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Judgment
Ashok Menon, Chairperson
The Appellants are in appeal impugning the order dated 14.12.2023 in Interlocutory Application (I.A.) No. 4045 of 2023 in Securitisation Application (S.A.) No. 519 of 2023 on the files of the Debts Recovery Tribunal-III, Mumbai (D.R.T.) wherein on a specific undertaking by the Ld. Counsel appearing for the Appellants that they are willing to settle the entire amount of the debt due to the bank, undertook to pay ₹10 lakhs forthwith and to pay ₹15 lakhs within 5 days. On the said undertaking, the physical possession scheduled to be taken on 14.12.2023 was deferred, and the D.R.T. directed the Appellants to surrender the possession of the secured asset voluntarily in case payment as undertaken by them was not paid.
The Appellants thus successfully thwarted the attempt to take possession of the property on 14.12.2023 but they did not abide by the undertaking given by them to pay the amount. Not a farthing more was paid towards the debt due. Aggrieved by that order that they will have to surrender without any demur, the Appellants are in appeal. The Ld. Presiding Officer did not go into the merits of the case because the Appellants themselves had expressed their willingness to settle the debt and undertook to pay certain amounts towards the debt. It is to be noted that there is absolutely nothing wrong with the impugned order because it was passed on an undertaking or consent made by the Appellants to settle the dues. After having been successful in getting the possession deferred, they failed to comply with the undertaking and therefore, it has to be observed that the Appellants did not come up with clean hands.
Anyhow, to entertain this appeal, the Appellants will first have to comply with the mandatory provisions of Sec. 18(1) of the Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’, for short). The S.A. was filed challenging the various measures taken by the bank against the secured asset. It is contended that the non-performing asset (NPA) classification was not proper. It is further contended that the demand notice issued under Sec. 13(2) on 05.09.2020 demanding a consolidated sum of ₹1,04,66,507 does not give a break-up of the principal amount and interest as well as other charges levied by the bank and therefore, there is a gross violation of the mandatory provisions under Sec. 13(3) of the SARFAESI Act. It is further contended that the application under Sec. 14 is not accompanied by a nine-pointer affidavit as is required by law. The application filed under Sec. 14 or the alleged affidavit which infringes the mandatory requirement is not produced for perusal before this Tribunal. Even the demand notice under Sec. 13(2) is not produced. However, the Respondent bank has produced the demand notice under Sec. 13(2) and there is an indication that the demand was for a consolidated amount without giving a break-up of the principal and interest due. The designation of the authorised officer who has issued the demand notice was also not specifically stated in the demand notice. That apart, it is also contended that there is no CERSAI registration of the debt and therefore, the Respondent bank is not entitled to proceed under the provisions of the SARFAESI Act.
The Appellants contended that they are under financial strain. Their business was badly affected by the pandemic. They have not revived therefrom. The Income Tax Returns of the first Appellant who is the proprietor of the proprietorship which is the principal borrower is produced. The statement of account of the proprietorship is also produced. It is contended that the second Appellant is only a housewife with no source of income and therefore, no Income Tax Returns are filed. The Income Tax Returns of the first Respondent indicate that he has a meagre income to pay 50% of the mandatory pre-deposit contemplated under Sec. 18(1) of the SARFAESI Act. The statement of the account of the proprietorship, however, is not authenticated by a Chartered Accountant and is, therefore, acceptable.
The Ld. Counsel appearing for the Respondent bank submits that the Appellants have undertaken to clear the entire debt and after having submitted so got the possession scheduled deferred but they did not pay any amount towards the debt which as of today is ₹1,64,00,000/-.
After having considered the entire facts and circumstances of this case, I find that the Appellants have not come up with clean hands. However, they have prima facie cases as far as demand notice under Sec.13(2) is concerned. Therefore, there is an arguable case but it will have to be decided whether the order which is passed by the D.R.T. could be challenged given the embargo under sub-Sec. 2 of Sec. 20 of the Recovery of Debts and Bankruptcy Act (‘RDB Act, for short) because there is an order passed on consent. The Appellants are directed to deposit a sum of ₹35 lakhs as pre-deposit. The Ld. Counsel appearing for the Appellants submits that he is producing two demand drafts totalling ₹10 lakhs. The balance ₹25 lakhs shall be paid in two instalments within a gap of two weeks each as mentioned hereunder.
Numbers of Instalments
Payment on or before
1st Instalment of ₹10 lakhs
28.02.2024
2ndInstalment of ₹15 lakhs
13.03.2024
Default in payment of any of the instalments entails in dismissal of the appeal without any further reference to this Tribunal.
Given the deposit of ₹10 lakhs today, the possession scheduled on the 16th instant shall stand deferred 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 29.02.2024 for reporting compliance regarding the first instalment.