ASREC (India) Ltd vs Fastgrowth Hospitality LLP & Ors

Ashok Menon, Chairperson

This is an application for a stay of the operation and effect of the impugned order dated 02.06.2022 in I.A. No. 1377/2022 in S.A. No. 160/2022 on the files of Debts Recovery Tribunal No. II, Mumbai (‘DRT’ for short) granting an ad-interim order against the Appellant from proceeding with the Sarfaesi measures. The Appellant is aggrieved and hence in Appeal.

The Ld. Presiding Officer had in the above-mentioned interlocutory application granted only an ad-interim order against the Appellant making it clear that the parties shall complete the pleadings and be ready for the final hearing of the Securitisation Application as well as the interlocutory application and therefore, the Ld. Presiding Officer thought it appropriate to protect the interest of the Applicant in the S.A. by granting an ad-interim relief in terms of prayer (c) in the application which reads thus:

“c) that this Hon’ble Tribunal may pass an order of injunction and restrain the Respondent, its officers, servants, agents, assigns and successors in office from proceeding further under the provisions of SARFAESI Act in respect of the subject properties pending the hearing and final the disposal of this securitisation application.”

The points which led the Ld. P.O. to find a prima facie case in the favour of the Applicant in the S.A. are as follows:

(a) That the Mamlatdar vide his notice dated 09.05.2022 sub-delegated the authority to take physical custody of the secured assets to a “Head clerk”.

(b) That the demand notice under Sec. 13(2) of the SARFAESI Act prima facie demonstrate capitalisation of the penal interest with quarterly rests which is apparently against the settled position;

(c) That the notice under Sec. 13(2) does not provide a breakup of the principal, interest and penal interest sought to be recovered and therefore, violates Sec. 13(3) of the SARFAESI Act.

The Appellant is aggrieved with the stalling of the measures because the principal amount outstanding from the Respondents towards the debt is ₹ 22,50,66,826/- and the interest chargeable on this principal amount is @ 14% per annum. There is, therefore, no dispute that on the principal amount aforementioned, there is a liability to pay interest of ₹ 2,03,57,542/- as of 24.08.2021. The technical objection has been raised only with the intention to obtain an order of stay. It is also contended that a detailed perusal of the account statements would indicate no capitalisation of penal interest as alleged.

It is true that the Mamlatdar has in the notice dated 09.05.2022 sub-delegated the task of taking possession to a “Head clerk”. The Appellant has no objection to setting aside that notice of the Mamlatdar and necessary directions being issued by the DRT. There was no necessity to stall the entire Sarfaesi measures because of this infirmity.

Regarding the flaw pointed out in the notice under Sec. 13(3) of the SARFAESI Act, the Ld. Counsel for the Appellant relies on the decision of the Hon’ble Supreme Court in the L & T Housing Finance Ltd V/s Trishul Developers & Ano. (2020) 10 SCC 659, the decision of the Hon’ble Gujarat High Court in Sugarwala Trdelink Pvt. Ltd. vs. Authorised Officer, Bank of India MANU/GJ/2331/2021 and the decision of the Hon’ble Delhi High Court in State Bank of India V/s DRAT (2010) (115) DRJ 304 (DB). The Ld. Counsel also relies upon the decision of the Hon’ble Apex Court in ARCE Polymers Pvt. Ltd. vs. Alpine Pharmaceuticals Pvt. Ltd. & Ors (2022) 2 SCC 221 to vouch for the position that a statutory right can be waived by implied conduct of the borrower who is the beneficiary of that statutory provision. It is urged by the Ld. Counsel for the Appellant that unless the debtor is able to show any substantial prejudice caused on account of procedural lapse as prescribed under the Act or Rules framed, the measures cannot be undone.

Per contra, the Ld. Counsel appearing for the Respondent submits that the further Sarfaesi measures were stalled based on the prima facie finding regarding the inadequacies of the notice issued under section 13 (2) of the SARFAESI Act. There is also an indication in the notice that the penal interest has been capitalised with quarterly rests. The Ld. Counsel relies upon the decisions of the Hon’ble Gujarat High Court in Punjab National Bank vs. Mithilanchal Industries Pvt. Ltd. (2021) 1 GLR 615 (DB) which has been followed in Bhavdipbhai Arunbhai Dave vs. Kotak Mahindra Bank Ltd. AIR 2022 Guj 53 Punjab National Bank vs. Telstar Industries Pvt. Ltd. 2019 SCC OnLine Guj 4467 in support of the argument that the details regarding the breakup and the demand notice issued under section 13 (2) of the SARFAESI Act it is essential.

The argument of the learned counsel appearing for the Appellant is that the Mithilanchal judgment (supra) does not lay down an absolute proposition. It is submitted that the facts and the Mithilanchal case are very different from the facts present case and the said case is, therefore, clearly distinguishable. With regard to the capitalisation of the penal interest, the Ld. Counsel for the Appellant submits that the perusal of the statement of account would indicate that there was no capitalisation in spite of the word ‘quarterly rests’ being mentioned in the notice together with the penal interest.

This is an application seeking a stay of the impugned order of the Ld. PO granting an interlocutory order of stalling the Sarfaesi measures till the disposal of the SA on prima facie finding is that there is a flaw in the notice under section 13 (2) of the SARFAESI Act. On reading the notice under section 13 (2) the Ld. PO also deduced that the penal interest has been capitalised. In view of the finding of the Ld. PO in the impugned order that the SA itself could be heard and disposed of is suggestive of the fact that it is not a final finding on merits but only a prima facie finding which is not going to influence his finding when the SA is taken for final hearing. Regarding the sub-delegation of the duty to take over possession of the property to the head clerk by the Mamlatdar is also prima facie defect. It is true that when the S.A. is ultimately disposed of, the Ld. PO can direct that the Mamlatdar himself should carry out the orders of the District Magistrate and thus cure that effect. For the interregnum, I find no defect in the impugned order of the Ld. PO. I have not expressed myself on the merits of this case. I am sure that the Ld. PO has also not expressed himself finally on these contentions. And therefore, I am not inclined to interfere with the order and declined to grant any stay in this matter.

In view of the above observations, I am declining to grant the stay of the impugned order, nothing remains in this appeal and therefore, the appeal is also disposed of with a direction to the Ld. PO DRT-II, Mumbai to dispose of the Securitisation Application No. 160 of 2022 as expeditiously as possible.

Resultantly, the appeal as well as IA No. 220 of 2022 are both disposed of with the above directions of expeditious disposal of the S.A. to the Ld. P.O.