2015 (3) TMI 1358 - HC - Indian Laws

Appeal under SARFAESI Act requires mandatory pre-deposit; DRAT cannot waive it.

The court held that an appeal under Section 18(1) of the SARFAESI Act is not maintainable without complying with the mandatory pre-deposit requirement. It ... Maintainability of appeal u/s 18(1) of SARFAESI Act - non-compliance with the pre-deposit - waiver of statutory requirement - HELD THAT:- When the debtor or guarantor as the case may be, if he prefers the statutory appeal under Section 18 of the SARFAESI Act, he cannot be allowed to shirk his statutory liability as he must be ready and willing to obey and comply with the order as to pre-deposit of the amount as a pre-condition to maintain the appeal - We find in the impugned order that the first respondent/Appellate Tribunal has misguided itself on clear mandate of the law while it wrongly granted complete waiver of the pre-deposit amount to the appellants/respondent, which has not been contemplated under law. In the interpretation of statutes, the Courts always presume that the legislature inserted every part thereof with a purpose and the legislative intention is that every part of the statute should have obedient 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 faster 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. The SARFAESI Act was enacted to curb the menace of growing nonperforming assets (NPAs). It affects the banks and financial institutions which is ultimately against the public interest. Normally there should be a presumption in favour of validity of legislative provision more so in regard to the mandatory provision of law aiming to facilitate the economic and financial matters and a few instances here and there of any harsh results would not be a valid consideration to invalidate or disregard the mandate of law. Hence, the impugned order passed by the first respondent/Appellate Tribunal is absolutely bereft of any statutory power granted to it and therefore, the same needs to be set aside. Impugned order set aside - Parties shall appear on 15.4.2015 before the Debt Recovery Appellate Tribunal for redressal of their grievance as to non-deposit of the portion of the debt as a pre-condition to lodge a statutory appeal under Section 18(1) of the SARFAESI Act and to invite appropriate reasoned order as to pre-deposit of sum in accordance with law as a mandatory pre-condition to maintain the appeal. Issues Involved:1. Maintainability of appeal under Section 18(1) of the SARFAESI Act without compliance with the pre-deposit requirement.2. Authority of the Debt Recovery Appellate Tribunal (DRAT) to waive the statutory pre-deposit requirement.Issue-wise Detailed Analysis:1. Maintainability of Appeal under Section 18(1) of the SARFAESI Act Without Compliance with Pre-Deposit Requirement:The court examined whether an appeal under Section 18(1) of the SARFAESI Act could be maintained without the mandatory pre-deposit of 50% of the debt or a minimum of 25% as ordered by the Debt Recovery Appellate Tribunal (DRAT). The court concluded that the appeal is not maintainable without compliance with the pre-deposit requirement. The statutory provision under Section 18(1) clearly mandates that no appeal shall be entertained unless the borrower has deposited 50% of the debt amount, subject to reduction by DRAT to not less than 25% for reasons recorded in writing.2. Authority of the Debt Recovery Appellate Tribunal (DRAT) to Waive the Statutory Pre-Deposit Requirement:The court addressed whether the DRAT has the authority to waive the statutory pre-deposit requirement. The court held that the DRAT does not have the authority to completely waive the pre-deposit requirement. The language of Section 18(1) is explicit in requiring the pre-deposit as a condition precedent for maintaining an appeal. The court emphasized that the statutory provision must be given full effect and that the DRAT can only reduce the pre-deposit amount to not less than 25% of the debt, but cannot waive it entirely.Relevant Legal Provisions and Judicial Precedents:- Section 17 of the SARFAESI Act: This section allows any person aggrieved by the measures taken by the secured creditor to make an application to the Debts Recovery Tribunal (DRT).- Section 18 of the SARFAESI Act: This section provides the right to appeal to the Appellate Tribunal against the order of the DRT, subject to the condition of pre-deposit of 50% of the debt amount, which can be reduced to 25% by the DRAT for reasons recorded in writing.- Judicial Precedents:- Narayan Chandra Ghosh vs. UCO Bank and others: The Supreme Court held that the requirement of pre-deposit under Section 18(1) is mandatory and the DRAT cannot entertain an appeal without compliance with this requirement.- Indian Bank vs. Blue Jaggers Estate Limited and others: The Supreme Court reiterated that the pre-deposit condition is a statutory mandate and must be complied with for the appeal to be entertained.Court's Conclusion:The court concluded that the statutory requirement of pre-deposit under Section 18(1) of the SARFAESI Act is mandatory and cannot be waived by the DRAT. The impugned order of the DRAT granting complete waiver of the pre-deposit was set aside as it was contrary to the statutory mandate. The parties were directed to appear before the DRAT for compliance with the pre-deposit requirement to maintain their appeal.Final Order:The rule was made absolute, and the impugned order was quashed and set aside. The parties were instructed to appear before the DRAT for redressal of grievances concerning the non-deposit of the pre-deposit amount as a mandatory pre-condition to maintain the appeal under Section 18(1) of the SARFAESI Act. No order as to costs was made.