Karnataka High Court
M/S Hindustan Polymers vs The Authorised Officer on 26 October, 2018
Bench: Raghvendra S.Chauhan, B.M.Shyam Prasad
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 26TH DAY OF OCTOBER 2018
PRESENT
THE HON'BLE MR.JUSTICE RAGHVENDRA S. CHAUHAN
AND
THE HON'BLE MR. JUSTICE B. M. SHYAM PRASAD
WRIT PETITION NO. 19445 OF 2018 (GM-DRT)
BETWEEN:
M/S. HINDUSTAN POLYMERS
# 77, I, J, K & L,
HOOTAGALLI INDUSTRIAL AREA,
MYSURU-570 018,
REPRESENTED BY ITS PARTNER
SRI S. MANJUNATH,
S/O. A. SURESH KUMAR,
AGED ABOUT 37 YEARS,
R/AT NO.1256, 2ND FLOOR,
NEAR CORPORATION BANK,
SHARADADEVINAGAR,
MYSURU-570 022
... PETITIONER
(BY SRI RAJAGOPAL M. R., ADV. AND
SRI BASAVARAJU H. N., ADV.)
AND:
1. THE AUTHORISED OFFICER
BANK OF BARODA,
MYSURU BRANCH,
# 765, OLD BANK ROAD,
GANDHI SQUARE, MYSURU-570 001.
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2. SRI SANDEEP SRIVARAS COFFEE
PLOT NO.77, I, J K & L,
HOOTAGALLI INDUSTRIAL AREA,
MYSURU, REPRESENTED BY ITS
SRI SANDEEP SHENOY,
S/O. SURESH RAO,
MAJOR IN AGE.
3. SRI SANDEEP SHENOY
S/O. SURESH RAO,
MAJOR IN AGE,
R/O. NARAYANA SHASTRI ROAD,
MYSURU.
4. SRI MADHU M
S/O. M. B. VASUDEV,
MAJOR IN AGE,
R/O. NO.31/3,1ST CROSS, 2ND MAIN,
4TH BLOCK, JAYALAKSHMIPURAM,
MYSURU.
... RESPONDENTS
(BY SRI R. S. RAJESH, ADV. FOR R-1;
R-2 TO R-4 ARE NOTICE TO DISPENSED WITH
V/O DATED 20.06.2018)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH
THE ORDER DATED 24.04.2018 PASSED BY THE DEBT
RECOVERY APPELLATE TRIBUNAL AT CHENNAI IN APPEAL
NO.AIR (SA) 215/2018 ON IA-420/2018 VIDE ANNEXURE-Q AND
DECLARE THAT THE CLAUSE OF PRE-DEPOSIT AS PROVIDED
UNDER THE THIRD PROVISO TO SECTION 18 OF THE
SECURITISATION AND RECONSTRUCTION OF FINANCIAL
ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT,
2002 WOULD NOT BE MADE APPLICABLE IN RELATED TO
CLAIM PUT FORTH BY A TENANT SEEKING ADJUDICATION OF
HIS TENANCY RIGHT IN TERMS OF SECTION 17(4A) OF THE
SAID ACT.
THIS WRIT PETITION COMING ON FOR PRELIMINARY
HEARING THIS DAY, RAGHVENDRA S. CHAUHAN J., MADE THE
FOLLOWING:
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ORDER
The petitioner has challenged the legality of the order dated 24.04.2018, passed by the Debt Recovery Appellate Tribunal ('DRAT' for short) whereby the DRAT has directed the petitioner to make a pre-deposit of Rs.2,10,00,000/- with the Registrar of the Tribunal, within a period of four weeks failing which the appeal would stand automatically dismissed without reference to the Board.
2. Briefly the facts of the case are that the petitioner is a partnership firm and a tenant in possession of the schedule property, namely Plot No.77, I, J, K & L Hootagalli Industrial Area, Mysuru. The petitioner claims that it was inducted into the tenancy even before a mortgage was created in favour of Bank of Baroda, the respondent No.1. The premises were rented to the petitioner by lease deed dated 01.12.2010, and was further extended by lease deed dated 28.05.2014. 4 Moreover, the respondent No.2 had borrowed certain amount from the bank. However, as respondent No.2 had failed to repay the loan amount, proceedings under The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('the Act' for short), for recovery of the money was initiated by the bank against the respondent No.2. Consequently, notice under Section 13(2) of the Act were issued to the respondent Nos. 3 and 4 who were representing respondent No.2. The petitioner further claims that during the proceedings under the Act, the petitioner continued to be in possession of the suit property. The petitioner further claims that the bank had initiated proceedings under Section 14 of the Act without disclosing the proper parties or the particulars of the tenants in possession as required by law. By order dated 19.06.2017, the District Magistrate and Deputy Commissioner, Mysuru passed an order for taking possession of the property as contemplated 5 under Section 14 of the Act. Consequently, the bank, respondent No.1, had approached the Tahsildar on 18.11.2017, with a request to implement the order passed by the District Magistrate.
Since the petitioner was aggrieved by the order dated 19.06.2017, passed by the District Magistrate and Deputy Commissioner, it had filed a writ petition, namely W. P. No. 10/2018 before this Court. However, by order dated 02.01.2018, this Court directed the petitioner to avail the remedy under Section 17(4A) of the Act. Hence the petitioner filed an application before the Debt Recovery Tribunal ('DRT' for short) under Section 17(4A) of the Act. Since the petition was filed with some delay, the petitioner also filed an application, namely I.A.No. 1/18 for condonation of delay. However, by order dated 02.04.2018, the DRT dismissed the petition inter alia on the ground that it was hit by limitation.
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Aggrieved by the order dated 02.04.2018, the petitioner filed an appeal before the DRAT. However, by order dated 24.04.2018, the DRAT has clearly opined that the petitioner would have to deposit the amount as mentioned hereinabove. In case the petitioner fails to deposit the said amount within a period of four weeks from the date of order, the appeal would stand automatically dismissed. Hence this petition before this Court.
3. Mr. M. R. Rajagopal, the learned counsel for the petitioner, has pleaded that Section 2(f) of the Act clearly defines the word "borrower". Section 18 creates a statutory right to file an appeal before the Appellate Tribunal against any order made by the DRT. The second proviso which imposes a liability of a pre-deposit is confined only to the "borrower" who is challenging the order passed by the DRT. However, as the petitioner happens to be merely a tenant, it does not fall within 7 the definition of the word "borrower". Therefore, the liability to make a pre-deposit cannot be imposed upon the petitioner by the DRAT.
4. On the other hand, Mr. R. S. Rajesh, the learned counsel for the bank, has raised the following counter-contentions:-
Firstly, the petitioner could not even file the appeal as it is an unregistered partnership firm.
Therefore, it is hit by Section 69 of the Partnership Act.
Secondly, Mr. S. Manjunath happens to be a partner, both in M/s. Hindustan Polymers, the petitioner-firm, as well as M/s. Sandeep Srivaras Coffee, the respondent No.2. Therefore, the petitioner would be deemed to be a "borrower" as it is M/s. Sandeep Srivaras Coffee which had borrowed the money from the bank. Hence the petitioner would fall within the definition of the word "borrower".8
Thirdly, since the petitioner does fall within the word "borrower", the DRAT was legally justified in imposing the liability to make a pre-deposit upon the petitioner. Hence the impugned order is legally valid.
5. In rejoinder Mr. Rajagopal submits that the respondent No.1 did not raise objection with regard to Mr. A. Suresh Kumar being a common partner between M/s. Hindustan Polymers and M/s. Sandeep Srivaras Coffee, before the DRT. Thus, a new plea, based on facts, cannot be raised at the appellate stage.
Secondly, the issue is not with regard to the maintainability of the appeal as it is allegedly filed by an un-registered partnership firm. The issue presently before this Court is, whether the liability of pre-deposit can be imposed upon the petitioner, although the petitioner is not a "borrower", and who is per se the tenant in the suit property. Thus, according to the learned counsel, the issue is whether a tenant can be 9 non-suited in limine by imposing a liability upon a tenant, a liability not warranted by the law.
6. Heard the learned counsel for the parties and perused the impugned order.
7. Section 17(1) of the Act is as under:
17(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.
8. Section 17(4A) of the Act is as under:
17(4A) Where -10
(i) any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy, -
(a) has expired or stood determined; or
(b) is contrary to section 65A of the Transfer of property Act, 1882 (4 of 1882); or
(c) is contrary to terms of mortgage; or
(d) is created after the issuance of notice of default and demand by the Bank under sub-section (2) of section 13 of the Act; and
(ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-
clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass 11 such order as it deems fit in accordance with the provisions of this Act.
9. A bare perusal of the provisions clearly reveals that any person, including the "borrower", who is aggrieved by any measures referred to under Sub- Section 4 of Section 13 of the Act, can file an application before the DRT challenging the measures taken by the Bank. Section 17(4A) of the Act further bestows a right upon a tenant, or a lessee to challenge the measure being taken by the Bank.
10. Section 18 of the Act is as under:
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 12 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.
(Emphasis added)
11. A bare perusal of this provision also clearly reveals that the provision begins with the generic words "any person". Therefore, any person aggrieved by any order passed by the DRT, has a statutory right to file an appeal before the Appellate Tribunal provided that the 13 requirement of Section 18 are fulfilled. Interestingly, the very first proviso to Section 18 bifurcates the category of "any person" in two sub-categories, namely an appeal filed by the "borrower", or an appeal filed by the person "other than the borrower". Therefore the provision itself envisages that appeal can be filed either by a "borrower", or by a "non-borrower". Moreover, the second proviso clearly states that no appeal shall be entertained unless the "borrower" has deposited with the Appellate Tribunal, 50% of the amount of debt due from him as claimed by the secured creditors or determined by the DRT, whichever is less.
12. Therefore, the question before this Court is, whether the word "borrower" would include a tenant, or a non-borrower, or not?
13. Needless to say the golden rule of interpretation is to go by the plain and grammatical 14 meaning of a provision. Section 2(f) of the Act itself defines the word "borrower" as under:
2(f) - "borrower" means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who becomes borrower of a asset reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance or who has raised funds through issue of debt securities.
14. Therefore, wherever the word "borrower" is used in the Act, the definition would necessarily has to be read therein. The definition of the word "borrower" does not include a tenant. Therefore, a tenant cannot be deemed to be a "borrower". Thus, a tenant, certainly, cannot be brought within the definition of the word "borrower". Hence, a tenant is a non-borrower. 15 Therefore, he would fall within the words "by the person other than the borrower". Thus, clearly, the liability to make a pre-deposit under the proviso is limited only to the "borrower", and cannot, by any stretch of imagination, be extended to a "non-borrower". The only liability imposed under Section 18 upon a non-borrower is the liability to pay the fees as prescribed by the rules. Thus, it is only this particular liability which could have been imposed upon the petitioner who claims to be the tenant. Therefore, the DRAT is certainly unjustified in directing the petitioner to make a pre-deposit of Rs.2,10,00,000/-. Such a direction, obviously, is contrary to the requirement of second proviso to Section 18(1) of the Act.
15. For the reasons stated above, this petition is hereby allowed. The order dated 24.04.2018, is set aside. The DRAT is directed to hear the appeal on its merit. Needless to say all the contentions are kept open 16 to both the parties, to be argued before the DRAT, including the contention with regard to maintainability.
SD/-
JUDGE SD/-
JUDGE RD