Madras High Court
M/S. K.G. Foundations (P) Ltd vs Uco Bank And Others 17 on 30 June, 2022
Author: M. Duraiswamy
Bench: M.Duraiswamy
C.M.S.A.No.46 of 2022
and C.M.P. No.10102 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 30.06.2022
CORAM :
THE HON'BLE MR. JUSTICE M.DURAISWAMY
AND
THE HON'BLE MR.JUSTICE SUNDER MOHAN
C.M.S.A.No.46 of 2022
and C.M.P. No.10102 of 2022
M/s. K.G. Foundations (P) Ltd.,
Re. by its Authorised Representative/
Assistant Manager Mr.Mahendra Chug
No.5, Ground Floor, Marble Arch,
Bishops Wallers Avenue East,
Mylapore, Chennai – 600 004. ... Appellant
v.
1. V.Gnanasambandam
2. G.Danya ... Respondents
Civil Miscellaneous Second Appeal filed under section 58 of TNRERA
Act r/w under section 100 of CPC to set aside the impugned order dated
28.03.2022 passed by the Tamil Nadu Real Estate Appellate Tribunal,
Chennai in Appeal No.7 of 2022.
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C.M.S.A.No.46 of 2022
and C.M.P. No.10102 of 2022
For Petitioner : Mr. K.P. Sanjeev Kumar
JUDGMENT
(Judgment was delivered by M. DURAISWAMY, J.) Challenging the order passed by the Tamil Nadu Real Estate Appellate Tribunal, Chennai in Appeal No.7 of 2022, the appellant before the Tribunal has filed the above Civil Miscellaneous Second Appeal.
2. By the order impugned in the appeal, the Tribunal dismissed the appeal for non-compliance of Section 43(5) of the Real Estate (Regulation and Development) Act, 2016. As per the provision of Section 43(5), where a promoter files an appeal with the Appellate Tribunal, it shall not be entertained, without the promoter first having deposited with the Appellate Tribunal at least 30% of the penalty, or such higher percentage as may be determined by the Appellate Tribunal, or the total amount to be paid to the allottee including interest and compensation imposed on him, if any, or with both, as the case may be, before the said appeal is heard.
Page 2/18https://www.mhc.tn.gov.in/judis C.M.S.A.No.46 of 2022 and C.M.P. No.10102 of 2022
3. In the Judgment reported in 2021 SCC Online SC 1044 [M/s.
Newtech Promoters & Developers Pvt. Ltd. V State of UP and others], the Hon'ble Supreme Court, while dealing with the provision of Section 43(5), held that the promoter, while filing an appeal as against the order passed by the Original Authority, should deposit the entire amount awarded by the Original Authority as a condition precedent for entertaining the appeal. The relevant paragraphs of the Judgment passed by the Hon'ble Supreme Court in the said Judgment reads as follows:-
“.............
121 .......Question no. 4: Whether the condition of predeposit under proviso to Section 43(5) of the Act for entertaining substantive right of appeal is sustainable in law?
122. Before we examine the challenge to the proviso to Section 43(5) of the Act of making pre-deposit for entertaining an appeal before the Tribunal, it may be apposite to take note of of the Act, 2016. Section 43(5) reads as follows: “Section 43(5)43. Establishment of Real Estate Appellate Tribunal …….Page 3/18
https://www.mhc.tn.gov.in/judis C.M.S.A.No.46 of 2022 and C.M.P. No.10102 of 2022 (5) Any person aggrieved by any direction or decision or order made by the Authority or by an adjudicating officer under this Act may prefer an appeal before the Appellate Tribunal having jurisdiction over the matter:
Provided that where a promoter files an appeal with the Appellate Tribunal, it shall not be entertained, without the promoter first having deposited with the Appellate Tribunal at least thirty per cent of the penalty, or such higher percentage as may be determined by the Appellate Tribunal, or the total amount to be paid to the allottee including interest and compensation imposed on him, if any, or with both, as the case may be, before the said appeal is heard.
Explanation – For the purpose of this sub- section “person” shall include the association of allottees or any voluntary consumer association registered under any law for the time being in force.”
123. It may straightaway be noticed that Section 43(5) of the Act envisages the filing of an appeal before the appellate tribunal against the order of an authority or the adjudicating officer by any person aggrieved and where the promoter intends to appeal against an order of authority or adjudicating officer against imposition of penalty, the promoter has to deposit at least 30 per cent of the penalty amount or such higher amount as may be Page 4/18 https://www.mhc.tn.gov.in/judis C.M.S.A.No.46 of 2022 and C.M.P. No.10102 of 2022 directed by the appellate tribunal. Where the appeal is against any other order which involves the return of the amount to the allottee, the promoter is under obligation to deposit with the appellate tribunal the total amount to be paid to the allottee which includes interest and compensation imposed on him, if any, or with both, as the case may be, before the appeal is to be instituted.
124. The plea advanced by the learned counsel for the appellants is that substantive right of appeal against an order of authority/adjudicating officer cannot remain dependent on fulfillment of pre-deposit which is otherwise onerous on the builders alone and only the builders/promoters who are in appeal are required to make the pre-deposit to get the appeal entertained by the Appellate Tribunal is discriminatory amongst the stakeholders as defined under the provisions of the Act.
125. Learned counsel further submits that if the entire sum as has been computed either by the Authority or adjudicating officer, is to be deposited including 30 per cent of the penalty in the first place, the remedy of appeal provided by one hand is being taken away by the other since the promoter is financially under distress and Page 5/18 https://www.mhc.tn.gov.in/judis C.M.S.A.No.46 of 2022 and C.M.P. No.10102 of 2022 incapable to deposit the full computed amount by the authority/adjudicating officer. The right of appreciation of his defence at appellate stage which is made available to him under the statute became nugatory because of the onerous mandatory requirement of predeposit in entertaining the appeal only on the promoter who intends to prefer under Section 43(5) of the Act which according to him is in the given facts and circumstances of this case is unconstitutional and violative of Article 14 of the Constitution of India.
126. The submission in the first blush appears to be attractive but is not sustainable in law for the reason that a perusal of scheme of the Act makes it clear that the limited rights and duties are provided on the shoulders of the allottees under Section 19 of the Act at a given time, several onerous duties and obligations have been imposed on the promoters i.e. registration, duties of promoters, obligations of promoters, adherence to sanctioned plans, insurance of real estate, payment of penalty, interest and compensation, etc. under Chapters III and VIII of the Act 2016. This classification between consumers and promoters is based upon the intelligible differential between the rights, duties and obligations cast upon the Page 6/18 https://www.mhc.tn.gov.in/judis C.M.S.A.No.46 of 2022 and C.M.P. No.10102 of 2022 allottees/home buyers and the promoters and is in furtherance of the object and purpose of the Act to protect the interest of the consumers visaviz., the promoters in the real estate sector. The promoters and allottees are distinctly identifiable, separate class of persons having been differently and separately dealt with under the various provisions of the Act.
127. Therefore, the question of discrimination in the first place does not arise which has been alleged as they fall under distinct and different categories/classes.
128. It may further be noticed that under the present real estate sector which is now being regulated under the provisions of the Act 2016, the complaint for refund of the amount of payment which the allottee/consumer has deposited with the promoter and at a later stage, when the promoter is unable to hand over possession in breach of the conditions of the agreement between the parties, are being instituted at the instance of the consumer/allotee demanding for refund of the amount deposited by them and after the scrutiny of facts being made based on the contemporaneous documentary evidence on record made available by the respective Page 7/18 https://www.mhc.tn.gov.in/judis C.M.S.A.No.46 of 2022 and C.M.P. No.10102 of 2022 parties, the legislature in its wisdom has intended to ensure that the money which has been computed by the authority at least must be safeguarded if the promoter intends to prefer an appeal before the tribunal and in case, the appeal fails at a later stage, it becomes difficult for the consumer/allottee to get the amount recovered which has been determined by the authority and to avoid the consumer/allottee to go from pillar to post for recovery of the amount that has been determined by the authority in fact, belongs to the allottee at a later stage could be saved from all the miseries which come forward against him.
129. At the same time, it will avoid unscrupulous and uncalled for litigation at the appellate stage and restrict the promoter if feels that there is some manifest material irregularity being committed or his defence has not been properly appreciated at the first stage, would prefer an appeal for reappraisal of the evidence on record provided substantive compliance of the condition of pre-
deposit is made over, the rights of the parties inter se could easily be saved for adjudication at the appellate stage.
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130. There are multiple statutes which provide a condition of pre-deposit of a stipulated statutory amount to be deposited before an appeal is entertained by an appellate forum/tribunal for re appraisal of facts and law at the appellate stage and it has been examined by this Court as well. Proviso to Section 18 of SARFAESI Act, 2002 of the Act which provides pre-deposit is as follows:
“18. Appeal to Appellate Tribunal …….
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.”
131. The intention of the legislature appears to be to ensure that the rights of the decreeholder (the successful party) is to be protected and only genuine bona fide appeals are to be entertained. While interpretating Section 18 of SARFAESI Act, this Court in Narayan Chandra Ghosh Vs. UCO Bank and Others 17 observed as under:
Page 9/18https://www.mhc.tn.gov.in/judis C.M.S.A.No.46 of 2022 and C.M.P. No.10102 of 2022 “8. It is wellsettled 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 predeposit 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.”
132. In Har Devi Asnani Vs. State of Rajasthan and Others [2011(14) SCC 160], the validity of proviso to Section 65(1) of the Rajasthan Stamp Act, 1998 came up for consideration in terms of which no revision application could be entertained unless it was accompanied by a satisfactory proof of payment of 50 per cent of the recoverable amount. Relying on the earlier Page 10/18 https://www.mhc.tn.gov.in/judis C.M.S.A.No.46 of 2022 and C.M.P. No.10102 of 2022 decisions of this Court including in Government of Andhra Pradesh and Others Vs. P. Laxmi Devi (Smt.) [2008(4) SCC720], the challenge was repelled and the view expressed in P. Laxmi Devi(supra) was repeated in Har Devi Ashani(supra) wherein this Court held as under:
“In our opinion in this situation it is always open to a party to file a writ petition challenging the exorbitant demand made by the registering officer under the proviso to Section 47A alleging that the determination made is arbitrary and/or based on extraneous considerations, and in that case it is always open to the High Court, if it is satisfied that the allegation is correct, to set aside such exorbitant demand under the proviso to Section 47A of the Stamp Act by declaring the demand arbitrary. It is well settled that arbitrariness violates Article 14 of the Constitution vide Maneka Gandhi v. Union of India [(1978) 1 SCC 248] . Hence, the party is not remediless in this situation.”
133. At the same time, Section 19 of the Consumer Protection Act, 1986 prescribes a condition for predeposit which provides that an appeal shall not be entertained unless 50 per cent of the amount awarded by the State Commission or Rs. 35,000/ whichever is less is deposited before the National Consumer Disputes Redressal Commission (NCDRC). This Court while placing reliance Page 11/18 https://www.mhc.tn.gov.in/judis C.M.S.A.No.46 of 2022 and C.M.P. No.10102 of 2022 on State of Haryana Vs. Maruti Udyog Ltd. and Others [2000(7) SCC 348]; in Shreenath Corporation and Others Vs. Consumer Education and Research Society and Others [2014 (8) SCC 657] held that such a condition is imposed to avoid frivolous appeals.
“7. Section 19 of the Consumer Protection Act, 1986 deals with the appeals against the order made by the State Commission in exercise of its power conferred by subclause (i) of clause (a) of Section 17 and the said section reads as follows:-
“19. Appeals.—Any person aggrieved by an order made by the State Commission in exercise of its powers conferred by subclause (i) of clause (a) of Section 17 may prefer an appeal against such order to the National Commission within a period of thirty days from the date of the order in such form and manner as may be prescribed:
Provided that the National Commission may entertain an appeal after the expiry of the said period of thirty days if it is satisfied that there was sufficient cause for not filing it within that period: Provided further that no appeal by a person, who is required to pay any amount in terms of an order of the State Commission, shall be entertained by the National Commission unless the appellant has deposited in the prescribed manner fifty per cent of the amount or rupees thirtyfive thousand, whichever is less.” Page 12/18 https://www.mhc.tn.gov.in/judis C.M.S.A.No.46 of 2022 and C.M.P. No.10102 of 2022 On plain reading of the aforesaid Section 19, we find that the second proviso to Section 19 of the Act relates to “predeposit” required for an appeal to be entertained by the National Commission.
9. The second proviso to Section 19 of the Act mandates pre deposit for consideration of an appeal before the National Commission. It requires 50% of the amount in terms of an order of the State Commission or Rs 35,000, whichever is less for entertainment of an appeal by the National Commission. Unless the appellant has deposited the predeposit amount, the appeal cannot be entertained by the National Commission. A predeposit condition to deposit 50% of the amount in terms of the order of the State Commission or Rs 35,000 being condition precedent for entertaining appeal, it has no nexus with the order of stay, as such an order may or may not be passed by the National Commission. The condition of predeposit is there to avoid frivolous appeals.”
134. Similarly, under Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006, any appellant, other than the supplier, is required to make a predeposit of 75 per cent to maintain an appeal against any decree, award or order made either by the Micro and Small Enterprises Facilitation Council or by any institution or center providing alternate dispute resolution services to which a reference is made by the Council. Section 19 reads as follows:
Page 13/18https://www.mhc.tn.gov.in/judis C.M.S.A.No.46 of 2022 and C.M.P. No.10102 of 2022 “19. Application for setting aside decree, award or order.—No application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventyfive per cent. of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such court: Provided that pending disposal of the application to set aside the decree, award or order, the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case, subject to such conditions as it deems necessary to impose.”
135. Similarly, the condition of predeposit has been examined recently by this Court in Tecnimont Pvt. Ltd. (Formerly Known As Tecnimont ICB Private Limited) Vs. State of Punjab and Others22, where the validity of Section 62(5) of the Punjab Value Added Tax Act, 2005 (PVAT) which imposes a condition of 25 per cent of predeposit for hearing of first appeal has been upheld. Section 62(5) of the PVAT Act reads as follows:
“62. First Appeal …… (5) No appeal shall be entertained, unless such appeal is accompanied by satisfactory proof of the prior minimum payment of twentyfive per Page 14/18 https://www.mhc.tn.gov.in/judis C.M.S.A.No.46 of 2022 and C.M.P. No.10102 of 2022 cent of the total amount of tax, penalty and interest, if any.
……..”
136. To be noticed, the intention of the instant legislation appears to be that the promoters ought to show their bona fides by depositing the amount so contemplated.
137. It is indeed the right of appeal which is a creature of the statute, without a statutory provision, creating such a right the person aggrieved is not entitled to file the appeal. It is neither an absolute right nor an ingredient of natural justice, the principles of which must be followed in all judicial and quasi judicial litigations and it is always be circumscribed with the conditions of grant. At the given time, it is open for the legislature in its wisdom to enact a law that no appeal shall lie or it may lie on fulfilment of pre condition, if any, against the order passed by the Authority in question.
138. In our considered view, the obligation cast upon the promoter of predeposit under Section 43(5) of the Act, being a class in itself, and the promoters who are in receipt of money which is being claimed by the home buyers/allottees for refund and determined in the first Page 15/18 https://www.mhc.tn.gov.in/judis C.M.S.A.No.46 of 2022 and C.M.P. No.10102 of 2022 place by the competent authority, if legislature in its wisdom intended to ensure that money once determined by the authority be saved if appeal is to be preferred at the instance of the promoter after due compliance of pre- deposit as envisaged under Section 43(5) of the Act, in no circumstance can be said to be onerous as prayed for or in violation of Articles 14 or 19(1)(g) of the Constitution of India. ...........”
4. The ratio laid down by the Hon'ble Supreme in the said judgment squarely applies to the facts and circumstances of the present case.
5. In these circumstances, we are not inclined to entertain the appeal for the reason that the appellant had not deposited the pre-deposit amount before filing the appeal. Accordingly, the Civil Miscellaneous Second Appeal is dismissed. No costs. Consequently, connected Miscellaneous Petition is closed.
[M.D., J.] [S.M., J.]
30.06.2022
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C.M.S.A.No.46 of 2022
and C.M.P. No.10102 of 2022
Index : Yes/No
Speaking Order/Non Speaking Order
Rj
M. DURAISWAMY, J.
and
SUNDER MOHAN, J
Rj
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C.M.S.A.No.46 of 2022
and C.M.P. No.10102 of 2022
C.M.S.A.No.46 of 2022
and C.M.P. No.10102 of 2022
30.06.2022
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