TaxTMI 
TaxTMI 
2025 (7) TMI 694
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....and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act"). In the remaining three petitions, the petitioners challenge the very same order dated 04 June 2024, to the extent the said order does not consider the interest component for determining the debt due. Accordingly, it is only appropriate that a common judgment and order dispose of these petitions. 4. Ms Pinky Anand, learned senior advocate for the petitioner in Writ Petition (L) and 18722 of 2024 ("borrower") submitted that under the scheme of Section 13(2) of the SARFAESI Act, the invocation of jurisdiction under the SARFAESI Act is pre-conditioned by the account in question being classified as a Non-Performing Asset (NPA). She submitted that unless this jurisdictional fact was established, the proceedings and the SARFAESI Act could never be launched, and, if launched, were ex-facie without jurisdiction and ultra vires. She referred to the provisions of Section 13(2) of the SARFAESI Act and relied upon M/s Sravan Dall Mill Private Limited Vs. Central Bank Of India (AIR 2010 AP 35) in support of this submission. 5. Ms Anand then referred to the notice dated 08 May 2021 by whi....
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....p is not dispositive of the jurisdiction of the appellate tribunal. She submitted that DRAT must evaluate whether a prime facie case has been made out for grant of waiver. She relied on Sterlite Technologies Ltd. Vs. Union of India and Ors. (2012) (2) Mh. L.J. 112 to support her contention. 10. Based upon the above contentions, Ms Anand submitted that the DRAT's impugned order dated 04 June 2024 warrants interference. She further submitted that this was a fit case where the petitioner-borrower must be allowed to prosecute the appeal by making a pre-deposit of 25% of the debt due instead of nonsuiting the petitioner-borrower by insisting upon a deposit of 50% of the debt allegedly due. She pointed out that the petitioner had already deposited an amount of Rs. 10 Crores to show bona fide. 11. Mr Thakker learned senior advocate for ARCL, defended the impugned order to the extent the same has declined any waiver under the 3rd proviso to Section 18(1) of the SARFAESI Act based upon the reasoning reflected therein. He referred to the application for waiver and submitted that there were virtually no pleadings on financial hardships, and even the ground about the borrower not being l....
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....al before the DRAT. He submitted a calculation chart by including this interest component and contended that the impugned order be modified accordingly. Accordingly, Mr. Thakker submitted that the borrower's writ petition may be dismissed, and ARCL's petitions may be allowed by directing the necessary modifications in the impugned order dated 04 June 2024. 16. In rejoinder, Ms. Anand handed in a compilation of documents. She explained that these documents referred to events after the DRAT made the impugned order dated 04 June 2024. She submitted that notices for taking over possession of some of the borrower's assets were entirely based on the impugned order dated 04 June 2024 and the consequent dismissal of the borrower's appeal for non- compliance with the directions for pre-deposit. She submitted that since the DRAT order regarding pre-deposit was challenged before this Court, the DRAT was not justified in dismissing the appeal pending the borrower's petition in this Court. 17. Ms. Anand submitted that the issue of the borrower not being classified as NPA was raised before the DRAT, and ARCL admits to this in its pleadings. She also submitted that the borrower made out a s....
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.... him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less: Provided also that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent. of debt referred to in the second proviso.] (2) Save as otherwise provided in this Act, the Appellate Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder." 23. Section 18 provides that any person aggrieved by any order made by the Debts Recovery Tribunal ("DRT") under Section 17 may prefer an appeal along with such fee as may be prescribed to the Appellate Tribunal (DRAT) within thirty days from the date of receipt of the DRT's order. The second proviso provides that no appeal shall be entertained unless the borrower has deposited with the DRAT 50% of the amount of debt due from him, as claimed by the secured creditors or determined by the DRT, whichever is less. The third proviso provides that the DRAT may, for reasons to be recorded in writing, reduce the amoun....
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....case, the pleadings about financial hardship are extremely sketchy and almost suggest that no such plea was seriously raised or pursued by the borrower. 28. In paragraph 46 of the waiver application, there is a bald statement which reads as follows:- ".... Given the compelling circumstances of the present case, the Appellants earnestly request the Hon'ble Tribunal to consider reducing the waiver amount from 50% to 25%. A copy of the Bank Statements mentioning the amount paid by the Appellants against the Loan is annexed hereto and marked as "Exhibit D"." 29. In paragraph 48, the borrower sought leave to rely on the averments in the appeal memo and the exhibits/annexures to the appeal memo, which should be read and considered part of the waiver application. However, nothing was pointed out to us regarding financial hardships in the appeal memo or the exhibits/annexures to the appeal memo. 30. Finally, in paragraph 52 of the waiver application, the borrower pleaded as follows: - "The Appellants state that if they are forced to pay the amount, it would cause undue hardship and may result in the denial of the right to appeal in case they fail to make the ....
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....rmal rule of fifty per cent pre-deposit, the onus was on the borrower to make out a waiver case. 36. Ms Anand, however, pointed out that financial hardship is not dispositive of the DRAT's jurisdiction in deciding a waiver application. Therefore, she urged that we consider the prima facie case and a waiver must be granted if a prima facie case is made. She reiterated that this was a question of access to justice, and a liberal approach was warranted in such matters. 37. As regards the prima facie case, we do not find that the contentions now raised before us were raised or at least seriously raised and pressed before the DRAT. This is not just a case of giving the borrower access to justice as urged by Ms Anand. This is also a case of permitting the borrowers with a serious case to be considered from availing the opportunity of an appeal. The borrower's interests and the interests of expeditious loan recoveries by curbing frivolous defences and delays must be balanced. The constitutional validity of the requirement of pre-deposit at the appeal stage has already been upheld. However, giving the borrower the utmost latitude, even if we were to proceed based on the premise that ....
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....fied as NPA. 41. Significantly, the borrower has produced no documents to show that as of 4 May 2021, the borrower's loan account could not have been classified as NPA. For this, all that the borrower had to show was that interest and/or instalment of the principal had not remained overdue for more than 90 days. These records would indeed be available to the borrower if the borrower had serviced the loan in terms of the loan agreement. No such documents were produced. No clear case of the borrower's account not being liable to be classified as NPA was made out, nor was prima facie established. Based only upon the error, an attempt is made to draw the disproportionate mileage. No prima facie case can be said to have been made out based on such a circumstance. 42. The circumstance that the borrower may have paid some amount after receiving Section 13(2) notice cannot constitute a waiver as was feebly suggested. In any event, at least prima facie, it is difficult to say that this amount has not been accounted for. The amount is accounted for, though there may be a dispute about the manner of such accounting. Mr Thakker, the learned Counsel ARCL, submitted that in terms of the lo....
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...., the term "prima facie" means at first sight; on the face of it; based on first impression. According to this dictionary "prima facie case" would be synonymous with "a case resting on prima facie evidence." 11. According to Halsbury (Halsbury's law of English, 3rd edition, vol, 15, para 506) (*) "prima facie evidence" is "evidence which, if accepted by the tribunal, establishes a fact in the absence of acceptable evidence to the contrary. Unless a particular enactment otherwise provides, sufficient evidence usually means prima facie evidence, which may establish a fact if there is no contradictory evidence. 45. Thus, this is a case where the borrower has failed even to plead a case of financial hardship. In any event, even if we were to consider the materials sought to be now placed before us, the borrower makes out no case for financial hardship. Independent of this aspect of financial hardship, not even any prima facie case is made out by the borrower as would justify allowing the borrower's application for waiver. The borrower has not produced any credible material, and by simply relying upon an inadvertent error, which, in any event, stands rectified, undue and disp....
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....itution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application [and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securities or;]]" 49. In Sony Mony Developers Pvt. Ltd (supra) the Coordinate Bench of this Court comprising of B. P. Colabawalla & Somasekhar Sundaresan, JJ has held that the above definition of "Debt" is extremely wide and means any liability inclusive of interest which is claimed as due from any person by a bank or a financial institution. The Court, in paragraph 6, observed as follows:- "6. We are of the considered view that on an e....
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....k (2016 (3) Mh.L.J. 589). The relevant portion of this decision reads thus: "18. On a plain reading of the 2nd proviso to section 18(1) of the SARFAESI Act read with the definition under the word "debt" as defined in section 2(g) of the RDDB Act, it is clear that before an appeal can be entertained by the DRAT, the borrower has to deposit 50% of the amount of debt due from him as claimed by the secured creditors or as determined by the DRT whichever is less. If there is no determination of the debt by the DRT under the provisions of the RDDB Act, then the borrower would have to deposit 50% of the amount of debt due from him as claimed by the secured creditors. The provision on a plain reading does not in any way exclude taking into consideration the future interest that is accrued on the debt owed by the borrower to the secured creditor. In fact, the definition of the word "debt" means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution. Therefore, if the claim made by the secured creditor in the section 13(2) notice includes future interest, the same would certainly be included in the "amount of the debt due" ....
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....ng the debt due. Ms. Anand, the learned counsel for the borrower, quite fairly did not even contest this position. 51. The DRAT's impugned order does not appear to have taken cognizance of the above legal position emanating from the statutory definitions and the two decisions of this Court. To that extent, therefore, the calculations or the determination made by the DRAT warrant interference. 52. However, since we do not have the precise details, it will be impossible to determine the interest component so that the same could be included or added to the determination made by the DRAT in the impugned order. 53. Mr. Thakker handed in a calculation sheet stating that the dues as of 10 May 2024 would be approximately Rs. 130.42 crores. Ms. Anand disputed this. Ms. Anand handed in a without prejudice calculation sheet under which the dues would be Rs. 103.86 crores as of 08 May 2021. The relevant date in this case would be 01 April 2024, i.e., the date the borrower filed the appeal before the DRAT. Therefore, this figure of Rs. 103.86 crores would be considerably enhanced given the interest for the last three years. Mr Thakker disputed this calculation sheet. 54. However, ev....