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Tuesday, April 26, 2016

deposit before the DRAT as a pre-condition under sec.18 DRAT -vs- secured assets / goods bailed = deposit before the DRAT as a pre-condition for considering the appeal on merits in terms of Section 18 of the Act, is not a secured asset. The partial deposit before the DRAT as a pre-condition for considering the appeal on merits in terms of Section 18 of the Act, is not a secured asset. It is not a secured debt either, since the borrower or the aggrieved person has not created any security interest on such pre- deposit in favour of the secured creditor. If that be so, on disposal of the appeal, either on merits or on withdrawal, or on being rendered infructuous, in case, the appellant makes a prayer for refund of the pre- deposit, the same has to be allowed and the pre-deposit has to be returned to the appellant, unless the Appellate Tribunal, on the request of the secured creditor but with the consent of the depositors, had already appropriated the pre-deposit towards the liability of the borrower, or with the consent, had adjusted the amount towards the dues, or if there be any attachment on the pre-deposit in any proceedings under Section 13(10) of the Act read with Rule 11 of The Security Interest (Enforcement) Rules, 2002, or if there be any attachment in any other proceedings known to law.= “171. General lien of bankers, factors, wharfingers, attorneys and policy- brokers.—Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.” Section 171 of The Indian Contract Act, 1872 provides for retention of the goods bailed to the bank by way of security for the general balance of account. The pre-deposit made by a borrower for the purpose of entertaining the appeal under Section 18 of the Act is not with the bank but with the Tribunal. It is not a bailment with the bank as provided under Section 148 of The Indian Contract Act, 1872. Conceptually, it should be an argument available to the depositor, since the goods bailed are to be returned or otherwise disposed of, after the purpose is accomplished as per the directions of the bailor. In the case before us, the first respondent had in fact sought withdrawal of the appeal, since the appellant had already proceeded against the secured assets by the time the appeal came up for consideration on merits. There is neither any order of appropriation during the pendency of the appeal nor any attachment on the pre-deposit. Therefore, the deposit made by the first respondent is liable to be returned to the first respondent. Though for different reasons as well, we endorse the view taken by the High Court. Thus, there is no merit in the appeal. It is accordingly dismissed. We make it clear that the dismissal of the appeal is without prejudice to the liberty available to the appellant to take appropriate steps under Section 13(10) of the SARFAESI Act read with Rule 11 of the Security Interest (Enforcement) Rules, 2002.

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION



                        CIVIL APPEAL NO. 4379 OF 2016
                   (Arising out of SLP (C) No. 13861/2015)


AXIS BANK                               ...  APPELLANT (S)

                                   VERSUS

SBS ORGANICS PRIVATE LIMITED AND
ANOTHER                                                ... RESPONDENT (S)


                           J  U  D  G  M  E  N  T

KURIAN, J.:

Leave granted.

An appeal under Section 18  of  The  Securitisation  and  Reconstruction  of
Financial  Assets  and  Enforcement   of   Security   Interest   Act,   2002
(hereinafter referred  to  as  ‘SARFAESI  Act’)  before  the  Debt  Recovery
Appellate Tribunal (hereinafter referred to as ‘DRAT’)  can  be  entertained
only if the borrower deposits fifty per cent of the amount in terms  of  the
order passed by the Debt  Recovery  Tribunal  (hereinafter  referred  to  as
‘DRT’) under Section 17 of the Act or fifty per cent of the amount due  from
the borrower as claimed by the secured  creditor,  whichever  is  less.  The
Appellate Tribunal may reduce the amount to twenty five per  cent.  What  is
the fate of such deposit on the disposal  of  the  appeal  is  the  question
arising for consideration in this case.
Being a pure legal issue, it may not be necessary for us  to  refer  to  the
factual position in detail. The  first  respondent,  being  a  borrower  and
aggrieved by the steps taken by the secured creditor,  filed  Securitisation
Application No. 152 of 2010 before the Debt  Recovery  Tribunal,  Ahmedabad.
Though, initially an interim relief was granted, the  same  was  vacated  by
order dated 20.01.2011. Therefore,  the  first  respondent  moved  the  Debt
Recovery Appellate Tribunal, Mumbai under Section 18 of  the  SARFAESI  Act.
In terms of the proviso under  Section  18,  the  first  respondent  made  a
deposit of Rs.50 lakhs before the Appellate Tribunal.  During  the  pendency
of the appeal before the DRAT, Securitisation Application itself came to  be
finally disposed of before the Debt Recovery Tribunal at Ahmedabad,  setting
aside the sale. Realising that the appeal did not  survive  thereafter,  the
first respondent sought permission to withdraw the same and also for  refund
of the deposit of Rs. 50 lakhs. Permission was granted, however,  making  it
subject to the disposal of the  appeal.  As  the  appeal  itself  was  being
withdrawn,  the  first  respondent  moved  the  High  Court  of  Gujarat  at
Ahmedabad by way of Writ Petition (Special Civil Application), aggrieved  by
the observation that the withdrawal would be subject to the  result  of  the
appeal. The same was disposed of by order dated 05.03.2015  by  the  learned
Single Judge, setting aside the said  condition  and  permitting  the  first
respondent herein to withdraw the  amount  unconditionally.  Aggrieved,  the
appellant-Bank filed an intra-Court appeal. That  appeal  was  dismissed  by
order dated 01.04.2015 by a Division Bench, and  thus  aggrieved,  the  Bank
has come up in appeal before this Court.
Heard learned Senior Counsel Shri C. U. Singh appearing for  the  appellant-
Bank and learned Counsel Vipul Jai appearing for the respondents.
The learned Senior Counsel appearing for  the  appellant-Bank  submits  that
the first respondent has no right to get back the deposit made by  it  as  a
pre-condition for entertaining the appeal. The said amount  has  to  be  set
off against the dues of  the  first  respondent,  which  has  actually  been
quantified and for which, Section 13 recovery steps have been permitted.  It
is submitted that the appellant-Bank  has  to  secure  the  entire  debt  by
proceeding against the secured assets, and therefore, the deposit is  liable
to be appropriated by the Bank. Reference is also made to Section 13(10)  of
the SARFAESI Act and Rule 11 of The Security Interest  (Enforcement)  Rules,
2002, which read as follows:

“13(10) Where dues of the secured creditor are not fully satisfied with  the
sale proceeds of the secured  assets,  the  secured  creditor  may  file  an
application in the form and  manner  as  may  be  prescribed  to  the  Debts
Recovery Tribunal having jurisdiction or a competent court, as the case  may
be, for recovery of the balance amount from the borrower.”


“11.  Procedure  for  Recovery  of  shortfall  of  secured  debt.-  (1)   An
application for recovery of balance amount by any secured creditor  pursuant
to sub-section (10) of section 13 of the  Act  shall  be  presented  to  the
Debts Recovery Tribunal in the form annexed as Appendix VI  to  these  rules
by the authorised officer or  his  agent  or  by  a  duly  authorised  legal
practitioner, to the Registrar of the Bench within  whose  jurisdiction  his
case falls or shall be sent by registered post addressed  to  the  Registrar
of Debts Recovery Tribunal.
(2) The provisions of the Debts Recovery Tribunal  (Procedure)  Rules,  1993
made under Recovery of Debts Due to Banks and  Financial  Institutions  Act,
1993 (51 of 1993), shall mutatis mutandis apply to any application filed  by
under sub-rule (1).
(3) An application under sub-rule (1)  shall  be  accompanied  with  fee  as
provided in rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993.”

Learned Senior Counsel further submits that the  Bank  has  a  lien  on  the
amount under Section 171 of The Indian Contract Act, 1872. The  decision  of
the High Court of Gujarat in Babu  Ganesh  Singh  Deepnarayan  v.  Union  of
India and another[1], which has been followed by the Division Bench  in  the
impugned judgment, does not reflect the true legal position, it  is  further
submitted.
Babu Ganesh (supra) was a case involving a challenge on  the  vires  of  the
second proviso under Section 18 of the SARFAESI Act, on the  mandatory  pre-
deposit. While upholding the  provision,  at  paragraphs-5  and  6,  it  was
observed that, in case the appeal is dismissed, the  amounts  deposited  for
entertaining the appeal would be refunded. To quote:
“5. Right of appeal is a creature of the  statute.  Legislature  can  impose
conditions under which it is to be exercised. Without a statutory  provision
creating such a right, a person aggrieved  is  not  entitled  to  prefer  an
appeal. Legislature while granting right of  appeal  can  impose  conditions
which it thinks reasonable. Such conditions merely regulate the exercise  of
right of appeal so that the same is not abused by a recalcitrant party,  and
there is no difficulty in the enforcement of the order appealed  against  in
case the appeal is ultimately dismissed. Imposition of such a  condition  is
essential, so that frivolous appeals would not be filed. Ultimately  if  the
appeal is dismissed, the aggrieved party  can  always  seek  refund  of  the
amount deposited and therefore, he is not in any way aggrieved. Further  the
Third Proviso to Section 18 (1) of the Securitization Act also  enables  the
Appellate Tribunal, for the reasons to be recorded in  writing,  reduce  the
amount to not less than 25% of the debt referred to in the  Second  Proviso.
We are not prepared to accept the contention that conditions imposed in  the
second and third proviso to Section 18(1)  of  the  Securitization  Act  are
onerous in nature so as to make the right of  appeal  illusory.  Delhi  High
Court in R.V. Saxena's case (supra)  also  upheld  the  validity  of  Second
Proviso to Section 18(1) of the  Securitization  Act  with  which  we  fully
concur.
6. We have also not come across any provision in the Statute,  enabling  the
secured creditor to adjust  or  appropriate  the  amount  deposited  by  the
borrower to prefer an appeal under Section 18(1) of the  Act.  On  dismissal
of the appeal the amount deposited as a pre-condition for filing the  appeal
will be refunded to the appellant and therefore, he is  no  way  prejudiced.
We therefore, find no merit in the contention raised by the petitioner  that
the second proviso  to  Section  18(1)  of  the  Act  is  discriminatory  or
violative of Article 14 of the Constitution of India. Petitions  lack  merit
and the same are dismissed.”

At this juncture, it may  be  necessary  to  refer  to  the  scheme  of  the
SARFAESI Act. The Act was intended to facilitate easy  and  faster  recovery
of  loans  advanced  by  banks  and  financial  institutions.  The  ordinary
recovery mechanism contemplated in The Code of  Civil  Procedure,  1908  was
not considered sufficient. Thus, the Recovery of  Debts  Due  to  Banks  and
Financial Institutions Act, 1993 was introduced for a special  and  speedier
mechanism for the recovery. Almost a decade of experience  proved  that  the
recovery process was not achieving  the  intended  objects  and  hence,  the
SARFAESI Act to regulate  securitisation  and  reconstruction  of  financial
assets  and  enforcement  of  security  interest  was   enacted.   The   Act
incorporates a system whereby direct action for  recovery  of  secured  debt
may be initiated against the secured assets of a borrower after the debt  is
declared to be a non performing asset (NPA).

“Borrower” is defined under Section 2(1)(f), which reads as follows:
“2(1)(f)    "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 securitisation  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;”

“Secured Asset”, under Section 2(1)(zc), is defined as:

“2(1)(zc)   “secured  asset”  means  the  property  on  which  the  security
interest is created”

“Section 2(1)(zd) provides  for  definition  of  “secured  creditor”,  which
reads as follows:
“2(1)(zd)   "secured creditor" means any bank or  financial  institution  or
any consortium or group of banks or financial institutions and includes—

(i)   debenture trustee appointed by any bank or financial institution; or
(ii)  securitisation company or reconstruction company,  whether  acting  as
such  or  managing  a  trust  set  up  by  such  securitisation  company  or
reconstruction company for the  securitisation  or  reconstruction,  as  the
case may be; or any other trustee holding securities on behalf of a bank  or
financial institution, in whose favour security interest is created for  due
repayment by any borrower of any financial assistance;”

Section 2(1)(ze) defines “secured debt” to mean “a debt which is secured  by
any security interest”.
“Security interest” is defined under Section 2(1)(zf):
“(zf) "security interest" means  right,  title  and  interest  of  any  kind
whatsoever upon property, created in favour  of  any  secured  creditor  and
includes any mortgage, charge, hypothecation, assignment  other  than  those
specified in section 31;”

The mechanism for  enforcement  of  security  interest  is      contemplated
under Section 13 of the Act. Sub- Sections  (1),  (2),(3),(3A)  and  (4)  of
Section 13 are relevant for the purposes of the present case and   they  are
extracted below:

“13. Enforcement of security interest
(1) Notwithstanding anything contained in section 69 or section 69A  of  the
Transfer of Property Act, 1882 (4 of 1882), any  security  interest  created
in favour of any secured creditor may be enforced, without the  intervention
of court or tribunal, by such creditor in accordance with the provisions  of
this Act.
(2) Where any borrower, who is under  a  liability  to  a  secured  creditor
under a security agreement, makes any default in repayment of  secured  debt
or any installment thereof, and his account  in  respect  of  such  debt  is
classified by the  secured  creditor  as  non-performing  asset,  then,  the
secured creditor may require the borrower by notice in writing to  discharge
in full his liabilities to the secured creditor within sixty days  from  the
date of notice failing which the  secured  creditor  shall  be  entitled  to
exercise all or any of the rights under sub-section (4).
(3) The notice referred to in sub-section (2)  shall  give  details  of  the
amount payable by the  borrower  and  the  secured  assets  intended  to  be
enforced by the secured creditor in the  event  of  non-payment  of  secured
debts by the borrower.
(3A) If, on receipt of the notice under sub-section (2), the borrower  makes
any representation or raises  any  objection,  the  secured  creditor  shall
consider such representation or objection and if the secured creditor  comes
to the conclusion that such representation or objection  is  not  acceptable
or tenable, he  shall  communicate  within  one  week  of  receipt  of  such
representation  or  objection  the  reasons  for   non-acceptance   of   the
representation or objection to the borrower:
Provided that the reasons so  communicated  or  the  likely  action  of  the
secured creditor at the stage of communication of reasons shall  not  confer
any right upon the borrower to prefer an application to the  Debts  Recovery
Tribunal under section 17 or the Court of District Judge under section 17A.
(4) In case the borrower fails to discharge his  liability  in  full  within
the period specified in sub-section  (2),  the  secured  creditor  may  take
recourse to one or more of the following measures  to  recover  his  secured
debt, namely:--
(a)   take possession of the secured assets of the  borrower  including  the
right to transfer by way of lease, assignment  or  sale  for  realising  the
secured asset;
(b)   take over the management of the business  of  the  borrower  including
the right to transfer by way of lease, assignment or sale for realising  the
secured asset:

Provided that the right to transfer by way  of  lease,  assignment  or  sale
shall be exercised only where the substantial part of the  business  of  the
borrower is held as security for the debt.

Provided further that where the management of whole of the business or  part
of the business is severable, the  secured  creditor  shall  take  over  the
management of such business of  the  borrower  which  is  relatable  to  the
security for the debt.

(c)   appoint any person (hereafter referred to as the manager),  to  manage
the secured assets the possession of  which  has  been  taken  over  by  the
secured creditor;
(d)   require at any time by notice in writing, any person who has  acquired
any of the secured assets from the borrower and from whom any money  is  due
or may become due to the borrower, to pay the secured creditor, so  much  of
the money as is sufficient to pay the secured debt.”

A conspectus of the aforesaid provisions shows that under the scheme of  the
SARFAESI Act,  a  secured  creditor  is  entitled  to  proceed  against  the
borrower for the purpose of recovering his secured  debt  by  taking  action
against the secured assets, in case the  borrower  fails  to  discharge  his
liability in full within the period specified in  the  notice  issued  under
Section 13(2) of the Act. It is the mandate of  Section  13(3)  of  the  Act
that the notice issued under Section 13(2) should  contain  details  of  the
amount payable by the borrower and also the secured assets  intended  to  be
enforced by the secured creditor in the event of non-payment of the dues  as
per Section 13(2) notice. Thus, the secured creditor is entitled to  proceed
only against the secured  assets  mentioned  in  the  notice  under  Section
13(2). However, in terms of Section 13(11) of the Act, the secured  creditor
is also free to proceed first against the guarantors  or  sell  the  pledged
assets. To quote:
“13(11) Without prejudice to the rights conferred on  the  secured  creditor
under or by this section, the secured creditor shall be entitled to  proceed
against the guarantors or sell the pledged assets without first  taking  any
of the measures specified  in  clauses(a)  to  (d)  of  sub-section  (4)  in
relation to the secured assets under this Act.”

Section 17 of the Act provides for a right to appeal to the DRT  in  respect
of the grievances on the  measures  taken  by  the  secured  creditor  under
Section 13 of the Act. To quote for easy reference, Section 17 of the Act:

“17. Right to appeal.-(1) Any person (including borrower), aggrieved by  any
of the measures referred to in sub-section (4) of section 13  taken  by  the
secured creditor or his authorised officer under this Chapter, may  make  an
application alongwith such fee, as may be prescribed to the  Debts  Recovery
Tribunal having jurisdiction in the matter within forty-five days  from  the
date on which such measure had been taken:
Provided that different fees may be prescribed for  making  the  application
by the borrower and the person other than the borrower.
Explanation: For the removal of doubts,  it  is  hereby  declared  that  the
communication of the reasons to the borrower by  the  secured  creditor  for
not having accepted his representation or objection or the likely action  of
the secured creditor at  the  stage  of  communication  of  reasons  to  the
borrower shall not entitle  the  person  (including  borrower)  to  make  an
application to the Debts Recovery Tribunal under sub-section (1).
(2) The Debts Recovery Tribunal shall consider whether any of  the  measures
referred to in sub-section (4) of section 13 taken by the  secured  creditor
for enforcement of security are in accordance with the  provisions  of  this
Act and the rules made thereunder.
(3)  If,  the  Debts  Recovery  Tribunal,  after  examining  the  facts  and
circumstances of the case and evidence produced by  the  parties,  comes  to
the conclusion that any of the measures referred to in  sub-section  (4)  of
section 13, taken by the secured creditor are not  in  accordance  with  the
provisions  of  this  Act  and  the  rules  made  thereunder,  and   require
restoration  of  the  management  of  the  business  to  the   borrower   or
restoration of possession of the secured assets to the borrower, it  may  by
order, declare the recourse to any one or more measures referred to in  sub-
section (4) of section 13 taken by the  secured  creditors  as  invalid  and
restore the possession of the secured assets to the borrower or restore  the
management of the business to the borrower, as the case  may  be,  and  pass
such order as it may consider appropriate and necessary in relation  to  any
of the recourse taken by the  secured  creditor  under  sub-section  (4)  of
section 13.
(4) If, the Debts  Recovery  Tribunal  declares  the  recourse  taken  by  a
secured creditor under sub-section (4) of section 13, is in accordance  with
the  provisions  of  this  Act  and  the  rules   made   thereunder,   then,
notwithstanding anything contained in any other law for the  time  being  in
force, the secured creditor shall be entitled to take  recourse  to  one  or
more of the measures specified  under  sub-section  (4)  of  section  13  to
recover his secured debt.
(5) Any application made under sub-section (1) shall be dealt  with  by  the
Debts Recovery Tribunal as expeditiously as possible and disposed of  within
sixty days from the date of such application:
Provided that the Debts Recovery Tribunal may, from  time  to  time,  extend
the said period for reasons to be recorded in  writing,  so,  however,  that
the total period of pendency of the application with the
Debts Recovery Tribunal, shall not exceed  four  months  from  the  date  of
making of such application made under sub-section (1).
(6) If the application is not disposed of by  the  Debts  Recovery  Tribunal
within the period of four months as specified in sub-section (5), any  party
to the application  may  make  an  application,  in  such  form  as  may  be
prescribed, to the Appellate  Tribunal  for  directing  the  Debts  Recovery
Tribunal for expeditious disposal of  the  application  pending  before  the
Debts  Recovery  Tribunal  and  the  Appellate   Tribunal   may,   on   such
application,  make  an  order  for  expeditious  disposal  of  the   pending
application by the Debts Recovery Tribunal.
(7) Save as otherwise provided in this  Act,  the  Debts  Recovery  Tribunal
shall, as far as may be, dispose of the application in accordance  with  the
provisions of the Recovery of Debts Due to Banks and Financial  Institutions
Act, 1993 and the rules made thereunder.”

Though Section 17 of the Act is titled as a ‘Right to appeal’,  the  liberty
granted to the aggrieved person is to make an application  to  the  DRT  and
the parties are at a liberty to  lead  evidence  before  the  tribunal.  And
thus, it is actually a trial  before  the  DRT  on  the  grievances  of  the
aggrieved persons in the respect  of  the  measures  taken  by  the  secured
creditor for recovery of dues of the  borrower  in  proceeding  against  the
secured assets.(See Mardia Chemicals v. Union of India[2])
The actual appeal is contemplated under Section 18 of the SARFAESI Act.  The
provision 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
alongwith 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:
Provided that different fees may be prescribed for filing an appeal  by  the
borrower or by the person other than the borrower:
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.
(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.”

Any person aggrieved by the order  of  the  DRT  under  Section  17  of  the
SARFAESI Act, is entitled to prefer an appeal along with the prescribed  fee
within the permitted period of 30 days. For ‘preferring’ an  appeal,  a  fee
is prescribed, whereas for the  Tribunal  to  ‘entertain’  the  appeal,  the
aggrieved person has to make a deposit of fifty per cent of  the  amount  of
debt due from him as claimed by the secured creditors or determined  by  the
DRT, whichever is less. This amount can, at the discretion of the  Tribunal,
in appropriate cases, for recorded reasons, be reduced to twenty-  five  per
cent of the debt.
This Court,  in  Lakshmi  Rattan  Enginerring  Works  Limited  v.  Assistant
Commissioner Sales Tax, Kanpur and Another[3], had the occasion to  consider
the meaning of the expression  ‘entertain’  in  the  context  of  a  similar
provision in the Uttar Pradesh Sales Tax Act,1948 where it was held that  in
such  context,  the  expression   has   the   meaning   of   “admitting   to
consideration”. The relevant discussion is available at paragraphs -  9  and
10:

“9. The  word  'entertain'  is  explained  by  a  Divisional  Bench  of  the
Allahabad High Court as denoting the point of time at which  an  application
to set aside the sale is heard by the court. The expression 'entertain',  it
is stated, does not mean the same thing as the filing of the application  or
admission of the application by the court. A similar view  was  again  taken
in Dhoom Chand Jain v. Chamanlal Gupta & Anr. AIR 1962 All.  543,  in  which
the learned Chief Justice Desai  and  Mr.  Justice  Dwivedi  gave  the  same
meaning to the expression 'entertain'. It is observed  by  Dwivedi  J.  that
the word 'entertain' in its application  bears  the  meaning  'admitting  to
consideration'. and therefore when  the  court  cannot  refuse  to  take  an
application which is  backed  by  deposit  or  security,  it  cannot  refuse
judicially to consider it. In a single bench  decision  of  the  same  court
reported in Bawan Ram & Anr. v. Kuni Beharilal A.I.R. 1961 All. 42,  one  of
us (Bhargava, J.) had to consider the same rule. There the deposit  had  not
been made within the period  of  limitation  and  the  question  had  arisen
whether the court could entertain the application or  not.  It  was  decided
that the application could not be entertained because proviso  (b)  debarred
the  court  from  entertaining  an  objection  unless  the  requirement   of
depositing the amount or furnishing security was complied  with  within  the
time prescribed. In that case of the word  'entertain'  is  not  interpreted
but it is held that the court cannot proceed to consider the application  in
the absence of deposit made within  the  time  allowed  by  law.  This  case
turned on the fact that the deposit was made out of  time.  In  yet  another
case of the Allahabad High Court reported in Haji Rahim Bux & Sons and  Ors.
v. Firm Samiullah & Sons A.I.R. 1963 All. 326, a division  bench  consisting
of Chief Justice Desai and Mr. Justice S. D. Singh interpreted the words  of
O. 21, r. 90, by saying that the word 'entertain'  meant  not  'receive'  or
'accept' but proceed to consider on merits' or 'adjudicate upon'.


10. In our opinion these cases  have  taken  a  correct  view  of  the  word
'entertain'  which  according   to   dictionary   also   means   'admit   to
consideration'. It would therefore appear that the direction  to  the  court
in the proviso to s. 9 is that the court  shall  not  proceed  to  admit  to
consideration an appeal which is not accompanied by  satisfactory  proof  of
the payment of the admitted tax. This will be when the case is taken  up  by
the court for the first  time.  In  the  decision  on  which  the  Assistant
Commissioner relied, the learned Chief Justice (Desai C.J.) holds  that  the
words 'accompanied by' showed that something tangible had to  accompany  the
memorandum of appeal. If the memorandum of appeal had to be  accompanied  by
satisfactory proof, it had  to  be  in  the  shape  of  something  tangible,
because no intangible thing can accompany a document like the memorandum  of
appeal. In our opinion, making 'an appeal' the equivalent of the  memorandum
of appeal is not sound. Even under O. 41 of the  Code  of  Civil  Procedure,
the expression "appeal" and "memorandum of appeal" are used to distinct  two
distinct things. In Wharton's Law Lexicon, the word "appeal" is  defined  as
the judicial examination of the decision by a higher Court of  the  decision
of  an  inferior  court.  The  appeal  is  the  judicial  examination;   the
memorandum of appeal contains the grounds on which the judicial  examination
is invited. For purposes of limitation and for purposes of the rules of  the
Court it is required that a written memorandum of  appeal  shall  be  filed.
When the proviso speaks of the entertainment of the appeal,  it  means  that
the appeal such as was filed will not be admitted  to  consideration  unless
there is satisfactory proof available  of  the  making  of  the  deposit  of
admitted tax.”



  We are also conscious of the fact that such a pre-condition is present  in
several statutes while providing for statutory appeals, like The  Income-Tax
Act, 1961, The Central Excise Act, 1944, The Consumer Protection Act,  1986,
The Motor Vehicles Act, 1988,  etc.  However,  unlike  those  statutes,  the
purpose of the SARFAESI Act is  different,  it  is  meant  only  for  speedy
recovery of the dues, and  the  scheme  under  Section  13(4)  of  the  Act,
permits the secured creditor to proceed only against the secured assets.  Of
course, the secured creditor is free to proceed against the  guarantors  and
the pledged assets,  notwithstanding  the  steps  under  Section  13(4)  and
without first exhausting the recovery as against secured assets referred  to
in the notice under Section 13(2). But such guarantor, if aggrieved, is  not
entitled to approach DRT under Section 17. That right is restricted only  to
persons aggrieved by steps  under  Section  13(4)  proceeding  for  recovery
against the secured assets.
The Appeal under Section 18 of the  Act  is  permissible  only  against  the
order passed by the DRT under Section 17 of the Act. Under Section  17,  the
scope of enquiry is limited to the steps taken under Section  13(4)  against
the secured assets. The partial deposit before the DRAT as  a  pre-condition
for considering the appeal on merits in terms of Section 18 of the  Act,  is
not a secured asset. It is not a secured debt either, since the borrower  or
the aggrieved person has not created any  security  interest  on  such  pre-
deposit in favour of the secured creditor. If that be  so,  on  disposal  of
the appeal, either  on  merits  or  on  withdrawal,  or  on  being  rendered
infructuous, in case, the appellant makes a prayer for refund  of  the  pre-
deposit, the same has to be allowed and the pre-deposit has to  be  returned
to the appellant, unless the Appellate  Tribunal,  on  the  request  of  the
secured creditor but  with  the  consent  of  the  depositors,  had  already
appropriated the pre-deposit towards the liability of the borrower, or  with
the consent, had adjusted the amount towards the dues, or if  there  be  any
attachment on the pre-deposit in any proceedings  under  Section  13(10)  of
the Act read with Rule 11 of  The  Security  Interest  (Enforcement)  Rules,
2002, or if there be any attachment in any other proceedings known to law.
We are also unable to agree with the contention that the Bank has a lien  on
the pre-deposit made under Section 18  of  the  SARFAESI  Act  in  terms  of
Section 171 of The Indian Contract Act, 1872.  Section  171  of  The  Indian
Contract Act, 1872 on general lien, is in a different context:

“171. General lien of bankers, factors, wharfingers, attorneys  and  policy-
brokers.—Bankers, factors,  wharfingers,  attorneys  of  a  High  Court  and
policy-brokers may, in the absence of a contract to the contrary, retain  as
a security for a general balance of account, any goods bailed to  them;  but
no other persons have a right to retain, as a  security  for  such  balance,
goods bailed to them, unless there is an express contract to that effect.”


Section 171 of The Indian Contract Act, 1872 provides for retention  of  the
goods bailed to the bank by way of  security  for  the  general  balance  of
account. The pre-deposit made by a borrower for the purpose of  entertaining
the appeal under Section 18 of the Act is not with the  bank  but  with  the
Tribunal. It is not a bailment with the bank as provided under  Section  148
of The Indian Contract Act, 1872.  Conceptually, it should  be  an  argument
available to the depositor, since the goods bailed are  to  be  returned  or
otherwise disposed  of,  after  the  purpose  is  accomplished  as  per  the
directions of the bailor.
In the case before us, the first respondent had in  fact  sought  withdrawal
of the appeal,  since  the  appellant  had  already  proceeded  against  the
secured assets by the time the appeal came up for consideration  on  merits.
There is neither any order of  appropriation  during  the  pendency  of  the
appeal nor any attachment on the pre-deposit. Therefore,  the  deposit  made
by the first respondent is liable to be returned to the first respondent.
Though for different reasons as well, we endorse the view taken by the  High
Court. Thus, there is no merit in the appeal. It is accordingly dismissed.
We make it clear that the dismissal of the appeal is  without  prejudice  to
the liberty available to the  appellant  to  take  appropriate  steps  under
Section 13(10) of the SARFAESI  Act  read  with  Rule  11  of  the  Security
Interest (Enforcement)   Rules, 2002.
There shall be no order as to costs.


                                  ........................................J.
                                                             (KURIAN JOSEPH)



                                                        ......………………………………J.
                                                     (ROHINTON FALI NARIMAN)
New Delhi;
April 22, 2016.
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[1]    AIR 2009 Guj. 98
[2]    (2004) 4 SCC 311
[3]    AIR 1968 SC 488


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                                                                  REPORTABLE





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