing for the Respondents 3 to 5, 25% of the amount works out to Rs.117 lakhs and the first Respondent Appellate Tribunal was very considerate in directing the petitioner to pay a sum of Rs.90 lakhs as pre-deposit for entertaining the appeal. 24. The learned counsel appearing for the Respondent Bank submitted that even though the said order is not in consonance with the second proviso to sub-section (1) of Section 18 of the SARFAESI Act, the Bank has not challenged the said order and therefore, the petitioner can deposit the said amount for entertainment of the appeal. 25. Similar issue came up for consideration before a Division Bench of this Court in W.P.No.17016 of 2009 and C.R.P(PD) No.2467 of 2009. The facts of the said case are, that the borrower therein sought for complete waiver of pre-deposit and it was allowed. Challenging the vires of the said order, Indian Bank, Asset Recovery Management Branch-I, Egmore, Chennai-8, has filed a writ petition and the borrower had also filed a Civil Revision Petition. 26. A Division Bench of this Court while disposing of the above said matters, had held as follows:- “The language used in this section is very plain and clear, making it unambiguously clear that any person aggrieved by the order of the Debts Recovery Tribunal passed under Section 17 may prefer appeal to the Debts Recovery Appellate Tribunal by paying necessary fee and second proviso to sub-section (1) makes it clear 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. However, under third proviso to sub-section (1), power has been given to the Appellate Tribunal to reduce the deposit amount, for the reasons to be recorded in writing, to not less than twenty five percent of debt referred to in the second proviso. Thus, though a discretionary power has been conferred on the Debts Recovery Appellate Tribunal under third proviso to sub- section (1), the discretion is not an absolute one, but a limited one. While exercising the discretion conferred on it, provided for under third proviso to sub-section (1), the https://hcservices.ecourts.gov.in/hcservices/ Appellate Tribunal has been mandated not to reduce the deposit amount to not less than twenty five percent of the debt referred to in the second proviso. While such is the legal mandate, in the impugned order, the first respondent/Appellate Tribunal has granted complete waiver of the deposit amount to the appellants/guarantors, which has not been contemplated under law. In the interpretation of statutes, the Courts always presume that the legislature inserted every part thereof for a purpose and the legislative intention is that every part of the statute should have effect. The legislature is deemed not to waste its words or to say anything in vain. By an interpretative process, the Court cannot reach a conclusion which makes it impossible for remedies provided for under the law to be worked out. The purposive interpretation requires that any interpretation which is unjust or absurd must be eschewed and the Court must adopt principles of reasonable and harmonious construction in consonance with the avowed statutory purpose. Hence, the impugned order passed by the first respondent/ Appellate Tribunal is absolutely bereft of any power granted to it and therefore, the same needs to be set aside.” Citing the said reasons, the writ petition filed by the Bank was allowed. 27. A Single Bench of the Calcutta High Court in the decision reported in (2008) 71 AIC page 500 (Calcutta) – Star Textiles and Industries Ltd., vs. Union of India, has considered the second proviso to Section 18(1) of the SARFAESI Act and held that requirement of deposit of 50% of the amount of debt due from the borrower, as claimed by the secured creditors or determined by the Debt Recovery Tribunal, whichever is less, cannot be contented to be oppressive or unreasonable. The legislature thought fit to impose conditions for regulations of such right of appeal and the legislative wisdom cannot be put to judicial scanner, as the condition is not onerous arbitrary or unreasonable. 28. In the light of the above said decisions, we hold that the Debt Recovery Appellate Tribunal cannot completely waive the deposit in exercise of its powers under the second proviso to sub- https://hcservices.ecourts.gov.in/hcservices/ section (1) of Section 18 of the SARFAESI Act and therefore, we answer the Issue No.1 against the petitioner. 29. Issue No.2:- The learned senior counsel appearing for the petitioner by way of alternate submission, would submit that this Court in exercise of Article 226 of the Constitution of India, can exercise its discretion in furtherance of justice and by taking into consideration of the fact that the entire properties of the petitioner had been taken possession and that sale of portion of properties had also been taken place and that the Bank has also realized a sum of Rs.2.03 Crores by way of such sale, can reduce the amount of pre-deposit to a lesser extent. 30. On the said submission, we heard the submissions of the learned counsel appearing for the Respondent Bank also. 31. In the judgment reported in 2009 (5) Scale page 301 – Ravi Gupta vs. Commissioner of Sales Tax, Delhi and another, the facts of the case are, that the appellant is a registered dealer registered under the Delhi Sales Tax Act, 1975 and Central Sales Tax Act, 1956 and after assessment, demand was raised by the authorities, on the ground that the appellant did not furnish the requisite declaration forms C and E-1 under the CST Act. The appellant filed appeal before the Appellate Authority praying for further time to produce the declaration forms, which was declined. The appellant therein moved the Appellate Tribunal VAT, Delhi, by filing these appeals and along with the appeals, the appellant filed applications in terms of sub-section (5) of Section 43 of the Act which dispensed with the pre-deposit, which is a condition precedent for entertaining the appeal. The Appellate Tribunal directed the appellant therein to deposit a sum of Rs.3.00 Crores and challenging the vires of the same, he filed a writ petition before the High Court of Delhi. The High Court of Delhi, has granted time to produce the evidence before the appellate authority within six weeks, failing which, the appellant shall be liable to make the pre-deposit in terms of the order. Since the appellant did not produce the evidence, the Tribunal held that the appellant was required to deposit a sum of Rs.3.00 Crores, as directed earlier. The appellant therein once again filed a writ petition challenging the said order and the Delhi High Court, has dismissed the writ petition on the ground that the appellant had not complied with the earlier order. The petitioner by filing appeal before the Hon’ble Supreme Court of India, has challenged the said order. https://hcservices.ecourts.gov.in/hcservices/ 32. The Hon’ble Supreme Court of India, has considered the scope of Section 43(5) of the Act and the same is extracted below:- “Section 43 so far as it is relevant reads as follows: “43. (5) No appeal against an order of assessment with or without penalty or against an order imposing the penalty shall be entertained by an appellate authority unless such appeal is accompanied by a satisfactory proof of the payment of tax with or without penalty or, as the case may be, of the payment of the penalty in respect of which the appeal has been preferred: Provided that the appellate authority may, if it thinks fit, for reasons to be recorded in writing, entertain an appeal against such order— (a) without payment of the tax and penalty, if any, or as the case may be, of the penalty, on the appellant furnishing in the prescribed manner security for such amount as it