SARFAESI Act = No writ is maintainable due to alternative remedy= justified in dismissing the appellant's writ petition on the ground of availability of alternative statutory remedy of filing an application under Section 17(1) of SARFAESI Act before the concerned Tribunal to challenge the action of the PNB in forfeiting the appellant's deposit under Rule 9(5). -The appellant is, accordingly, granted liberty to file an application before the concerned Tribunal (DRT) under Section 17(1) of the SARFAESI Act, which has jurisdiction to entertain such application within 45 days from the date of this order.

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 19847 OF 2017
(ARISING OUT OF SLP (C) No. 33514/2016)
Agarwal Tracom Pvt. Ltd. ...Appellant(s)
VERSUS
Punjab National Bank & Ors. …Respondent(s)
J U D G M E N T
Abhay Manohar Sapre, J.
1. Leave granted.
2. This appeal is directed against the final
judgment and order dated 11.05.2016 passed by
the High Court of Delhi at New Delhi in LPA No.699
of 2015 whereby the Division Bench of the High
Court dismissed the appeal filed by the appellant
herein for quashing the order dated 01.09.2015
2
passed by the Single Judge, which dismissed the
appellant’s W.P.(c) No.8314 of 2015.
3. The controversy involved in the appeal centers
around the short facts and is essentially a legal one.
However, few relevant facts need mention, in brief,
to appreciate the controversy.
4. Respondents-Punjab National Bank(hereinafter
referred to as "PNB") is a Nationalised Bank. The
PNB had given loan facility to a Company called
"M/s India Iron & Steel Corporation Limited" (in
short, "Borrower”) for their business, which they
were carrying at a place called Noorpur Khirki,
Village Farid Nagar, Tehsil Dhampur, District Bijnor
(U.P.).
5. To secure the loan amount, the Borrower had
secured their assets, which consisted of the land,
factory building, plant and machinery situated at
Dhampur. The Borrower, however, failed to clear
their loan amount and became a defaulter in its
3
repayment. The PNB, therefore, invoked their
powers under Section 13(4) of the Securitization and
Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 (hereinafter referred to
as “SARFAESI Act”) and issued a public sale notice
in leading English newspapers for sale of the
mortgaged assets of the Borrower in the public
auction fixed for 17.06.2014 (Annexure-P-1). The
appellant herein was one of the bidders, whose bid
was declared the highest.
6. The appellant's bid was accordingly accepted
by the PNB followed by execution of memorandum
of understanding between the appellant and the
PNB (Annexure P-4). The PNB also sent a letter to
the appellant stating that the entire plant,
machinery, land and the building is auctioned in
favour of the appellant. The letter also authorized
the appellant to dismantle and sell the scrap plant
and the machinery which was lying at the
4
Borrower’s factory's premises after depositing the
necessary installment of sale amount, as agreed
upon between the parties in the memorandum of
understanding.
7. The appellant, however, failed to pay the
regular installments towards sale money in terms of
memorandum of understanding to PNB and sought
extension of time to pay and remove the scrap
material from the site.
8. This gave rise to the disputes between the
parties, namely, PNB, appellant (auction purchaser)
and the Borrower before the Debt Recovery Tribunal
(DRT), Lucknow being S.A. No 310 of 2014 wherein
an order was passed on 03.07.2014
(Annexure-P-11) directing the appellant not to
remove any material from the factory premises. The
appellant then wrote a letter to PNB requesting
them to refund their money with interest. This led to
another dispute between the parties which was filed
5
in the DRT and then before the appellate authorityDRAT
and finally, in the High Court at Allahabad in
Writ Petition(c) No. 22246/2015 by the Borrower.
This writ petition was disposed of finally on
29.05.2015 observing therein that since the
appellant had failed to comply with the term of
memorandum of understanding inasmuch as the
appellant having failed to deposit the requisite
installment of sale money, the PNB cannot proceed
with the auction sale held on 17.06.2014 and nor
can the appellant be permitted to remove the scrap
material lying in the factory premises.
9. This led the PNB to forfeit the appellant's
deposit by their letter dated 26.06.2015
(Annexure-P25). The appellant objected to the action
of PNB by letters and then filed the writ petition in
the High Court of Delhi challenging therein the
action of PNB in forfeiting the appellant's deposit of
money.
6
10. The Single Judge of the High Court, by order
dated 01.09.2015, dismissed the appellant's writ
petition on the ground of availability of alternative
statutory remedy to the appellant of filing the
application under Section 17 of the SARFAESI Act
before the DRT to challenge the action of PNB in
forfeiting the deposit money of the appellant. The
Single Judge, therefore, declined to go into the
merits of the case.
11. The appellant, felt aggrieved of the order of the
Single Judge, filed intra Court appeal (LPA 699 of
2015) before the Division Bench. By impugned
judgment, the Division Bench dismissed the appeal
and confirmed the order of the Single Judge. The
Division Bench was also of the view that the writ
petition filed by the appellant was rightly not
entertained by the Single Judge (writ Court) on the
ground that the proper remedy of the appellant was
to file an application before the DRT under Section
7
17 of the SARFAESI Act to question the action of
forfeiture made by PNB and not in filing the writ
petition under Article 226 of the Constitution. Felt
aggrieved, the auction purchaser has filed the
present appeal by way of special leave in this Court.
12. Heard Mr. Jaideep Gupta, learned senior
counsel for the appellant and Mr. M.T. George,
learned counsel for the respondents.
13. Mr. Jaideep Gupta, learned senior counsel
appearing for the appellant (auction purchaser)
while questioning the legality and correctness of the
view taken by the two Courts below contended that
the reasoning and the conclusion arrived at by the
writ Court and the Appellate Court is not correct
and hence deserves to be set aside. His main
submission was that the action impugned by the
appellant in their writ petition, namely, "forfeiture
of the deposit of money by PNB" is not one of the
measures specified under Section 13(4) of the
8
SARFAESI Act and, therefore, provisions of Section
17 of SARFAESI Act are not attracted so far as the
appellant's right to challenge such action under
Section 17 before the DRT is concerned.
14. In other words, the submission was that in
order to attract the rigor of Section 17 of the
SARFAESI Act, it is necessary that the action
complained of by the party concerned must satisfy
the conditions set out in Section 13 (4). It was urged
that the “forfeiture of deposit" impugned in the writ
petition is not and nor it could be considered as one
of the measures falling in Section 13 (4) so as to
attract the rigor of Section 17 of the SARFAESI Act.
It was urged that the dispute in question was
essentially between the PNB (secured creditor) and
the auction purchaser (appellant) and arose after
the measures under Section 13(4) had been taken
by the secured creditor (PNB) against the borrower
and, therefore, the dispute in question fell outside
9
the purview of Section 13(4) and, in consequence,
fell out of purview of Section 17. In short, the
dispute in question had nothing to do with any of
the measures specified in Section 13(4).
15. It was further urged that reading of Section 17
would go to show that the application under Section
17 can be made to DRT by “any person” including
borrower to challenge any of the measures referred
to in Section 13(4) once taken by the secured
creditor. However, since forfeiture of the amount
made by the secured creditor against the auction
purchaser is not one of the measures under Section
13(4) and hence, the action of forfeiture made by the
secured creditor cannot be challenged by the
auction purchaser under Section 17 of the
SARFAESI Act by filing an application. It was
urged that under these circumstances the appellant
had rightly filed the writ petition under Article
226/227 of the Constitution to challenge the action
10
of forfeiture of deposit money in the High Court,
that being the only remedy available to them and,
therefore, the writ petition should have been
entertained for its hearing on merits by the writ
court. It is these submissions, which were
elaborated by the learned counsel for the appellant
by pointing out relevant provisions of the SARFAESI
Act.
16. In reply, learned counsel for the respondents
(PNB) supported the impugned judgment and
contended that the action impugned in the writ
petition does attract Section 13(4) read with the
Rules framed thereunder and hence the remedy of
the appellant lies in approaching DRT by filing an
application under Section 17 of the SARFAESI Act
as was rightly held by the two Courts below.
17. Having heard the learned counsel for the
parties and on perusal of the record of the case, we
find no merit in the appeal. In other words, the view
11
taken by the High Court appears to be just and
reasonable and hence does not call for any
interference.
18. The short question that arise for consideration
in this appeal is whether the High Court was
justified in holding that the remedy of the appellant
(auction purchaser) lies in challenging the action of
the secured creditor (PNB) in forfeiting the deposit
by filing an application under Section 17 of the
SARFEASI Act before the DRT or the remedy of
auction purchaser is in filing the writ petition under
Article 226/227 of the Constitution of India to
examine the legality of such action.
19. Section 13(4) and Section 17 of the SARFAESI
Act, Rules 8 and 9 of the Security
Interest(Enforcement) Rules,2002(hereinafter
referred to as “the Rules”) to the extent they are
relevant for deciding the question involved in the
appeal are quoted below:
12
Section 13(4)
13. Enforcement of security interest-
(1) to (3A)……………………………………………….
(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
realizing 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
realizing 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 or the debt;
13
(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.”
Section 17
“17. Application against measures to recover
secured debts-(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
authorized officer under this Chapter, may
make an application along with 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 measures had been taken:
(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.
14
(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 or
restoration of possession, of the secured
assets to the borrower or other aggrieved
person, it may, by order,-
(a) to (c)……………………
(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.
(4A)……………………………………………………..
(5)………………………………………………………..
(6)………………………………………………………..
(7) Save as otherwise provided in this Act,
the Debts Recovery Tribunal shall, as far as
may be, dispose of application in accordance
with the provisions of the Recovery of Debts
Due to Banks and Financial Institutions Act,
1993(51 of 1993) and the rules made
thereunder.
Rule 8
8. Sale of immovable secured assets-
(1) to (8)………………………………………………….
15
Rule 9
9. Time of sale, issue of sale certificate and
delivery of possession, etc.-
(1) to (4)…………………………………………………
(5) In default of payment within the period
mentioned in sub-rule (4), the deposit shall be
forfeited to the secured creditor and the
property shall be resold and the defaulting
purchaser shall forfeit all claim to the
property or to any part of the sum for which
it may be subsequently sold.
(6) On confirmation of sale by the secured
creditor and if the terms of payment have
been complied with, the authorized officer
exercising the power of sale shall issue a
certificate of sale of the immovable property
in favour of the purchaser in the form given
in Appendix V to these rules.”
(Emphasis supplied)
20. Section 13(4) is invoked by the secured
creditor against their borrower when the borrower
fails to discharge his liability in full within the
specified time. The secured creditor then can take
possession of the assets of the borrower, transfer
the assets by lease or by assignment or sell the
assets to recover the outstanding dues under clause
(a).
16
21. The secured creditor under clause (b) can also
take over the management of the business of the
borrower or transfer by way of lease, assignment or
sale. However such power can be invoked only when
the creditor holds substantial part of the borrower’s
business as security and further it satisfies the
condition set out in second proviso.
22. The secured creditor under clause (c) can also
appoint any manager to manage the borrower’s
business and lastly under clause (d), the secured
creditor can ask any person to whom the money is
due or become due to pay to the secured creditor
instead of paying to borrower which is sufficient to
satisfy the debt.
23. So far as Section 17 is concerned, it provides a
remedy to a person who is aggrieved by the
measures taken by the secured creditor or his
authorized officer under Section 13(4) in relation to
secured assets of the borrower. It says that "any
17
person (including borrower)" may make an
application to the DRT within 45 days from the date
of measures taken under Section 13(4). Sub-section
(2) of Section 17 was added by way of amendment
w.e.f. 11.11.2004. It provides that the Tribunal, on
such application being made under Section 17(1),
shall consider whether the measures referred to and
taken under Section 13(4) by the secured creditor
are in accordance with the "provisions of this Act
and the Rules made thereunder". Similarly, subsections
(3), (4) and (7) of Section 17 which deal
with the power of the DRT also use the expression
“in accordance with provisions of the Act and the
Rules made thereunder”.
24. Rule 8, which has 8 sub-rules, deals with the
manner of sale of immovable secured assets and
provides detail procedure as to how and in what
manner the sale of secured assets, is to be held.
18
Rule 9 deals with time of sale, issue of sale
certificate and delivery of possession
25. Rule 9(6) empowers the authorized officer to
issue sale certificate in favour of the purchaser.
Rule 9(9) then empowers the authorized officer to
deliver the properties to the purchaser whereas Rule
9(10) empowers the authorized officer to mention in
sale certificate that the property is free from
encumbrances.
26. So far as this case is concerned, sub-rule (5) of
Rule 9 is relevant. It provides that, if the auction
purchaser commits any default in payment of sale
consideration within the time specified, the deposit
made by auction purchaser shall be “forfeited” to
the secured creditor and the auctioned property
shall be resold and the defaulting purchaser shall
“forfeit” all claims to the property or its part of the
sum for which it may be sold subsequently.
19
27. Reading of the aforementioned Sections and
the Rules and, in particular, Section 17(2) and Rule
9(5) would clearly go to show that an action of
secured creditor in forfeiting the deposit made by
the auction purchaser is a part of the measures
taken by the secured creditor under Section 13(4).
28. The reason is that Section 17(2) empowers the
Tribunal to examine all the issues arising out of the
measures taken under Section 13(4) including the
measures taken by the secured creditor under Rules
8 and 9 for disposal of the secured assets of the
borrower. The expression "provisions of this Act
and the Rules made thereunder" occurring in
sub-sections (2), (3), (4) and (7) of Section 17 clearly
suggests that it includes the action taken under
Section 13(4) as also includes therein the action
taken under Rules 8 and 9 which deal with the
completion of sale of the secured assets. In other
words, the measures taken under Section 13 (4)
20
would not be completed unless the entire procedure
laid down in Rules 8 and 9 for sale of secured assets
is fully complied with by the secured creditor. It is
for this reason, the Tribunal has been empowered
by Section 17(2),(3) and (4) to examine all the steps
taken by the secured creditor with a view to find out
as to whether the sale of secured assets was made
in conformity with the requirements contained in
Section 13(4) read with the Rules or not?
29. We also notice that Rule 9(5) confers express
power on the secured creditor to forfeit the deposit
made by the auction purchaser in case the auction
purchaser commits any default in paying
installment of sale money to the secured creditor.
Such action taken by the secured creditor is, in our
opinion, a part of the measures specified in Section
13(4) and, therefore, it is regarded as a measure
taken under Section 13(4) read with Rule 9(5). In
our view, the measures taken under Section 13(4)
21
commence with any of the action taken in clauses
(a) to (d) and end with measures specified in Rule 9.
30. In our view, therefore, the expression “any of
the measures referred to in Section 13(4) taken by
secured creditor or his authorized officer” in Section
17(1) would include all actions taken by the secured
creditor under the Rules which relate to the
measures specified in Section13(4).
31. The auction purchaser (appellant herein) is
one such person, who is aggrieved by the action of
the secured creditor in forfeiting their money. The
appellant, therefore, falls within the expression “any
person” as specified under Section 17(1) and hence
is entitled to challenge the action of the secured
creditor (PNB) before the DRT by filing an
application under Section 17(1) of the SARFAESI
Act.
32. Learned counsel for the appellant placed
reliance on the decision of the Division Bench of
22
High Court of Bombay in Umang Sugars Pvt. Ltd.
vs. State of Maharashtra & Anr., 2014(4) Mh.L.J.
113 which, according to him, supports his
submission. We have gone through the decision
and unable to agree with the view taken therein.
Their Lordships, while holding that Section 17(1)
does not apply to auction purchaser and, therefore,
writ petition filed by him can be entertained in such
cases, did not notice the Rules, which deal with the
measures taken under Section 13(4) and nor
considered its effect on the measures.
33. In United Bank of India vs. Satyawati
Tondon & Ors., (2010) 8 SCC 110, this Court had
the occasion to examine in detail the provisions of
the SARFAESI Act and the question regarding
invocation of the extraordinary power under Article
226/227 in challenging the actions taken under the
SARFAESI Act. Their Lordships gave a note of
caution while dealing with the writ filed to challenge
23
the actions taken under the SARFAESI Act and
made following pertinent observations which, in our
view, squarely apply to the case on hand:
“42. There is another reason why the
impugned order should be set aside. If
Respondent 1 had any tangible grievance
against the notice issued under Section 13(4)
or action taken under Section 14, then she
could have availed remedy by filing an
application under Section 17(1). The
expression “any person” used in Section
17(1) is of wide import. It takes within its
fold, not only the borrower but also the
guarantor or any other person who may be
affected by the action taken under Section
13(4) or Section 14. Both, the Tribunal and
the Appellate Tribunal are empowered to pass
interim orders under Sections 17 and 18 and
are required to decide the matters within a
fixed time schedule. It is thus evident that
the remedies available to an aggrieved person
under the SARFAESI Act are both expeditious
and effective.
43. Unfortunately, the High Court overlooked
the settled law that the High Court will
ordinarily not entertain a petition under
Article 226 of the Constitution if an effective
remedy is available to the aggrieved person
and that this rule applies with greater rigour
in matters involving recovery of taxes, cess,
fees, other types of public money and the
dues of banks and other financial
institutions. In our view, while dealing with
the petitions involving challenge to the
action taken for recovery of the public dues,
etc. the High Court must keep in mind that
the legislations enacted by Parliament and
24
State Legislatures for recovery of such dues
are a code unto themselves inasmuch as they
not only contain comprehensive procedure
for recovery of the dues but also envisage
constitution of quasi-judicial bodies for
redressal of the grievance of any aggrieved
person. Therefore, in all such cases, the High
Court must insist that before availing remedy
under Article 226 of the Constitution, a
person must exhaust the remedies available
under the relevant statute.
44. While expressing the aforesaid view, we
are conscious that the powers conferred upon
the High Court under Article 226 of the
Constitution to issue to any person or
authority, including in appropriate cases, any
Government, directions, orders or writs
including the five prerogative writs for the
enforcement of any of the rights conferred by
Part III or for any other purpose are very wide
and there is no express limitation on exercise
of that power but, at the same time, we
cannot be oblivious of the rules of
self-imposed restraint evolved by this Court,
which every High Court is bound to keep in
view while exercising power under Article
226 of the Constitution.
45. It is true that the rule of exhaustion of
alternative remedy is a rule of discretion and
not one of compulsion, but it is difficult to
fathom any reason why the High Court
should entertain a petition filed under Article
226 of the Constitution and pass interim
order ignoring the fact that the petitioner
can avail effective alternative remedy by
filing application, appeal, revision, etc. and
the particular legislation contains a detailed
mechanism for redressal of his grievance.”
25
34. In the light of foregoing discussion, we are of
the considered opinion that the Writ Court as also
the Appellate Court were justified in dismissing the
appellant's writ petition on the ground of availability
of alternative statutory remedy of filing an
application under Section 17(1) of SARFAESI Act
before the concerned Tribunal to challenge the
action of the PNB in forfeiting the appellant's
deposit under Rule 9(5). We find no ground to
interfere with the impugned judgment of the High
Court.
35. The appellant is, accordingly, granted liberty to
file an application before the concerned Tribunal
(DRT) under Section 17(1) of the SARFAESI Act,
which has jurisdiction to entertain such application
within 45 days from the date of this order. In case,
if the appellant files any such application, the
Tribunal shall decide the same on its merits in
accordance with law uninfluenced by any of the
26
observations made by this Court and the High
Court in the impugned judgment.
36. With these observations and liberty granted to
the appellant, the appeal fails and is accordingly
dismissed.
………...................................J.
[R.K. AGRAWAL]
…...……..................................J.
[ABHAY MANOHAR SAPRE]
New Delhi;
November 27, 2017

SARFAESI Act, verses Official liquidator under companies Act = any sale conducted defraud other secured creditor within one year after the commencement of company petition is void = There cannot be any doubt of the fact from the dates given earlier that the transfer was within a period of six months from the date of presentation of the liquidation proceedings and consequently it is statutorily invalid and the law does not recognize it. In fact, an attempt was sought to be made that there is no reference to sale in either of the Sections and it only refers to transfer and consequently these provisions can have no application. It has to be held that the transfer of interest in immovable property is in consequence of a sale and therefore the word transfer takes in its fold the very act of sale. Therefore, by applying Section 531 it is quite clear that the transfer shall be deemed to be invalid. 12. Even under Section 531-A it is quite clear if the sale was within a period of one year from the date of presentation of the liquidation proceedings as against the Official Receiver who represents the body of the creditors on his appointment after the winding up proceedings, the sale is void. Therefore, by applying Section 531 or 531-A it is quite clear from any angle the sale in this case is hit by the above provisions and when the sale is statutorily invalid or void there is no need for a relief to be asked by the Official Receiver to set aside the sale or approach the Debt Recovery Tribunal, since these two provisions are to be exclusively dealt by the Company Court alone, which is rightly contended by the Official Liquidator. I hold that this Court alone can decide the binding nature of the transactions under Section 531 or 531(A) of the Companies Act. It is to be noted that the powers conferred under the SARFAESI Act for the Bank or the Authorized Officer is only in order to avoid the delay of legal proceedings and it does not give any right or advantage to misuse the power of quasi judicial nature in order to convert a Non Performing Asset and realize the money by adopting improper mode. Therefore, for all the above reasons, I hold that the sale as held by the Authorized Officer on behalf of the Creditor Bank is void and the right of the Official Receiver in the liquidation proceedings cannot be defeated and as the sale is void, it goes to the root of the obligations between the auction purchaser and the Authorized Officer and when once the sale is set aside as void, it is needless to say that the Creditor Bank cannot take advantage of the void sale and the auction purchaser shall be restored to the same position prior to the sale and any amount realized by the Creditor Bank cannot be retained by it. Accordingly, W.P.No.19297 of 2012 is allowed granting the reliefs claimed thereunder. W.P.No.33655 of 2011 and Company Application No.1972 of 2011 are dismissed. Consequent on the orders holding that the sale as void as it comes within the purview of this Court, Company Application No.421 of 2013 is also allowed as a consequence of the sale being held as void under Section 531 and 531 (A) of the Companies Act. No costs.

HON'BLE SRI JUSTICE N.R.L. NAGESWARA RAO        

WRIT PETITION Nos.19297 of 2012 & 33655 of 2011 & COMP.A.Nos.1972 of 2011 & 421    
of 2013 in C.P.No.215 of 2010

22.04.2013.

M/s. United Steel Allied Industries Private Limited             ....Petitioner

M/s. Indian Bank, Corporate Office, and others            ...Respondents

Counsel for the Petitioner:

Counsel for the Respondents:

<Gist :

>Head Note:

?Cases referred:
1. (2004) 4 SCC 311
2. 2013 LawSuit(SC) 205
3. 2012 (2) D.R.T.C. 47 (M.P.)
4. (2006) 134 Comp Cases 267 (Madras)
5. (2005) 127 Comp Cases 85 (Madras)
6. 2004 Comp Cases 27
7. (2007) 139 Comp Cases 191 (Madras)
8. 2012 (6) ALD 345 (DB)
9. (2010) 1 SCC 655
10. 2011 (1) L.S. 196

COMMON ORDER:    

1.      All these matters arise out of a common issue.
M/s. Laran Sponge & Minerals Private Limited (hereinafter called as borrower)
has availed a loan with Indian Bank by hypothecation of the agricultural land
and also machinery belonging to the company and also the guarantors,
Smt. P. Latha and Sri P. Vara Prasada Raju, who are the Directors of the
Company.  A loan facility of Rs.12,00,00,000/- as M.T.L. loan and O.C.C. Limit
of Rs.5,00,00,000/- and L.C. of Rs.5,00,00,000/- and B.G. Limit of
Rs.40,00,000/- was availed in the year, 2008 and ad hoc Limit of
Rs.3,50,00,000/- in the year, 2009.
As there was default in repayment of the
loan and the loan was classified as Non Performing Asset (N.P.A.) Account and
the Indian Bank being a secured creditor under the provisions of SARFAESI Act,
2002, has taken possession of the property. 
A publication was given on
28.08.2010 for auction of the same.  
M/s. United Steel Allied Industries Private
Limited (Auction Purchaser) participated in the auction on 29.09.2010 and 25% of
sale price was deposited.  
Subsequently, on 01.01.2010 S.B.I. Global Factors
Limited has filed company petition for winding up as it is also a secured creditor and the petition was allowed on 18.07.2011 and the Official Liquidator was appointed to take possession of the property.  
After the auction 
a letter
dated 18.10.2010 was addressed by the auction purchaser to the effect that their
participation in the auction is subject to the following conditions:-
1) "Satisfactory legal due diligence and clear marketable title over land, plant
and machinery free from any lien, charge, encumbrances etc.,
2) Indemnity guarantee from the Indian Bank with respect to future litigation,
what so ever in nature, if any,
3) Indian Bank shall put us in the peaceful possession and handling over the
land, plant and machinery and smooth functioning without any obstructions, what
so ever in nature, from any quarter.
In this connection, we would also like to mention that in your above referred
letter you have mentioned that the total available land is about 20 acres,
whereas the land available is only 16 acres.  Further, the land available is not
sufficient to meet the technical requirements of plant.
In view of the above, we have no option, except to reserve our right to with
draw.  We request the Bank to refund the initial bid amount (inclusive of EMD)
of Rs.9.0 Crores deposited with the Bank at the earliest."


2.      It is also to be noted here that after the sale on 29.09.2010 after
deposit of 25% of the sale price, the balance of 75% was not deposited within
fifteenth day.  
Thereafter, on 24.11.2010 a letter is said to have been
addressed by the auction purchaser for grant of loan and accordingly loan was
granted on 07.01.2011 and the balance of sale consideration was adjusted from
that loan and a sale certificate was issued on 18.01.2011. 
Thereafter, as
contemplated under the tender agreement, the documents were sent for 
registration. 
At that stage, the Official Liquidator has addressed a letter on
20.09.2011 to the Sub Registrar, Hakundi Village, Ballari District, informing that the borrower company was wound up in C.P.No.215 of 2010 and he was   appointed as Liquidator and the Sub Registrar was requested not to register any
document with regard to the properties of the borrower.
Subsequently,
W.P.No.33655 of 2011 was filed on 14.12.2011 by the Indian Bank for a direction
to the Sub Registrar to register the sale certificate with regard to the
auctioned property.
While, the Writ Petition was pending, the Bank also filed
the COMP.A.No.1972 of 2011 on 27.12.2011 for a direction to the Official
Receiver to clarify his letter, dated 20.09.2011 addressed to the Sub Registrar.
While the matter stood thus as the auction purchaser claimed that the possession
was not given as there was further claims with regard to the auctioned property
and there were dues claimed by the authorities and as the property is not free
from encumbrances and as the Bank threatened to recover the amounts as a  
defaulter and to treat the loan account as Non Performing Asset.  W.P.No.19297
of 2012 was filed by the auction purchaser on 26.06.2012 and interim orders were
passed in W.P.M.P.No.24720 of 2012 in favour of the auction purchaser
restraining the Bank from proceeding and later it was varied in W.P.M.P.No.2850
of 2012 giving the Bank liberty to proceed against the auction purchaser in
accordance with law for recovery of the over due amounts and installments to the
extent of default by the auction purchaser.
As against that W.A.No.17 of 2013
was filed and by order dated 09.01.2013 the modification ordered in
W.P.M.P.No.2850 of 2012 was deleted and the matter was directed to be dealt by
this Court along with W.P.No.33655 of 2011. That is how both the Writ Petitions
were transferred to this Court.
While these matters are pending the auction
purchaser has filed COMP.A.No.421 of 2013 to set aside the sale alleging several
irregularities, suppression of facts and not following due process. It was also
further pleaded that the properties are not properly valued and the encumbrances
were not disclosed and possession was not delivered effectively.  It was also
pleaded that there were several claims of taxes etc., to a large sum of more
than 1 Crore and as such the sale is liable to set aside.
3.      The Indian Bank has denied all the allegations and supported the action
taken under SARFAESI Act. The Official Liquidator claims that this sale is void
under Section 446 as the leave was not obtained and also under Sections 531 and
531 (A) of Companies Act, 1956.  The transfer being void as it was done within
one year from the date of presentation of the winding up petition and the sale
certificate having been issued after the winding up order under Section 531(A).
The sale being fraudulent and undue preference to the one of the creditors,
since it is within six months is not valid under Section 531 and consequently he
has got every right to oppose the registration even without asking for setting
aside the sale as it is void. It is the contention of the S.B.I. Global that it
is also a secured creditor and there was no proper and valid notification or
valuation of the property and since the winding up process has been initiated by
it, the Indian Bank cannot claim any priority.

4.      In view of the above circumstances, the points that arise for
consideration are:-
1) Whether a valid sale has been conducted on behalf of the Indian Bank by the Authorized Officer under SARFAESI Act?  
2)  Whether the sale is void and fraudulent as contended by the Official Receiver?
3) Whether the sale is vitiated for several of the irregularities raised by the auction purchaser and if so it is liable to be set aside?
POINTS:
5.      The contention of Sri S. Ravi, Senior Advocate appearing for the Indian
Bank is that under the statutory provisions of SARFAESI Act, the sale has been
conducted and it is a special enactment and if any party is aggrieved, the
remedy is only to approach the Debt Recovery Tribunal (DRT) as contemplated
under Section 17 of the Act.  According to him, the Company Court does not have
any jurisdiction since SARFAESI Act is later enactment and as held by the
Supreme Court in several decisions.  He relied upon a decision reported in
Mardia Chemicals Limited and others Vs. Union Of India and others1,
whereunder
the constitutional validity of the SARFAESI Act was considered and the remedy
was found before the Debt Recovery Tribunal.  He also relied upon a decision
reported in Official Liquidator, U.P. and Uttarakhand Vs. Allahabad Bank and
others2, 
whereunder the same principle has been reiterated the above decision
shows that if the matter is pending before the Debt Recovery Tribunal then the
Official Receiver should be associated with the actions, if the matter is not
before the Debt Recovery Tribunal it is the Company Court that has to deal with
the validities. He also relied on a decision reported in
Saroj Shivhare and Others Vs. Gaurav Enterprises and others3, 
whereunder it was
held that the issue of the sale certificate itself is a completion of a sale and
no registration is necessary. 
According to him, the correspondence and the
admissions of the auction purchaser clearly goes to show that the possession was
delivered.  According to him, when once the possession was delivered, the
subsequent interference is not the duty of the Bank to protect.  He also
contends that it is for the buyer to verify whether there are any encumbrances
or not and if there are arrears of taxes etc., it shall be paid by the auction
purchaser only in substance.  According to him, neither the Official Liquidator
nor the auction purchaser can question the sale before the Company Court and
therefore their claims have to be rejected as the sale having been confirmed.
The Registrar shall be directed to register the property.
6.      On the other hand, the Official Liquidator contends that his attack on the
sales is under Section 531 and 531 (A) of the Companies Act and it is the
exclusive jurisdiction of the Company Court alone and the Debt Recovery Tribunal
has no jurisdiction.
According to him, in the decision relied on by the senior
counsel, the matters were pending before the Debt Recovery Tribunal and before
the sale the part of the Official Liquidator was dealt with.  
But in this case,
the sale was completed and, therefore, the facts are quite different.
According
to him, the question of fraudulent preference cannot be considered by the Debt
Recovery Tribunal.  Further more, if a sale is not void under the Statute, the
remedy is only to approach the forum, which has got jurisdiction to decide the
issue and the later Act does not apply as under Section 37 of the SARFAESI Act,
the provisions of the Company Act are not made inapplicable and they are held to
be only additional.  According to him, if a valid sale is conducted by the
Authorized Officer, even if the contention of the senior counsel is to be
accepted then only the Debt Recovery Tribunal has to be approached, but when the
sale itself is void there being no necessity to be set aside the question of
approaching the Debt Recovery Tribunal does not arise.
7.      The Official Liquidator has relied upon a Division Bench decision of the
Madras High Court reported in
Asset Reconstruction Company (India) Limited Vs. Official Liquidator, High
Court4,
whereunder even under the SARFAESI Act for the sale of the property and
the distribution of the assets, the association of the Official Liquidator is
stressed.  He also relied upon a decision of the Madras High Court reported in
Administrator, MCC Finance Limited Vs. Ramesh Gandhi5,
whereunder the provisions
of 531, 531-A and 537 of the Companies Act were considered.  He also relied upon
a decision of the Gujarat High Court reported in Official Liquidator of Piramal
Financial Services Limited Vs. Reserve Bank of India6,
 whereunder the instances
of fraudulent preference or transfer have been considered.  He also relied upon
another decision reported in Archean Granites Private Limited Vs. R.P.S. Benefit
Fund Limited and others7,
whereunder the instances of fraudulent preference and
sale of the property for lesser price etc., were considered.
8.      The learned counsel appearing for the auction purchaser has also relied
upon a decision of this Court reported in
India Finlease Securities Limited, Chennai Vs. Indian Overseas Bank, Vijayawada,
Krishna District and Others8,
whereunder the provisions of SARFAESI Act, the
notion of sale and transfer have been considered and opined that the sale is not
complete unless the property for which the price was paid is transferred to the
buyer by a written proceedings.  It was also considering the provisions of
Rule 9 (2) and 9 (4) and found that the confirmation shall be by the secured
creditor and not by the Authorized Officer.  Incidentally, it was held that a
sale certificate is not required to be registered and no registered sale deed is
to be executed after the sale was confirmed by the Banks.  He also relied upon a
decision of the Supreme Court reported in
Haryana Financial Corporation and another Vs. Rajesh Gupta9, whereunder the
defects in the formation of a contract can be agitated by the auction purchaser.
9.      Therefore, in view of the above contentions, it is necessary now to see
the provisions under Section 531, 531A and 537 of the Companies Act:-
531:Fraudulent Preference:- .
1) Any transfer of property, movable or immovable,
delivery of goods, payment, execution or other act relating to property made,
taken or done by or against a company within six months before the commencement   
of its winding up which, had it been made, taken or done by or against an
individual within three months before the presentation of an insolvency petition
on which he is adjudged insolvent, would be deemed in his insolvency a
fraudulent preference, shall in the even of the company being wound up, be
deemed a fraudulent preference of its creditors and be invalid accordingly;
Provided that, in relation to things made, taken or done before the commencement
of this Act, this sub-section shall have effect with the substitution, for the reference to six
months, of a reference to three months.
2) For the purposes of sub-section (1), the presentation of a petition for
winding up in the case of a winding up by [the Tribunal], and the passing of a
resolution for winding up in the case of a voluntary winding up, shall be deemed
to correspond to the act of insolvency in the case of an individual.
531A: Avoidance of voluntary transfer:-  
Any transfer of property, movable or
immovable, or any delivery of goods, made by a company, not being a transfer or
delivery made in the ordinary course of its business or in favour of a purchaser
or encumbrancer in good faith and for valuable consideration, if made within a
period of one year before the presentation of a petition for winding up by [the
Tribunal] or the passing of a resolution for voluntary winding up of the
company, shall be void against the liquidator.
537: Avoidance of certain attachments, executions, etc., in winding up by
Tribunal:- .
1) Where any company is being wound up by the Tribunal- 
(a) any attachment, distress or execution put in force, without leave of the
Tribunal against the estate or effects of the company, after the commencement of
the winding up; or
(b) any sale held, without leave of the Tribunal of any of the properties or
effects of the company after such commencement,  shall be void.
2) Nothing in this section applies to any proceedings for the recovery of any
tax or impost or any dues payable to the Government."
10.     Section 531 deals with the case of fraudulent preference and in such a
circumstance the sale is held to be invalid.
In fact, though several complaints
were made about the nature of the publication and the contents therein, there is no material before the Court as to whether proper publication was given. 
 It
cannot be disputed that the S.B.I. Global is also a secured creditor, if the interest of the other creditors is not taken care of and if it is only for the benefit of single creditor even applying the principles under the Insolvency
Law, the sale is a fraudulent one.
The argument that the Indian Bank is
prepared to place before the Court the amount realized by the sale for
distribution of all the creditors does not hold good, for the reason that if at
the time of the sale, if the auction purchaser is to know that there are other
encumbrances on the property then the price to be quoted will be definitely
different. 
 In fact, there is no material on record as to what was the sale
price quoted by the Authorized Officer and as to whether it was less or more
than the price quoted by the auction purchaser.
11.     There cannot be any doubt of the fact from the dates given earlier that
the transfer was within a period of six months from the date of presentation of
the liquidation proceedings and consequently it is statutorily invalid and the
law does not recognize it.  In fact, an attempt was sought to be made that there
is no reference to sale in either of the Sections and it only refers to transfer
and consequently these provisions can have no application.  It has to be held
that the transfer of interest in immovable property is in consequence of a sale
and therefore the word transfer takes in its fold the very act of sale.
Therefore, by applying Section 531 it is quite clear that the transfer shall be
deemed to be invalid.
12.     Even under Section 531-A it is quite clear if the sale was within a period
of one year from the date of presentation of the liquidation proceedings as
against the Official Receiver who represents the body of the creditors on his
appointment after the winding up proceedings, the sale is void.  Therefore, by
applying Section 531 or 531-A it is quite clear from any angle the sale in this
case is hit by the above provisions and when the sale is statutorily invalid or
void there is no need for a relief to be asked by the Official Receiver to set
aside the sale or approach the Debt Recovery Tribunal, since these two
provisions are to be exclusively dealt by the Company Court alone, which is
rightly contended by the Official Liquidator.             I hold that this Court
alone can decide the binding nature of the transactions under Section 531 or
531(A) of the Companies Act. 
13.     In fact, the amendments made to SARFAESI Act in 2004 deletes the word   
Appeal under Section 17 and only provides for an application to be made to the
Debt Recovery Tribunal.  The right of Appeal is quite different from an
application to be presented before the Debt Recovery Tribunal. The Legislative
intent is not very clear for deleting word "Appeal".  Therefore, it cannot be
said that this Court cannot entertain this application and consider the
objections of the Official Receiver to consider the sale as not binding and his
consequential request for not registering the properties as being without
jurisdiction.
14.     Though no specific pleadings are made by the parties challenging the
procedure of the sale, since the Court is considering the validity of the sale
under the statute, it is the question of law and the Court has to deal with it.
If the provisions of SARFAESI Act have been violated in conducting sale, the
sale cannot be said to be a valid sale.
It is to be noted that the powers
conferred under the SARFAESI Act for the Bank or the Authorized Officer is only in order to avoid the delay of legal proceedings and it does not give any right or advantage to misuse the power of quasi judicial nature in order to convert a
Non Performing Asset and realize the money by adopting improper mode.
Any  
Authorized Officer who is conducting the sale is discharging the quasi-judicial
functions and he has to follow the rules and conduct the sale according to law.
There cannot be an understanding or agreement between the borrower, auction 
purchaser or the creditor by violating mandatory provisions, in order to get
undue benefit to the Creditor Bank.
15.     In this connection, it is useful to refer to Rule 9 (1) (2) (3) (4) and
(5) of SARFAESI Act:- 
Rule 9: Time of Sale, issues of sale certificate and delivery of possession,
etc.:-
1) "No sale of immovable property under these rules shall take place before the
expiry of thirty days from the date on which the public notice of sale is
published in newspapers as referred to in the proviso to sub-rule (6) or notice
of sale has been served to the borrower.
2) The sale shall be confirmed in favour of the purchaser who has offered the
highest sale price in his bid or tender or quotation or offer to the authorised
officer and shall be subject to confirmation by the secured creditor:
Provided that no sale under this rule shall be confirmed, if the amount offered
by sale price is less than the reserve price, specified under sub-rule (5) of
rule 9:
Provided further that if the authorised officer fails to obtain a price higher
than the reserve price, he may, with the consent of the borrower and the secured
creditor effect the sale at such price.
3) On every sale of immovable property, the purchaser shall immediately pay a
deposit of twenty-five
per cent. of the amount of the sale price, to the authorised officer conducting
the sale and in default of such deposit, the property shall be forthwith be sold
again.
4) The balance amount of purchase price payable shall be paid by the purchaser
to the authorised officer on or before the fifteenth day of confirmation of sale
of the immovable property or such extended period as may be agreed upon in
writing between the parties.
5) In default of payment within the period mentioned in sub-rule (4), the
deposit shall be forfeited and the property shall be resold and the defaulting
purchaser shall forfeit all claim to the property or to any part of the sum for
which it may be subsequently sold."
16.     The provisions are akin to the provisions of the Court sale to be
conducted under Order XXI Rule 85 and 86 of Civil Procedure Code. Order XXI,
Rules.85 and 86 reads as under:-

Order XXI, Rules.85 and 86:-
85. Time for payment in full of purchase-money:- The full amount of purchase-
money payable shall be paid by the purchaser into Court before the Court closes
on the fifteenth day from the sale of the property:
Provided the in calculating the amount to be so paid into Court, the purchaser
shall have the advantage of any set-off to which he may be entitled under
Rule.72.
86. Procedure in default of payment:- In default of payment within the period
mentioned in the last proceeding rule, the deposit may, if the Court thinks fit,
after defraying the expenses of the sale, be forfeited to the Government and the
property shall be re-sold and the defaulting purchaser shall forfeit all claim
to the property or to any part of the sum for which it may subsequently be sold.
17.     Under the provisions of Rules 85 and 86, if the full purchase money is not
paid within fifteen days, further steps have to be taken.  But the only
difference under Rule 9 (4) is that the time can be extended by agreement in
writing between both the parties, it evidently means that such an extension
shall be within 15 days period stipulated under Clause 4.  But, in this case no
such thing has happened.
18.     The tender cum bid agreement also stipulates the same, which reads as
under:-
33. Sale is subject to confirmation by the Bank.  Bank will confirm the sale
only after ensuring that initial payment of 25% of sale price is paid/deposited
(on the same date) by way of DD/BPO.
34. The EMD deposited by the successful tenderer shall be held as Security
Deposit for due performance of the contract.  Successful tenderer shall deposit
the balance amount within 15 days of confirmation of the sale by the Bank or
within the extended period as agreed between the parties. Such deposit will be
made in the form of Demand Draft/ Bankers' Pay Order on a Bank, payable at
Hyderabad.
35. No time extension for making the payment after the stipulated period will be
granted nor shall the successful tenderer be allowed to make part payments.
However, the Seller may, in his discretion, entertain and consider request for
extension of time for making payment provided the request has been made in
writing and duly signed by the successful tenderer/representative himself.
Evidently, the above stipulations are keeping in view the provisions under Rule
9 of SARFAESI Act.
19.     To be more clear, the auction was held on 29.09.2010 and the amount has to
be deposited by fifteenth day that comes by 14.10.2010, if both the parties have
agreed between themselves in writing, the extension of the time should have been
given by the Authorized Officer. But, in this case, it did not happen and on the
other hand on 18.10.2010 the auction purchaser has written a letter repudiating
the sale and for refund of the money, which clearly goes to show that no
extension is sought within a period of 15 days.  Therefore, if the rigor under
Rule 9 is to be followed, there is no occasion for the Authorized Officer except
to go for re-auction.  In fact, this is the principle of law even under the
Court sale which has been repeatedly held and in this connection it will be
useful to refer to a decision of this Court reported in V. Vedanda Vyasulu and
Others Vs. K. Purushotam and another10.  The Authorized Officer has no option or
discretion rather than to cancel the sale.
20.     Further, the manner in which the further steps were taken are also
objectionable and it cannot be said to be fair play either by the creditor or
the Authorized Officer, when the sale consideration was not paid.  An
application for loan was given on 24.11.2010, evidently, it is not an
application for loan for purchase of the property. A loan of nearly Rs.19 to 20
Crores was granted on 07.01.2012 and from this loan amount the sale price was
adjusted and the balance was treated as a separate loan account.  It is crystal
clear that the Authorized Officer has violated the mandatory provisions in
conducting a sale, which a civil Court itself cannot violate and, therefore,
facilitated the creditor to grant a loan and thereafter appropriated the same
towards the sale consideration and thereafter the sale certificate was issued on
17.01.2011 without there being a request in writing for extension of the time
within the fifteenth day for payment of balance consideration and an order in
writing granting such extension, as claimed, which are mandatory under Rule 9
and Tender-cum-Bid agreement. The above facts are telltale about the failure of
the Authorized Officer to proceed according to law and the consequential
advantage the creditor bank has got.  It is abundantly fraudulent. When once the
sale fails to have any legal effect by application of Rule 9 it cannot be said
to be a valid sale and neither the auction purchaser nor the creditor can derive
any benefits and such sales are to be ignored.
21.     Therefore, taking any view of the matter, it is quite clear the sale in
this case is statutorily void under Section 531, 531-A and 537 of the Companies
Act and also under Rule 9 of the SARFAESI Act, that being so the creditor cannot
claim any benefits.
22.     It is sought to be contended that there was no need for registration and the sale certificate itself is sufficient probably under the SARFAESI Act it appears to be so. 
But if the parties have contracted to the contrary, the same
cannot be avoided.  In this connection, it is useful to refer to Clause 42, 43
and 44 of the tender given bid documents for sale.
" 42) On confirmation of sale by the Bank and upon payment of the full amount of
price, the Authorised Officer will execute the Sale Certificate in favour of the
Purchaser. The registration charges, payment and stamp duty etc., shall be borne
by the Purchaser.
43) It will be the responsibility of the Purchaser to take all steps necessary
for registration of the Sale Certificate.
44) The cost towards registration if, expenses incurred towards stamp duty,
etc., and any other expenses will be borne by the purchaser.  The seller will
not bear any expenses what so ever."

It clearly goes to show that the parties contemplated registration, but however,
it shall be at the expenses of the purchaser consequently, it cannot be argued
by the creditor.
23.     Therefore, when the auction purchaser wants the sale deed to be executed,
the Authorized Officer or the creditor cannot deny the same.
24.     There is a question about the maintainability of the application by the auction purchaser about the validity of the sale. 
 It is true that on the basis
of the decisions relied on by the learned senior counsel Sri S. Ravi, it may be
correct that the auction purchaser has to approach the Debt Recovery Tribunal.
But, however, it has been fairly well settled that when the proceedings before
the lower authorities are not properly conducted, the Writ jurisdiction of the
High Court is not denied.  The substance of the writ is about the several
irregularities in conducting the sale, which were found to be valid by this
Court and the sale having been held to be void, the right of the auction
purchaser to quick redressal in the writ is sustainable. Though in ordinary
circumstances, if the application is singularly filed by the auction purchaser,
then it may be that he has to approach the Debt Recovery Tribunal, but, however
in this case the other applications challenging the action of the Official
Liquidator and the exclusive jurisdiction of the Company Court under Section 531
and 531(A) of the Companies Act are being considered and the benefit of such
proceedings cannot be denied to the auction purchaser and consequently I hold
that in the particular circumstances of this case, the application filed by the
auction purchaser can be held to be maintainable.
25.     Therefore, I hold that as the sales are statutorily void and the Official
Liquidator has got every right to take possession of the property by ignoring
them, the letter written by him for restraining the registration itself is an
action of assertion that the sale is void.  In fact, such action is being
questioned in the Writ Petition and also Comp.A.No.1927 of 2011. The point in
these cases is the binding nature of the sale on the Official Liquidator and
when once the sales are void and when the decision rests on this aspect, there
need not be any separate application to be filed by the Official Liquidator for
setting aside the sale. If once his letter seeking for stopping of registration
is held to be valid, consequently, it has to be held that as the void sale need
not be set aside, they have to be ignored and challenge made by the Creditor
Bank is not valid.
26.     So far as the auction purchaser is concerned, evidently, he is challenging
the letter written by the Creditor Bank about the pressure for realization of
the amount due under a void sale and the reasons given above clearly goes to
show that the Creditor Bank cannot take advantage of the void sale and
therefore, the necessary relief has to be granted to the auction purchaser
restraining the Creditor Bank enforcing the liability.  So far as it relates to
the auction sale proceedings and the adjustment or payment, which has been 
realized by it, since substantial relief is granted in the Writ filed by the
auction purchaser, the benefit of it cannot be denied in the application to set
aside the sale.
27.     Therefore, for all the above reasons, I hold that the sale as held by the
Authorized Officer on behalf of the Creditor Bank is void and the right of the
Official Receiver in the liquidation proceedings cannot be defeated and as the
sale is void, it goes to the root of the obligations between the auction
purchaser and the Authorized Officer and when once the sale is set aside as
void, it is needless to say that the Creditor Bank cannot take advantage of the
void sale and the auction purchaser shall be restored to the same position prior
to the sale and any amount realized by the Creditor Bank cannot be retained by
it.
28.     Accordingly, W.P.No.19297 of 2012 is allowed granting the reliefs claimed
thereunder.  W.P.No.33655 of 2011 and Company Application No.1972 of 2011 are  
dismissed.  Consequent on the orders holding that the sale as void as it comes
within the purview of this Court, Company Application No.421 of 2013 is also
allowed as a consequence of the sale being held as void under Section 531 and
531 (A) of the Companies Act. No costs.
_____________________________  
N.R.L. NAGESWARA RAO, J    
Dated: 29.04.2013

SARFAESI Act It is thus clear that an appeal under sub-section (1) of S. 17 would lie only after some measure has been taken under sub-section (4) of S. 13 and not before the stage of taking of any such measure. According to sub-section (2), the borrower has to deposit 75% of the amount claimed by the secured creditor before his appeal can be entertained. Section 18 - Appeal to Appellate Tribunal - 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:

HIGH COURT OF JUDICATURE AT ALLAHABAD 

AFR 
Judgment reserved on 19th November, 2012 
Judgment delivered on 5th December, 2012 
Court No.2 

Civil Misc. Writ Petition No.50624 of 2011 
Mohan Lal Saraf 
Vs. 
Chairperson, Debts Recovery Appellate Tribunal, Allahabad & Ors. 
******** 

Hon'ble Dilip Gupta, J. 

The petitioner as the guarantor and mortgagor of the loan taken by Hyper Chemicals & Cosmetics Pvt. Ltd. from the Kanpur Branch of the State Bank of Patiala (hereinafter referred to as the 'Bank') and against whom proceedings under Section 13 of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (hereinafter referred to as the 'Act') were initiated by the respondent-Bank, has filed this petition for quashing the order dated 14th July, 2011 passed by the Debts Recovery Appellate Tribunal, Allahabad (hereinafter referred to as the 'Appellate Tribunal') by which the appeal filed by the petitioner under Section 18 of the Act against the order dated 11th April, 2011 passed by the Debts Recovery Tribunal Allahabad (hereinafter referred to as the 'Tribunal') was dismissed for the reason that the requisite Court fee was not deposited and for the reason that the petitioner had not deposited 50% of the amount of debt due as required under the second proviso to Section 18(1) of the Act. Further relief that has been claimed in this petition is for a direction upon the Appellate Tribunal to decide the appeal filed by the petitioner on merits without requiring the petitioner to make any further payment of Court fee or deposit any amount under the second proviso to Section 18(1) of the Act. 
It is stated that the Bank had filed Original Suit No.549 of 1996 against Hyper Chemicals & Cosmetics Pvt. Ltd. & Ors., (principal borrowers) and the guarantors/mortgagors on 16th May, 1996 for recovery of dues to the extent of Rs.13,89,430/-. The petitioner was impleaded as a defendant in the said suit in the capacity of a guarantor and mortgagor of his half share in the House No.2797, Chirkhana, Gali Matawali, Chandani Chowk, Delhi. The suit was filed by the Bank with the allegation that equitable mortgage of the said property was created by the petitioner by depositing the title deeds on 15th February, 1992. The said suit was subsequently transferred to the Tribunal and was renumbered as T.A. 507 of 2000. The defendants filed a counter claim/set off, but the Tribunal by the judgment dated 18th February, 2003 allowed the claim of the Bank in full and dismissed the counter claim/set off. This judgment of the Tribunal was challenged by the defendants in an appeal before the Appellate Tribunal which remanded the case back to the Tribunal for fresh adjudication with liberty to the parties to adduce additional evidence. This order of remand was challenged by the defendants in Writ Petition No.18606 of 2004 in which further proceedings before the Tribunal were stayed by the order dated 17th May, 2006, and the interim order is said to be operating till date. 
It is further stated that thereafter the Bank initiated proceedings against the petitioner by issuing a notice dated 10th May, 2007 under Section 13(2) of the Act by which the petitioner was called upon to discharge the dues of the Bank aggregating to Rs.1,19,56,663.67/- within sixty days from the date of receipt of the notice. The petitioner sent a reply denying his liability to pay the amount. The objections were, however, rejected by the Bank by the order dated 2nd June, 2007 and thereafter the petitioner received a notice captioned 'Possession Notice' dated 13th March, 2008. The petitioner sent a reply dated 10th April, 2008 inter alia pointing out that the notice did not specify the date on which the alleged possession was taken or would be taken and nor was the notice affixed at the outer door or at any other conspicuous place of the house in question and nor it was published in two newspapers having circulation in the locality. When no reply was received from the Bank, the petitioner believed that the Bank had dropped the proceedings but by way of abundant caution sought information from the Bank under the Right to Information Act on 12th March, 2010. The Bank supplied information dated 15th April, 2010 to the petitioner that a composite possession notice covering 11 properties of different borrowers was published in the Kanpur Editions of Pioneer and Swatantra Bharat on 18th February, 2009 in which the property of the petitioner was shown at Serial No.11 and reference to the earlier possession notice dated 13th March, 2008 was made. 
The petitioner, thereafter, filed an application under Section 17 (1) of the Act before the Tribunal on 31st May, 2010 to challenge the measures taken by the Bank which application was numbered as S.A. 68 of 2010. In the said application the petitioner asserted that the application had been filed within the limitation period of 45 days from the date of knowledge of the measures taken by the Bank but by way of abundant caution, the petitioner also filed an application under Section 5 of the Limitation Act 1963 (hereinafter referred to as the 'Limitation Act') for condoning the delay, if any, in filing the application. This delay condonation application was accompanied by an affidavit. The Tribunal, however, dismissed the application filed under Section 5 of the Limitation Act on 11th April, 2011 and consequently the application filed by the petitioner under Section 17(1) of the Act was also dismissed. 
This order dated 11th April, 2011 passed by the Tribunal was assailed by the petitioner in Writ Petition No. 27545 of 2011. The petition was dismissed by the Court on 12th May, 2011 with the observation that the petitioner could file an appeal under Section 18 of the Act. 

The petitioner then filed an appeal before the Appellate Tribunal under Section 18 of the Act for setting aside the order dated 11th April, 2011 passed by the Tribunal. 

The appeal was dismissed by the Appellate Tribunal by the judgment dated 14th July, 2011 for the reason that the petitioner did not pay the requisite Court fees of Rs.32,300/- and 

for the reason that the petitioner had not deposited 50% of the amount of debt due as claimed by the Bank as was required to be deposited under the second proviso to Section 18(1) of the Act. 

Sri R.P. Agarwal, learned counsel appearing for the petitioner submitted that the Appellate Tribunal committed an illegality in dismissing the appeal for the aforesaid two reasons. Learned counsel submitted that the appeal had been filed against the order passed by the Tribunal on the application filed by the petitioner under Section 5 of the Limitation Act for condoning the delay in filing the application under Section 17(1) of the Act and, therefore, the Court fees of Rs.200/- only as contemplated under Rule 13(2)(1)(e) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the 'Rules') was required to be paid which was paid and the appellant was not required to deposit the Court fees contemplated under Rule 13(2)(1)(d) of the Rules. Learned counsel has pointed out that under Rule13(2)(2) of the Rules, the amount of fee payable in an appeal against any order passed by the Tribunal is the same fees as provided at Clauses (a) to (e) of Rule 2(2)(1) of the Rules and, therefore, the fees provided for at Serial No 1(e) of Rs.200/- for 'any other application' was required to be paid as the appellant was actually aggrieved by the order passed on the delay condonation application and the order dismissing the application under Section 17(1) of the Act was only a consequential order as the delay condonation application had been rejected. In support of his contention, learned counsel for the petitioner placed reliance on a decision of the Kerala High Court in Mohd. Fariz & Co. Vs. Commissioner of Central Excise 2010 (260) ELT-29 (Ker). 
Learned counsel for the petitioner also submitted that the condition of pre-deposit under the second proviso to Section 18(1) of the Act would be applicable only when an order is passed on the application filed under Section 17(1) of the Act and not when it is passed on 'any other application' as the pre-deposit under the said proviso is linked to amount of debt due from the borrower as claimed by the secured creditor or determined by the Tribunal, whichever is less and likewise the fee payable under Rule 13 is linked to 'debt due' while fee for 'any other application' is fixed at Rs.200/-. Learned counsel for the petitioner, therefore, submitted that the requirement of pre-deposit under the second proviso to Section 18(1) of the Act will not apply to all appeals filed under Section 18, but only to the appeals filed against a final order and not against an interim order. In this connection, learned counsel pointed out that, if the condition of pre-deposit under the second proviso to Section 18(1) of the Act is held to apply even when the Tribunal has not determined the debt due then it would be hit by Article 14 of the Constitution of India as being arbitrary, onerous and expropriatory in view of the decision of the Supreme Court in Mardia Chemicals Ltd. etc. etc. Vs. Union of India & Ors., AIR 2004 SC 2371. 
Learned counsel for the petitioner also submitted that the possession notice dated 13th March, 2008 was patently illegal as it did not specify the date when possession was taken and nor was it affixed at the outer door of such conspicuous place of the property as provided for under Rule 8(1) of the Rules. He also pointed out that the notice was not published in two newspapers within the stipulated period of seven days as provided for under Rule 8(2) of the Rules and in support of his contention, reliance was placed on the decision of the Division Bench of the Karnataka High Court in K.R. Krishnegowda & Anr. Vs. The Chief Manager/Authorised Officer, Kotak Mahindra Bank reported in 2012 (2) D.R.T.C. 684 (Knt.). 
It is in this context that learned counsel for the petitioner submitted that the application was filed under Section 17(1) of the Act against the measures allegedly taken by the Bank under Section 13(4) of the Act but it was rejected for the reason that it was filed beyond the period prescribed even though it was within the stipulated period from the date of knowledge of the information conveyed by the Bank that it had taken possession and even otherwise good and sufficient reasons had been given by the petitioner for condoning the delay in filing the application. Learned counsel for the petitioner, therefore, submitted that in such circumstances, when the application for condoning the delay was rejected in an arbitrary manner, the petitioner should not be compelled in an appeal filed under Section 18 of the Act to not only pay the Court fee as if it were an appeal against a final order passed under Section 17(1) of the Act but also to make the deposit of 50% of the amount of debt due as claimed by the Bank under the second proviso to Section 18 of the Act. 
Sri M.P. Sarraf, learned counsel appearing for the respondent-Bank, however, submitted that the condition of pre-deposit under the second proviso to Section 18(1) of the Act is mandatory and will apply to all the appeals and in support of his contention he has placed reliance upon the decision of the Supreme Court in Narayan Chandra Ghosh Vs. UCO Bank & Ors., 2011 AIR SCW 2572. Learned counsel further submitted that what has first to be considered by the Court is whether the Appellate Tribunal was justified in dismissing the appeal for non-compliance of the condition of pre-deposit because if the appeal has to be dismissed for this reason, then it will not be necessary for the Court to examine whether the appellant had paid the requisite Court fee or not. It is also his contention that the view taken by the Appellate Court regarding deficiency of Court fees is correct and does not call for any interference by the Court. 
I have considered the submissions advanced by learned counsel for the parties. 
In order to appreciate the rival contentions, it would be appropriate to refer to the relevant provisions of Sections 13, 17 and 18 of the Act which are as follows:- 
"Section 13 - Enforcement of security interest.-
(1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882, any security interest created in favour of any secured creditor may be enforced, without the intervention of the 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 instalment 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. 
(5) Any payment made by any person referred to in clause (d) of sub-section (4) to the secured creditor shall give such person a valid discharge as if he has made payment to the borrower. 
(6) Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset. 
.................. 
(17). Section 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 along with 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 measures 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 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) of Section 17. 
(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 secured assets 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 assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the secured assets 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. 
...................................... 
18. Section 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. 
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 and rules made thereunder." 

It will also be useful to reproduce the relevant provisions of Rules 8, 12 and 13 of the Rules which deal with sale of immovable secured assets, Application to the Tribunal/Appellate Tribunal and Fees for applications and appeals under Sections 17 and 18 of the Act and the same are as follows:- 
"8. Sale of immovable secured assets.-
(1) Where the secured asset is an immovable property, the authorised office shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix-IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property. 
(2) The possession notice as referred to in sub-rule(1) shall also be published in two leading newspapers, one in vernacular language having sufficient circulation in that locality, by the authorised officer. 
(3) In the event of possession of immovable property is actually taken by the authorised officer, such property shall be kept in his own custody or in the custody of any person authorised or appointed by him, who shall take as much care of the property in his custody as a owner of ordinary prudence would, under the similar circumstances, take of such property. 
....................... 
12. Application to the Tribunal/Appellate Tribunal. 
(1) Any application to the Debt Recovery Tribunal under sub-section (1) of section 17 shall be, as nearly as possible, in the form given in Appendix VII to the rules. 
(2) Any application to the Appellate Tribunal under sub-section (6) of section 17 of the Act shall be, as nearly as possible, in the form given in Appendix VIII to the said rules. Any appeal to the Appellate Tribunal under Section 18 of the Act shall be, as nearly as possible, in the form given in Appendix IX to the said rules. 
13 Fees for applications and appeals under Sections 17 and 18 of the Act.- (1) Every application under sub-section (1) of section 17 or an appeal to the Appellate Tribunal under sub-section (1) of section 18 shall be accompanied by a fee provided in the sub-rule(2) and such fee may be remitted through a crossed demand draft drawn on a bank or Indian Postal Order in favour of the Registrar of the Tribunal or the Court as the case may be, payable at the place where the Tribunal or the Court is situated. ." 
(2) The amount of fee payable shall be as follows:- 
No. 
Nature of application 
Amount of fee payable 
1. 
Application to a Debt Recovery Tribunal under sub-section (1) of section 17 against any of the measures referred to in sub-section (4) of section 13. 

(a) 
Where the applicant is a borrower and the amount of debt due is less than Rs.10 lakhs 
Rs.500 for every Rs.1 lakh or part thereof 
(b) 
Where the applicant is a borrower and the amount of debt due is Rs.10 lakhs and above 
Rs.5000 + Rs.250 for every Rs.1 lakh or part thereof in excess of Rs.10 lakhs subject to a maximum of Rs.1,00,000 
(c) 
Where the applicant is an aggrieved party other than the borrower and where the amount of debt due is less than Rs.10 lakhs 
Rs.125 for every rupees One lakh or part thereof 
(d) 
Where the applicant is an aggrieved party other than the borrower and where the amount of debt due is Rs.10 lakhs and above 
Rs.1250 +Rs.125 for every Rs.1 lakh or part thereof in excess of Rs.10 lakhs subject to a maximum of Rs.50,000 
(e) 
Any other application by any person 
Rs.200 
2. 
Appeal to the Appellate Authority against any order passed by the Debt Recovery Tribunal under Section 17 Same fees as provided at clauses (a) to (e) of Serial Number 1 of this rule. 


It is seen that notice under Section 13(2) of the Act that was issued by the Bank on 10th May, 2007 required the petitioner to deposit Rs.19,56,663.67/-. In the original suit, which the Bank had filed, the amount claimed by the Bank from the defendants was Rs.13,89,430/- which comprised of Rs.6,47,571/- as principal amount and Rs.7,41,865/- as interest. The petitioner filed a objections to the aforesaid notice issued under Section 13(2) of the Act but the objections were not accepted by the Bank and this fact was communicated to the petitioner by the communication dated 2nd June, 2007. 
It is thereafter that the Bank issued 'possession notice' dated 13th March, 2008 and the relevant portion is as follows:- 
"The borrower and/the guarantors having failed to repay the amount, notice is hereby given to the borrower/guarantor and the public in general that the undersigned has taken possession of the property described herein below in exercise of powers conferred on him/her under Section 13(4) of the said Act read with Rule 8/9 of the said rules on this......................Day of .................the year ..............." 

Rule 8(1) of the Rules provide that the 'possession notice' should be prepared as nearly as possible in Appendix IV to the Rules which is as follows:- 


"Appendix IV 
Possession Notice. 
Whereas 
The undersigned being the authorised officer of the .............(name of the Institution) under the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 and in exercise of powers conferred under section 13(12) read with rule 9 of the Security Interest (Enforcement) Rules, 2002 issued demand notice dated.................. calling upon the borrower Shri................................/M/s.................... to repay the amount mentioned in the notice being Rs..........(in words...............) within 60 days from the date of receipt of the said notice. 
The borrower having failed to repay the amount, notice is hereby given to the borrower and the public in general that the undersigned has taken possession of the property described hereinbelow in exercise of powers conferred on him/her under section 13(4) of the said Act read with rule 9 of the said rule on this...............day of ...........of the year............. 
The borrower in particular and the public in general is hereby cautioned not to deal with the property and any dealings with the property will be subject to the charge of the.................(name of the Institution) for an amount of Rs............... and interest thereon. 

Description of the Immovable Property 



All that part and parcel of the property consisting of Flat No................../Plot No............In Survey No................../City or Town Survey No................./Khasra No................within the registration Sub-district.................and District........................ 
Bounded: 
On the North by 
On the South by 
On the East by 
On the West by 

Authorised Officer 
(Name of the Institution) 
Date:....................... 
Place......................." 

Learned counsel for the petitioner pointed out that the said 'possession notice' dated 13th March, 2008 did not specify the date when the possession was taken or was likely to be taken and nor was it affixed at the outer door of conspicuous place of the property. Learned counsel also pointed out that it was also not published in the two newspapers within the stipulated period of seven days as provided for in Rule 8(2) of the Rules. Learned counsel, therefore, contended that the notice was not issued in accordance with the provisions of sub-rules(1) and (2) of Rule 8 of the Rules and in fact possession was never taken by the Bank either physically or symbolically and the petitioners are still occupying the dwelling house. It is for this reason that learned counsel for the petitioner submitted that the application was filed by the petitioner under Section 17(1) of the Act for setting aside the alleged measures taken by the Bank under Section 13(4) of the Act. 
In support of his contention learned counsel for the petitioner placed reliance upon the decision of the Karnataka High Court in K.R. Krishnegowda (supra) wherein it was held that issuance of notice as per sub-rules (1) and (2) of Rule 8 of the Rules indicating the date on which possession of property would be taken from the borrower is mandatory, non-observance of which would invalidate the exercise of power. 
The relevant observations are:-
"14. On a conspectus reading of sub-section (4) of Section 13, Section 14 with Rule 8 the question that would arise is, as to the stage at which notice under Rule 8 would have to be issued, as the contention of the Counsel for the Respondent is that the notice regarding possession would be issued after an order under Section 14 is passed and possession is taken and before sale. When once there is non-compliance of the demand made under sub-section (2) of Section 13, steps could be initiated under sub-section (4) by taking possession of the secured asset. The question is, as to whether the borrower ought to know as to when exactly possession of the secured asset would be taken, when once the demand under sub-section (2) of Section 13 is not complied with the borrower. Having regard to sub-section (13) read with sub-section (2) of Section 13 would imply that the receipt of notice under sub-section (2) results in a virtual attachment of the secured asset. If the demand made in sub-section (2) of Section 13 is not complied with and the representation as well as the objections filed by the borrower are also not accepted and communicated to the borrower, then in that case, steps could be initiated under sub-section (4) of Section 13. Having regard to the fact that sub-section (6) of Section 13 enables a secured creditor to transfer the secured asset after taking possession would imply that the possession of the secured asset vests with the secured creditor prior to any such transfer. The procedure for taking possession or control of the secured asset by the secured creditor is envisaged in Section 14 after the date mentioned in the possession notice at which stage, it is not necessary to actually inform or indicate to the borrower, the taking of possession by secured creditor. Section 14 in fact does not prescribe an opportunity of hearing the borrower before an order is passed with regard to taking of possession. But we have held that if possession has to be taken by the secured creditor, then in that event, the borrower must be informed or intimated about the taking of possession, more precisely, the actual date on which possession would be taken over from the borrower by the secured creditor which would have to be indicated to the former. It is in this regard, that insofar as immovable property is concerned, sub-rules (1) and (2) of Rule 8 prescribe notices or intimation to the borrower in two ways; (i) by delivery of possession notice and (ii) by newspaper publication, clearly indicating the date on which possession of the secured asset would be taken by the secured creditor. If on the date indicated in the possession notice, the secured creditor is unable to take possession of the secured asset, then in that case, recourse may be had to Section 14 of the Act, at which stage a further notice to the borrower is not envisaged under the said section. 
15. Therefore, what emerges is the mandatory requirement under the Act read with the Rules, that in order to enable the borrower to know the date on which possession would be taken by the secured creditor, sub-rules (1) and (2) of Rule 8 would have to be complied with by issuance of notices indicating the date on which possession would be taken. There is another purpose for issuing the notice prior to taking possession and that is, to enable the borrower to discharge the liability to the secured creditor. Also a 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 can pay the secured creditor, so much of the money as is sufficient to pay the secured debt as per Clause (d) of sub-section (4) of Section 13 read with sub-section (5) thereof. We have also borne in mind the fact that on an application being filed under Section 14 of the Act before the Magistrate, there is no provision for issuance of notice to the borrower before an order to take possession is issued. We are, therefore, of the considered view that before initiating action under sub-section (4) of Section 13 of the Act, the issuance of notice as per sub-rules (1) and (2) of Rule 8 has to be complied with indicating the date on which possession of the property would be taken from the borrower by the secured creditor. If on the said date possession of the secured asset cannot be taken or it is not surrendered by the borrower, then the secured creditor can take recourse to Section 14 of the Act and take possession of the secured immovable property, of course, he hasten to add that the Notices issued under sub-rules (1) and (2) of Rule 8 cannot be assailed per se as the purpose of issuance of such notices is only to indicate the date of taking possession. 
15 (a) Therefore, the issuance of notice in terms of Rule 8 of the Rules is a mandatory requirement having regard to the purpose of following the principles of natural justice so as to prevent miscarriage of justice and so as to ensure fair play in action. Issuance of notice prior to initiation of action under sub-section (4) of Section 13 is thus, a mandatory procedural requirement, the non-observance of which would invalidate the exercise of power. The taking of possession of a secured asset of a borrower under sub-section (4) of Section 13 is a drastic measure and the exercise of such a power would definitely visit the borrower with civil consequences. In Mohinder Singh Gill v. The Chief Election Commissioner, AIR 1978 SC 851, the Supreme Court has opined the civil consequences would cover not merely civil liberties and personal rights of a person but also material deprivations as well as right to property. Therefore, we have held that the issuance of notices in terms of Rule 8 of the Rules is a necessary requirement prior to taking possession, although Rule 8 speaks of sale of immovable secured assets, even if eventually after taking possession the secured assets are not sold. 
.................... 
18. In that view of the matter compliance of sub-rules (1) and (2) of Rule 8 of the Rules, is a mandatory requirement before possession of the secured asset is sought to be taken by a Financial Institution. Any violation or infraction of Section 13(4) of the Act by the Financial Institution could be called in question by way of filing an Appeal under Section 17 of the Act, and the DRT has the power to restore possession to the borrower." 

(emphasis supplied) 
As noticed hereinabove, it was this issue which was raised by the petitioner in the application filed under Section 17(1) of the Act but it has not been examined by the Tribunal for the reason that the application filed by the petitioner under Section 5 of the Limitation Act for condoning the delay was rejected. 
Learned counsel for the petitioner, however, submitted that the application under Section 17(1) of the Act was filed within the period of forty-five days as provided for in Section 17(1) of the Act. In this connection it is his submission that the application under Section 17(1) of the Act was required to be filed within forty-five days from the date on which measures under Section 13(4) of the Act were taken by the Bank but as the 'possession notice' was invalid and the petitioner had pointed out this fact in the registered letter dated 1st April, 2005 to the Bank to which no reply was sent, the petitioner bona fide believed that the Bank had dropped the proceedings and it is only when the petitioner in order to be satisfied that the Bank had dropped the proceedings, filed the application under the Right to Information Act before the Bank on 12th March, 2010 to seek such information that information dated 15th April, 2010 which was received by the petitioner on 28th April, 2010, was given by the Bank that the possession had been taken and the 'possession notice' was also published in two newspapers on 18th February, 2009 in which the property of the petitioner was shown at Serial No.11. Learned counsel pointed out that even in this notice which was published, the Bank did not specify the date on which the possession was taken and only reference was made to the earlier 'possession notice' dated 13th March, 2008 which also did not indicate the date when possession was taken or was likely to be taken. 
Learned counsel for the petitioner submitted that the petitioner had filed an application under Section 17(1) of the Act on 31st May, 2010 against the alleged measures taken by the Bank with the assertion that it was within the stipulated period of forty five days since the petitioner acquired knowledge of such alleged measures having been taken by the Bank on 26th April, 2010 only and it was only by way of abundant caution that the petitioner had filed the application under Section 5 of the Limitation Act to condone the delay, if any, in filing the application under Section 17(1) of the Act. 
The delay condonation application filed by the petitioner was rejected by the Tribunal by the order dated 11th April, 2011 holding that the appellant was negligent in pursuing the remedy. Accordingly, the application filed under Section 17(1) of the Act was dismissed as being barred by limitation. 
Learned counsel for the petitioner submitted that the application under Section 5 of the Limitation Act was maintainable even though Section 17(1) of the Act may not provide for condoning such delay in view of the provisions of Section 29(2) of the Limitation Act 1963 and in support of this contention learned counsel for the petitioner placed reliance upon the decision of a learned Judge of this Court in State Bank of Patiala Vs. Chair Person, Debt Recovery Appellate Tribunal, Allahabad & Ors., AIR 2012 Allahabad 1 wherein it was observed:- 
"21. In my view considering Section 17(7) of Act 2002 and Section 24 of Act 1993 there ought to be no difficulty in answering the issue raised above that the Limitation Act, 1963 shall apply to the Tribunal which would include Sections 5 and 14 also. 
........................ 
26. Considering the authorities above, wherein various judgments of the Apex Court and other High Courts cited on behalf of the parties to argue that Act 1963 ought not be applied to the proceedings under Section 17(1) have been discussed threadbare, and distinguished, with which I find myself in complete agreement. I do not find any reason to repeat the same thing hereat and suffice it to mention that decisions in respect of different special Acts having been rendered considering provisions contained therein would not be relevant in the context of application to Act 2002 whereto statutory scheme is totally different. Unless two Special Acts are shown in all respect pari materia, a decision rendered considering statutory scheme of one such Act by itself may not apply to another Act. I, therefore, hold that Limitation Act 1963 would be attracted and an application under Section 5 would be maintainable for the purpose of Section 17(1) of Act 2002.". 

Learned counsel for the petitioner contended that the Tribunal committed an illegality as not only was the application under Section 17(1) of the Act filed within time but even otherwise the delay had been satisfactorily explained. It is for this reason that the petitioner filed an appeal under Section 18 of the Act with the following reliefs:- 
"(i) to set aside the impugned order dated 11-04-2011 (Annexure-1 hereto) passed by the Ld. Presiding Officer, DRT, Allahabad, in SA-68 of 2010-Mohan Lal Saraf Vs. State Bank of Patiala and other; 
(ii) to hold that there is no delay in filing the above SA and/or condone the delay, if at all any, for reasons explained in the Delay Condonation Application; 
(iii) to direct the Ld. P.O., DRT, Allahabad, to decide the above S.A. on merits; 
(iv) to pass such other and further order as this Hon'ble Tribunal may deem fit and proper in the interest of justice; 
(v) to award cost." 
Learned counsel for the petitioner, with reference to the reliefs claimed in the appeal, submitted that the principle relief was to hold that there was no delay in filing the application and/or to condone the delay and to direct the Tribunal to decide the application on merits and, therefore, as the appeal was directed against the order passed on the application, the requisite fee of only Rs.200/- was required to be paid. He, therefore, submitted that the Appellate Tribunal was not justified in dismissing the appeal for the reason that the requisite Court fee was not paid. 
Learned counsel for the respondents, however, submitted that the order of the Appellate Tribunal dismissing the appeal for this reason does not suffer from any illegality but in any case it will not be necessary to examine this issue if the appeal is otherwise held to be not maintainable for the reason that the condition of pre-deposit of the amount under the second proviso to Section 18(1) of the Act was not satisfied. 
Learned counsel for the respondents is justified in asserting that what needs to be first decided is whether the condition of pre-deposit was required to be satisfied by the appellant because if it is held that the appellant was required to make the deposit as provided for in the second proviso to Section 18 (1) of the Act, the appeal would have to be dismissed for non-deposit of the amount and it will not be necessary to examine whether the requisite Court fee was paid by the appellant. 
The submission of learned counsel for the petitioner regarding pre-deposit of amount has to be examined in the context of Section 18 of the Act. It provides that any person aggrieved, by any order made by the Tribunal under section 17, may prefer an appeal within thirty days from the date of receipt of the order of the Tribunal. The second proviso to Section 18(1) of the Act, however, provides 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 Bank or determined by the Tribunal, whichever is less but this amount can be reduced to not less than 25% by the Appellate Tribunal. 
Learned counsel for the petitioner contended that as the Tribunal has yet to determine the amount of debt due from the petitioner since the application under Section 17(1) of the Act filed by the petitioner was not decided on merits but had been rejected for the reason that it was filed beyond the period prescribed, the petitioner should not be compelled to deposit 50% of the amount as claimed by the Bank because, in such circumstances, the requirement will be arbitrary and onerous and contrary to the decision of the Supreme Court in Mardia Chemicals Ltd. etc. etc. Vs. Union of India & Ors., AIR 2004 SC 2371 as it would require pre-deposit of the amount at the first instance of proceedings and in support of his contention he has placed reliance upon paragraphs 40, 59, 60, 61, 62, 63, 64 and 80 of the judgment in Mardia Chemicals Ltd. (supra) rendered in respect to the unamended provisions of Section 17 of the Act. The relevant paragraphs on which reliance has been placed by learned counsel for the petitioner are :- 
"40. Now coming to S.17, it provides for filing of an appeal to the Debt Recovery Tribunal within 45 days of any action taken against the borrower under sub-section (4) of S.13 of the Act. It reads as under : 

"17. Right to appeal. -- 
(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of S.13 taken by the secured creditor or his authorised officer under this Chapter, may prefer an appeal to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken. 

(2) Where an appeal is preferred by a borrower, such appeal shall not be entertained by the Debts Recovery Tribunal unless the borrower has deposited with the Debts Recovery Tribunal seventy-five per cent. of the amount claimed in the notice referred to in sub-section (2) of S. 13 : 

Provided that the Debts Recovery Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section. 

(3) Save as otherwise provided in this Act, the Debts Recovery 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." 

It is thus clear that an appeal under sub-section (1) of S. 17 would lie only after some measure has been taken under sub-section (4) of S. 13 and not before the stage of taking of any such measure. According to sub-section (2), the borrower has to deposit 75% of the amount claimed by the secured creditor before his appeal can be entertained. 
............................. 

59. We may like to observe that proceedings under Section 17 of the Act, in fact are not appellate proceedings. It seems to be a misnomer. In fact it is the initial action which is brought before a Forum as prescribed under the Act, raising grievance against the action or measures taken by one of the parties to the contract. It is the stage of initial proceeding like filing a suit in Civil Court. As a matter of fact proceedings under Section 17 of the Act are in lieu of a civil suit which remedy is ordinarily available but for the bar under Section 34 of the Act in the present case. We may refer to a decision of this Court reported in (1974) 2 SCC 393, Smt. Ganga Bai Vs. Vijay Kumar and others, where in respect of original and appellate proceedings a distinction has been drawn as follows:- 

"........There is a basic distinction between the right of suit and the right of appeal. There is an inherent right in every person to bring a suit of civil nature and unless one's choice. It is no answer to a suit, howsoever frivolous to claim, that the law confers no such right to sue. A suit for its maintainability requires no authority of law and it is enough that no statute bars the suit. But the position in regard to appeals is quite the opposite. The right of appeal inheres in no one and, therefore, an appeal for its maintainability must have the clear authority of law. That explains why the right of appeal is described as a creature of statute." 

60. The requirement of pre-deposit of any amount at the first instance of proceedings is not to be found in any of the decisions cited on behalf of the respondent. All these cases relate to appeals. The amount of deposit of 75% of the demand, at the initial proceeding itself sounds unreasonable and oppressive more particularly when the secured assets/the management thereof along with the right to transfer such interest has been taken over by the secured creditor or in some cases property is also sold. Requirement of deposit of such a heavy amount on basis of one sided claim alone, cannot be said to be a reasonable condition at the first instance itself before start of adjudication of the dispute. Merely giving power to the Tribunal to waive or reduce the amount, does not cure the inherent infirmity leaning one-sidedly in favour of the party, who, so far has alone been the party to decide the amount and the fact of default and classifying the dues as NPAs without participation/association of the borrower in the process. Such an onerous and oppressive condition should not be left operative in expectation of reasonable exercise of discretion by the concerned authority. Placed in a situation as indicated above, where it may not be possible for the borrower to raise any amount to make the deposit, his secured assets having already been taken possession of or sold, such a rider to approach the Tribunal at the first instance of proceedings, captioned as appeal, renders the remedy illusory and nugatory. 

61. In the case of Seth Nandlal (supra), while considering the question of validity of pre-deposit before availing the right of appeal the Court held "........... right of appeal is a creature of the statute and while granting the right the Legislature can impose conditions for the exercise of such right so long as the conditions are not so onerous as to amount to unreasonable restrictions rendering the right almost illusory. ...." (Emphasis supplied). While making said observation this Court referred to the decision in the case of Anant Mills Co. Ltd. (supra). In both the above noted decisions this Court had negated the plea raised against pre-deposit but in the case of Seth Nandlal (supra) it was found that the condition was not so onerous since the amount sought to be deposited was meager and that too was confined to the landholding tax payable in respect of the disputed area i.e. the area or part thereof which is declared surplus by the Prescribed Authority (Emphasis supplied) after leaving the permissible area to the appellant. In the above circumstances it was found that even in the absence of a provision conferring discretion on the appellate authority to waive or reduce the amount of pre-deposit, it was considered to be valid, for the two reasons indicated above. The facts of the case in hand are just otherwise. 

62. As indicated earlier, the position of the appeal under Section 17 of the Act is like that of a suit in the Court of the first instance under the Code of Civil Procedure. No doubt in suits also it is permissible, in given facts and circumstances and under the provisions of the law to attach the property before a decree is passed or to appoint a receiver and to make a provision by way of interim measure in respect of the property in suit. But for obtaining such orders a case for the same is to be made out in accordance with the relevant provisions under the law. There is no such provision under the Act. 

63. Yet another justification which has been sought to be given for the requirement of deposit is that the secured assets which may be taken possession of or sold may fall short of the dues therefore such a deposit may be necessary. We find no merit in this submission too. In such an eventuality the recourse may have to be taken to sub-section 10 of Section 13 where a petition may have to be filed before the Tribunal for the purpose of making up of the short-fall. 

64. The condition of pre-deposit in the present case is bad rendering the remedy illusory on the grounds that (i) it is imposed while approaching the adjudicating authority of the first instance, not in appeal, (ii)there is no determination of the amount due as yet (iii) the secured assets or its management with transferable interest is already taken over and under control of the secured creditor (iv) no special reason for double security in respect of an amount yet to be determined and settled (v) 75% of the amount claimed by no means would be a meager amount (vi) it will leave the borrower in a position where it would not be possible for him to raise any funds to make deposit of 75% of the undetermined demand. Such conditions are not alone onerous and oppressive but also unreasonable and arbitrary. Therefore, in our view, sub-section (2) of Section 17 of the Act is unreasonable, arbitrary and violative of Art. 14 of the Constitution. 
............................... 

80. Under the Act in consideration, we find that before taking action a notice of 60 days is required to be given and after the measures under Section 13(4) of the Act have been taken, a mechanism has been provided under Section 17 of the Act to approach the Debt Recovery Tribunal. The above noted provisions are for the purposes of giving some reasonable protection to the borrower. Viewing the matter in the above perspective, we find what emerges from different provisions of the Act, is as follows :- 

1. Under sub-section (2) of Section 13 it is incumbent upon the secured creditor to serve 60 days notice before proceeding to take any of the measures as provided under sub-section (4) of Section 13 of the Act. After service of notice, if the borrower raises any objection or places facts for consideration of the secured creditor, such reply to the notice must be considered with due application of mind and the reasons for not accepting the objections, howsoever brief they may be, must be communicated to the borrower. In connection with this conclusion we have already held a discussion in the earlier part of the judgment. The reasons so communicated shall only be for the purposes of the information/knowledge of the borrower without giving rise to any right to approach the Debt Recovery Tribunal under Section 17 of the Act, at that stage. 

2. As already discussed earlier, on measures having been taken under sub-section (4) of Section 13 and before the date of sale/auction of the property it would be open for the borrower to file an appeal (petition) under Section 17 of the Act before the Debt Recovery Tribunal. 

3. That the Tribunal in exercise of its ancillary powers shall have jurisdiction to pass any stay/interim order subject to the condition at it may deem fit and proper to impose. 

4. In view of the discussion already held on this behalf, we find that the requirement of deposit of 75% of amount claimed before entertaining an appeal (petition) under Section 17 of the Act is an oppressive, onerous and arbitrary condition against all the canons of reasonableness. Such a condition is invalid and it is liable to be struck down. 

5. As discussed earlier in this judgment, we find that it will be open to maintain a civil suit in civil Court, within the narrow scope and on the limited grounds on which they are permissible, in the matters relating to an English mortgage enforceable without intervention of the court." 
(emphasis supplied) 

Learned counsel for the respondent-Bank, however, submitted that Section 17 of the Act has since been amended and the petitioner had filed an Appeal under Section 18 of the Act. Learned counsel further placed reliance upon the decision of the Supreme Court in Narayan Chandra Ghosh Vs. UCO Bank & Ors., 2011 AIR SCW 2572, and submitted that since there is an absolute bar on entertaining an appeal under Section 18 of the Act unless the condition precedent of pre-deposit is satisfied, the Appellate Tribunal committed no illegality in dismissing the appeal as the said mandatory condition was not satisfied. It is his submission that even if the amount of debt had not been determined by the Tribunal, then too the appellant would be required to deposit the amount of debt due as claimed by the Bank. 
The observations made by the Supreme Court in Narayan Chandra Ghosh (supra) are as follows:- 
"2. This appeal by the borrower is directed against judgment dated 7th December, 2010 delivered by the High Court of Calcutta in C.O. No.3608 of 2009. By the impugned judgment, the High Court has set aside the order passed by the Debts Recovery Appellate Tribunal, Kolkata (for short, "the Appellate Tribunal") in Appeal No.35 of 2009, whereby the Appellate Tribunal, while allowing the application filed by the appellant under Section 18(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, "the Act") had exempted the appellant from making any deposit in terms of second proviso to Section 18 of the Act before entertaining the appeal against the order passed by the Debts Recovery Tribunal. 
..................................... 
4. Assailing the judgment, Mr. Ranjan Mukherjee has submitted that since the Debts Recovery Tribunal had not entertained the appeal preferred by the appellant under Section 17 of the Act on a technical ground and the quantum of amount due from the appellant had not been determined, the Appellate Tribunal could not saddle the appellant with any liability of pre-deposit under Section 18 of the Act. It is thus, asserted that the Appellate Tribunal was justified in entertaining the appeal without insisting on any deposit in terms of Section 18 of the Act. 
....................................... 
8. Section 18(1) of the Act confers a statutory right on a person aggrieved by any order made by the Debts Recovery Tribunal under Section 17 of the Act to prefer an appeal to the Appellate Tribunal. However, the right conferred under Section 18(1) is subject to the condition laid down in the second proviso thereto. The second proviso postulates 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. However, under the third proviso to the sub-section, the Appellate Tribunal has the power to reduce the amount, for the reasons to be recorded in writing, to not less than twenty-five per cent of the debt, referred to in the second proviso. Thus, there is an absolute bar to 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. It is well-settled that when a Statute confers a right of appeal, while granting the right, the Legislature can impose conditions for the exercise of such right, so long as the conditions are not so onerous as to amount to unreasonable restrictions, rendering the right almost illusory. Bearing in mind the object of the Act, the conditions hedged in the said proviso cannot be said to be onerous. Thus, we hold that the requirement of pre-deposit under sub-section (1) of Section 18 of the Act is mandatory and there is no reason whatsoever for not giving full effect to the provisions contained in Section 18 of the Act. In that view of the matter, no court, much less the Appellate Tribunal, a creature of the Act itself, can refuse to give full effect to the provisions of the Statute. We have no hesitation in holding that deposit under the second proviso to Section 18(1) of the Act being a condition precedent for preferring an appeal under the said Section, the Appellate Tribunal had erred in law in entertaining the appeal without directing the appellant to comply with the said mandatory requirement. 
......................................... 
9. The argument of learned counsel for the appellant that as the amount of debt due had not been determined by the Debts Recovery Tribunal, appeal could be entertained by the Appellate Tribunal without insisting on pre-deposit, is equally fallacious. Under the second proviso to sub-section (1) of Section 18 of the Act the amount of fifty per cent, which is required to be deposited by the borrower, is computed either with reference to the debt due from him as claimed by the secured creditors or as determined by the Debts Recovery Tribunal, whichever is less. Obviously, where the amount of debt is yet to be determined by the Debts Recovery Tribunal, the borrower, while preferring appeal, would be liable to deposit fifty per cent of the debt due from him as claimed by the secured creditors. Therefore, the condition of pre-deposit being mandatory, a complete waiver of deposit by the appellant with the Appellate Tribunal, was beyond the provisions of the Act, as is evident from the second and third proviso to the said Section. At best, the Appellate Tribunal could have, after recording the reasons, reduced the amount of deposit of fifty per cent to an amount not less than twenty five per cent of the debt referred to in the second proviso. We are convinced that the order of the Appellate Tribunal, entertaining appellant's appeal without insisting on pre-deposit was clearly unsustainable and, therefore, the decision of the High Court in setting aside the same cannot be flawed." 
(emphasis supplied) 

Learned counsel for the petitioner, however, submitted that the decision of the Supreme Court has to be considered in the light of the facts mentioned by the Appellate Tribunal and in this connection he has placed the decision of the Kolkata Appellate Tribunal reported in Narayan Chandra Ghosh Vs. UCO Bank & Ors., 2010 (1) Bank CLR 353. Learned counsel pointed out that the reason assigned by the Appellate Tribunal for not insisting on the pre-deposit is that the actual physical possession of the secured asset of the borrower had been taken and the application filed by the appellant for waiver of the deposit was allowed, but in the instant case, waiver application had not been filed as there was no requirement of pre-deposit. Paragraphs 10 and 11 of the Appellate Tribunal on which reliance was placed by learned counsel for the petitioner are as follows:- 
"10. In the case in hand, the disposal of the petition under Section 17(1) of the said SARFAESI Act as above merely puts a seal of approval to the measures that have been taken by the creditor-Bank for recovering the amount as claimed in the notice under Section 13(2) of the said Act. Such disposal clearly implies that the amount so claimed in the notice under Section 13(2) of the said Act was recoverable in law from the borrower or the guarantor as the case may be. As per the provisions thereof the appellant-borrower is required to deposit the maximum 50% of the amount as claimed to be due from him or determined to be due to the secured creditor by the Debts Recovery Tribunal. This is a fetter put under the Act upon the borrower or the guarantor whoever wants to prefer an appeal against an order passed in the proceedings under Section 17 of the said SARFAESI Act, 2002. No one has absolute right of appeal under the law. Right of appeal is the creature of statute. Such right of appeal may be circumscribed by any condition or term as may be prescribed by a legislature.. This fetter should not be read in the manner so as to oust the right to appeal altogether. If the said provisions are looked at such angle it would not be difficult to hold that once actual physical possession of the secured assets of the borrower has been taken over by the creditor-Bank, there would be sufficient compliance of either of the provisos of Section 18(1) of the said Act for the purpose of entertaining an appeal of the borrower by the Appellate Tribunal. Because, primarily secured assets stand as security for full and final satisfaction of the debts of the borrower. Again in the absence of any contest by the borrower against any measures that have been taken by the creditor-Bank under Section 13(4) of the said Act, the creditor-Bank would be left with no other option than to proceed as against the secured assets in the manner as prescribed thereunder for recovering it's debts. In such situation it cannot ask for further deposit by the borrower unless it is established in law that such secured asset will not satisfy fully the debts of the creditor. Therefore, the creditor-Bank cannot demand further payment by the borrower after it had taken actual physical possession of the secured properties. The financial assistance had been given to the borrower by the creditor-Bank upon being satisfied with the security of such properties. The natural presumption therefore arises that such secured assets would satisfy fully and finally the outstanding dues of the creditor-Bank unless proved otherwise. 
11. In such consideration and by taking into consideration the fact that actual physical possession of the secured assets of the borrower appellant has been taken over by the Bank in the meantime. I am of the view that for the purpose of entertaining this appeal, by this Appellate Tribunal no further deposit is required to be made by the appellant-borrower. For the reasons as aforesaid and also by taking note of the fact that a sum of Rs.9,00,000/- (Rupees Nine Lakh) has already been deposited by the borrower-appellant with the creditor-Bank in the meantime, I allow the application under Section 18(1) of the SARFASEI Act, 2002 as filed by the borrower-appellant by exempting him from making any further deposit for the purpose of entertaining this appeal for disposal on merits." 

It needs to be noticed that the view taken by the Appellate Tribunal was set aside by the Calcutta High Court and it is against this decision that the borrower approached the Supreme Court. It is not possible to accept the contention of learned counsel for the petitioner in view of the decision of the Supreme Court in Narayan Chandra Ghosh (supra). The Supreme Court rejected the arguments of the counsel for the appellant that as the amount of debt due had not been determined by the Tribunal, an appeal could be entertained by the Appellate Tribunal without insisting on pre-deposit for the reason that the amount of pre-deposit is computed either with reference to the debt due as claimed by the Bank or with reference to the amount determined by the Tribunal, whichever is less. Thus, even if the amount of debt has yet to be determined by the Tribunal, the appellant would be liable to deposit of the 50% of the debt due from him as claimed by the Bank. The Supreme Court further pointed out that this was a mandatory condition and at best the amount could be reduced to not less than 25% of the debt on an application for waiver having been filed. 
Thus, without examining on merits as to whether there was a delay or not in filing the application under Section 17(1) of the Act and if not then whether the delay was required to be condoned and without examining the quantum of the Court fees that was required to be paid by the appellant, the writ petition is dismissed for the reason that the Appellate Tribunal committed no illegality in dismissing the appeal on account of failure to make the pre-deposit as contemplated under the second proviso to Section 18(1) of the Act. 
Date: 5.12.2012 
NSC