Chhattisgarh HC: Amount under S. 13(2) notice is to be considered for calculating the deposit amount under S. 18 and not any subsequent interest

The Chhattisgarh High Court vide its judgment dated May 18, 2020 in the matter of Shri Mohan Products Private Limited v. State Bank of India and ors., adjudicated upon an issue as to whether the statutory deposit of 50% to be made in terms of the second proviso to Section 18(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI”) to have the appeal entertained by the Debts Recovery Appellate Tribunal (“DRAT”) is to be reckoned with reference to the amount claimed by the bank in the notice issued under Section 13(2) of the SARFAESI or will it include the subsequent interest as well (as on the date of filing of the appeal). Position under the law It may be relevant to note that the second proviso to Section 18(1) of the SARFAESI places a bar to entertain the appeal, unless the borrower has deposited 50% of the amount of debt due from him as claimed by the secured creditor or determined by the DRAT, whichever is less. The appeal before the DRAT is from an order passed by the Debt Recovery Tribunal (“DRT”) under Section 17, enabling any person including borrower, aggrieved of any measures referred to in Section 17(4) taken by the secured creditor, to seek remedy by filing an application before the DRT. The cause of action for filing an application under Section 17 before the DRT is with reference to the course and proceedings arising out of Section 13(2), read with Section 13(4) of the SARFAESI and if anybody is aggrieved by the order passed by the DRT, the said order is to be challenged before the DRAT under Section 18. Judgment The Chhattisgarh High Court held that the 50% of the amount to be deposited by the borrower for entertaining the appeal preferred before the DRAT, in terms of the second proviso to Section 18(1) of the SARFAESI Act, is 50% of the amount of debt due from him as claimed by the secured creditors in the notice issued under Section 13(2) of the SARFAESI Act and never beyond to include future interest or any subsequent interest between the period of issuance of notice under Section 13(2) of the SARFAESI and the date of filing of appeal. It was stated as follows ”When Section 13 (2) notice is issued by the secured creditor, it will include the principal amount and also 'interest' having become due as on date. It cannot include any 'future interest', to have it termed as 'due' as on the date of said notice. To put it more clear, future interest is not a 'debt due' on the date of issuance of Section 13(2) notice. The debt due from borrower, as claimed by the secured creditor, can only be the amount as shown in the notice issued under Section 13(2) of the SARFAESI Act and as such, it cannot include future interest to be accrued till the date of filing the appeal. This is more so, since the terminology used in the second proviso to Section 18(1) of the said Act does not say that the amount to be deposited is 50% of the amount 'claimable' by the secured creditor. It is only 50% of the amount claimed by the secured creditor which has already become due.... In other words, it should be 'due' when it is claimed; as the term 'debt' does not say what is 'claimable' as due, so as to include the 'future interest'. The second proviso to Section 18(1) of the SARFAESI Act also does not say that 50% of the amount to be deposited is that of the "total amount outstanding as on the date of filing of the appeal", so as to include the subsequent interest after issuance of notice under Section 13(2) of the SARFAESI Act. Insofar as, the provision does not say anything with regard to the future/subsequent interest, it cannot be read into the Act; which otherwise would amount to the Court's entering into the forbidden field, re-writing the law.” Please find a copy of the judgment here. This update has been contributed by Arka Majumdar (Partner) and Debanik Bid (Associate).