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Judgment
Ashok Menon, Chairperson
The matter is taken up for hearing by way of a praecipe filed on 12.01.2024 by the Appellants for seeking urgent relief.
The Appellants are the borrowers who are aggrieved by the dismissal of the Securitisation Application (S.A.) No. 29 of 2023 vide order dated 13.12.2023 by the Debts Recovery Tribunal-I, Mumbai (D.R.T.). The Appellants had filed the S.A. challenging the Sarfaesi measures on various counts. It was contended that the demand notice under Sec. 13(2) of the Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’, for short) dated 02.05.2019 does not give bifurcation of the amount and rate of interest which has been calculated and demanded. The other objection is that the notice only mentions the signatory as the authorised officer without indicating his designation and authority and therefore, is not a proper officer who is authorised under Rule 2(a) of the Security Interest (Enforcement) Rules, 2002 (‘Rules’, for short) issue a notice under Sec. 13(2). That apart, it is also contended that the demand notice gives a description of the property which is intended to be proceeded against. It does not include 4 garages which are on the part of the mortgage property. The demand notice mentions just a flat and not garages. Therefore, the Respondent Bank could not have proceeded against the garages also. The Ld. Presiding Officer considered all these contentions raised by the Applicants and disregarded them and arrived at the conclusion that the exclusion of the garages does not in any way affect the borrowers and they were aware of what was the property mortgaged. It was also contended that the bank had subsequently produced evidence to indicate that a person who had signed the notice was, in fact, an authorised officer of the bank and therefore, that objection was also overruled. The property was ultimately sold for a sum of ₹10.24 crores in the auction sale that was conducted on 16.09.2023 which was conducted as per auction sale notice dated 25.08.2023. The Appellants had also raised the contention that the property was sold for a lesser amount and that proper valuation was not done. An amendment application was moved in the S.A. but even though there was an observation by the Ld. Presiding Officer which would be taken up prolonged with the matter, it was not taken up for consideration neither was it pressed by the Counsel who appeared for the Applicants before the D.R.T. nor considered by the Ld. Presiding Officer in the impugned order. The Appellants are aggrieved and hence, in appeal. In order to entertain the appeal, the Appellants will have to first cross the hurdle of making the mandatory pre-deposit under Sec. 18(1) of the SARFAESI Act. The Ld. Senior Counsel appearing for the Appellants submits that the Appellants have a very good prima facie case. It is also contended that they are facing financial hardships as substantiated by the Income Tax Returns which have been produced. The Ld. Counsel, therefore, seeks indulgence of this Tribunal to keep the mandatory pre-deposit at a minimum of 25% exercising the jurisdiction of the Tribunal under the third proviso to Sec. 18 of the SARFAESI Act.
Per contra, the Ld. Counsel appearing for the Respondent bank has vehemently opposed this application stating that in the impugned order, all these contentions raised by the Appellants. It is also submitted that the Respondent bank has produced evidence regarding a person who has signed the demand notice and established that is actually an authorised officer as contemplated under Rule 2(a) of the Rules and therefore, the said objection will not lie. It is further contended that the Appellants were fully aware that what was the property that was mortgaged and therefore, non-mentioning of the garages also in the demand notice is only an inadvertent omission on the part of the Respondent bank and the sale notice which was subsequently issued includes in the description of the garages also.
There is no dispute that it is for the bank to prove what rate of interest was calculated. It is also incumbent upon the bank to prove that the person who has signed the notice is an authorised officer. The demand notice apparently does not contain the name and designations of the person who has signed it and bare perusal of the notice would not indicate that he is an authorised officer who is competent to issue the notice.
The garages, in this case, are four separate standalone garages and it is very much possible that the bank could have taken an option to proceed against the flat alone to set aside the garages to be proceeded against in case the entire debt amount is not realised. A bare perusal of the Sec. 13(2) notice indicates that it does not include the garages. It is also pertinent at this point to indicate that the Appellants had taken physical possession of the flat but it does not indicate that the physical possession of garages too were taken. The order under Sec. 14 obtained from the Chief Metropolitan Magistrate (CMM) does not indicate that the garages are part of the property which was taken to be possession of. That too would fortify the case of the Appellants that the demand notice does not include the entire property which was mortgaged and ultimately sold in the auction. The Appellants, therefore, apparently have a very strong prima facie case. They have also to a great extent proved that they are under financial strain. The Ld. Counsel appearing for the Respondent bank points out that the Appellants have offered to settle the entire debt and even redeem the property for a sum of ₹11.30 crores. They had given an OTS proposal consequent to the sale. It would indicate that they are not having any financial strain and having money with them to discharge the debt. In answer to that, the Ld. Senior Counsel for the Appellants, Mr Umesh Shetty would contend that an OTS proposal and an offer for redemption are totally different. The Appellants may raise amounts from elsewhere to redeem the property in order to save the property. That does not indicate that they have money ready with them. In case the Respondent bank accepts the proposal, they would try to raise the amount in whatever way they can. Therefore, the submission made by the Appellants to be effect that they are willing to redeem the property and that they are submitting an OTS proposal will not be any way to agitate against their contention that they are under financial strain which is apparent from the Income Tax Returns submitted by the Appellants. The Appellants, however, have not produced the balance sheet of the first Appellant company. It should be given a clear picture what exactly the amount.
Taking the entire facts and circumstances into consideration, I find that the threshold amount in the sale notice is the amount mentioned in the demand notice together with the interest up to date and the amount which is due from the Appellants would, therefore, be approximately ₹15 crores. The Appellants would, therefore, have to make a pre-deposit on the basis of this threshold amount. The Appellants are, therefore, directed to deposit ₹5 crores as pre-deposit for the purpose of entertaining the appeal. The said amount shall be deposited in three instalments within a gap of two weeks each as mentioned hereunder.
Numbers of Instalments
Payment on or before
1st Instalment of ₹2,00,00,000/-
02.02.20274
2nd Instalment of ₹2,00,00,000/-
16.02.2024
3rd Instalment of ₹1,00,00,000/-
01.03.2024
Default in payment of any of the instalments entails in dismissal of the appeal without any further reference to this Tribunal.
On the payment of the first instalment, the Appellants shall be entitled to get the further proceedings in the S.A. stalled till the next date of hearing.
The amount shall be deposited as 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 after that to be renewed periodically.
With these observations, the I.A. is disposed of. The Respondent is at liberty to file a reply in the Appeal with an advance copy to the other side.
Post on 05.02.2024 for reporting compliance regarding the first instalment.