India Infoline Finance Ltd vs Jaipuria Buildcon (P) Ltd

P.K. Bhasin, J

I have heard the Counsel for the appellant and respondents in the appeal. The respondents borrowers/guarantors/mortgagors filed a petition under Section 17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the SARFAESI Act) against the appellant Financial Institution (FI) to protect their property which allegedly was mortgaged in favour of appellant to secure the repayment of the loan advanced to respondent No. 1 to the tune of Rs. 10 crores in the year 2013 and which the appellant FI was going to auction after taking over its physical possession to recover its money in exercise of its rights and powers under the SARFAESI Act.

The property which the appellant was claiming to have been mortgaged in its favour comprises of two towers at GH-6, Jaipuria Apartments, Crossing Republic, Dundahera, Ghaziabad. Out of these two residential towers, one was in semi finished state when the same was sought to be auctioned and the other, however, was complete in all respects. The respondents in their S.A. had raised a grievance before the DRT that the mortgaged property was to secure payment of debt of Rs. 10 lacs only by way of registered mortgage of property, besides some other grievances regarding validity of the measures taken by the appellant under the SARFAESI Act. However, when the S.A. came to be taken up by the learned Presiding Officer of DRT-II, Delhi for the first time after notice to the appellant, the following order came to be passed with which the appellant is aggrieved and its correctness is being impugned in the present appeal:

"Present: Ms. Pratiti Rungta, Counsel for the applicant.

None for the respondent No. 1

Heard the Counsel for the applicant. It is submitted by the Counsel for the applicant that the respondent FI is claiming Rs. 11 crores plus and approached the District Magistrate to take possession of two towers and if three floors of one tower are taken possession the entire amount due to the respondent FI would be covered. In the facts and circumstances of the case, the respondent FI is permitted to take possession of four floors of Tower 'A' in Plot No. GH-6, Jaipuria Apartments, Crossing Republic, Dundahera, Ghaziabad only and the respondent No. 1 FI is hereby restrained from taking possession of the rest of the property in question until further orders.

For reply and hearing posted to 16.2.2017.

DASTI."

A bare perusal of the aforesaid order goes to show that the respondents' main grievance urged before the DRT on 13.1.2017 was that sale of only three floors of one particular tower was sufficient to liquidate the entire liability of the appellant The respondents do not appear to have urged before the DRT any other ground nor there is any reference to any other ground even by the DRT though Counsel for the respondent No. 1 submits that all the grounds taken in the S.A. were urged before the DRT but they are not reflected in the impugned order.

The learned Presiding Officer of DRT, however, straightaway accepted the submission made by the Counsel for respondents that sale of three floors only was sufficient to liquidate the entire debt of the appellant and without even forming any prima facie view on the basis of any material which might have been available before him in the form of valuation report which, in fact, was not even filed by the respondents, restrained the appellant from taking over the possession of the two towers except four floors of one tower though the submission of the respondents was that sale proceeds of only three floors would be sufficient to clear the dues of the appellant. As per the appellant's case, its dues cannot be recovered only by selling four floors.

There is dispute now as to whether the appellant took possession of the two towers, which is now the common case of the parties, before passing the aforesaid stay order or after receipt of the same by the appellant and I am informed that respondents have already initiated contempt proceedings against the appellant before the DRT, claiming that in violation of the stay order the appellant had taken over the possession of both the towers and not the four floors which were permitted to be taken over by the DRT.

Be that as it may, this Tribunal is not inclined to make any observation in that regard as that is a matter pending before the DRT. As far as the present appeal is concerned, I have no doubt that the learned Presiding Officer was not justified in passing the impugned order without even making an observation that the applicants before him had any prima facie case to question the measures taken by the appellant under the SARFAESI Act and, as observed by me above, the submissions made before the DRT on behalf of the respondents, prima facie, should have been sufficient to reject the interim prayer, if not the main itself, for the reason that if at all the respondents had any strength in their case they would have urged and pressed into service all the grounds of challenge even on the first date of hearing despite the fact that the appellant had not appeared on that date. I need not go into the submissions made by the learned Counsel for the appellant that it was not served for 13.1.2017. Even if the appellant had failed to appear before the DRT, the Presiding Officer was expected to refer to the grounds of challenge raised by the respondents in their S.A. and before granting any interim relief it ought to have formed a prima facie view, in the absence of which there is no justification for passing any restrain order against the secured creditor. This appeal is accordingly allowed on this short ground alone. The impugned order dated 13.1.2017 is set aside.

Since the S.A. is still pending, the DRT will now proceed further in the matter in accordance with law.

I.A. No. 50/2017, 52/2017, 212/2017, 213/2017, 214/2017, 215/2017, 216/2017, 217/2017, 218/2017, 219/2017, 220/2017, 221/2017, 272/2017, 273/2017 & 316/2017.

These are applications moved by some persons, who claim to have invested with respondent No. 1 Company to purchase flats in the two towers in question and apprehending that in this legal battle between the FI and the builder Company their money may not get blocked and in the process they may lose their investments, to seek intervention in the present proceedings. In view of the aforesaid order of acceptance of the appeal, I need not go into the merits of these applications as, if at all, these applicants have any grievance arising out of the legal battle between the FI and the builder concerned, they can always have recourse to independent legal remedies available to them. In case they choose to appear before the DRT in the present S.A. proceedings itself and seek any order/direction/relief, it is needless to state, the DRT will deal with their grievances in accordance with law uninfluenced by their filing of present intervention applications before this Tribunal and their being not considered by this Tribunal.

Record of the DRT be sent back immediately along with a copy of this order.