2025:HHC:9582 IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA CWP No.10918 of 2024 a/w CWP No.11346 of 2024 Decided on:18.03.2025 __________________________________________________________ 1. CWP No.10918 of 2024 Harbhajan Singh Nagpal ...Petitioner Versus State Bank of India & ors. ...Respondents 2. CWP No.11346 of 2024 Harbhajan Singh Nagpal ...Petitioner Versus State Bank of India & ors. ...Respondents Coram Hon’ble Mr. Justice G.S. Sandhawalia, Chief Justice Hon’ble Mr. Justice Ranjan Sharma, Judge 1Whether approved for reporting?. For the petitioner: Mr. Sumeet Raj Sharma, Advocate, in both petitions. For the respondents: Mr. Arvind Sharma, Advocate and Ms. Kiran Sharma, Advocate, in both petitions. G.S. Sandhawalia, Chief Justice [Oral] By common order, Writ Petition No.10918 of 2024 and Writ Petition No.11346 of 2024, filed by the 1 Whether reporters of Local Papers may be allowed to see the judgment? 2025:HHC:9582 - 2 - petitioner, who is a guarantor, are being disposed of. 2. The basic challenge is that the second writ petition bearing No. CWP No.11346 of 2024 was filed on account of an order being passed by Debts Recovery Appellate Tribunal, Delhi, on 24.09.2024, whereby the Tribunal declined the benefit of the amount which was deposited with the Bank in pursuance of this Court’s order in CWP No.4979/2021 as directed on 14.09.2021 to the tune of Rs.1,03,16,564.34/-to be treated as a pre-deposit. The Tribunal came to the conclusion that the aforesaid amount could not be treated as a pre- deposit and therefore dismissed the appeal, giving liberty to the petitioner to revive the same, in case the compliance is made as per requirement of pre-deposit within two weeks, failing which the appeal would automatically stand dismissed. 3. The reason, as such, given by learned Appellate Tribunal was that the amount could not have been appropriated by the Bank, in view of the direction passed by the Tribunal on the request of petitioner on 01.05.2023 and the fact that the writ petitioner had also been asked whether he was prepared to allow the 2025:HHC:9582 - 3 - appropriation of said amount for reducing his liability while noticing that Bank had admitted and was ready to adjust the aforesaid amount. The pre-deposit of 25% of the amount mentioned by the Bank in its notice dated 02.06.2020 under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (for short “SARFAESI Act”), which was to the tune of Rs.88,31,822.49/- was offered to be deposited by the petitioner. It was noticed that the said amount at that point of time (27.02.2020) was outstanding and has now swollen to Rs.1,86,79,114/- with interest and other charges. 4. Reliance has been placed upon the judgment of Apex Court in Sidha Neelkanth Paper Industries Pvt. Ltd. & Anr. versus Prudential ARC Ltd. & Ors., 2023 SCC Online SC 12 and Section 18 of the SARFAESI Act. Similar view having been taken by the Apex Court in Civil Appeal No.538/2021, titled as Kotak Mahindra Bank Pvt. Ltd. vs. Ambuj A Kaliwal & Ors., decided on 16.02.2021 which was a case of adjustment of auction amounts received that even the High Courts do not have the power to waive the pre-deposit in its entirety, which 2025:HHC:9582 - 4 - had weighed with Appellate Tribunal. 5. We are of the considered opinion that the impugned order is not sustainable, keeping in view the facts and circumstances of the case and the directions issued by this Court on earlier occasions as the interest of the Bank is being looked after. It is not disputed that the amount which has been deposited as spelt out is approximately Rs.1.1 Crore on account of being put in the fixed deposit receipts and thereafter has been put in the requisite interest bearing no lien account in the form of an FDR. 6. It is also the stand of the respondent-Bank that at present the outstanding liability is approximately Rs.1.95 Crore and therefore, learned counsel for the respondent-Bank is not in a position to dispute that the amount as now available to the Bank is more than 50% of the amount which is to be recovered. 7. Keeping in the view above backdrop, we proceed to discuss the facts of the case. 8. Section 18 of the SARFAESI Act provides that an appeal can only be entertained unless the borrower has deposited with the Appellate Tribunal 50% of the 2025:HHC:9582 - 5 - amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less. As per the third proviso, the Appellate Tribunal has power to reduce the amount but not less than 25% of the debt referred for reasons to be recorded. 9. The solitary purpose apparently is to ensure that, on account of decision by Debts Recovery Tribunal against the borrower, the amount is secured since appropriate orders can be passed by the Debts Recovery Appellate Tribunal at the time of pre-deposit, if so required. 10. In the instant case, the petitioner had firstly approached this Court against the action taken on 02.06.2020 under Section 13(2) and subsequent proceedings dated 10.08.2020 under Section 13(4) of the SARFAESI Act, which had led to the order being passed under Section 14(I) of the SARFAESI Act, on 05.03.2021, whereby, an Executive Magistrate had directed to take over and hand over the possession of the property in question to the respondent-Bank. The order passed by the Co-ordinate Bench of this Court on 14.09.2021 in CWP No.4979 of 2021, directing the present writ 2025:HHC:9582 - 6 - petitioner to deposit the said amount, which was to be subject to final outcome of further orders, reads as under:- “ As per respondent-Bank an amount of Rs.1,03,16,564.34 stands due towards the petitioner. Learned counsel for the petitioner on the basis of the instructions imparted to him by Mr. Harbhajan Singh Nagpal-petitioner, who is otherwise present in this Court, states that the entire amount of Rs.1,03,16,564.34 shall be deposited in the Registry of this Court by way of cheque within two days. His statement is taken on record. Registry is directed to accept the payment through crossed cheque payable in favour of the Registrar General, H.P. High Court. This deposit obviously shall be subject to the final outcome of the further orders that may be passed by this Court from time to time. It would be noticed that a limited prayer is made in this petition for a direction to respondent Bank to furnish Bank account so as to facilitate the settlement of the account. In such circumstances, let the representatives of both the parties sit together and reconcile the account. The first meeting in this regard be held tomorrow. The Corporate Centre of respondent-Bank GIDC Department, Belapur, Maharashtra is directed to provide access to the respondent-Bank for obtaining statement of accounts for the year, 2008 onwards pertaining to the petitioner within two days from today. This entire process be completed within two weeks. List on 28.09.2021.” 11. The aforesaid writ petition [CWP No.4979 of 2021] was dismissed on 18.11.2021, on the ground that the prayer, as such, was to furnish accounts; and 2025:HHC:9582 - 7 - provide loan records; and to extend One Time Settlement Policy and indulgence had been shown to the petitioner and that the remedy lies elsewhere. 12. On account of preferring his remedy before DRT-I Chandigarh, by filing application dated 26.11.2021, the second writ petition bearing No.7677 of 2021, was then filed on account of the fact that there was no Officer-In Charge at Chandigarh and the cases were being taken by the Presiding Officer at Jaipur and in such circumstances due to the authorization granted to DRT Jaipur, the writ petition was disposed of on 15.12.2021 with a direction that the amount deposited as such to be disbursed as per the directions that may be issued by the DRT. The relevant portion of the order reads as under:- “7. Considering that the petitioner has already availed his remedy before the DRT-I Chandigarh and the District Magistrate had already stayed the impugned notice till further orders and that the Presiding Officer DRT Jaipur has now been authorized to take up the urgent cases filed before the DRT-I, Chandigarh and also taking note of the fact that the entire outstanding amount in the loan account of respondents No.4 to 6 is now lying deposited with the Registry of this Court, we are not persuaded to entertain the present writ petition directly. The writ petition is therefore, disposed of with liberty to the petitioner as well as to the respondents to approach DRT Jaipur for appropriate interim orders with regard to taking possession and/or auction of the 2025:HHC:9582 - 8 - mortgaged property covered by Schedule ‘C’ to the notice to borrower dated 2.6.2020 (Annexure P-11) and the amount of Rs.1,03,16,564.34 deposited by the petitioner with the Registry of this Court pursuant to order dated 14.09.2021, passed by this Court in CWP No.4979 of 2021, disbursement of which shall abide by the directions that may be issued by the DRT. It is expected from the DRT Jaipur to decide the application filed by either of the parties within one month from the date of filing of the application before the DRT Jaipur. However we, for the present, do not deem necessary to pass interim order in view of the order passed by the District Magistrate, Shimla. 8. Pending application(s), if any, also stand(s) disposed of.” 13. Resultantly, the DRT Chandigarh, while dismissing the Securitization application on 18.03.2023 and directed that the Registrar of this Court, would remit the sum of Rs.1,03,16,564.34/- lying deposited with it to the respondent-Bank and the Bank was at liberty to adjust the same in the loan account and would also be entitled to recover its remaining dues, if any, from the borrowers and the petitioner. The relevant portion of order dated 18.03.2023, passed in application under Section 17 of the SARFAESI Act, reads as under:- “11. I am of the considered view that applicant has failed to show that there was any violation by the Bank in the proceedings against him. During the pendency of the proceedings before the Hon’ble High Court of Himachal Pradesh in CWP No.4979/2021, the applicant had deposited Rs.1,03,16,564.34. While disposing of CWP No.7677/2021, the Hon’ble High Court of 2025:HHC:9582 - 9 - Himachal Pradesh had ordered that the disbursement of the amount shall abide by the directions that may be issued by the DRT. Since, I am of the view that there is no substance in the SA of the applicant, I hereby order that the Register of Hon’ble High Court of Himachal Pradesh would remit the sum of Rs.1,03,16,564.34 lying with it to State Bank of India. SBI would adjust the same in the loan account of the borrower. The Bank would also be entitled to recover its remaining dues, if any, from the borrowers and the applicant. 12. There is no merit in the present SA and the same is hereby dismissed. All the pending IAs, if any, are also dismissed, accordingly. File be consigned to the record room after due completion.” 14. On filing of the appeal before DRAT, the writ petitioner had objected to the said amount to be released to the Bank and resultantly the DRAT was persuaded to pass an order that the amount be kept in an interest bearing No Lien Account in the form of FDR, while leaving it open that notice will be given to take physical possession of the property. The relevant portion of the order dated 01.05.2023, reads as under:- “This matter has been taken up by me through Video Conferencing. This is an appeal against the order dated 18.03.2023 whereby SA of the appellant was dismissed. Ld. Counsel for appellant states that appellant has deposited a sum of Rs.1,03,16,564.34 before the Hon’ble High Court of Himachal in W.P. (C) No.4979/2021. Ld. Counsel for appellant further states that Ld. DRT has ordered that aforesaid 2025:HHC:9582 - 10 - amount be released to the Bank, therefore, prays that the said order may be stayed to that extent. Heard. Issue of pre-deposit is yet to be decided. Let the aforesaid amount be released, in favour of the Bank and be kept in an interest bearing No Lien Account in the form of FDR or any other mode but Bank will not appropriate the said amount till further order of this Tribunal. Ld. Counsel for appellant states that he has apprehension that respondent Bank will take physical possession of the premises in question. On the other hand, Ld. Counsel for respondent Bank states that in an eventuality the physical possession of the premises in question is to be taken by the Bank at least fifteen days’ notice will be given to the appellant before taking possession. List the matter for 16.05.2023 for hearing on the aspect of pre-deposit.” 15. On account of Bank wanting to take physical possession of property, another application was filed which led to the passing of order dated 04.07.2024, whereby, it was noticed that amount was lying in an interest bearing No Lien Account with the Bank, who had moved an application for appropriation of the amount and requirement of seven days notice was made mandatory for taking physical possession of the property vide order dated 04.07.2024 which reads as under:- “This matter has been taken up by me through Video Conferencing. I.A No. 657/2024 This is an application for restraining the Bank from taking physical possession of the property involved 2025:HHC:9582 - 11 - in the matter. Ld. counsel for the appellant submits that appellant has received notice dated 20.06.2024 for taking possession of the premises within 15 days. Ld. counsel for the appellant states that appellant has already deposited an amount of Rs.1,03,16,564.34 in pursuance of the direction of Hon’ble High Court in CWP No.4679/2021, which is now lying in an interest-bearing no-lien account with the respondent Bank in view of the order dated 01.05.2023 passed by this Tribunal and the Bank has moved an application (I.A. No.483/2023) before this Tribunal seeking permission to appropriate the same. Ld. Counsel for the respondent Bank, on the other hand, states that the Bank is not going to take physical possession of the property in question for now and in case the Bank proceeds to take possession of the property, it will give seven days’ prior notice to the appellant. In view of the above, list the matter on 29.07.2024, the date already fixed. In case the Bank gives seven days notice for taking physical possession of the property before the next date of hearing, the appellant will be at liberty to approach this Tribunal for an early hearing.” 16. Since the Bank had insisted for physical possession, it led to filing of first writ petition No.10918 of 2024, wherein, it was noticed that in spite of deposit of the entire outstanding amount kept in deposit with the Bank, the physical possession was sought to be taken by notice dated 07.09.2024, (Annexure P-15) which is also subject matter of challenge and also for taking possession of the property, therefore, the notices dated 07.09.2024 and 04.09.2024 (Annexure P-16) were stayed 2025:HHC:9582 - 12 - on 24.09.2024. Thereafter, the impugned order dated 24.09.2024 came to be passed by the DRAT on the same date by dismissing the appeal, on the ground that the pre-deposit has not been done. 17. A perusal of the paper-book would go on to show that the writ petitioner while opposing the application for appropriation of the amount received from this Court which was kept in FDR Account has taken a stand that as per Section 18 of the SARFAESI Act, it was only liable to deposit maximum 50% of the amount determined and claimed and he was ready to comply with the direction that the amount could be liquidated, in favour of the Bank in view of the order dated 01.05.2023, already reproduced above. 18. Similarly, the plea in the reply was that till the final adjudication of the issues made by DRAT, the Bank had no right to claim liquidation of the amount along with interest and thus the application was opposed, which led to passing of order dated 04.07.2024. Thus apparently, it is clear that the petitioner has been very candid in stating before the DRAT that the amount which has been deposited, is liable to be adjusted against 50% 2025:HHC:9582 - 13 - amount for the pre-deposit. 19. The judgment of Apex Court in Axis Bank versus SBS Organics Private Limited and Another, (2016) 12 Supreme Court Cases 18, also discusses the issue as such of the limited right of the Bank to appropriate the amount which has been deposited to the Tribunal as pre-deposit while referring to Section 171 of the Contract Act,1872. The same reads as under: “The appeal under Section 18 of the Act is permissible only against the order passed by DRT under Section 17 of the Act. Under Section 17, the scope of enquiry is limited to the steps taken under Section 13(4) against the secured assets. The partial deposit before DRAT as a precondition for considering the appeal on merits in terms of Section 18 of the Act, is not a secured debt either, since the borrower or the aggrieved person has not created any security interest, on such pre-deposit in favour of the secured creditor. If that be so, on disposal of the appeal, either on merits or on withdrawal, on or being rendered infructuous, in case, the appellant makes a prayer for refund of the pre-deposit, the same has to be allowed and the pre-deposit has to be returned to the appellant, unless the Appellate Tribunal, on the request of the secured creditor but with the consent of the depositors, had already appropriated the pre-deposit towards the liability of the borrower, or with the consent, had adjusted the amount towards the dues, or if there be any attachment on the pre-deposit in any proceedings under Section 13(10) of the Act read with Rule 11 of the Security Interest (Enforcement) Rules, 2002, or if there be any attachment in any other proceedings known to law.” 20. The said view was followed in CA 6016-17 of 2025:HHC:9582 - 14 - 2019 M/s Kut Energy Pvt. Ltd. and others versus the Authorized Officer, PNB. 21. In our considered opinion, it was open to the DRAT to put appropriate condition, as such, at the time when the stay applications were filed by the writ petitioner that the amount be not appropriated by the Bank and directions were also issued on 01.05.2023 that amount be put in an interest bearing No Lien Account while noticing that the issue of pre-deposit was pending. The end result is that the Bank’s interest was secured and therefore, the Bank could not also take necessary steps by resorting to taking possession of secured property and also by retaining the amount as the solitary purpose is to secure its interest which the Tribunal was supposed to take care at the time of receipt of amount from this Court. 22. In such circumstances, we are of the considered opinion that the orders passed by the Tribunal dated 24.09.2024 are not sustainable and liable to be set-aside. 23. At this stage, it is also brought to our notice by learned counsel for the petitioner on instructions that 2025:HHC:9582 - 15 - the petitioner is willing if the amount as such be appropriated against the amount, which is due in case appeal is dismissed on merits. 24. In such circumstances, the interest of the Bank being duly protected, we do not see any plausible reason that the impugned order as such can stand judicial scrutiny. 25. Accordingly, we allow these writ petitions and set-aside the order and direct that the Tribunal shall consider the amount, which is lying with the Bank, as a pre-deposit and shall revive and pass fresh orders on the issue of pre-deposit and then hear the appeal. 26. In view of the above, the present writ petitions are disposed of along with pending miscellaneous application(s), if any. (G.S. Sandhawalia) Chief Justice (Ranjan Sharma) Judge March 18, 2025 [Himani/Shivender]