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Judgment
Ashok Menon, Chairperson
This is an application filed under Sec. 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’, for short) requesting to invoke the discretionary jurisdiction of this Tribunal under the 3rd proviso to Sec. 18 to keep the mandatory pre-deposit at the minimum of 25% of the amount demanded or due.
The Applicants/Appellants are the original Applicants in Securitisation Application (S.A.) No. 323 of 2020 on the files of the Debts Recovery Tribunal-II, Ahmedabad (DRT). They are the guarantors/mortgages of the debt incurred by the 3rd Respondent company as the principal borrower. The Sarfaesi measures, including the creation of security interest, the issuance of notice under Sec. 13 (2), and the taking of physical possession under Sec. 14 as also the consequent auction sale stand challenged in the aforesaid SA filed by the Appellants. The S.A. was allowed in part by the Ld. PO, vide impugned Judgment dated 07/07/2021, setting aside the auction sale finding infirmity with the auction procedures but declined to find fault with the other Sarfaesi measures as requested in the aforesaid S.A. Aggrieved by that finding, the Appellants are in appeal.
The Appellants had challenged the creation of the security interest, as also the demand notices issued against the company by the secured creditors who are Respondent Nos. 1 and 2. The Learned Counsel appearing for the Appellants would contend that the Appellants have a strong prima facie case, and hence, the discretion of this Tribunal may be exercised to reduce the amount of pre-deposit to 25% of the amount allegedly due and claimed. The amount demanded as per the demand notice dated 29/10/2011 is ₹212,882,976/-and therefore, the Appellants plead that they may be permitted to deposit a sum of ₹53,220,744.04 as pre-deposit and proceed with the appeal.
Respondents Nos. 1 and 2 the bankers and Respondent No. 4, the auction purchaser vehemently opposed the application stating that the Appellants have no grounds to get the amount reduced to 25%.
The creditor banks had earlier filed a reply and a statement stating that the amount of pre-deposit may not be reduced to 25% from the mandatory 50%. The statements of account pertaining to the abovementioned debt were later produced detailing that inclusive of interest that is claimed on the debt due to the creditors inclusive of interest as of the date of appeal is about ₹50 crores.
The challenge raised by the Appellants concerning the demand notice was issued by the creditors as also the challenge raised concerning the creation of a mortgage and also the challenge concerning non-compliance with Rules 8 (6) and (7) of the Security Interest (Enforcement) Rules, 2002 (“Rules” for short) were not accepted by the Ld. P.O.
Ms Abhineeta Chaturvedi, the learned counsel appearing for the 4th Respondent has vehemently opposed the application for waiver stating that the Appellants have no grounds for getting the amount of pre-deposit reduced to any extent.
The creditors have produced the certified account statement with regard to the amount that is due as of the date of filing of the appeal, from the Appellants. The demand notice issued under sec.13 (2) of the SARFAESI Act demands a sum of ₹212,882,976/-together with interest at the rate of 16.60% per annum as of 29/10/2011. The interest till the date of filing of the appeal is to be added. Under the circumstances, the pre-deposit is to be made based on the amount inclusive of interest. The Appellants have not pleaded anything about having a financial strain to make the pre-deposit. The Appellants cannot, therefore, get the amount reduced to 25% under the 3rd proviso to Sec. 18. However, the Appellants have taken certain grounds challenging the impugned judgment of the DRT and hence, I hold that a prima facie case has been made out to grant certain concessions to the Appellants in the matter of making the pre-deposit. The Appellants are, therefore, directed to pay a sum of ₹20 crores as pre-deposit in two equal instalments of ₹10 crores each. The 1st instalment shall be paid within three weeks from today, payable on or before 30.01.2023. And, the 2nd instalment shall be payable within three weeks therefrom, payable on or before 20.02.2023. In default, the Appeal shall stand dismissed 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 nationalized bank, initially for 13 months, and thereafter to be renewed periodically.
On deposit of the payment within the stipulated time, all further proceedings to be initiated by Respondent No.1 and 2 under the SARFAESI Act shall stand stayed.
With these observations, the I.A. is disposed of. Respondents are at liberty to file a reply in the Appeal with an advance copy to the other side.
Post on 31.01.2023 for reporting compliance concerning the payment of the first instalment.