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Judgment
Ashok Menon, Chairperson
This is an application filed for a waiver of pre-deposit u/s 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SARFAESI Act). The Appeal is filed impugning the interim order dated 27.01.2022 of the Ld. P.O., D.R.T.-II, Ahmedabad, in S.A. No. 435/2020 wherein the Ld. P.O. declined to grant any interim relief to stay the action of the Respondent Bank to proceed with the measures under the SARFAESI Act and the Rules framed thereunder.
The Appeal is filed by the borrowers challenging the aforesaid order of the Ld. P.O., the Appellants are liable to deposit 50% of the amount which is due from them or determined by the D.R.T. and to seek the indulgence of this Tribunal to reduce that amount to the maximum extent possible, the Appellants have filed this application for waiver of pre-deposit.
After declaring the debt due from the Appellant as Non-Performing Asset (N.P.A.), the Respondent Bank took measures under the SARFAESI Act, and hence the Appellants filed the aforesaid S.A. for challenging the measures taken under the SARFAESI Act. The Respondent Bank had obtained an order from the Chief Metropolitan Magistrate Court and consequently Mamlatdar and Executive Magistrate and Notice was issued to Appellants on 29.09.2021 seeking physical possession of the secured assets. Since the S.A. was pending, the Appellants moved an application for amendment of the S.A. before the D.R.T. On that application Ld. P.O., D.R.T., vide impugned order dismissed the prayers of the Appellants and granted permission to proceed with the measures under the SARFAESI Act.
Soon after the dismissal of the application seeking amendment, Appellants herein preferred R/Special Civil Application No. 2907 of 2022 before the Hon'ble High Court of Gujarat because the Chairperson of this Tribunal had not been posted and the said proceedings were disposed of on 11.03.2022 extending the stay for 7 days from the date the Chairperson of this Tribunal assumes the charge. The order of the Hon'ble High Court of Gujarat is annexed at Exh. 'A' and that is how this Appeal was filed by the Appellants.
It is contended that the notice dated 10.07.2020 under section 13(2) of the SARFAESI Act was received by the Appellants in which the Respondent Bank had claimed a sum of Rs.6,20,41,349/-and called upon the Appellants to pay the same within 50 days. The Appellants sent a reply raising objections against the notice. The main contention raised by the Appellants was about retrospective debit and increase in the rate of interest as against the sanctioned terms, which according to the Appellants, is contrary to the guidelines of the Reserve Bank of India (R.B.I.). The Appellants also filed R/Special Civil Application No. 3134 of 2020 before the Hon’ble High Court of Gujarat raising the said issues regarding the excessive claim of interest and on that application the Hon’ble High Court of Gujarat vide order dated 22.10.2021 directed the D.R.T. to consider the question of charging excessive interest and disposed of the R/SCA. The said order of the Hon’ble High Court of Gujarat is annexed at Exh. ‘B’.
Issue regarding charging excessive interest by the Respondent Bank and the validity of the claim made in notice u/s 13 (2) of the SARFAESI Act is still pending consideration. That apart, the Appellants also would challenge the classification of the Account as N.P.A. that too during the pandemic which is contrary to the guidelines of the R.B.I.
The Appellants would further submit that they had submitted a One Time Settlement (O.T.S.) on 18.11.2021 agreeing to pay a sum of Rs.5.70 Crores and the Respondent Bank had to vide letter dated 17.12.2021 accepted the said offer on certain terms and conditions. The negotiations ensued between the parties and at a later point in time on 24.12.2021 the Respondent Bank refused to accept the O.T.S. proposal. The said correspondence is annexed at Exh. 'C'. The Hon'ble High Court of Bombay vide order dated 02.12.2021, which is annexed at Exh. 'D', granted interim relief to all those borrowers who intended to file an Appeal before the D.R.A.T. and were not able to do so because of the absence of the Chairperson, D.R.A.T., to deposit 25% of the amount due u/s 18(1) of the SARFAESI Act and conditional stay was granted. Given the proceedings initiated by the Appellants by the O.T.S. proposal, the Appellants are not liable to pay any amount as pre-deposit and, therefore, the appeal may be entertained.
Respondent Bank filed a detailed reply to the application stating that the Appellants were sanctioned credit facility in the year 2008 which was renewed from time to time and the last renewal being in the year 2019 for a sum of Rs.5.5 Crores. The Appellants defaulted payments and hence their loan account was declared as N.P.A. as early as 08.03.2020 and measures under the SARFAESI Act were initiated and notice under section 13 (2) was issued on 10. 07.2020 calling upon them to pay a total sum of Rs.6,20,41,349/-within 60 days on receipt of the notice. Measures were taken for physical possession of the secured asset situated in the district of Surat. Aggrieved by the measures taken by the Respondent Bank, the Appellants preferred S.A. The Appellants wanted to stall all further proceedings under the SARFAESI Act, but the D.R.T. refused the same, hence this Appeal. Appellants submitted O.T.S. proposal for Rs.5.70 Crores and the acceptance was approved by the competent authority of the Bank and it was conveyed to the Appellants vide letter dated 17.12.2021. The O.T.S. proposal offered by the Bank, however, was not accepted by the borrowers and the O.T.S. failed.
The allegation that the SARFAESI Act measures were taken against the Appellants by declaring the Account as N.P.A. dispute directions issued by the R.B.I. is not true. The Appellants' account was declared as N.P.A. before the pandemic. The Appellants did not, following the directions of the Hon'ble High Court of Bombay deposit 25% of the amount due to them and obtained a stay on all further proceedings. Recently a sum of Rs.7,75,64,475.67 is pending towards the loan as of 24.03.2022 and, therefore, 50% of the amount needs to be paid as pre-deposit before this Tribunal to entertain the Appeal. The Appellants have no reason to get the said amount reduced to any extent and the Bank prayed that the application may be dismissed.
Heard Shri. G. R. Kinkhabwala, Advocate appearing for Appellants, and Mrs Rathina Maravarman, Advocate appearing for Respondent Bank. Perused the documents and records.
The main contention of the Appellants is that without first determining the issue regarding the correctness of the interest claimed by the Respondent Bank, it was improper on the part of the D.R.T. to have declared to grant a stay of the proceedings against the Appellants. Under the O.T.s. proposal that was submitted, the Appellants had made an up-front payment of Rs.57 Lakhs to the Respondent Bank and that amount would be sufficient to take care of the deposits which are to be made as pre-deposit under section 18 (1) of the SARFAESI Act.
The learned counsel for Respondent Bank, Mrs Rathina Maravarman, vehemently opposed the submissions made by Shri. G. R. Kinkhabwala, Advocate appearing for Appellants, stated that given the rejection of the O.T.S. proposal the Appellants cannot claim to have deposited any amount. However, the learned counsel for Respondent Bank, in answer to the queries made by this Tribunal, filed a Pursis admitting that a sum of Rs.57 Lakhs was deposited and the same is not debited from the total amount due and that the said amount is kept in a 'No Lien Account' by the Bank. The learned counsel also offered to return that amount to the Appellants.
The Appellants are challenging the amount that is claimed as due from them in the notice under section 13 (2) of the SARFAESI Act. Given the decision of the Hon'ble High Court of Bombay in M/s. MRB Roadconst. Pvt. Ltd. Vs. Rupee Co-operative Bank Ltd. [(2016) SCC OnLine Bom. 85], the amount due as per notice under section 13 (2) of the SARFAESI Act together with subsequent interest accrued will have to be paid under the provisions of Section 18 (1) of the SARFAESI Act. The argument of the learned counsel for Appellants, Shri G. R. Kinkhabwala, is that the amount claimed under section 13 (2) includes excessive interest, therefore, Appellants are not liable to pay that amount. This is not the argument that can be countenanced at this stage in appeal. The D.R.T. has not decided on the rate of interest or the claim of excessive interest by the Respondent Bank. Hence under the stipulation of Section 18 (1) of the SARFAESI Act, the Appellants are liable to pay a pre-deposit of 50% of the amount that is due, and the amount due is inclusive of interest to date. The learned counsel for the Respondent Bank stated that an amount of Rs.7,75,64,475.67 is the amount that is due and it is also admitted that a sum of Rs.57 Lakhs was paid by the Appellant. However, it was not accounted for and is lying in the "No lien Account". The Appellants state that they are, therefore, entitled to get that amount accounted for by Section 18 (1) of the SARFAESI Act towards pre-deposit.
Considering the entire facts and circumstances of the case, the arguments advanced, and the attending circumstances, I find that for the Appeal to be entertained, the Appellants shall deposit a sum of Rs.2.50 Crores as pre-deposit. The Respondent Bank is directed to deposit a sum of Rs.57 Lakhs, lying with them as 'No Lien Account', in this Tribunal towards the part payment of the pre-deposit, on or before 08.06.2022 and the balance amount of Rs.1.93 Crores shall be deposited in two equal tranches by the Appellants. The first tranche of Rs.96.50 Lakhs shall be deposited on or before 15.06.2022 and the balance tranche of Rs.96.50 Lakhs shall be deposited on or before 06.07.2022. Default in payment of any of the tranches would result in the Appeal being dismissed.
In case the first tranche of Rs.96.50 Lakhs is paid within the time stipulated, there shall be a stay on further proceedings concerning the subject property under the SARFAESI Act.
The above amount shall be deposited in the form of a Demand Draft with the Registrar of this Tribunal. Failure to deposit the above-referred amount would result in an automatic dismissal of the Appeal.
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 it will be renewed periodically.
Post on 16.06.2022 for reporting compliance concerning payment of the first installment.