Case Note & Summary
The present writ petition was filed by six petitioners, including two public limited companies and four individuals, challenging an order dated 30.05.2018 passed by the Debt Recovery Appellate Tribunal (DRAT), Mumbai. The impugned order directed the petitioners to deposit 50% of the amount stated in the notice issued under Section 13(2) of the SARFAESI Act, requiring them to deposit an additional Rs.4.57 crores over and above Rs.1.75 crores already deposited. The dispute arose from proceedings under the SARFAESI Act initiated by respondent no.1, Assets Reconstruction Company of India Limited (ARCIL), as a secured creditor, to which State Bank of India had assigned the debt of petitioner no.1. Respondent no.2 was the purchaser of two immovable properties of petitioner no.1 sold by respondent no.1. The petitioners had earlier filed a securitisation application before the Debt Recovery Tribunal (DRT), which was dismissed on 03.06.2011. In the appeal before the DRAT, the petitioners sought waiver of the pre-deposit condition under the provisos to Section 18(1) of the SARFAESI Act. The DRAT initially granted complete waiver on 04.07.2011, but that order was recalled and a fresh order on 11.04.2012 held the pre-deposit requirement satisfied. Respondent no.2 challenged this in the High Court, but the challenge eventually failed. Meanwhile, the DRAT proceeded to allow the appeal on merits on 13.01.2014. That order was set aside by the High Court on 15.04.2019 in writ petitions filed by respondents no.1 and 2, and the matter was remanded to the DRAT. On remand, the DRAT passed the impugned order directing pre-deposit. The petitioners argued that respondent no.1 had assigned the debt to BMW Industries Ltd. in 2007-08, thereby ceasing to be a secured creditor, and that no debt was due. They contended that the provisions of Section 18(1) were not applicable. They further submitted that the secured creditor had already recovered more than 50% of the claimed amount through the sale of two properties for Rs.7,60,50,000, and hence no further pre-deposit was required. The DRAT was also accused of not giving reasons for denying waiver under the third proviso to Section 18(1). The judgment text as provided ends without recording the court's analysis, findings, or final decision. Therefore, the court's reasoning and the ultimate outcome of the writ petition are not available.
Issue of Consideration
Whether the Debt Recovery Appellate Tribunal (DRAT) erred in directing the petitioners to deposit 50% of the amount claimed in the notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Act, 2002 (SARFAESI Act) as pre-deposit under the second proviso to Section 18(1) of the SARFAESI Act, considering the assignment of debt by the secured creditor and the alleged recovery of more than 50% of the debt through sale of secured assets.
Case Details
2019 LawText (BOM) (11) 117
WRIT PETITION NO. 5204 OF 2019
Sunil B. Shukre, Milind N. Jadhav
Shri S. S. Sitani, Shri S. V. Purohit, Shri S. N. Kumar, Shri M. G. Bhangde, Shri R. S. Sundaram, Miss U. R. Tanna
M/s. Coverntry Springs and Engineering Company Limited, M/s. Coventry Coil-O-Matic (Haryana) Limited, Nishant Bafna, Ashokmal Bafna, Narendramal Bafna, Shri Rajendra Bafna
M/s. Assets Reconstruction Company of India Limited, Galvanotek Industries Private Ltd., The Central Provident Fund Commissioner
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Challenge to order of Debt Recovery Appellate Tribunal (DRAT) directing pre-deposit of 50% of debt amount under Section 18(1) of SARFAESI Act in an appeal against proceedings initiated under the said Act.
Remedy Sought
Petitioners sought quashing of the DRAT order dated 30.05.2018 and waiver of the pre-deposit condition.
Filing Reason
Petitioners contended that the secured creditor (respondent no.1) had assigned the debt to a third party and ceased to be a secured creditor, and that more than 50% of the debt had already been recovered through sale of secured assets, rendering the pre-deposit requirement unnecessary.
Previous Decisions
Debt Recovery Tribunal (DRT) dismissed Securitisation Application No.71/2007 on 03.06.2011. Petitioners filed appeal before DRAT with waiver application; DRAT initially allowed waiver on 04.07.2011, recalled it, then on 11.04.2012 held pre-deposit satisfied. The appeal was allowed on merits by DRAT on 13.01.2014, which was set aside by the High Court in Writ Petition Nos. 1006/2014 and 3574/2014, and remanded back. On remand, DRAT passed the impugned order dated 30.05.2018 directing pre-deposit.
Issues
Whether DRAT erred in directing pre-deposit under Section 18(1) of SARFAESI Act when the secured creditor had assigned the debt and ceased to be a secured creditor.
Whether the pre-deposit condition was satisfied by the recovery of more than 50% of the claimed amount through sale of secured assets.
Whether DRAT failed to consider the waiver provisions under the third proviso to Section 18(1).
Whether the impugned order was a non-speaking order lacking reasons.
Submissions/Arguments
Respondent no.1 assigned its debt to BMW Industries Ltd. on 17.08.2007 and 18.01.2008, thus ceasing to be a secured creditor; hence, provisions of Section 18(1) SARFAESI Act do not apply.
There was no computation of debt due; the application for substitution was dismissed, so debt due should be considered nil.
The secured creditor had already recovered Rs.7,60,50,000 by selling two properties, which is more than 50% of the claimed amount, satisfying any pre-deposit requirement.
DRAT did not give reasons for disallowing waiver under the third proviso to Section 18(1).
The impugned order was passed contrary to the order of remand.
Judgment Excerpts
The order directs the Petitioners to deposit 50% of the amount stated in the notice issued under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Act, 2002
the provisions of Section 18(1) of the SARFAESI Act would therefore not apply to the present case
if a secured creditor has recovered more than 50% of the amount claimed in the Notice issued under Section 13(2) of the SARFAESI Act, then there was no requirement of any pre-deposit
Procedural History
State Bank of India assigned debt to respondent no.1 (ARCIL) perpetually. Respondent no.1 took possession of two immovable properties of petitioner no.1 on 25.08.2007 and 29.08.2007. Petitioners filed Securitisation Application no.71/2007 before DRT on 08.10.2007. Respondent no.1 sold the properties to respondent no.2 by private treaty on 23.10.2007 and 24.10.2007 for Rs.7,60,50,000. DRT dismissed SA no.71/2007 on 03.06.2011. Petitioners filed Appeal no.135/2011 before DRAT with Waiver Application no.626/2011, seeking waiver of pre-deposit under Section 18(1) SARFAESI Act. DRAT allowed complete waiver on 04.07.2011, recalled it on objection by respondent no.2, and after hearing, passed fresh order on 11.04.2012 holding pre-deposit satisfied. Respondent no.2 filed Writ Petition no.5005/2012 in High Court challenging the waiver; High Court admitted on 01.11.2012 with stay that outcome of DRAT would be subject to the petition. Respondent no.2 filed SLP no.35012/2012 in Supreme Court, which was dismissed as not pressed. On 07.08.2013, High Court directed respondent no.2 to take steps else petition would stand dismissed; eventually WP 5005/2012 dismissed automatically. DRAT proceeded with appeal and by judgment dated 13.01.2014 allowed the appeal on merits. Respondent nos.1 and 2 filed Writ Petition nos.3574/2014 and 1006/2014 in High Court. High Court by common order dated 15.04.2019 allowed those writ petitions on grounds of jurisdiction and remanded the case back to DRAT. Meanwhile, WP 5005/2012 was restored on 09.03.2015 and allowed, but after DRAT had already allowed appeal. On remand, DRAT passed impugned order dated 30.05.2018 directing petitioners to deposit Rs.4.57 crores in addition to Rs.1.75 crores already deposited on 12.07.2017. Present writ petition filed challenging that order.
Acts & Sections
- Securitization and Reconstruction of Financial Assets and Enforcement of Securities Act, 2002 (SARFAESI Act): Section 13(2), Section 14, Section 18(1)
