TaxTMI 
TaxTMI 
2016 (4) TMI 917
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....il. The first respondent, being a borrower and aggrieved by the steps taken by the secured creditor, filed Securitisation Application No. 152 of 2010 before the Debt Recovery Tribunal, Ahmedabad. Though, initially an interim relief was granted, the same was vacated by order dated 20.01.2011. Therefore, the first respondent moved the Debt Recovery Appellate Tribunal, Mumbai under Section 18 of the SARFAESI Act. In terms of the proviso under Section 18, the first respondent made a deposit of Rs. 50 lakhs before the Appellate Tribunal. During the pendency of the appeal before the DRAT, Securitisation Application itself came to be finally disposed of before the Debt Recovery Tribunal at Ahmedabad, setting aside the sale. Realising that the appeal did not survive thereafter, the first respondent sought permission to withdraw the same and also for refund of the deposit of Rs. 50 lakhs. Permission was granted, however, making it subject to the disposal of the appeal. As the appeal itself was being withdrawn, the first respondent moved the High Court of Gujarat at Ahmedabad by way of Writ Petition (Special Civil Application), aggrieved by the observation that the withdrawal would be subjec....
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..... (3) An application under sub-rule (1) shall be accompanied with fee as provided in rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993." 6. Learned Senior Counsel further submits that the Bank has a lien on the amount under Section 171 of The Indian Contract Act, 1872. The decision of the High Court of Gujarat in Babu Ganesh Singh Deepnarayan v. Union of India and another AIR 2009 Guj. 98, which has been followed by the Division Bench in the impugned judgment, does not reflect the true legal position, it is further submitted. 7. Babu Ganesh (supra) was a case involving a challenge on the vires of the second proviso under Section 18 of the SARFAESI Act, on the mandatory pre-deposit. While upholding the provision, at paragraphs-5 and 6, it was observed that, in case the appeal is dismissed, the amounts deposited for entertaining the appeal would be refunded. To quote: "5. Right of appeal is a creature of the statute. Legislature can impose conditions under which it is to be exercised. Without a statutory provision creating such a right, a person aggrieved is not entitled to prefer an appeal. Legislature while granting right of appeal can impose conditions which it t....
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....cement of security interest was enacted. The Act incorporates a system whereby direct action for recovery of secured debt may be initiated against the secured assets of a borrower after the debt is declared to be a non performing asset (NPA). 9. "Borrower" is defined under Section 2(1)(f), which reads as follows: "2(1)(f) "borrower" means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who becomes borrower of a securitisation company or reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance;" 10. "Secured Asset", under Section 2(1)(zc), is defined as: "2(1)(zc) "secured asset" means the property on which the security interest is created" 11. "Section 2(1)(zd) provides for definition of "secured creditor", which reads as follows: "2(1)(zd) "secured creditor" means any bank or financial institution or any consortium or group of banks or financial institutions a....
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....sentation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non- acceptance of the representation or objection to the borrower: Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under section 17 or the Court of District Judge under section 17A. (4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-- (a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset; (b) take over the management of the business of the borrower including the right to transfer by way of lease, as....
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....on 13 of the Act. To quote for easy reference, Section 17 of the Act: "17. Right to appeal.-(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application alongwith such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken: Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower. Explanation: For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under sub-section (1). (2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor ....
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....e Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal. (7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the rules made thereunder." 17. Though Section 17 of the Act is titled as a 'Right to appeal', the liberty granted to the aggrieved person is to make an application to the DRT and the parties are at a liberty to lead evidence before the tribunal. And thus, it is actually a trial before the DRT on the grievances of the aggrieved persons in the respect of the measures taken by the secured creditor for recovery of dues of the borrower in proceeding against the secured assets.(See Mardia Chemicals v. Union of India (2004) 4 SCC 311) 18. The actual appeal is contemplated under Section 18 of the SARFAESI Act. The provision reads as follows: "18. Appeal to Appellate Tribunal.-(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under section 17, may prefe....
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....ion of the application by the court. A similar view was again taken in Dhoom Chand Jain v. Chamanlal Gupta & Anr. AIR 1962 All. 543, in which the learned Chief Justice Desai and Mr. Justice Dwivedi gave the same meaning to the expression 'entertain'. It is observed by Dwivedi J. that the word 'entertain' in its application bears the meaning 'admitting to consideration'. and therefore when the court cannot refuse to take an application which is backed by deposit or security, it cannot refuse judicially to consider it. In a single bench decision of the same court reported in Bawan Ram & Anr. v. Kuni Beharilal A.I.R. 1961 All. 42, one of us (Bhargava, J.) had to consider the same rule. There the deposit had not been made within the period of limitation and the question had arisen whether the court could entertain the application or not. It was decided that the application could not be entertained because proviso (b) debarred the court from entertaining an objection unless the requirement of depositing the amount or furnishing security was complied with within the time prescribed. In that case of the word 'entertain' is not interpreted but it is held tha....
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....ax." 21. We are also conscious of the fact that such a precondition is present in several statutes while providing for statutory appeals, like The Income-Tax Act, 1961, The Central Excise Act, 1944, The Consumer Protection Act, 1986, The Motor Vehicles Act, 1988, etc. However, unlike those statutes, the purpose of the SARFAESI Act is different, it is meant only for speedy recovery of the dues, and the scheme under Section 13(4) of the Act, permits the secured creditor to proceed only against the secured assets. Of course, the secured creditor is free to proceed against the guarantors and the pledged assets, notwithstanding the steps under Section 13(4) and without first exhausting the recovery as against secured assets referred to in the notice under Section 13(2). But such guarantor, if aggrieved, is not entitled to approach DRT under Section 17. That right is restricted only to persons aggrieved by steps under Section 13(4) proceeding for recovery against the secured assets. 22. The Appeal under Section 18 of the Act is permissible only against the order passed by the DRT under Section 17 of the Act. Under Section 17, the scope of enquiry is limited to the steps taken under Se....