Indian Bank Asset Recovery Management Branch v. M/s.Hamosons Apparels Private Ltd

- Vs -1. Mrs. Shirin Iqbal2. The Debts Recovery Appellate Tribunal No.55, Ethiraj Salai Chennai 600 008.3. M/s.H.M.Hajee Moosa rep. by its Managing Partner Mr. Abdul Razaq Osman 51, Jawaharlal Nehru Salai Guindy, Chennai 600 097.4. M/s.Hanif Bros. rep. by its Managing Partner Mr. Abdul Razaq Osman 51, Jawaharlal Nehru Salai Guindy, Chennai 600 097.5. M/s.Hamosons Apparels Private Ltd. rep. by its Managing Partner Mr. Abdul Razaq Osman 51, Jawaharlal Nehru Salai Guindy, Chennai 600 097.6. M/s.Hamosons rep. by its Managing Partner Mr. Abdul Razaq Osman 51, Jawaharlal Nehru Salai Guindy, Chennai 600 097.7. Mrs. Munira Haroon.. RespondentsW.P. No.5172 of 2008M/s.Hamosons Apparels Private Ltd.rep. by its Managing PartnerMr. Abdul Razaq Osman51, Jawaharlal Nehru SalaiGuindy, Chennai 600 097... Petitioners- Vs -1. Indian Bank Asset Recovery Management Branch rep. by its Authorised Officer & Chief Manager, S.Arulselvan 55, Ethiraj Salai, Chennai 600 008.2. Indian Bank George Town Branch No.155, Thambu Chetty Street Chennai 600 001... Respondents https://hcservices.ecourts.gov.in/hcservices/ C.R.P. (PD) Nos.1591 & 3301 of 2007Ms.S.Chitra.. Petitioner/Petitioner- Vs -Syndicate BankOopanakara StreetCoimbatore 641 001rep. by its Chief Manager .. Respondents/RespondentsW.P. No.17009 of 2007S.Chitra.. Petitioner - Vs -1. Union of India through the Secretary Ministry of Finance New Delhi.2. Syndicate Bank Oopanakara Street Coimbatore 641 001 rep. by its Chief Manager3. The Debts Recovery Appellate Tribunal Chennai, rep. by its Chairperson... RespondentsW.P. No.3958 of 2008 filed under Article 226 of the constitutionof India for the issuance of a writ of certiorari to call for therecords pertaining to the order dated 28.1.2008 passed in IN(SARFAESI) No.40 of 2008 in SA 20/07 on the file of the DebtsRecovery Appellate Tribunal, Chennai and quash the same.W.P. No.3959 of 2008 filed for the issuance of a writ ofcertiorari to call for the records pertaining to the order dated28.1.2008 passed in IN (SARFAESI) No.964 of 2007 in SA 20/07 on thefile of the Debts Recovery Appellate Tribunal, Chennai and quash thesame.W.P. No.5172 of 2008 filed for the issuance of a writ ofcertiorari to call for the records of the Debts Recovery AppellateTribunal, Chennai, in I.A. No.112 of 2008 in IN-SARFAESINo.40 of 2008dated 28.01.2008 and quash the same.W.P. No.17009 of 2007 filed for the issuance of a writ ofdeclaration declaring that the provision of law under Section 18 (1)of the Securitisation and Reconstruction of Financial Assets andEnforcement of Security Interest Act, 2002, as void, arbitrary,unconstitutional and ultra vires Article 14 of the Constitution ofIndia, insofar as the petitioner is concerned.C.R.P. (PD) Nos.1591 of 2007 filed under Article 227 of theConstitution of India against the order dated 7th May, 2007, made inIN (SA) No.173 of 2007 on the file of the Debts Recovery AppellateTribunal. https://hcservices.ecourts.gov.in/hcservices/ C.R.P. (PD) No.3301 of 2007 filed against the order dated 27thSept., 2007, made in I.A. No.866 of 2007 in O.A. (S) No.42 of 2005 onthe file of the Debts Recovery Tribunal, Coimbatore.For Petitioners: Mr.V.Ramachandran, SC, for Mr. Zaforullah Khan in WP No.5172/08 Mr. G.Masilamani, SC, for M/s.Aiyar & Dolia in WP 3958 & 3959/08 Mr. K.Ramalinga Gounder in WP 17009 & CRP (PD) 1591 & 3301/07For Respondents: Mr.V.Ramachandran, SC, for Mr. Zaforullah Khan for RR-3 to 6 in WP.3959/08 Mr. G.Masilamani, SC, for M/s.Aiyar & Dolia in WP 5172/08 Mr. T.R.Rajagopalan, SC, for Dr.Anita Sumanth for R-1 in WP 3958 & 3959/08 Mr. P.Sreenivasalu in CRP (PD) 3301/07 & 15901/2007 Mr. P.Wilson, Asst. Solicitor General, for R-1 in WP 17009/07COMMON ORDERS.J.MUKHOPADHAYA, J.Common question of law being involved, though the cases wereheard separately, they are disposed of by this common judgment.2. In both the cases, the borrowers, while raised question ofDebts Recovery Appellate Tribunal's (hereinafter referred to as'Appellate Tribunal') jurisdiction to pass conditional interimorders, they have also challenged the validity of Section 18 (1) ofthe Securitisation and Reconstruction of Financial Assets andEnforcement of Security Interests Act (hereinafter referred to as'NPA Act').3. The borrower of the first set of cases, M/s.Hamosons ApparelsPvt. Ltd., filed a petition for condonation of delay along with anappeal u/s 18 of the NPA Act, wherein, by impugned orders dated 28thJan., 2008, Appellate Tribunal passed conditional order on payment ofRs.2.5 Crores. The delay having condoned and interim order havingpassed, while bank preferred two writ petitions (W.P. Nos.3958 &3959/08), against the conditional order of payment of Rs.2.5 Crores,M/s.Hamosons Apparels Pvt. Ltd., challenged the said order in W.P.No.5172/08.Another borrower, Ms.S.Chitra, of the 2nd set of cases, has alsochallenged the conditional interim order and dismissal of the appealby filing revision petition, C.R.P. (PD) No.1519/07 and alsochallenged the validity of Section 18 (1) of NPA Act in W.P.No.17009/07. https://hcservices.ecourts.gov.in/hcservices/ In original application, Ms.S.Chitra also prayed for cross-examination of the bank manager and to send the documents forexpert's opinion, but it having been negatived, she has preferredanother revision petition, C.R.P. (PD) No.3301/07.Stand of borrower – M/s.Hamsosons Apparels Pvt. Ltd. (in 1st set ofcases):4. Mr.V.Ramachandran, learned senior counsel appearing for theborrower submitted that pursuant to judgment of Supreme Court inMardia Chemicals - Vs – Union of India (2004 (4) SCC 311), theParliament amended NPA Act, but what was sought to be corrected bySupreme Court by striking down Section 17 (2) as onerous found itselfonce again under 2nd proviso to Section 18 (1) of the said Act. U/s13 (2), a secured creditor makes claim for recovery of money due andpayable by borrower by putting him on notice and on failure thesecured creditor invokes Section 13 (4) for taking further course ofaction of one or more options or measures to recover the secureddebt. The borrower can react under the provision of Section 13 (3-A), which also imposes condition upon the secured creditor to replyto the objections that may be received from the borrower within aweek, stating the reasons for non-acceptance of the objections raisedby the borrower. The further course of action as detailed u/s 13 (4)could be taken by the secured creditor while not accepting theobjections. Section 13 (13) imposes a restraint upon the borrowerfrom transferring the secured asset by way of sale, lease orotherwise without prior consent of the secured creditor. This wouldmean that, immediately on communication of notice u/s 13 (2), theborrower is restrained from liquidating his asset, which the securedcreditors have included in their notice, this notwithstanding thefact that the said asset may not have been offered as security.According to learned senior counsel, Section 17 provides firstopportunity to the borrower, which, however, is limited only to theextent to decide whether measures referred u/s 13 (4) taken bysecured creditor for enforcement of security interest is inaccordance with the provisions of the Act and the rules made therein.None of the sections confer the borrower any right to move the DebtsRecovery Tribunal (hereinafter referred to as 'Tribunal') to questionthe quantum of money claimed by the secured creditor. Thecorrectness of action u/s 13 (4), if upheld by the Tribunal, a rightof appeal is provided u/s 18. At that stage, the assets of theborrower stands frozen with the secured creditor, in view of Section13 (13). In this background, demand for payment of 50% of the debtclaimed by the secured creditor or liability determined by theTribunal is an onerous condition. An analysis of such provision,which has been imposed by amendment after Mardia Chemicals caseamounts to relocation of onerous condition that existed u/s 17 (2)prior to Mardia Chemicals case, without change of situation in anymanner for the borrower. Even at the appellate stage, the plight ofthe borrower in no manner eases. Therefore, the condition imposedupon the borrower not pursuant to any determination of liability, butby an independent authority, if allowed to continue, ultra vires for https://hcservices.ecourts.gov.in/hcservices/ the same reason for which Section 17 (2) was so declared. Reliancewas placed on Supreme Court decision in Seth Nand Lal – Vs – State ofHaryana (1980 (Supp.) SCC 574), wherein the Supreme Court held asfollows :-"....... that the right of appeal is a creaturestatute and there is no reason why our legislature,while granting the right cannot impose conditions forthe exercise of such right so long as conditions arenot so onerous as it amounts to unreasonablerestrictions rendering the right almost illusionary."Supreme Court decision in Commissioner of Civil Supplies – Vs –V.Sethuraman (1974 TNLJ 511), was also relied, relevant portion ofwhich reads as follows :-"When an authority which is entrusted with onlypower of execution cannot assume for itself ajurisdiction to resolve interior disputes byadjudication. Judicial power to decide civildisputes should not be confined with executionentrustment of recovery powers of a summary characteras an expedient for equal recovery on grounds ofState interest."5. According to learned counsel for the borrower, the provisionof Section 18 (1) imposing condition of pre-deposit for preferringappeal are onerous and economic blockade is created upon borrowerdenying him the right to prefer appeal. While Section 13 (13)imposes a restraint, 2nd and 3rd proviso to Section 18 (1) imposes afinancial burden upon already overburdened borrower. The appealprovided u/s 18 is nothing but a mirage for the borrower andimposition of condition under 2nd and 3rd proviso to Section 18 (1)without being heard on merit on the quantum of amount claimed by thesecured creditor could never have been intended by the Legislature asit would amount to denial of natural justice and ultra vires theConstitution, being arbitrary, rendering the legal remedy beyond thereach of the borrower. The Supreme Court embarked on a process tocorrect the unconstitutional or onerous condition, which were foundu/s 17 (2), but the very same provisions have been inserted as 2nd and3rd proviso to Section 18 (1) even where no determination of quantumis done by the Tribunal. According to learned counsel, the followingcondition set out in para-64 of Mardia Chemicals case are alsoapplicable in the present case :-i) The action u/s 13 (4) of NPA Act is taken evenwhile adjudication of the debt due is pending beforethe Debts Recovery Tribunal, which is the authorityof the first instance;ii) There is no determination of the amount due bythe DRT;iii) The secured assets are under the control of thesecured creditor insofar as they have issued noticeu/s 13 (2) and taken action under Section 13 (4) of https://hcservices.ecourts.gov.in/hcservices/ the Act in view of Section 13 (13); andiv) There is no special reason for double securityin respect of an amount yet to be determined andsettled.Stand of the Guarantor – Ms.Shirin Iqbal (in the 1st set of cases) :6. Learned counsel for the guarantor, while referred to the factthat Indian Bank has already filed original application before theTribunal for recovery of Rs.304.09 lakhs, informed that the Tribunalhas not yet finalised the quantum. Therefore, there is nodetermination of debt due to the bank. According to him, the 2ndproviso to Section 18 (1), while imposes a restriction on right toappeal, it stipulates pre-deposit of quantum only by determination asto which one is lower of the two amounts, viz., the amount of debtclaimed by the secured creditor or the amount of debt determined bythe Debts Recovery Tribunal. Thus, the 2nd proviso could come intooperation only if both the above details of amounts are availablebefore the Appellate Tribunal and not otherwise. Where the originalapplication is pending before the Tribunal for determination of debtamount, the 2nd proviso cannot be given effect to and no pre-depositcould be ordered by the Appellate Tribunal. In absence ofdetermination of amount by Tribunal, the second operative figure incalculation would be "Zero" and, consequently, lower of the twoamounts being "Zero", 50% thereof would be "Nil". Hence, theapplication of 2nd proviso would not arise in appeal where nodetermination of due is made by Tribunal. It is only if suchinterpretation of 2nd proviso to Section 18 (1) is accepted, i.e., theappeal to be entertained without any deposit, the question ofreducing the deposit under 3rd proviso would not arise and theprovision could be saved.Stand of secured creditor - Indian Bank (in the 1st set of cases) :7. Mr. G.Masilamani, learned Advocate General appeared for theBank. Referring to Section 18 (1) he submitted that any personaggrieved by any order of Tribunal is entitled to prefer appeal toAppellate Tribunal. Under 2nd proviso to Section 18 (1), no suchappeal could be entertained unless the borrower deposits with theAppellate Tribunal 50% of the amount of debt due from the borrower asclaimed by the secured creditor or as determined by Tribunal,whichever is less. The 3rd proviso provides that the AppellateTribunal, may, in exercise of its discretion, for reasons recorded inwriting, may reduce the amount to be so deposited to 25%. Theexpression "amount as determined by Debts Recovery Tribunal" found in2nd proviso to Section 18 (1) requires, as a condition precedent forexercising power u/s 18 (1), if pre-determination of amount due isdetermined by the Tribunal.It was submitted that the Recovery of Debts due to Banks andFinancial Institutions Act, 1993 (hereinafter referred to as 'DRTAct, 1993') is enacted prior to NPA Act, 2002 and both Acts operate https://hcservices.ecourts.gov.in/hcservices/ independently in different fields. NPA Act was enacted with theintent of facilitating recovery of dues to the secured creditorwithout the intervention of the court and Tribunal, which is similarto Section 16 (a) of the Transfer of Property Act. DRT Act, 1993,envisages adjudication and determination of claim made by the Bank orFinancial Institution by the Tribunal as a pre-condition to initiaterecovery proceeding. On the other hand, NPA Act presupposesdetermination of amount by the secured creditor itself prior toissuance of Section 13 (2) notice. Such determination is recognisedfor taking action against the borrower for recovery of the amounteven without institution of the suit or recovery application bydeclaring the account of the borrower as Non-Performing Asset (NPA).All that is required is the procedure laid down under the NPA Act andthe Rules framed therein should be adhered to.Stand of the borrower, Ms.S.Chitra (in the 2nd set of cases) :8. This petitioner claims to be a third-party, neither theborrower nor the guarantor and further according to her she has notobtained any loan from Syndicate Bank. She was impleaded asdefendant along with her father and sisters in O.A. No.278/04preferred by Syndicate Bank. The ancestral property in which thepetitioner, along with other defendants 2 to 8 are the co-owners wasmortgaged without her knowledge. It was submitted that proviso toSection 18 (1) of NPA Act is bad and ultra vires. U/s 18 (1), "anyorder passed by Tribunal could be challenged, including an interimorder by any person including a stranger to a loan transaction, evenwho is not a borrower or a guarantor". The law is silent as topurpose and manner of the word "as claimed by secured creditors ordetermined by the Debts Recovery Tribunal, whichever is less", so faras it relates to a third-party. Further, according to thispetitioner, the 2nd proviso to Section 18 (1), even beforedetermination of amount of debt by Tribunal as due from borrower,mandates any person including third-party to deposit 50% of the debtamount, which could be reduced to 25% by the Appellate Tribunal.Therefore, proviso to Section 18 (1) is more onerous than unamendedSection 17 (2), which was struck down by the Supreme Court. Thecondition of pre-deposit is alleged to be bad rendering the remedyillusory for the following grounds :-(i) it is imposed while approaching the AppellateTribunal even against an interim order ;(ii) there is no determination of amount due asyet ;iii) the possession of the secured asset or itsmanagement with transferable interest is taken overby the secured creditor and is in their control ;iv) there is no special reason for double securityin respect of an amount yet to be determined andsettled ; https://hcservices.ecourts.gov.in/hcservices/ v) 50% of the amount claimed is by no means would bea meagre amount ;vi) it will leave not only the borrower orguarantor, but also a total stranger in a positionwhere it would not be possible for him/her to raiseany funds to make the deposit of 50% of the unnamedor uncertain amount ; andvii) the borrower, including the guarantor and astranger-third party are treated alike.Stand os secured creditor, M/s.Syndicate Bank (in 2nd set of cases) :9. This bank has denied the fact that the petitioner S.Chitra isa third-party. According to the bank, the petitioner and hersisters, who were defendants 5, 6 and 8, through their father andpower of attorney holder (4th defendant), by giving personalguarantee, have mortgaged their property in favour of the bank bydepositing the title deeds and executing registered memorandum ofdeposit of title deeds in favour of the bank as security for duepayment of credit facilities availed by M/s.Aandavar ElectricalDistributors represented by partners, who are defendants 1 to 3.So far as validity of law is concerned, learned counsel for thebank took similar plea as taken by Indian Bank in the first set ofcases.10. We have heard the learned counsel for the parties and noticedtheir rival contentions.11. The reasons for enactment of DRT Act, 1993 and NPA Act, 2002,fell for consideration before Supreme Court in Transcore – Vs – Unionof India reported in 2008 (1) SCC 125 :: 2006 (5) CTC 753. In thesaid case, object of both the Acts were noticed and followingobservation was made :-"13. ............. The object of the DRT Act as wellas NPA Act is recovery of debt by non-adjudicatoryprocess. These two enactments provide for cumulativeremedies to the secured creditors. By removing allfetters on the rights of the secured creditor he isgiven a right to choose one or more of the cumulativeremedies. The object behind Section 13 of the NPAAct and Section 17 read with Section 19 of the DRTAct is the same, namely, recovery of debt.Conceptually there is no inherent or impliedinconsistency between the two remedies. Therefore,as stated above, the object behind the enactment ofthe NPA Act is to accelerate the process of recoveryof debt and to remove deficiencies in the way of https://hcservices.ecourts.gov.in/hcservices/ realization of debt under the DRT Act by theenactment of the Act, 2002."The Supreme Court further held in the case of Transcore that thebank or financial institution having elected remedy in terms with DRTAct, 1993, can also invoke the NPA Act, 2002, for realising thesecured debt without withdrawing or abandoning the originalapplication filed before the Tribunal under the DRT Act, 1993.Therefore, it will be clear that the secured creditor can recover thesecured debt under NPA Act by invoking any one or more measuresmentioned u/s 13 (4), independent of an application u/s 19 of the DRTAct, 1993.12. There can be a case where, without filing an application u/s19 of DRT Act, 1993, a secured creditor can take steps to recover hisdebt u/s 13 (4) of NPA Act. In such case, question of determinationof amount u/s 19 of DRT Act, 1993, do not arise.There can be another situation where the secured creditor, thoughelected to opt for remedy u/s 19 of DRT Act, 1993, may also invokeSection 13 (4) of NPA Act, 2002. In such a case, the securedcreditor is not supposed to wait for determination of the claim bythe Tribunal u/s 19 of DRT Act, 1993, for the purpose of takingaction u/s 13 (4), as otherwise the object of Section 13 (4) of NPAAct will be defeated.In a third situation, even after obtaining a decree and issuanceof a recovery certificate u/s 19 of DRT Act, 1993, with regard tocertain assets, it is also open for a secured creditor to takeindependent action u/s 13 (4) of NPA Act for recovery of certain duesdue to the secured creditor.There can be a fourth situation in which the secured creditor maytake recourse to recovery of amount only u/s 19 of DRT Act, 1993without taking recourse u/s 13 (4) of NPA Act.From the aforesaid fact it will be evident that it is notnecessary that in all such cases the borrower (including theguarantor) or any person who has preferred appeal u/s 18 of NPA Actor u/s 20 of DRT Act, 1993, there will be pre-determination of amountby the Tribunal. It will depend on the situation whether whiletaking action taken u/s 13 (4) of NPA Act any pre-determination hasbeen made by Tribunal u/s 19 of the DRT Act, 1993.13. Section 18 (1) contemplates presentation of appeal if anyperson, including the borrower is aggrieved against any order passedu/s 17 of NPA Act. However, entertaining the appeal and passingorders thereon, is subject to 2nd proviso to Section 18 (1), andexercising of power by Appellate Tribunal under 3rd proviso to Section18 (1). https://hcservices.ecourts.gov.in/hcservices/ It cannot be presupposed that Section 18 appeal will only beagainst a final order that may be passed u/s 17 of NPA Act. Evenagainst an interim order or non-grant of an interim order, anyperson, including the borrower may prefer appeal u/s 18. In such acase, a person, including the borrower do not allow the Tribunal tomake any determination of the claim or counter-claim or the legalityof the action taken u/s 13 (4) and before that the person moves inappeal u/s 18. Therefore, it cannot be presumed that in all suchcases, pre-determination of the by Tribunal is mandatory.14. Section 13 is a pivotal section in NPA Act, which stipulatesthat in default in repayment of secured debt and account in respectof such debt is classified as NPA, further action could be taken u/s13 (4). The term "debt" defined u/s 13 of NPA Act and DRT Act, 1993,includes "money due under a decree". Therefore, even this categoryof money due in terms of debt or a decree could attract action u/s 13of NPA Act, provided that other eligibility conditions as specifiedunder NPA Act are satisfied.In certain cases there is no possibility for Tribunal todetermine the amount; in certain other cases there can be apossibility of determination by Tribunal, but actually determinationhas not been made; in some other cases determination of claim mayhave been made by Tribunal. From the Supreme Court decision inTranscore's case, as it is evident that the NPA Act could be invokedfor realisation of secured debt without withdrawing or abandoning theoriginal application before the Tribunal and such secured debt couldbe realised u/s 13 (4) of NPA Act even without filing an applicationu/s 19 of DRT Act, 1993, it cannot be said that a pre-determinationof claim to be made by Tribunal, for the purpose of invoking 2nd or 3rdproviso to Section 18 (1) of NPA Act.15. The safeguard against action u/s 13 (4) of NPA Act isavailable to any aggrieved person, including the borrower (guarantor)u/s 17 of NPA Act, wherein Tribunal is required to consider whetherany measures referred u/s 13 (4) taken by secured creditor is inaccordance with Act and Rules framed thereunder. The following wasthe observation of Supreme Court in Transcore's case (supra) :-"......... the DRT is required to consider whetherany of the measures referred to in Section 13 (4)taken by the secured creditor for enforcement ofsecurity are in accordance with the provisions of theNPA Act and the Rules made thereunder. If the DRT,after examining the facts and circumstances of thecase and the evidence produced by the parties, comesto the conclusion that any of the measures takenunder Section 13 (4) are not in accordance with theNPA Act, it shall direct the secured creditor torestore the possession/management to the borrower(vide Section 17 (3) of NPA Act)."At the stage of Section 17 there is no scope of determination ofdispute regarding liability as Section 13 (2) of NPA Act deals with https://hcservices.ecourts.gov.in/hcservices/ liquidation of liability. That is a stage in which the borrower(includes guarantor) gets liberty to object u/s 13 (3-A), which isadjudicated by the secured creditor who may accept or reject theobjection but is liable to communicate the reasoning to the borrowerwithin a specified period. This will be evident from the SupremeCourt decision in Transcore's case (supra) and quoted hereunder :-"On reading Section 13 (2) it is clear that the saidsub-section proceeds on the basis that the borroweris already under a liability and further that hisaccount in the books of the bank or FI is classifiedas substandard, doubtful or loss. The NPA Act comesinto force only when both these conditions aresatisfied. Section 13 (2) proceeds on the basis thatthe debt has become due. It proceeds on the basisthat the account of the borrower in the books ofbank/FI, which is an asset of the bank/FI, has becomenon-performing. Therefore, there is no scope of anydispute regarding the liability......... Section 13 (2) deals with liquidation ofliability. Section 13 deals with enforcement ofsecurity interest, therefore, the remedies ofenforcement of security interest under the NPA Actand the DRT Act are complementary to each other.There is no inherent or implied inconsistency betweenthese two remedies under the two different Acts.Section 13 (3) inter alia states that the noticeunder Section 13 (2) shall give details of the amountpayable by the borrower as also the details of thesecured assets intended to be enforced by thebank/FI. In the event of non-payment of secureddebts by the borrower, notice under Section 13 (2) isgiven as a notice of demand. It is very similar tonotice of demand under Section 156 of the Income TaxAct, 1961. After classification of an account asNPA, a last opportunity is given to the borrower ofsixty days to repay the debt. Section 13 (3-A)inserted by amending Act 30 of 2004 after thejudgment of this Court in Mardia Chemicals (supra),whereby the borrower is permitted to makerepresentation/objection to the secured creditoragainst classification of his account as NPA. He canalso object to the amount due if so advised. UnderSection 13 (3-A), if the bank/FI comes to theconclusion that such objection is not acceptable, itshall communicate within one week the reasons fornon-acceptance of the representation/objection.********........ if the DRT as an Appellate Authority, afterexamining the facts and circumstances of the casecomes to the conclusion that any of the measures https://hcservices.ecourts.gov.in/hcservices/ under Section 13 (4) taken by the secured creditorare not in accordance with the provisions of the Act,it may, by order, declare that the recourse taken toany one or more measures is invalid, and,consequently, restore possession to the borrower andcan also restore management of the business of theborrower. Therefore, the scheme of Section 13 (4)read with Section 17 (3) shows that if the borroweris dispossessed, not in accordance with theprovisions of the Act, then the DRT is entitled toput the clock back by restoring the status quo ante."16. In the case of Mardia Chemicals (2004 (4) SCC 311), SupremeCourt declared the condition of pre-deposit under unamended Section17 (2) bad, rendering the remedy illusory as the condition wasimposed while approaching the adjudicating authority at the firstinstance and not in appeal. That was a stage where no provision likeSection 13 (3-A) was inserted. There was no such provision asSection 13 (3-A) to submit objection pursuant to Section 13 (2)notice. In absence of any such determination by secured creditoraccepting or rejecting such application, as action u/s 13 (4) used tobe taken, the Supreme Court held the same violative of rules ofnatural justice and the other reasons as mentioned at para-64 of thejudgment (Mardia Chemicals). In view of the said decision of SupremeCourt in Mardia Chemicals case, Section 13 (3-A) was inserted makingit mandatory to secured creditor to entertain an objection andcommunicate reasons to borrower for non-acceptance of objection.17. The Supreme Court decisions in Vijay Prakash D.Mehta – Vs –Collector of Customs (1998 (4) SCC 402) and Sam Kishore – Vs –Municipal Corporation, Delhi (1993 (1) SCC 22), were noticed bySupreme Court in Mardia Chemicals case, wherein it observed thatrequirement of pre-deposit of any amount at first instance ofproceeding is not found in those two decisions. All those casesrelated to appeals. In the aforesaid case of Vijay Prakash D.Mehta(supra), Supreme Court held that right to appeal is neither anabsolute right nor an ingredient of natural justice, which principlesare to be followed in judicial and quasi-judicial proceeding, but itis a statutory right, which can be circumscribed by conditions.Similar provision was upheld by Supreme Court in Sam Kishore's case(supra), without there being any provision for waiver of condition.18. The 2nd proviso to Section 18 (1) mandates the AppellateTribunal not to entertain an appeal unless the borrower deposits withthe Appellate Tribunal 50% of the debt amount, which can be waivedupto 25% under 3rd proviso. The sentence "as claimed by securedcreditors or determined by Debts Recovery Tribunal, whichever isless", though presupposes that there is a claim by secured creditor,but in all cases it cannot be presumed that there shall be adetermination by the Tribunal. It has been noticed that in all casesthere may not be a determination by the Tribunal, as action u/s 13(4) of NPA Act can be taken independently without taking recourse u/s19 of the DRT Act, 1993. https://hcservices.ecourts.gov.in/hcservices/ In all cases it is not necessary that the borrower will disputethe claim. It may not dispute the claim, but while taking action u/s13 (4), if such action is not in accordance with the Act or rules,the borrower may object to the same by filing a petition u/s 17. Insuch case, the question of determination of dues by the Tribunal u/s17 does not arise, which is only supposed to determine whether any ofthe action taken u/s 13 (4) is in accordance with the Act and Rules.In such case, if an appeal is preferred u/s 18 of NPA Act, theaggrieved person cannot say that the Tribunal has to determine theclaim, even though the borrower has not disputed such claim.Similarly, in a case where appeal u/s 18 is preferred against interimorder or for non-grant of interim order, the aggrieved persons, whilepraying for interim injunction to stall the proceeding, cannot allegethat no determination has been made by DRT with regard to the claim.It cannot blow hot and cold by moving in appeal u/s 18 againstinterim order or non-grant of interim order, for the purpose ofgetting an appropriate interim order in appeal u/s 18 and allege non-determination of claim by Tribunal, which at best can be determinedat the time of final hearing of the case, that too in a case where ifany dispute is raised by party u/s 19 of DRT Act, 1993 or bank filesan application u/s 13 (10) of NPA Act. Therefore, the effect andcorrect meaning to give to the sentence "the amount of debt due fromhim as claimed by secured creditor or determined by Debts RecoveryTribunal, whichever is less" as mentioned under 2nd proviso to Section18 (1), a harmonious reading has to be made, which may fit in allsituations. Therefore, we hold that the 2nd proviso to Section 18 (1)stipulates pre-deposit of 50% due as claimed by the secured creditoror determined by the Debts Recovery Tribunal, whichever is less, andin absence of a determination by the Tribunal, the person has todeposit 50% of the amount claimed by the secured creditor, subject towaiver under 3rd proviso to Section 18 (1). If any person, afternotice u/s 13 (2) has deposited any amount, including amount, if any,deposited during Section 13 (4) stage or pendency of appeal u/s 17,it can be brought to the notice of the Appellate Tribunal foradjusting such amount for the purpose of determination of amount ofclaim for the purpose of 2nd proviso to Section 18 (1). Similarly, itis also open to any aggrieved person to show that another aggrievedperson, for same action taken by secured creditor, while preferringappeal u/s 18 against common order, has deposited certain amount andin such case, the Appellate Tribunal will take into considerationsuch amount for the purpose of determination of amount to be paidunder 2nd proviso to Section 18 (1) or for waiver under 3rd proviso toSection 18 (1).As we find no ambiguity or illegality in the 2nd or 3rd proviso toSection 18 (1) of NPA Act, we hold the said provision intra vires andreject the contention as raised by the petitioners.19. So far as individual cases are concerned, in the first set ofcases, we have noticed that there was a delay of 119 days inpreferring appeal u/s 18, which was condoned by Appellate Tribunal by https://hcservices.ecourts.gov.in/hcservices/ order dated 28th Jan., 2008, as challenged by Indian Bank in W.P.No.3958/08. By the said very order, the borrower, M/s.HamosonsApparels Pvt. Ltd., having asked to deposit Rs.2.5 Crores, theborrower lenged the said order in W.P. No.5172/08. Conditionalinterim order against the same very cause of action having allowedtill 6th march, 2008, by another order dated 26th June, 2008, IndianBank has challenged the same in W.P. No.3959/08.Now it is settled law that the Appellate Tribunal hasjurisdiction to condone the delay, if satisfied, on the grounds shownby the appellant. Though it is alleged by the Bank that the appealwas hopelessly barred and stated that it was not filed within theperiod of limitation, we find that the limitation of 30 daysprescribed for preferring appeal to be counted from the date ofreceipt of the order. The Indian Bank initially filed original application before theTribunal for recovery of Rs.3,05,09,000/= in O.A. Nos.1214/01,1217/01, 1371/01 and 53/00. By interim order, the Appellate Tribunalhaving asked the borrower to deposit a sum of Rs.2.50 Crores out ofthe claim made by the bank, the ground for delay having properlyexplained, we find no illegality in the order condoning the delay orasking the borrower to deposit the amount of Rs.2.5 Crores. We havenoticed that the borrower, M/s.Hamosons Apparels Pvt. Ltd.,originally paid certain amount with the bank, but having challengedthe conditional order, has not paid the balance amount. Pursuant tothis Court's interim order, it has deposited further sum of Rs.2.35Crores, which was accepted by the bank and kept in an interestbearing no lien account. By order dated 25th April, 2008, havingnoticed the intention of the borrower company (M/s.Hamosons ApparelsPvt. Ltd.), and that it wanted to make one-time settlement with theBank, notice was issued to the Bank. However, we are not expressingany opinion with regard to one-time settlement, though give libertyto the parties to negotiate the matter. However, as we find thatauction of secured asset was not confirmed because of the interimorder passed by this Court, we direct that the said sale in favour ofthe auction purchased be not confirmed till the appeal is decided bythe Appellate Tribunal on merits.20. So far as the second set of cases filed by Ms.S.Chitra isconcerned, the Appellate Tribunal, by order dated 10th April, 2007,directed the borrower to deposit a sum of Rs.10 lakhs in two spells.This was affirmed by this Court in C.R.P. No.1269/07. The amounthaving not deposited, the Appellate Tribunal, by order dated 7th May,2007, dismissed the appeal preferred by Ms.S.Chitra, u/s 18 of NPAAct. The said order has been challenged in C.R.P. (PD) No.1519/07,while questioning the validity of proviso to Section 18 (1) in W.P.No.17009/07. In view of our decision above, the aforesaid civilrevision petition and the writ petition cannot be allowed and theyare accordingly dismissed.It further appears that two original application Nos.42/05 and278/04 were preferred by the Bank before the Debts Recovery Tribunal,Coimbatore. In the said case, the borrower, Ms.S.Chitra, wanted to https://hcservices.ecourts.gov.in/hcservices/ cross-examine the Manager of Syndicate Bank and to send certaindocuments for expert's opinion. The Tribunal, by its order dated 27thSept., 2007, having noticed the earlier order passed by this Court inC.R.P. No.1269/07, rejected the applications for cross-examinationand refused to send the documents for expert's opinion and fixed thecase for hearing. Against the said order, another revisionapplication, C.R.P. (PD) No.3301/07 has been preferred by theborrower, Ms.S.Chitra. On behalf of the borrower, Ms.S.Chitra, thepetitioner in the second set of cases, learned counsel for thepetitioner has failed to make out any case for fresh cross-examination of the Manager of Syndicate Bank or sending the documentsfor expert's opinion and has also failed to show necessity for suchcross-examination or obtaining expert's opinion, the liabilityotherwise having not disputed, we are not inclined to interfere withthe order dated 27th Sept., 2007, passed by Debts Recovery Tribunal,Coimbatore, and dismiss C.R.P. (PD) No.3301/07.21. All the writ petitions and revision petitions are accordinglydismissed, but with observation of one-time settlement andconfirmation of sale as made with regard to the case of the borrower,M/s.Hamosons Apparels Pvt. Ltd. Consequently, connectedmiscellaneous petitions are also dismissed. But there shall be noorder as to costs.Sd/Asst.Registrar/true copy/Sub Asst.RegistrarGLNTo1. The Secretary Govt. of India Ministry of Finance New Delhi.2. The Authorised Officer & Chief Manager, Indian Bank Asset Recovery Management Branch 55, Ethiraj Salai, Chennai 600 008.3. The Bank Manager Indian Bank George Town Branch No.155, Thambu Chetty Street Chennai 600 001. https://hcservices.ecourts.gov.in/hcservices/

4. The Presiding Officer Debts Recovery Appellate Tribunal No.55, Ethiraj Salai Chennai 600 008.5. The Chief Manager Syndicate Bank Oopanakara Street Coimbatore 641 001. 3 ccs To Mr.K.Ramalinga Gounder, Advocate, SR.64362, 64363, 643642 ccs To Mr.Aiyar & Dolia , Advocate, SR.64467 & 644681 cc To Mr.Zaffarullah Khan, Advocate, SR.640801 cc To Dr.Anita Sumanth, Advocate, SR.640211 cc To Mr.P.Sreenivasalu, Advocate, SR.64437 W.P. NOS. 3958, 3959 AND 5172 OF 2008 AND 17009 OF 2007 AND C.R.P. (PD) NOS. 1519 & 3301/2007GV(CO)SRA(02/12/2008)