@JUDGMENTTAG-ORDER
Ghulam Mohammed, J.@mdashThis writ petition is filed seeking writ of Certiorari to call for the records relating to I.A. No. 1452 of 2010 in AIR (SA) 823 of 2010, dated 13-09-2010 on the file of Debt Recovery Appellate Tribunal, Chennai and to quash the same.
2. The 3rd Respondent-company approached the Petitioner-Bank, Khairatabad Branch, requesting for sanction of loan of Rs. 250 crores for the purpose of implementation of three infrastructure projects at Gachibowli, Hyderabad. The Petitioner-Bank sanctioned Term loan-I for Rs. 25 crores, Term loan-II for Rs. 50 crores and Term loan Rs. 75 crores subject to terms and conditions mentioned in the sanction letter dated 4-2-2008. As per conditions of sanction of loan, 3rd Respondent was to mortgage the project properties towards security for sanction of loan of Rs. 150 crores. Since the project properties belonged to APIIC, 3rd Respondent agreed to mortgage the properties after the APIIC executing sale deeds in favour of 3rd Respondent, but the 3rd Respondent failed to mortgage the properties in favour of Petitioner-Bank. For project No. 1, the sale deed had already been executed by APIIC and for remaining two projects, sale of land i.e., for project Nos. II and III was pending. The Petitioner-Bank is not aware as to why the APIIC had not executed sale deeds in respect of two project properties in favour of 3rd Respondent. Since the terms of the sanction were not complied with by 3rd Respondent, the Petitioner-Bank did not release the funds under sanction of Rs. 150 crores. It is stated that the 3rd Respondent failed to repay the short term loan within three months, as agreed, and requested for extension of time for repayment of short term loan mentioning various reasons in its letter dated 19-5-2008 and also sought extension vide letters dated 12-07-2008, 22-10-2008 and 27-07-2009. At every stage of request, the Petitioner-Bank considered the request of the 3rd Respondent and extended time, but 3rd Respondent failed to repay the same. On 10-9-2009, Petitioner Bank wrote a letter to 3rd Respondent informing that to consider their request for release of term loan of Rs. 150 crores, the short term loan which was over due and long pending had to be cleared and requested 3rd Respondent company to close the short term loan. On 3-10-2009 again the Petitioner-Bank wrote a letter informing that the account slipped to NPA on 30-09-2009 as per RBI guidelines and it was further informed that the outstanding amount by that date was Rs. 52,53,28,709/-and requested 3rd Respondent to repay the outstanding amount, but in vain. Thereafter, the Petitioner-Bank issued Demand Notice u/s 13(2) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, (for short ''SARFEASI Act'') 2002 on 24-11-2009 and the same was received by the 3rd Respondent and filed objections u/s 13(3)(A) to the Authorized Officer on 22-1-2010 and the Authorized Officer sent reply on 5-2-2010. Thereafter, possession of the properties were taken on 23-2-2010, 26-2-2010 and on 6-3-2010.
3. The 3rd Respondent-company filed S.A. No. 208 of 2010 on 8-3-2010 and the Guarantor company/mortgagor M/s. Subramanya Construction & Development Company, also filed S.A. No. 183 of 2010 on 2.3.2010 before Debts Recovery Tribunal, Bangalore. It is stated that even though no cause of action has accrued at Bangalore, the Debts Recovery Tribunal, Bangalore, entertained the S. As. and granted conditional stay subject to the 3rd Respondent company depositing Rs. 2.50 crores by 10-4-2010 another Rs. 5 crores by 10-05-2010. It is stated that the 3rd Respondent had not complied with the said condition and deposited only Rs. 50 lakhs and another Rs. 34 lakhs on 9-5-2010 and sought time for deposit of amount by filing petitions. Subsequently, DRT, Bangalore dismissed both S As on 23-07-2010. Thereafter, Petitioner-Bank issued sale notices on 27-07-2010. The 3rd Respondent-company filed another S.A. No. 656 of 2010 on 28-07-2010 questioning the sale notice on same grounds as in SA No. 208 of 2010 and DRT, Bangalore again entertained SA and granted stay of further proceedings on condition of 3rd Respondent paying Rs. 4.5 crores by 31-08-2010 and another Rs. 1.5 crores by 30-09-2010. But, 3rd Respondent-company failed to deposit Rs. 4.5 crores by 31-08-2010 and therefore, DRT, Bangalore, dismissed SA No. 656 of 2010 on 13-09-2010. Again 3rd Respondent-company filed appeal before the Debt Recovery Appellate Tribunal (DRAT), Chennai against the order of dismissal of SA No. 208 of 2010 and also filed I.A. No. 1452 of 2010 for waiver of the deposit as provided u/s 18 of SARFAESI Act. The DRAT passed order in I.A. No. 1452 of 2010 directing the 3rd Respondent-company to deposit Rs. 13 crores on or before 23-11-2010 and directed the same to be kept in fixed deposit and further directed that the Authorized Officer is at liberty to proceed with the auction but shall not confirm the same. Aggrieved by the said order, the present writ petition has been filed.
4. Learned Counsel appearing for the Petitioner-Bank vehemently contended that the Tribunal has committed serious jurisdictional error and also serious infirmity in not adhering to 18 of the SARFEASI Act. He further contended that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent of the amount of debt due from him or as determined by the Debts Recovery Tribunal.
5. In this regard, it may be necessary to refer to the provisions of Section 18 of the SARFEASI Act, which reads as under:
18. Appeal to Appellate Tribunal: (1) Any person aggrieved by any order made by the Debts Recovery Tribunal (under Section 17, may prefer an appeal along with such fee, as may be prescribed) to the Appellate tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal.
(3) provided further that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent of the amount of debt due from 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.
6. A plain reading of the provision clearly postulates that unless and until the borrower-3rd Respondent-Company deposits 50% of the amount, the Tribunal cannot pass any interim orders, but nonetheless can grant interim direction or interim stay subject to depositing of not less than 25% of the amounts due and payable.
7. Learned Counsel appearing for the Petitioner-Bank further contends that the total amount due by the 3rd Respondent-company is Rs. 56 crores, out of that amount, the Tribunal has directed to deposit only 13 crores, which is less than 25% and also the Tribunal has failed to adhere to the Statutes for non-assigning the reasons and therefore, the Tribunal has committed an error in granting the interim order. Learned Counsel for the Petitioner-Bank has also drawn attention of this Court to a decision reported in
(i) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002-Sections 13(4), 17, 18-Appeal to Appellate Tribunal-Pre-deposit of 50% of amount due-Condition precedent for entertaining appeal-Grant of complete waiver of deposit amount to Appellants/guarantors by Appellate Tribunal, not contemplated under law-Power has been given to Appellate Tribunal to reduce the amount to not less than 25% of debt, for reasons to be recorded in writing-Appellate Tribunal committed gross legal error in ordering to give credit of amount deposited by auction purchaser to guarantor, as auction purchaser cannot be brought within the fold of ''borrower'' under SARFEASI Act. (paras 10, 13, 14)
10. The language used in this section is very plain and clear, making it unambiguously clear that any person aggrieved by the order of the Debts Recovery Tribunal passed u/s 17 may prefer appeal to the Debts Recovery Appellate Tribunal by paying necessary fee and second proviso to Sub-section (1) makes it clear that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent of the amount of debt due from him. However, under third proviso to Sub-section(1), power has been given to the Appellate Tribunal to reduce the deposit amount, for the reasons to be recorded in writing, to not less than twenty-five per cent of debt referred to in the second proviso. Thus, though a discretionary power has been conferred on the Debts Recovery Appellate Tribunal under third proviso to Sub-section (1), the discretion is not an absolute one, but a limited one. While exercising the discretion conferred on it, provided for under third proviso to Sub-section (1), the Appellate Tribunal has been mandated not to reduce the deposit amount to not less than twenty-five percent of the debt referred to in the second proviso.
13. We are unable to accept this part of the order of the Appellate Tribunal also, since being illegal. As could be seen from Section 18 of the SRFAESI Act, extracted supra, the condition precedent for entertaining any appeal preferred by a ''borrower'' is deposit of 50% of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less. But, a power has been granted to the Appellate Tribunal, whichever is less. But, a power has been granted to the Appellate Tribunal, to reduce the amount to not less than twenty-five percent of the debt, for the reasons to be recorded in writing. To understand as to who is the ''borrower'', we shall revert back to the definition of Section 2 of the SRFAESI Act. Section 2(1)(f) of the SRFAESI Act defines the term ''borrower'' in the following terms: "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 securitization 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.
14. From this definition clause it is clear that the ''borrower'' includes the guarantor also. Therefore, it goes without saying that the obligation created on the person who has availed loan from the Bank or the financial institution, under second proviso to Section 18(1)-to deposit fifty percent of the amount of debt to avail the appeal remedy before the Appellate Tribunal-also applies equally to the guarantor and no difference or distinction could be made between a debtor and a guarantor, while entertaining the appeal u/s 18(1) of the SRFAESI Act. That being the legal situation, we have no hesitation to hold that the first Respondent/Appellate Tribunal has committed a gross legal error in ordering to give credit of the amount deposited by the auction purchaser to the guarantor as the auction purchaser cannot be brought within the fold of ''borrower'' defined under the SRFAESI Act. For these reasons, the legal point framed above, is answered against the Respondents 3 and 4/guarantors.
He has also drawn attention of this Court to a decision reported in Kotak Mahindra Bank Ltd v. Debts Recovery Appellate Tribunal, Allahabad and Ors. IV (2009) BC 334 wherein it is held as under:
(ii) Recovery of Debts due to Banks and Financial Institutions Act, 1993-Sections 20, 21, 22-Debts Recovery Tribunal Procedure Rules, 1994-Interim Order-Grant of-State filed an appeal under a presumption that decree is likely to affect interest of State-Appeal has to be presented in manner in which it has been provided for under the statute-From perusal of statutory provisions, it is evident that Tribunal was obliged to pass order on application moved by State for making condition of pre-deposit and to consider issue of limitation before proceeding to entertain appeal on merits or application for interim application-Grant of interim order was patently without jurisdiction without there being competent appeal in terms of statute-Tribunal being creation under Statute, could not have traveled beyond provisions-Directions issued.
8. Learned Counsel for 3rd Respondent vehemently contends that the order passed by the Tribunal is a discretionary order and a party cannot be usurped the right of availing the appeal remedy. It is stated that the Tribunal 2 IV (2009) BC 334 passed an equitable order directing to proceed with the auction, but not to confirm the same subject to depositing of Rs. 13 crores. He further contends that even though there is time to comply with the said order, the Petitioner-Bank has rushed to this Court and filed the present writ petition which is not maintainable. He further contends that having participated in the proceedings earlier, he cannot now be permitted to approbate and reprobate in the present writ petition. He further submits that the Petitioner-Bank has not filed any vacate stay petition seeking to vacate the interim order and the writ petition has to be filed before the High Court at Bangalore inasmuch as the properties are situated at Bangalore, Mangalore, Nacharam-Hyderabad. He further contends that the High Court at Bangalore has got jurisdiction and, therefore, the Petitioner ought not to have approached this Court by way of filing the present writ petition. He has drawn attention of this Court to a decision reported in Vikas Motors Ltd., v. Dr. P.K. Jain AIR 2000 SC wherein it is held as under:
Consumer Protection Act (68 of 1986), Section 11-Jurisdiction of Forum-Plea that District Forum had no territorial jurisdiction to entertain complaint and pass orders-Party is estopped from raising it after participating in proceedings and being satisfied with verdict regarding jurisdiction.
He also relied upon a decision reported in
(ii) Constitution of India, 1950-Articles 226(1), 226(2), 227-Debts Recovery Appellate Tribunal (Procedure) Rules, 1994-Rule 3-Recovery of Debts Due to banks and Financial Institutions Act, 1993-Section 22(2)(e) r/w Section 22(2)(h)-Sitting of Appellate Tribunal-location of Appellate Tribunal may vary from time-to-time according to its convenience-Appellate Tribunal, in the eye of law, located at Hyderabad, though, for convenience it holds office at Chennai, as same Presiding Officer has been discharging same function for other States-Madras High Court has no power of jurisdiction or superintendence, either administrative or judicial, over DRT at Hyderabad- Merely because Appellate Tribunal is situated within territorial limits of this High Court, such a fact cannot confer jurisdiction to scrutinize order passed by such Tribunal in any appeal preferred against decision of original Tribunal, over which this Court has no power of superintendence (Paras 23, 24, 25).
According to this rule, an Appellate Tribunal can hold its sitting either at head quarters or at such other place falling within its jurisdiction as it may consider convenient.
Thus, it is clear that the location of the Appellate Tribunal may vary from time-to-time according to its convenience. In the present case, as indicated above, the Appellate Tribunal is, in the eye of law, located at Hyderabad, though, for convenience, it holds office at Chennai, as the same Presiding Officer has been discharging the same function for other States.
Admittedly, this Madras High Court has no power of jurisdiction or superintendence, either administrative or judicial, over the Debts Recovery Tribunal at Hyderabad. Merely because the Appellate Tribunal is situated within the territorial limits of this High Court, such a fact cannot confer jurisdiction to scrutinize the order passed by such Tribunal in any appeal preferred against the decision of the original Tribunal, over which this Court has no power of superintendence.
9. Having regard to the rival contentions advanced by the counsel on either side, the point that arises for consideration is whether the Appellate Tribunal exceeded its limits or committed any jurisdictional error in not adhering to the statutes in passing the order, which, according to the learned Counsel for the Petitioner is not permissible under law.
10. In Syed Yakoob v., K.S. Radhakrishnan and Ors. AIR 1964 SC he Supreme Court held as under:
A writ of Certiorari can be issued for correcting errors of jurisdiction committed by inferior courts or tribunals: these are cases where orders are passed by inferior courts or tribunals without jurisdiction, or is in excess of it, or as a result of failure to exercise jurisdiction. A writ can, similarly, be issued where in exercise of jurisdiction conferred on it, the Court or Tribunal acts illegally or improperly, as for instance, it decides a question without giving an opportunity to be heard to the party affected by the order, or where the procedure adopted in dealing with the dispute if opposed to principles of natural justice...
11. This Court has admitted the writ petition having exercised the power under Article 226 of the Constitution. Having regard to Section 18 of the Act and also the chequered history of the case, we are of the considered opinion that the Appellate Tribunal has not adhered to the requirements u/s 18 of the Act and insisted to deposit at least 25% of the amount due and payable. As noted above, Section 18 of the Act clearly postulates that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty percent of the amount of debt due from him, if for any reason, the amount is reduced the Appellate Tribunal shall assign reasons for reducing the amount. In the case on hand, the amount payable by the 3rd Respondent is stated to be 56 crores out of that, the Tribunal directed to deposit 13 crores which is less than 25%. The Tribunal failed to exercise its jurisdiction in not recording the reasons, which is paramount duty and an ingredient u/s 18 of the Act. In the circumstances, we are of the view that the Appellate Tribunal committed error while passing the impugned order. The contention that the High Court at Bangalore has jurisdiction and therefore this Court ought not have entertained the writ petition cannot be countenanced as the subject properties are situated in both the States and the Petitioner has approached this Court in the first instance and invoked the extraordinary jurisdiction seeking equitable relief.
12. In the result, the writ petition is allowed and the order passed by the 1st Respondent-Debt Recovery Appellate Tribunal, Chennai is set aside and the matter is remitted to the Tribunal to record reasons and pass appropriate orders, in conformity with Section 18 of the Act. No costs.
