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Judgment
Ashok Menon, Chairperson
The appellants are in appeal impugning the dismissal of I.A. No. 3191/2024 in Securitisation Application No. 433/2024 (S.A.) on 30.10.2024 by the Debts Recovery Tribunal-III, Mumbai (DRT) declining to grant a stay to the appellants concerning the sale of a portion of the secured asset scheduled on 29.10.2024. The appellants consist of a firm and its partners who had admittedly borrowed money from the respondent bank and defaulted in repayment, in consequence of which, the respondent bank initiated measures under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short) for the recovery of the debt due. Demand notices were issued u/s 13(2) and thereafter steps were taken u/s 13(4) and the properties comprising four items were put up for sale. Only one of the items was sold in the first attempt. In the second attempt for the sale of the remaining properties, yet another item of property was sold. Two more properties remain to be sold. The main objections raised by the appellants about the sale are that the 2nd notice was issued without granting 30 days’ notice for redeeming the debt and the notice did not comply with the provisions u/s Rule 8(6) of the Security Interest (Enforcement) Rules, 2002. Moreover, the notice under Rule 9(1) was issued before the notice under Rule 8(6) was issued, as is apparent and would invalidate the entire sale. In the impugned order, the DRT has observed that being a 2nd sale admittedly, only 15 days’ notice is required to be served to which the Ld. Counsel appearing for the appellants submits that a notice under Rule 8(6) is to precede a notice under Rule 9(1) and the amendment about the time for the 2nd sale was reduced to 15 days. But no such amendment was incorporated into Rule 8(6) and therefore, Rule 8(6) has to be issued mandatorily giving 30 days for redemption. This particular aspect has not been considered by the Ld. Presiding Officer, DRT.
The Ld. Counsel appearing for the appellants has also relied upon the decision of Celir LLP versus Bafna Motors (Mumbai) Pvt. Ltd. & Ors. 2024 2 SSC 1 in support of his arguments which has been relied upon in another decision by the Hon’ble Debts Recovery Appellate Tribunal, Kolkata (DRAT) in Miscellaneous Appeal No. 34/2023 wherein it is stated that the notice period 30 days contemplated under Rule 8(6) has not been reduced and is to be issued mandatorily.
To entertain this appeal, the appellants will first have to comply with the mandatory requisite of making a pre-deposit u/s 18(1) of the SARFAESI Act. The Ld. Counsel appearing for the appellants contends that the appellants have a very firm prima facie case because the notice under Rule 8(6) was issued after the notice issued under Rule 9(1) and that 30 days as contemplated under Rule 8(6) was not given to be appellants and hence, the entire sale has to fail. The appellants have also produced the Income Tax Returns of the firm as well as all three partners which would indicate that the firm has not substantial income to pay 50% of the debt due. It is, therefore, urged by the Ld. Counsel appearing for the appellants that exercising jurisdiction of this Tribunal under the 3rd proviso to Section 18(1) of the SARFAESI Act, the pre-deposit amount may be reduced to 25% of the debt due.
The Ld. Counsel appearing for the respondent bank has vehemently opposed this application by stating that the appellants are not entitled to any concession whatsoever and that the appeal may be entertained only by depositing the mandatory pre-deposit. It is pointed out that as of the date of filing of the appeal, the outstanding dues are about ₹ 6.86 crores.
After hearing both sides, I find that the appellants have an arguable case with regard to the issuance of the sale notice under Rule 8(6) which does not give 30 days and it is also pertinent to note that the personal notice issued under Rule 9(1) is before the publication of the notice under Rule 8(6) which prima facie appears to be a lacuna. Hence, the appellants are entitled to some concession regarding the payment of the pre-deposit amount. The total income of the firm and its partners will have to be taken into consideration to ascertain the impecuniosity of the appellants and therefore, the appellants are not entitled to the indulgence of bringing the pre-deposit amount down to 25% of the debt due. But because they have a prima facie case, the appellants are directed to deposit a sum of ₹ 2 crores as a pre-deposit for entertaining this appeal. The Ld. Counsel appearing for the appellants submits that a demand draft of ₹1 crore is being produced today (produced and paid on 13.12.2024). The balance ₹ 1 crore shall be deposited in two equal instalments of ₹ 50 lakhs each within a gap of two weeks each as stated hereunder.
Numbers of Instalments
Payment on or before
1st Instalment of ₹ 50,00,000
26.12.2024
2nd Instalment of ₹ 50,00,000
09.01.2025
Given the deposit made today, the further Sarfaesi measures shall stand stayed till the next date of hearing.
The Ld. Counsel appearing for the appellants submits that the appellants are eager to redeem the property and want to settle the matter to which the Ld. Counsel appearing for the respondent submits that the appellants are at liberty to approach the bank with a proposal that shall be considered on its merits.
It is made clear that in case of any default in payment of any of the amount/instalment on time shall entail the dismissal of the appeal without any further reference to this Tribunal.
The amount shall be deposited in the form of a Demand Draft/RTGS with the Registrar of this Tribunal. Payment by RTGS shall be communicated to the Registry for verification.
As and when the said amount is deposited, it 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 27.12.2024 for reporting compliance of 1st instalment of payment of pre-deposit.