Union Bank Of India vs Rajat Infrastructure Pvt. Ltd. on 2 March, 2020

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Supreme Court of India
Union Bank Of India vs Rajat Infrastructure Pvt. Ltd. on 2 March, 2020Author: Deepak Gupta

Bench: Deepak Gupta, Aniruddha Bose

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NON­REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1902 OF 2020
(@ SPECIAL LEAVE PETITION (CIVIL) NO.28608 OF 2019)

UNION BANK OF INDIA …APPELLANT(S)

Versus

RAJAT INFRASTRUCTURE PVT.
LTD. & ORS. …RESPONDENT(S)

WITH

CIVIL APPEAL NO. 1903 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO.1753 OF 2020)

JUDGMENT

Deepak Gupta, J.

Leave granted.

2. These appeals were initially directed against the order dated

25.11.2019 of the Bombay High Court. By the said impugned order
Signature Not Verified

the High Court had relegated the appellant before it i.e. respondent
Digitally signed by
RAJNI MUKHI
Date: 2020.03.02
15:59:04 IST
Reason:

no. 1 herein to avail the statutory remedy of appeal before the Debt

Recovery Appellate Tribunal (for short ‘the DRAT’).
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3. The short question which arises for determination is whether

the High Court was right in directing that pre­deposit was not

required for entertaining an appeal before the DRAT as mandated

by Section 18 of the Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002 (for short

‘SARFAESI Act’).

4. It is not necessary to set out the facts of the case in detail in

view of the decision which we propose to take. The basic facts are

that the respondent no. 1 stood guarantee and mortgaged its

property for repayment of loan availed by respondent nos. 4 and 5.

The property was put to auction and respondent nos. 2 and 3 who

are the alleged leaseholders in possession of the property are the

highest bidders for a sum of Rs.65.52 crores. The main objection of

the respondent no.1 to the sale is that it is for a low amount and

there is collusion between the officers of the Bank and the auction

purchaser. The petitioner challenged the order of the DRAT dated

11.11.2019 before the High Court and the High Court passed the

following order dated 25.11.2019:

“2. Relegating the Petitioner to the appellate remedy on
account of aforenoted facts and holding that the
Petitioner has an efficacious alternate remedy of appeal
before the learned DRAT where no pre­deposit is
required, the Petition is rejected without making any
observation on the merits of the disputes between the
parties.”
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5. It appears that the successful bidders filed review petitions

before the High Court praying that the High Court could not have

issued directions that no pre­deposit was required. Vide order

dated 16.12.2019 the High Court dismissed the review petition and

the relevant observations of the High Court are as under:

“7. Suffice it to state that where a proposed sale notice is
questioned with reference to the reserve price fixed and
the argument takes the form of considering valuation
report, such order, if challenged before DRAT, would not
require any pre­deposit being made for the reason under
the impugned order, no decree has been passed or
liability fixed. It would depend on the nature of the order
whether before the appeal there against is entertained,
should a pre­deposit be made.”

6. Mr. O.P. Gaggar, learned counsel for the appellant submitted

that the order of the High Court is not only against the provisions of

the Act but also against the law laid down by this Court. Mr.

Dushyant A. Dave, learned senior counsel for the auction

purchasers, respondent nos. 2 and 3, supported the case of the

appellant and submitted that the no appeal on behalf of respondent

no. 1 can lie without complying with the provisions of Section 18 of

the SARFAESI Act which mandates the deposit of 50% or at least

25% of the amount due, as claimed by the secured creditor or

determined by the Debt Recovery Tribunal (DRT). On the other

hand, Mr. Vikram Chaudhri, learned senior counsel appearing for

the respondent no.1 urged that the High Court has exercised its
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discretionary jurisdiction under Article 226 of the Constitution of

India while holding that it is not required to make pre­deposit. He

also submits that the respondent no.1 is not a borrower and finally

submits that the main ground is that since the amount offered by

the highest bidder is below the value of the property, the DRAT is

entitled to entertain the appeal without deposit of any amount. It is

submitted that the value of the property is about Rs.160 crores and

even the value as per the circle rate is about Rs.120 crores, but the

same has been sold for a pittance of Rs.65.52 crores. He also

submitted that there is collusion between the employees of the

Bank and the successful bidders.

7. We may make it clear that we are not going into the merits of

the case in view of the fact that we agree with the High Court that

the matter must be decided by the DRAT. The only issue is whether

the High Court was right in holding that no pre­deposit was

required. We may refer to Section 18 of the SARFAESI Act, which

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 prefer an appeal along
with such fee, as may be prescribed to an Appellate
Tribunal within thirty days from the date of receipt of the
order of Debts Recovery Tribunal.

Provided that different fees may be prescribed for filing
an appeal by the borrower or by the person other than
the borrower:
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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 twenty­five per cent. of debt referred to in
the second proviso.

xxx xxx xxx”

This Court in the case of Narayan Chandra Ghosh vs. UCO Bank

& Ors.1, held that keeping in view the language of the Section even

if the amount or debt due had not been determined by the DRT, the

appeal could not be entertained by the DRAT without insisting on

pre­deposit. The DRAT, at best could, after recording the reasons,

have reduced the amount to 25% but could not have totally waived

the deposit. This Court also held that the right of appeal conferred

under Section 18(1) is subject to the conditions laid down in the

second proviso therein which postulates that no appeal shall be

entertained unless the borrower has deposited 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

enables the DRAT, for reasons to be recorded in writing, to reduce

the amount of deposit to not less than 25%. The following

observations of this Court are relevant:

1 (2011) 4 SCC 548
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“7…Thus, there is an absolute bar to the entertainment
of an appeal under Section 18 of the Act unless the
condition precedent, as stipulated, is fulfilled. Unless the
borrower makes, with the Appellate Tribunal, a pre­
deposit of fifty per cent of the debt due from him or
determined, an appeal under the said provision cannot be
entertained by the Appellate Tribunal. The language of
the said proviso is clear and admits of no ambiguity.”

8. In view of the law laid down by this Court, we are clearly of the

view that the observation made by the High Court was totally

incorrect.

9. We are not in agreement with the submission of Mr. Chaudhri

that the High Court has exercised its discretionary powers under

Article 226 of the Constitution. The order of the High Court does

not show any exercise of such discretionary powers but according

to the High Court on an interpretation of the Section, pre­deposit

was not required. We are also not impressed with the argument of

Mr. Chaudhri that his client is not a borrower. A guarantor or a

mortgagor, who has mortgaged its property to secure the repayment

of the loan, stands on the same footing as a borrower and if he

wants to file an appeal, he must comply with the terms of Section

18 of the SARFAESI Act.

10. Furthermore, we may add that the High Court has no powers

akin to powers vested in this Court under Article 142 of the

Constitution. The High Court cannot give directions which are

contrary to law.
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11. In view of the above discussion, we set aside both the orders

dated 25.11.2019 and 16.12.2019 of the High Court in so far as

they hold that pre­deposit is not required and allow the appeals.

We reiterate that we have not gone into the merits of the

contentions raised by the parties which shall be decided by the

DRAT when it entertains the appeal and is called upon to do so. We

extend the time given to the auction purchasers, respondent nos. 2

and 3 to deposit the balance of the sale amount till 20.03.2020. We

also direct that in case respondent no.1 files an appeal within 30

days of the pronouncement of this order it shall not be rejected on

the ground of limitation.

12. Pending application(s), if any, stand(s), disposed of.

…………………………..J.
(Deepak Gupta)

…………………………..J.
(Aniruddha Bose)
New Delhi
March 2, 2020