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

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

For an appeal under Section 18 SARFAESI by a borrower who challenges steps under Section 13(2)/13(4) and also challenges the auction sale, the borrower must deposit fifty per cent of the 'debt due' as claimed by the secured creditor inclusive of interest (as per Section 2(g) RDDB Act); proceeds deposited by an auction purchaser cannot be adjusted/appropriated towards the borrower's pre-deposit where the auction sale itself is under challenge.

Parties
Borrower/appellant: Sidha Neelkanth Paper Industries Pvt. Ltd.; Secured Creditor/assignee/appellant: Prudent ARC Limited; Original Secured Creditor: Andhra Bank; Auction Purchaser/respondent: M/s Tejswi Impex Pvt. Ltd.
Jurisdiction
India
Judgment Date
05 January 2023
Procedural Posture
Civil Appeal / Disposed (final Judgment)
Outcome
Civil Appeal Nos. 8970, 8972, 8973 and 8974 of 2022 allowed; Civil Appeal No. 8969 of 2022 dismissed; appeals disposed of.
Legal Topics
Pre Deposit Under Section 18 SARFAESI Act, Definition of Debt (inclusive of Interest), Treatment of Auction Sale Proceeds, Adjustment/appropriation of Sale Proceeds, Scope of Challenge Under Section 17/13 SARFAESI Act
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Recovery of Debts and Bankruptcy Act, 1993 Banking and Finance Litigation Appeal/tribunal Procedure Pre Deposit Under Section 18 SARFAESI Act Definition of Debt (inclusive of Interest) Treatment of Auction Sale Proceeds Adjustment/appropriation of Sale Proceeds +1 more

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Parties

Sidha Neelkanth Paper Industries Pvt. Ltd.

Borrower/appellant

Prudent ARC Limited

Secured Creditor/assignee/appellant

Andhra Bank

Original Secured Creditor

M/s Tejswi Impex Pvt. Ltd.

Auction Purchaser/respondent

Procedural Posture

Civil Appeal / Disposed (final Judgment)

Legal Issues

  1. 1 Whether auction-sale proceeds deposited by an auction purchaser can be adjusted/appropriated towards the borrower's statutory pre-deposit under Section 18 of the SARFAESI Act when the borrower has challenged the auction sale
  2. 2 Whether the term 'debt due' under Section 18 of the SARFAESI Act includes liability plus interest as per Section 2(g) of the Recovery of Debts and Bankruptcy Act, 1993
  3. 3 How to determine the 'debt due' for computing pre-deposit when both the Section 13(2)/13(4) steps and the auction sale are under challenge

Ratio Decidendi

For an appeal under Section 18 SARFAESI by a borrower who challenges steps under Section 13(2)/13(4) and also challenges the auction sale, the borrower must deposit fifty per cent of the 'debt due' as claimed by the secured creditor inclusive of interest (as per Section 2(g) RDDB Act); proceeds deposited by an auction purchaser cannot be adjusted/appropriated towards the borrower's pre-deposit where the auction sale itself is under challenge.

Court Disposition

Civil Appeal Nos. 8970, 8972, 8973 and 8974 of 2022 allowed; Civil Appeal No. 8969 of 2022 dismissed; appeals disposed of.

Orders

  • Borrower shall deposit 50% of the amount of 'debt due' as claimed by the bank/financial institution/assignee along with interest as claimed in the notice under Section 13(2) of the SARFAESI Act
  • Borrower is not entitled to claim adjustment/appropriation of amounts realised by selling the secured properties and deposited by the auction purchaser when the auction sale is also under challenge