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Judgment
Ashok Menon, Chairperson
The Appellants are aggrieved with the impugned order dated 09.12.2022 in Interim Application (I.A.) No. 2212/2022 in Securitization Application (S.A.) No. 435/2022 on the files of the Debts Recovery Tribunal-Nagpur (D.R.T.), wherein the Ld. Presiding Officer rejected the application without granting any relief to the Appellants concerning the Sarfaesi measures challenged by the Appellants before the D.R.T. The Appellants state that they have a very good prima facie case in challenging the Sarfaesi measures which include the auction sale of the property. It is submitted that the rules have not been complied with. The valuation of the property is also challenged and the Appellants have also challenged the Sarfaesi measures under 13 (2) and 13 (4). The Appellants state that they are under financial strain as is borne out from the income tax returns filed by them and that indulgence may be shown reducing the mandatory pre-deposit to 25% of the debt due for entertaining the appeal u/s 18 (1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act” for short).
Since, the Appellants have challenged the Sarfaesi measures including the sale as per the decision of the Hon’ble Supreme Court of India in Sidha Neelkanth Paper Industries Pvt. Ltd. & Ano. vs. Prudent ARC Ltd & Ors., 2023 SCC OnLine SC 12, the amount of debt due inclusive of interest as of date of the filing the appeal would be the threshold amount for determining the amount is to be deposited. On the date of dismissing the application by the D.R.T. the amount due was a sum of ₹1,53,36,316.93 and within a couple of weeks, the appeal has been filed and not much interest may have accrued.
The Ld. Counsel appearing for the Respondent Bank has vehemently opposed this application and stated that the Appellants should not be given any indulgence and their intention is only to protract the matter even after the sale has been concluded, the possession of the property could not be handed over to the auction purchaser and the movable of the Appellants are lying in the property has not been removed despite there being a specific order from this Tribunal to corporate with Respondent Bank to remove the movables. The Respondents have also filed a reply with a statement of account which indicates that the present due is more than ₹2 crores which includes the legal charges as well as other expenses.
The Ld. Counsel appearing for the Appellants have taken exception to that statement stating that the breakup of the legal charges and the other expenses have not been stated in the statement and that the portion of the interest is also not detailed through a certified extract of the account statement.
The Ld. Counsel appearing for the Respondent Bank submits that because the Appellants did not remove the movables several guards were engaged as security to the property and expenses were incurred on that account. The exact amount due to the Appellants is not to be calculated at this stage when the application for waiver of pre-deposit is being considered. The Appellants have raised certain contentions which also would have to be decided in detail in the appeal. I would only conclude that the Appellants have an arguable case and they have to some extent succeeded in proving that they are under financial strain because the income tax return filed by them does not show a large income.
However, the Ld. Counsel appearing for the Respondent Bank has pointed out that the income tax return and balance sheet of the firm has not been produced which would have given a clear picture of the income of the Appellants. Moreover, it is also pointed out that they own other restaurants and bars from which they are earning income but the income tax returns pertaining to income from those restaurants and bars also show negative income and there is no positive evidence to show that the Appellants have income sufficient to deposit the 50% amount of the debt as pre-deposit.
Taking the amount mentioned in the order of the D.R.T. as the threshold amount, the Appellants are directed to deposit a sum of ₹70 lakhs as pre-deposit for entertaining this appeal. The Ld. Counsel appearing for the Appellants undertakes to deposit ₹25 lakhs by 08.01.2024 and the balance amount shall be deposited in two instalments within the gap of two weeks each as stated hereunder.
Numbers of Instalments
Payment on or before
1st Instalment of ₹ 20,00,000/-
22.01.2024
2nd Instalment of ₹ 25,00,000/-
05.02.2024
Subject to the deposit of a sum of ₹25 lakhs on or before 08.01.2024, the Appellants shall be entitled to stay of the handing over the possession of the property till the next date of hearing.
The Ld. Counsel appearing for the Respondent Bank submits that the Appellants have not complied with the direction of this Tribunal to remove the movable. The Respondents are at liberty to move a separate application with the prayer to direct the Appellants to comply with the order of this Tribunal.
Default in payment of any of the instalments/amount shall entail dismissal of the appeal without any further reference to this Tribunal.
The amount shall be deposited in the form of a Demand Draft with the Registrar of this Tribunal.
As and when the said amounts are deposited, they shall be invested in term deposits in the name of Registrar, DRAT, Mumbai, with any nationalised bank, initially for 13 months, and thereafter to be renewed periodically.
With these observations, the I.A. is disposed of. The Respondents is at liberty to file a reply in the Appeal with an advance copy to the other side.
Post on 09.01.2024 for reporting compliance