High Court of KeralaSingle Judge2023-04-11Writ petition disposed of with directions (as a...

V. Shareef and Suhara v. The Authorised Officer, State Bank of India

Case / Petition Number:OP (DRT) NO.283 OF 2022

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: Anu Sivaraman
Judgment Date: 2023-04-11
Court Decision / Holding: Writ petition disposed of with directions: (i) petitioners to deposit an additional Rs. 1,50,75,798 within ten days for the DRAT to decide if 25% pre-deposit is justified; (ii) the DRAT shall pass appropriate orders on the pre-deposit amount, and if 25% is found sufficient, the appeal shall be heard on merits; (iii) the interim order granted by this Court shall remain in force for one month from receipt of a copy of this judgment.
Final Disposition: Writ petition disposed of with directions (as above).

Parties to the Case

Appellants / Petitioners

V. Shareef
Suhara

Respondents

The Authorised Officer, State Bank of India, Stressed Assets Management Branch, Kochi

Legal Representation & Advocates

Counsels for Petitioners

• Nisha George
• N. Sasi George Poonthottam (Sr.)

Counsels for Respondents

• S. Easwaran

Case Synopsis & Summary

This petition under the SARFAESI Act and the Debt Recovery Tribunal (DRT) procedure concerns the pre-deposit required to entertain an appeal before the Debt Recovery Appellate Tribunal (DRAT). The petitioners challenge DRAT’s interim order directing a pre-deposit of Rs. 9,01,51,596 (50% of the debt claimed by the bank, i.e., Rs. 18,03,03,192) in two equal instalments, as per Exhibit P16. The bank relies on the provisos to Section 18 of the SARFAESI Act to justify the 50% deposit, while the petitioners contend for consideration under the 3rd proviso that allows the amount to be reduced to not less than 25% for reasons to be recorded. The petition emphasizes that there were two loan accounts; one account had an outstanding balance settled under a One Time Settlement (OTS) for Rs. 29.68 crores, leaving a balance of Rs. 18,03,03,192. The court notes that the challenge to the liability and the procedure under Section 13 of the SARFAESI Act is already before the DRT in the appeal. Relying on a decision cited by the petitioners (Sidha Neelkanth Paper Industries v. Prudent ARC Ltd & Others), the court recognizes the possibility of a 25% pre-deposit but seeks to test the sufficiency of this amount by directing further deposit. The judgment outlines that the DRAT should determine whether 25% is justified and, if so, hear the appeal on merits, while the interim order remains in force for a month. The petition is accordingly disposed of with directions.

Provisions of Law Cited

SARFAESI Act, Section 182nd proviso to Section 183rd proviso to Section 18Section 13(2) of the SARFAESI Act

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioners contend that the DRAT should not be bound to accept the 50% pre-deposit mandated by the 2nd proviso to Section 18 of the SARFAESI Act. They point to the presence of two loan accounts and reveal that one account was settled via One Time Settlement, with only Rs.18,03,03,192 outstanding. They argue that the pre-deposit may be reduced to 25% under the 3rd proviso, and that the matter of liability under Section 13(2) and related notices to guarantors is in dispute, warranting examination on merits. They seek to have the DRAT consider AIR(SA) 105/2022, and stay the further progression of the pre-deposit requirement pending adjudication. They rely on a decision cited as Sidha Neelkanth Paper Industries v. Prudent ARC Ltd & Others (2023 KHC 6009) to support the contention that pre-deposit can be less than 50% in appropriate cases.

Contentions of Respondents

The bank argues that under Section 18 and its 2nd proviso, an appeal can be entertained only after deposit of 50% of the debt due, or as determined by the DRT, whichever is less; the 3rd proviso allows reduction to not less than 25% with reasons to be recorded in writing. It maintains that the DRAT’s pre-deposit direction is in consonance with statutory provisions and ensures the integrity of the debt recovery process. It asserts that the challenge to the debtor’s liability and the Section 13(2) notices is being addressed separately in the DRAT/DRAT proceedings and that a higher pre-deposit is necessary to prevent frivolous appeals. It relies on the established DRAT and SARFAESI framework to press for adherence to the prescribed pre-deposit norms.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
M/s Sidha Neelkanth Paper Industries Private Limited & Another v. Prudent ARC Limited & Others	2023 KHC 6009	Partly Overruled / Limited	The petition relies on this case to support a 50% pre-deposit; however, the present judgment recognizes that under the 3rd proviso to Section 18, a reduction to not less than 25% may be justified in writing, thereby limiting and narrowing the impact of that prior authority.

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Extracted Judgment Text

Exact text extracted from official judgment records.

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **TUESDAY, THE 11[TH] DAY OF APRIL 2023 / 21ST CHAITHRA, 1945 OP (DRT) NO. 283 OF 2022 AGAINST THE ORDER/JUDGMENT SA 47/2019 OF DEBT RECOVERY TRIBUNAL, ERNAKULAM** ## **PETITIONERS:** 1 V.SHAREEF, AGED 54 YEARS S/O. V. AHAMMEDKUTTY, EXCEL PLAZA, PETTA, FEROKE, KOZHIKODE DISTRICT, PIN - 673301 2 SUHARA, AGED 49 YEARS W/O. V. SHAREEF, EXCEL PLAZA, PETTA, FEROKE, KOZHIKODE DISTRICT, PIN - 673301 BY ADVS. NISHA GEORGE N.SASI GEORGE POONTHOTTAM (SR.) ## **RESPONDENT:** THE AUTHORISED OFFICER, STATE BANK OF INDIA, STRESSED ASSETS MANAGEMENT BRANCH, NO.32/1747, K1, 7TH FLOOR, VENKARATH TOWERS, PALARIVATTOM, KOCHI, PIN - 682024 BY ADV S.EASWARAN **THIS OP (DEBT RECOVERY TRIBUNAL) HAVING COME UP FOR ADMISSION ON 11.04.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** OP (DRT) NO.283 OF 2022 2 ## **ANU SIVARAMAN, J.** ========================= ## **OP (DRT) NO.283 OF 2022** ========================= Dated this the 11[th] day of April, 2023 ## **JUDGMENT** ## This OP(DRT) is filed seeking the following reliefs: _“i) To call for the records and files leading to Exhibits P11, P17 and P21 orders, scrutinize and set aside the same. ii) Direct the Debt Recovery Appellate Tribunal, Chennai to take up AIR (SA) No.105/2022 for consideration and pass orders on stay petition as expeditiously as possible.”_ 2. Heard the learned Senior Counsel appearing for the petitioners and the learned Standing Counsel for the Bank at considerable length. 3. Having considered the contentions advanced, I notice that the dispute raised in this case is with regard to the pre-deposit required for the consideration of an appeal by the Debt Recovery Appellate Tribunal (DRAT). The petitioners had attempted to subject Exhibit P11 OP (DRT) NO.283 OF 2022 3 interim order of the Debts Recovery Tribunal (DRT) to an appeal before the DRAT. By Exhibit P16 order, the DRAT directed pre-deposit of an amount of Rs.9,01,51,596/- for entertaining the appeal, after considering the amounts payable and paid by the petitioners. The respondent bank had represented before the DRAT that the outstanding amount in the account is Rs.18,03,03,192/and the DRAT had directed the pre-deposit of 50% of the said amount which comes to Rs.9,01,51,596/- in two equal instalments. 4. The learned counsel appearing for the respondent relies on a decision of the Apex Court in **M/s** **Sidha Neelkanth Paper Industries Private Limited & Another v. Prudent ARC Limited & Others** (2023 KHC 6009) and contends that the amount to be paid as pre-deposit is 50% of the amount which is claimed by the financial institution as debt due and that there can be no direction by this Court to entertain an appeal without OP (DRT) NO.283 OF 2022 4 such pre-deposit being made by the appellant. 5. Having considered the contentions advanced, I notice that Section 18 of the SARFAESI Act provides for an appeal to be filed by any person aggrieved by any order made by the DRT to the Appellate Tribunal within 30 days. The 2[nd] proviso states that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal 50% of the amount of debt due from him, as claimed by the secured creditors or determined by the DRT, whichever is less. 6. 3[rd] proviso further provides that the Appellate Tribunal may, for reasons to be recorded in writing, reduce the amount to not less than 25% on the debt referred to in the 2[nd] proviso. 7. It is submitted by the learned Senior Counsel appearing for the petitioners that the entire proceedings including the notice under Section 13(2) of the SARFAESI Act issued to the guarantors were under challenge before 5 OP (DRT) NO.283 OF 2022 the DRT on the specific ground that no notice had been issued to the company which was the borrower. It is further submitted that the petitioners had raised specific contentions that there were two loan accounts and that one of such loan accounts, where the outstanding was 41,14,88,766/- had been settled under the One Time Settlement Scheme by paying an amount of Rs.29.68 Crores. It was the specific contention that the balance amount to be recovered from the company under the transaction was only Rs.18,03,03,192/-. This appears to have been accepted by the Bank also as evidenced from Exhibit P17 order of the DRAT. 8. In the above view of the matter and in view of the fact that even the amount of liability as also the procedure followed under Section 13 of the SARFAESI Act are under challenge in the appeal, I am of the opinion that the question whether the appeal requires to be considered on merits on payment of 25% of the amount 6 OP (DRT) NO.283 OF 2022 of Rs.18,03,03,192/- is to be considered by the DRT in terms of the 3[rd] proviso to Section 18 of the SARFAESI Act. In the above view of the matter, this writ petition is disposed of with the following directions: i) In case the petitioners deposit a further amount of Rs.1,50,75,798/- before the DRAT within ten days from the date of receipt of a copy of this judgment, the DRAT shall consider the question whether the pre-deposit of 25% of the debt due is justified in a case of this nature. - ii) The DRAT shall pass appropriate orders on the amount of pre-deposit and in case the pre-deposit of 25% is found to be sufficient, the appeal shall be considered on merits in accordance with law. iii) To enable the DRAT to take a call on the amount of the pre-deposit required for a OP (DRT) NO.283 OF 2022 7 consideration of the appeal, the interim order granted by this Court shall remain in force for a period of one month from the date of receipt of a copy of this judgment. **Sd/ANU SIVARAMAN JUDGE** SSK/11/04 OP (DRT) NO.283 OF 2022 8 ## **APPENDIX** |PETITIONER EXHIBITS|| |---|---| |Exhibit-P1|TRUE COPY OF THE DEMAND NOTICE DATED| ||28.6.2018 ISSUED BY THE RESPONDENT BANK.| |Exhibit-P2|TRUE COPY OF THE OBJECTION UNDER SECTION| ||13 (3A) DATED 17.8.2018.| |Exhibit-P3|TRUE COPY OF THE REPLY FILED BY THE 1ST| ||RESPONDENT DATED 7.9.2018.| |Exhibit-P4|TRUE COPY OF THE POSSESSION NOTICE DATED| ||10.1.2019 ISSUED BY THE RESPONDENT.| |Exhibit-P5|TRUE COPY OF THE S.A.NO. 47/2019 (WITHOUT| ||ANNEXURES) FILED BY PETITIONERS PENDING| ||ON THE FILE OF DEBT RECOVERY TRIBUNAL I,| ||ERNAKULAM.| |Exhibit-P6|TRUE COPY OF THE SALE NOTICE DATED| ||7/03/2022 WITH REGARD TO THE TALIPARAMBA| ||PROPERTY IN KANNUR DISTRICT ISSUED BY THE| ||RESPONDENT.| |Exhibit-P7|TRUE COPY OF THE SALE NOTICE DATED| ||7/03/2022 WITH REGARD TO THE PROPERTIES| ||IN CALICUT DISTRICT ISSUED BY THE| ||RESPONDENT.| |Exhibit-P8|TRUE COPY OF THE SALE NOTICE DATED| ||7/03/2022 WITH REGARD TO THE POLLACHI| ||PROPERTY IN COIMBATORE DISTRICT ISSUED BY| ||THE RESPONDENT.| |Exhibit-P9|. TRUE COPY OF I.A.NO.426/2019 PRAYING| ||FOR STAY OF EXHIBIT P6 & P7.| |Exhibit-P10|TRUE COPY OF I.A.NO. 425/2022 PRAYING TO| OP (DRT) NO.283 OF 2022 9 PERMIT THE PETITIONER TO AMEND EXHIBIT P5 (WITHOUT ANNEXURE). Exhibit-P11 TRUE COPY OF THE ORDER IN IA NO. 426/2022 DATED 30.3.2022 PASSED BY THE DEBT RECOVERY TRIBUNAL I, ERNAKULAM. Exhibit-P12 TRUE COPY OF THE IA NO. 486/2022 DATED 31.3.2022 WITHOUT ITS ANNEXURE. Exhibit-P13 TRUE COPY OF THE IA NO. 487/2022 DATED 31.3.2022. Exhibit-P14 TRUE COPY OF THE ORDER IN IA NO. 487/2022 DATED 20.4.2022. Exhibit-P15 TRUE COPY OF THE AIR(SA) NO. 80/22 BEFORE THE DRAT Exhibit-P16 TRUE COPY OF THE AIR (SA) NO. 105/2022. Exhibit-P17 TRUE COPY OF THE ORDER DATED 17.5.2022 IN IA NO. 113/2022. Exhibit-P18 COPY OF THE JUDGMENT OF THIS HON'BLE COURT IN OP(DRT) NO. 268 OF 2022 DATED 25.05.2022. Exhibit-P19 TRUE COPY OF THE I.A.NO. 232/2022 IN AIR(SA) NO. 80/2022 FILED BEFORE THE DRAT, CHENNAI. Exhibit-P20 TRUE TYPED COPY OF THE ORDER PASSED BY THE DRAT IN I.A.NO. 231/2022 AND I.A.NO. 232/2022 IN AIR(SA) NO. 80/2022 DATED 13.06.2022. Exhibit-P21 TRUE TYPED COPY OF ORDER PASSED BY THE DRAT I.A.NO. 113/2022 IN AIR(SA) NO. 80/2022 DATED 14.06.2022