2024 (9) TMI 1552 - HC - FEMA

Deposit requirement for delay condonation applications premature before determining if delay should be condoned

M/s Gadekar Ginning and Pressing Pvt. Ltd., Jayashree Vishnu Gadekar Versus Canara Bank M/s Adarsh Ginning and Pressing Aurangabad

Bombay HC allowed writ petition challenging DRAT order requiring 50% deposit as pre-condition for condonation of delay application. Court held that ... Depositing 50% amount, as a pre-condition for entertaining the Application for Condonation of Delay - scope of of statutory provisions under the Maharashtra Co-operative Societies Act and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. HELD THAT:- The main proceedings before the DRT u/s 17 would have been registered and the DRT would have then commenced the hearing on the merits of the application filed u/s 17. DRAT only had to consider whether the order of the DRT can be construed to be perverse and erroneous so as to cause interference. In view thereof and considering the law as is settled by this Court in Dilawar Hakim [2005 (10) TMI 617 - BOMBAY HIGH COURT] DRAT could not have directed the Petitioner to deposit 50% of the amount due from him keeping in view that an auction sale had already occurred and the DRT had not determined any amount to be recovered from the Petitioner. Moreover, the Petitioner has deposited Rs. 50,00,000/- with the DRAT. We, therefore, conclude that in the matters of condonation of delay, unless the delay is condoned, the main proceedings would not be taken up for hearing. Hence the stage of depositing the amount as may be prescribed / engrafted in any statute as a pre-condition for entertaining a substantive proceeding, would not be applicable for dealing with applications for condonation of delay. Writ Petition is allowed. The impugned order of the learned DRAT dated 17.10.2022, to the extent of directing the Petitioners to deposit 50% of the amount, stands quashed and set aside. The proceedings are remitted to the learned DRAT. DRAT would consider whether the impugned order of the DRT, refusing to condone delay, is sustainable or not. All contentions to this extent, are kept open. Issues:Condonation of delay in filing an interlocutory application before the Debt Recovery Tribunal (DRT) under the SARFAESI Act, 2002.Analysis:The judgment revolves around the issue of condonation of delay in the context of an interlocutory application filed before the Debt Recovery Tribunal (DRT) under the SARFAESI Act, 2002. The Court highlighted the importance of distinguishing between the proceedings for establishing sufficient cause for delay and the actual entertainment of the appeal. Referring to previous judgments, the Court emphasized that the delay in filing should be condoned before the appeal can be entertained. The Court also discussed the requirement of depositing a certain percentage of the debt before the appeal can be entertained, as per the provisions of the SARFAESI Act.The Court specifically referred to Section 18 of the SARFAESI Act, which mandates that an appeal to the Appellate Tribunal will not be entertained unless the borrower has deposited 50% of the debt due from him. The Court noted that the language used in this section is similar to that of Section 154 of the Maharashtra Co-operative Societies Act. The judgment reiterated that the main litigation stage, i.e., entertaining an appeal on its merits, can only proceed after the delay is condoned.The Court analyzed the facts of the case where the Petitioner's delay application was rejected by the DRT purely on the issue of limitation. The Petitioner then approached the Appellate Tribunal (DRAT) seeking condonation of delay. The Court observed that the Petitioner mistakenly filed an application for waiver of pre-deposit, which was not required as the main issue was the condonation of delay. The Court emphasized that the proceedings for hearing the main appeal would only commence after the delay is condoned.In conclusion, the Court allowed the Writ Petition, quashing the direction of the DRAT to deposit 50% of the amount due. The matter was remitted to the DRAT for further consideration. The Court clarified that in matters of condonation of delay, the stage of depositing the amount as a pre-condition for entertaining a substantive proceeding is not applicable. The Court directed both parties to appear before the DRAT for further proceedings, with the deposited amount being subject to the final result of the case. The Court also instructed the DRAT to review the impugned order of the DRT regarding the condonation of delay.The judgment provides a comprehensive analysis of the legal principles governing the condonation of delay in filing interlocutory applications before the DRT under the SARFAESI Act, emphasizing the procedural requirements and the distinction between delay condonation and appeal entertainment.