SIDHA NEELKANTH PAPER INDUSTRIES PVT. LTD. & ANR versus PRUDENT ARC LTD. & OTHERS

Citation: [2023] 1 S.C.R. 553 · Decided: 05-01-2023 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Disposed off

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Judgment (excerpt)

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   [2023] 1 S.C.R. 553
553
SIDHA NEELKANTH PAPER INDUSTRIES PVT. LTD. & ANR
v.
PRUDENT ARC LTD. & OTHERS
(Civil Appeal No. 8969 of 2022)
JANUARY 05, 2023
[M. R. SHAH AND B. V. NAGRATHNA JJ.]
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002: s.18 – Appeal to
appellate tribunal – Pre-deposit of 50% of the amount due from the
borrower as claimed by the secured creditor under the second proviso
of s. 18 – Requirement of – Auction sale – Amount already been
recovered/realised by the secured creditor by selling the mortgaged
property through an auction– While calculating the amount of “debt
due”, the amount deposited by the auction purchaser on purchase
of the secured assets, if to be adjusted and/or appropriated towards
the amount to be deposited by the borrower u/s. 18 i.e., 50% of the
debt due – Held: Under s. 18, the borrower has to deposit 50% of
the amount of “debt due” as claimed by the bank/financial
institution/assignee along with interest as claimed in the notice u/s.
13(2) – The borrower can take the benefit of the amount received
by the creditor in an auction sale only if he unequivocally accepts
the sale – Borrower is not entitled to claim adjustment/appropriation
of the amount realised by selling the secured properties and
deposited by the auction purchaser when the auction sale is also
under challenge – On facts, as the auction sale was challenged by
the borrowers, the High Courts erred in directing to adjust/
appropriate the amount realised by auction sale of the secured
properties/deposited by the auction purchasers while considering
the 50% of the amount as pre-deposit to be deposited by the
borrower, while preferring an appeal before the DRAT – Recovery
of Debts and Bankruptcy Act, 1993 – s. 2(g).
s. 18 - “Debt due” u/s. 18, if includes the liability plus interest
– Held: “Debt” means any liability inclusive of interest – On facts,
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SUPREME COURT REPORTS
[2023] 1 S.C.R.
the High Court erred in excluding the amount payable towards
interest while considering the “debt due” – Recovery of Debts and
Bankruptcy Act, 1993 – s. 2(g).
Disposing of the appeals, the Court
HELD: 1.1 As per Section 2(ha) of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002, “debt” shall have the same meaning assigned
to it in clause (g) of Section 2 of the Act 1993. As per section
2(g) of the Act 1993, “debt” means any liability inclusive of interest
which is claimed as due from any person, by a bank or a financial
institution during the course of any business activity undertaken
by the bank or the financial institution, in cash or otherwise,
whether secured or unsecured, or assigned, or whether payable
under a decree or order of any civil court or any arbitration award
or otherwise or under a mortgage and subsisting on, and legally
recoverable on the date of the application. That the “debt” means
any liability inclusive of interest. [Para 13][569-D-F]
1.2 An appeal under Section 18 of the SARFAESI Act is
permissible against the order passed by the DRT under Section
17 of the SARFAESI Act. Under Section 17, the scope of enquiry
is limited to the steps taken under Section 13(4) against the
secured assets. Therefore, whatever amount is mentioned in the
notice under Section 13(2) of the SARFAESI Act, in case steps
taken under Section 13(2)/13(4) against the secured assets are
under challenge before the DRT will be the ‘debt due’ within the
meaning of proviso to Section 18 of the SARFAESI Act. In case
of challenge to the sale of the secured assets, the amount
mentioned in the sale certificate will have to be considered while
determining the amount of pre-deposit under Section 18 of the
SARFAESI Act. However, in a case where both are under
challenge, namely, steps taken under Section 13(4) against the
secured assets and also the auction sale of the secured assets, in
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that case, the “debt due” shall mean any liability (inclusive of
interest) which is claimed as due from any person, whichever is
higher. [Para 13][567-H; 568-A-C]
1.3. As per the second proviso to Section 18 of the
SARFAESI Act, it is the “borrower” who has preferred an appeal
before the Appellate Tribunal and the “borrower” who shall have
to deposit 50% of the amount of “debt due” from him. If the
words used in the second proviso to Section 18 of the SARFAESI
Act are “borrower has to deposit”, it is not apprecia

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