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Judgment
Ashok Menon, Chairperson
This is an application filed by the Appellants under Sec. 18 (1) of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short) for a waiver of 25 % of the mandatory pre-deposit contemplated for entertaining the appeal.
The Appellants are the Applicants in Securitisation Application (S.A.) No. 187 of 2023 on the files of the Debt Recovery Tribunal, Nagpur (D.R.T.) who are aggrieved by the order dated 01/04/2024 dismissing Interlocutory Application (I.A.) No. 611 of 2024 filed by them for protection against the dispossession of the secured assets in the Sarfaesi measures taken by the Respondent PNB Housing Finance Ltd. for recovery of the debt allegedly due from them. Hence this appeal.
The Respondent had sanctioned a loan of ₹10,52,00,000/-in favour of the 4th Applicant company named M/s Nakoda Fruit Products Pvt Ltd. which is presently undergoing CIRP pursuant to an application filed by the Respondent under section 7 of the Insolvency & Bankruptcy Code, 2016 before the NCLT, Mumbai. The 1st Appellant is a suspended director of the aforesaid company. It is alleged that to secure the aforesaid loan amount, a mortgage was created on 29/09/2018, concerning the secured assets. CERSAI registration was obtained on 01/10/2018. It is further alleged that the repayment of the loan was defaulted and the account was classified as Non-Performing Assets (NPA) on 14/12/2019. Consequent to that, the demand notice was issued to the borrowers on 15/01/2020 under section 13 (2) of the SARFAESI Act demanding a sum of ₹10,61,22,067.16. An objection was sent to the notice on 09/03/2020 by the borrowers. Symbolic possession of the property was taken on 08/06/2020 and thereafter application was filed by the Respondent under section 14 of the SARFAESI Act before the District Magistrate for physical possession of the property. The application was allowed on 03/01/2023.
On receipt of notice intending to take possession of the secured assets from the official concerned, the Appellants approached the D.R.T. with the aforesaid S.A. raising several contentions challenging the Sarfaesi measures taken by the Respondent. It is contended that the demand notice under section 13 (2) does not give a breakup of the principal and the interest as required under section 13 (3). The name and designation of the authorised officer who has sent the demand notice are not mentioned in the notice. The possession notice dated 08/06/2020 for taking symbolic possession is not per the Rules and the said possession was taken during the height of the COVID-19 pandemic. The E-auction notice for the sale of the secured assets dated 15/09/2021 mentions the same amount stated in the demand notice as the debt due.
The Respondent opposed the application for protection stating that the matter was earlier heard by the Hon’ble High Court of Judicature at Bombay, Nagpur bench in Writ Petition No. 8108 of 2023 and disposed it as per order dated 08/12/2023 giving directions to the Revenue Authorities. The Applicants had submitted OTS proposals on 11/11/2022 and then again on 17/07/2023. The classification of the account as NPA was never questioned. It is stated by the Respondent that the outstanding amount as of 18/03/2024 is ₹ 18,06,30,850.75.
The Ld. Presiding Officer. After having stated the contentions on both sides, by a very cryptic order running into four lines, dismissed the application. The Appellants are aggrieved and are apprehending dispossession from the property at any time. Hence this appeal.
The Appellants would contend that they have a good prima facie case. It is pointed out that the identity of the mortgaged property in question is highly disputed. There are no clear demarcation boundaries and access to the property. There are certain encroachments also over the said land and the neighbouring landowners have filed a civil suit concerning the property and interim orders are running against the property. The Appellants contend that they are under grave financial strain. There are several other loans which the Applicants have to discharge. Their business is also under stress. The personal income tax returns of Appellants Nos. 1 and 2 have been produced to indicate that they have little income to deposit the mandatory 50% of the debt due. It is further contended that the amount mentioned by the Respondents before the D.R.T. regarding the outstanding amount is not correct. An email was received by the Appellants indicating that the outstanding amount due to the Respondent is ₹14,34,95,467/-the Appellants may be, therefore granted a waiver of 25% of the said amount.
The Respondent has vehemently opposed this application for waiver stating that the allegations made by the Appellants are false and frivolous. There is, therefore, no prima facie case in favour of the Appellants to get a waiver of the pre-deposit. The Income Tax Returns for the last 3 years have not been produced. It is further contended that all three Appellants have company shares which have a market value running into crores of rupees. Hence allegation that they are under financial strain is not true. Since an E-auction notice has been issued to put the property for sale, the amount as of date together with interest is the debt due and that amount is ₹18,06,30,850.75. To entertain the appeal, the Appellants may be directed to deposit 50% of the said amount.
The impugned order has not gone into the merits of the case and is based on the fact that the OTS proposals were made by the Appellants and repeatedly rejected. The order passed by the Ld. Presiding Officer does not show any reasons for declining the protection sought by the Applicants. It is a non-speaking order and passing of such orders by the D.R.T. is deprecated.
Even coming to the merits of the case, the Appellants do not have a strong prima facie case. They have approached the creditor multiple times with proposals for settlement. The OTS proposals were rejected by the Respondent. Given these actions of the Appellants, it has to be considered that they have waived their right to challenge the Sarfaesi measures. The Income Tax Returns would to some extent indicate their impecunious condition but that alone is not sufficient. As pointed out by the Respondent, the Appellants have invested in share capital which could be liquidated to raise funds. Since the E-auction notice has been issued, the amount inclusive of interest is the debt due and the amount which is pointed out to be ₹18,06,30,850.75.
Considering the entire facts and circumstances, the Appellants are directed to deposit a sum of ₹7 crores as pre-deposit to entertain the appeal. The said amount shall be deposited in two equal instalments of ₹3.5 crores each with a gap of 3 weeks each as stated hereinunder.
Number of Instalments
Payment on or before
1st Instalment of ₹3.50 crores
21.05.2024
2nd Instalment of ₹3.50 crores
11.06.2024
In case of deposit of the first instalment within the time stipulated, further Sarfaesi measures shall stand deferred till the next date of hearing.
Default in payment of any of the instalments/amount on time shall entail the dismissal of the appeal without any further reference to this Tribunal.
14 The amount shall be deposited in the form of a Demand Draft/RTGS 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 Respondent is at liberty to file a reply in the Appeal with an advance copy to the other side.
Post on 22.05.2024 for reporting compliance regarding the payment of the 1st instalment.