1. M/s.New Horizon Sugar Mills Limited, Ariyur, Kandamangalam P.O., Pondicherry, 605 102, Rep. by its Director V.Kannan
2. V.Kannan
3. V.Baskaran
4. K.Usha
5. B.Bhavani
6. The Debts Recovery Appellate Tribunal, No.55, Ethiraj Salai, Chennai-600 008.
.. Respondents in W.P.No.22218 of 2009 Writ Petition No.21486 of 2009 filed under
Article 226 of the Constitution of India, praying for issuance of a Writ of Certiorari, to call for the records of the first respondent, the Debts Recovery Appellate Tribunal, Mumbai, in I.A.NO.1183 of 2009 in IN (S.A).No.607 of 2009 and quash its order dated 1.10.2009.
Writ Petition No.22218 of 2009 filed under
Article 226 of the Constitution of India, praying for issuance of a Writ of Certiorari, to call for the records on the files of the sixth respondent in I.A.NO.1183 of 2009 in IN.S.A.No.607 of 2009 and quash the same.
For petitioner in W.P.No.21486 of 2009:
Mr.T.R.Rajagopalan, Senior Counsel for Mr.P.Raghunathan for M/s.T.S.Gopalan & Co.
For petitioner in W.P.No.22218 of 2009:
Mr.Jayesh B.Dolia for M/s.Aiyar & Dolia For respondents in W.P.No.21486 of 2009:
RR-1 & 2 Tribunal Mr.T.K.Seshadri, Senior Counsel for M/s.Gupta & Ravi for RR-3 to 7 Mr.Jayesh B.Dolia for M/s.Aiyar & Dolia for RR-8 & 9 For respondents in W.P.No.22218 of 2009:
Mr.T.K.Seshadri, Senior Counsel for M/s.Gupta & Ravi for RR-1 to 5 R-7 No appearance R-6 Tribunal COMMON ORDER S.J.MUKHOPADHAYA,J As both the Writ Petitions relate to the very same order passed by the DRAT, Mumbai, one preferred by the auction-purchaser and the other preferred by the Bank, they were heard together and disposed of by this common order.
2. The Writ Petitions are preferred against the order dated 1.10.2009 passed by the DRAT, Mumbai, whereby the DRAT, Mumbai, in the petition for waiver under the second proviso to
Section 18(1) of the SARFAESI Act, ordered that the borrowers are not liable to deposit any amount under the said proviso.
3. Learned Senior Counsel appearing for the petitioner-auction purchaser, in W.P.No.21486 of 2009 and the learned counsel appearing for the petitioner-Bank in W.P.No.22218 of 2009, submitted that the provisos to
Section 18(1) of the SARFAESI Act, are mandatory and 100% waiver cannot be allowed in favour of the borrowers. Under the third proviso to
Section 18(1), for the reasons to be recorded in writing, the DRAT at best, could reduce the amount to not less than 25% of the debt referred to in the second proviso, i.e. the debt due from him as claimed by the secured creditor or determined by the DRT, whichever is less.
4. The aforesaid submissions were opposed by the learned Senior Counsel appearing on behalf of the borrowers, who referred to the facts to suggest that on the facts and circumstances, the Bank, having recovered the total amount, no further amount was liable to be paid and thus, no amount was to be deposited in terms of the second proviso to
Section 18(1) of the SARFAESI Act.
5. From the impugned order dated 1.10.2009, it would be evident that the DRAT, Mumbai, has noticed that the secured asset has been sold for a sum of Rs.50.20 crores. Taking into consideration the same, it was observed by the DRAT, Mumbai, that the amount claimed by the borrowers (appellants therein) is less than the sale consideration and on that ground, it was held that the borrowers were not liable to pay any further amount under the second proviso to
Section 18(1).6. Learned counsel appearing on behalf of the borrowers rightly pointed out that the amount of Rs.50.20 crores has not been deposited by the borrowers. The said amount has been deposited by the third party-auction purchaser and the sale is under challenge before the DRT/DRAT.
7. In the above background, the sale amount of the secured asset cannot be taken into consideration to determine as to whether any amount is due from the borrowers.
8. Learned Senior Counsel for the borrowers referred to one or other order, including the impugned order passed by the DRAT, Mumbai, to suggest that the due amount has already been determined by the DRT, which is challenged before the DRAT, but it is accepted that the order has been passed by the DRT under
Section 17 of the SARFAESI Act.
9. The second proviso to
Section 18(1) of the SARFAESI Act, mandates the appellate Tribunal not to entertain the appeal, unless the borrower has deposited with the appellate Tribunal 50% of the amount of debt due from him, as claimed by the secured creditor or determined by the DRT, whichever is less. The appellate Tribunal is empowered to waive and reduce the amount under the third proviso to
Section 18(1), but such amount cannot be reduced below 25% of the debt referred to in the second proviso.
10. The debt amount can be determined by the DRT under
Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, 'the DRT Act, 1993'). Under
Section 13(10) of the SARFAESI Act, if the dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application before the DRT or a competent Court, for recovery of the balance amount from the borrower, and in such a case also, the balance amount can be determined by the DRT by following the procedures prescribed under
Section 19 of the DRT Act, 1993. There is no other provision made either under the DRT Act, 1993 or under the SARFAESI Act, empowering the DRT to determine the debt due to the secured creditor from the borrower.
11. Under
Section 17 of the SARFAESI Act, the DRT has been empowered to determine as to whether any of the measures referred to in sub-section (4) of
Section 13 taken by the secured creditor for enforcement of security, are in accordance with the provisions of the Act and the Rules made thereunder, and under
Section 17 of the SARFAESI Act, the DRT does not determine the debt due to the secured creditor from the borrower. Therefore, the borrowers in the present cases cannot derive any advantage of the order passed by the DRT under
Section 17 of the SARFAESI Act to show as to what is the claim amount, nor can claim that such amount has been determined by the DRT.
12. We have already observed that the amount deposited by the third party-auction purchaser cannot be counted to be the amount paid by the borrower and therefore, the amount of Rs.50.20 crores deposited by the auction-purchaser and recovered by the Bank, cannot be taken into consideration to reduce the amount under the third proviso to
Section 18(1) of the SARFAESI Act, particularly when such sale is under challenge.
13. The DRAT, Mumbai, having failed to take into consideration the aforesaid facts, the impugned order dated 1.10.2009 passed by the DRAT, Mumbai, in I.A.No.1183 of 2009 is set aside. The case is remitted with a direction to the DRAT, Mumbai/Chennai, whichever is dealing with the matter, to re-consider the application filed by the borrowers for waiver of deposit as contemplated under the second proviso to
Section 18(1) of the SARFAESI Act, within 15 days from the date of receipt/production of a copy of this order. If the borrowers fail to deposit the statutory amount in terms of the second proviso to
Section 18(1), read with the waiver, if any, allowed under the third proviso to
Section 18(1), the DRAT will not entertain the appeal and dismiss the same.
14. Both the Writ Petitions are allowed with the aforesaid observations. No costs. The Miscellaneous Petitions are closed.
(S.J.M.J) (M.D.J) 01.12.2009 Index: Yes Internet: Yes cs To
1. The Debts Recovery Appellate Tribunal, No.55, Ethiraj Salai, Chennai-600 008.
2. The Debts Recovery Tribunal-1, Chennai, 6th Floor, Spencer Towers, Mount Road, Chennai-600 002.
S.J.MUKHOPADHAYA,J and M.DURAISWAMY,J cs Common Order in Writ Petition Nos.21486 and 22218 of 2009 01.12.2009