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Judgment
Ashok Menon, Chairperson
This is an application for a stay of the operation of the impugned order till disposal of the appeal and to direct Respondents Nos. 1 and 2 to maintain the status quo concerning the secured asset pending disposal of the appeal.
This Tribunal had while considering I.A. No. 289 of 2023 for waiver of deposit under Sec. 18(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act, for short), vide order dated 12. 07.2023, directed the Appellants to deposit 50% of the threshold amount which was determined to be ₹99,081.34 and the Appellants had deposited ₹50,000/-. Even before that, on submission made by the Ld. Counsel for the Appellants that the building situated in the secured asset was being demolished by the second Respondent auction purchaser who is in possession of the property, an order to maintain status quo was made on 15.05.2023. The second Respondent had submitted that a major portion of the property was already demolished and what remained was only a compound wall. Hence a direction was given to maintain the status quo as regards the compound wall. That order of status quo was being extended from time to time.
The Appellants had filed Interlocutory Application (I.A.) No. 496 of 2023 for stay and maintaining status quo. The said application is now being heard.
The Appellants had filed this appeal challenging the order dated 13. 04.2023 passed by the Debts Recovery Tribunal-II, Ahmedabad in Securitisation Application (S.A.) No. 525 of 2019 dismissing the S.A.
the Appellants contend that during the pendency of the S.A., they had deposited ₹4,25,00,000/- against a claim of ₹3,20,27,798.69 made by the bank. The account of the first Appellant firm was classified as a non-performing asset (NPA) with effect from 22. 04.2017 and the symbolic possession of the property was taken on 03.02.2018. Thereafter, a fresh demand notice under Sec. 13(2) was issued on 17.12.2018 demand a sum of ₹3,57,71,151.24 from the Appellants. An objection was sent by the Appellant on 12.02.2019 to which the bank sent a reply on 27.02.2019. The bank obtained an order from the District Magistrate on 15.10.2019 for taking physical possession of the secured asset under Sec. 14 of the SARFAESI Act. As a consequence of that, physical possession was taken on 08.01.2020. Challenging the Sarfaesi action under Sec. 17 of the SARFAESI Act, S.A. No. 525 of 2019 was filed. Meanwhile, Original Application (O.A.) No. 777 of 2018 filed by the bank was allowed by the D.R.T. vide judgment and order dated 30.11.2022 directing the Appellants to pay ₹3,20,27,092.69 together with simple interest at the rate of 9% per annum.
The Recovery Certificate issued by the D.R.T. was sought to be executed by the Recovery Officer. The Appellants submitted before the Recovery Officer that they have already paid ₹4,25,00,000/- to the bank and the Ld. Recovery Officer directed the bank to submit a closure report. No such closure report, however, was filed. Simultaneously, the bank proceeded under the provisions of the SARFAESI Act. The sale notice was issued on 15.01.2020 and the e-auction was scheduled on 25.02.2020. The said auction failed for want of bidders and the bank put up the property for sale once again on 28.12.2021. That auction also failed. A fresh e-auction notice was issued on 25.12.2021 scheduling the auction on 12.01.2022. The second Respondent was declared as the highest bidder for a sum of ₹5,55,40,000/-. The sale certificate was issued on 24.01.2022 and the physical possession was handed over on 23.02.2023.
The main contention of the Appellants is that they had already redeemed the mortgage even before the sale certificate was issued by paying a substantial amount. The sale certificate dated 24.01.2022 mentions the outstanding dues towards the loan as only Rs.99,081.34. It is for the realisation of that amount that the secured asset was sold for ₹5,55,40,000/-. The Appellants would, therefore, contend that the sale could not have been confirmed and that the bank had acted in an arbitrary and high-handed manner.
The Appellants would further contend that the sale notice does not indicate the amount of debt that was due to be paid and hence, the sale notice is also not valid.
The Counsel appearing for the Respondents would contend that the Appellants had waived their rights to challenge the Sarfaesi measures because they had filed an affidavit agreeing to settle the debt. This is an appeal in the year 2023. Serious contention is raised regarding the validity of the sale. It has to be considered in detail. On a prima facie finding, the status quo concerning secured assets needs to be maintained till the disposal of the appeal. The balance of convenience is on maintaining the status quo. Hence, the order of status quo shall continue till the disposal of the appeal. The parties shall get ready for hearing the appeal.
Post on 11.07.2024 for hearing.