2019 (2) TMI 467 - HC - Indian Laws

Court upholds DRAT's decision on pre-deposit requirement under SARFAESI Act

INDIABULLS HOUSING FINANCE LTD. Versus VAIBHAV JHAWAR AND ORS.

The court upheld the Debt Recovery Appellate Tribunal's decision to entertain an appeal without requiring a mandatory pre-deposit under Section 18 of the ... Requirement of pre-deposit of half of the amount for maintainability of appeal - Section 13(2) of the SARFAESI Act - Interpretation of statute - whether respondent Nos. 1 to 5, who were neither the borrowers nor the guarantors are liable to make pre-deposit of half of the amount of the debt, which has been claimed by the petitioner herein under Section 13(2) of the SARFAESI Act? Held that:- The provision of pre-deposit has been prescribed in second proviso to Section 18(1) of the SARFAESI Act. The said proviso clearly states that “no appeal shall be entertained unless the borrower has deposited with the Arbitral Tribunal 50% of the amount of debt”. It must be noted that even though the appeal under Section 18(1) can be filed by “any person” aggrieved, as it starts with those words, but when it comes to pre-deposit with the Arbitral Tribunal for entertaining the appeal, reference is made to “borrower” - On a reading of the definition of “borrower”, the same would include a guarantor as well but not a person other than borrower / guarantor. The only interpretation given to second proviso to Section 18(1) shall be that if a person other than borrower / guarantor files an appeal before the Arbitral Tribunal then the stipulation of the pre-deposit of 50% (or 25%) of the amount of debt due from him as claimed by the secured creditors or determined by the DRT shall not be insisted upon. This is the only interpretation, which can be given to second proviso to Section 18(1) read with Section 2(f) of the SARFAESI Act. It is a well settled law of interpretation that “when the words of the statute are clear, plain or unambiguous, ie., they are reasonably susceptible to only one meaning, the Courts are bound to give effect to that meaning irrespective of consequences - there is no ambiguity in the provisions of Section 18 of the SARFAESI Act. The provisions of Section 18 of the SARFAESI Act, are determinative of the fact that the legislature intended that it is only the borrower and the guarantor, who should be under obligation to make the pre-deposit. The same is clear on a literal and grammatical meaning of the words “borrower” and “any person aggrieved” as found mentioned in Section 18 and 2 (f) of the Act. There is no inconsistency within the provision of Section 18(1) of the Act. The only way, second proviso to Section 18(1) can be interpreted is that it is either the borrower or the guarantor, who is liable to make pre-deposit on an appeal filed by him / her against the order of the DRT. The DRAT has rightly rejected the contention made on behalf of the petitioner for the pre-deposit to be made by the respondent. Petition dismissed - decided against petitioner. Issues Involved:1. Whether the Debt Recovery Appellate Tribunal (DRAT) can entertain an appeal without insisting on the mandatory pre-deposit under Section 18 of the SARFAESI Act.2. Whether respondents who are neither borrowers nor guarantors are required to make a pre-deposit under Section 18 of the SARFAESI Act.3. Interpretation of Section 18 of the SARFAESI Act regarding the requirement of pre-deposit by third parties.Detailed Analysis:Issue 1: Whether the Debt Recovery Appellate Tribunal (DRAT) can entertain an appeal without insisting on the mandatory pre-deposit under Section 18 of the SARFAESI Act.The petitioner challenged the DRAT's order that entertained the appeal without requiring the respondents to make the mandatory pre-deposit as per Section 18 of the SARFAESI Act. The petitioner argued that the impugned order violated the statutory provision of Section 18, which mandates a pre-deposit of 50% of the debt amount for entertaining an appeal. The DRAT relied on the judgment in *Manju Devi and Ors v. M/s RBL Bank Ltd. and Ors* to reject the petitioner's plea. The court examined the relevant provisions and concluded that the DRAT's decision was in line with the statutory requirements, dismissing the petitioner's challenge.Issue 2: Whether respondents who are neither borrowers nor guarantors are required to make a pre-deposit under Section 18 of the SARFAESI Act.The court analyzed Section 18 of the SARFAESI Act, which states that 'any person aggrieved' by a DRT order may appeal to the DRAT. However, the second proviso specifies that no appeal shall be entertained unless the borrower deposits 50% of the debt amount. The definition of 'borrower' under Section 2(f) includes guarantors but not third parties. The court interpreted that the pre-deposit requirement applies only to borrowers and guarantors, not to third parties. Therefore, respondents who are neither borrowers nor guarantors are not obligated to make the pre-deposit.Issue 3: Interpretation of Section 18 of the SARFAESI Act regarding the requirement of pre-deposit by third parties.The court emphasized that the statutory language must be interpreted literally unless it leads to absurdity. The court cited various precedents to support the principle that clear and unambiguous statutory language should be given its plain meaning. The court found no ambiguity in Section 18, which clearly distinguishes between borrowers/guarantors and other aggrieved persons. The court held that the legislative intent was to impose the pre-deposit requirement only on borrowers and guarantors. Consequently, the court dismissed the petition, affirming that third parties are not required to make a pre-deposit under Section 18.Conclusion:The court concluded that the DRAT correctly entertained the appeal without insisting on a pre-deposit from respondents who are neither borrowers nor guarantors. The statutory interpretation of Section 18 of the SARFAESI Act supports this conclusion, as the pre-deposit requirement applies exclusively to borrowers and guarantors. The petition was dismissed, and the DRAT's order was upheld.