M/s. Sanket Industries Ltd. & Ors vs Bank of India

Ashok Menon, Chairperson

The Appeal is filed impugning the order dated 21.07.2022 passed by the Debts Recovery Tribunal No. I, Mumbai in Misc. Application No. 42 of 2002 in Original Application No. 32 of 2008 by the Appellants who were the defendants in the said O.A.

The aforesaid application is filed under Sec. 21 of the Recovery of Debts and Bankruptcy Act, 1993 (hereinafter referred to as, “RDB Act”).

The O.A. No. 32 of 2018 was filed by the Respondent Bank of India for recovery of the amount allegedly due from the Appellants. The O.A. was heard ex-parte and allowed on 04.03.2021. Recovery Certificate No. 56 of 2021 was also issued. In execution of the Recovery Certificate notice was affixed on the property and a proclamation was made for sale coming to know about the proceedings against the property, the Appellants filed the aforesaid M.A. 42/2022 for setting aside the ex-parte order and to withdraw the Recovery Certificate. D.R.T.-I, Mumbai vide the impugned order dated 21.07.2022 dismissed the M.A. Aggrieved by the order, the Appellants are in Appeal.

The Appellants contend that the first Appellant is a Company represented by the second Appellant who is a director of the Company. The third Appellant is a guarantor and the wife of the second Appellant. No notice was served about the O.A. on the Appellants. The registered office of the first Appellant Company is in Jalna and admittedly no notice was served at Jalna. The order passed ex-parte against the Appellant needs to be set aside as the Appellants have a good case on merits. Steps are being taken to sell the property of the Appellants. The Appellants are in financial strain and Income Tax Returns pertaining to three years have been produced. Moreover, it is also stated that the Respondent Bank had proceeded with the measures under the SARFAESI Act and the Appellants had filed two Securitisation Applications as numbers 92 and 93 of 2017 and obtained a stay of the measures which is yet to be vacated. It is under such circumstances that an ex-parte order was obtained by the Respondent Bank and the property sought to be sold.

The Respondent Bank has filed an affidavit in reply stating that the Appellants were aware of the entire proceedings before the D.R.T. under the RDB Act. They have also filed Securitisation Applications under Sec.17 of the SARFAESI Act. The Appellants attempted to settle the dues with the Bank and time was granted by the D.R.T.-II, Mumbai where the aforesaid S.As were pending. Despite granting reasonable time, the Appellants did not settle the dues. They also did not contest the Original Application that was pending before D.R.T.-I, Mumbai. Income Tax Returns for three years from 2017 to 2020 have been produced but the Tax Returns for the last two years have not been produced. The Appellants cannot as a matter of right claim the debt to be considered under O.T.S. There is an outstanding due of ₹ 5,98,88,853.63 as of 16.06.2022. Future Interest @ 12.30% is also due.

The Respondent Bank contends that the Appellants do not have a prima facie case to get the ex-parte order in the O.A. set aside. Hence, they are not entitled to any indulgence of the court to get the amount reduced. The property has already been sold for ₹ 8 crores. The allegation that the notice was not served is not true.

Heard both sides. The main contention of the Appellants is that proper notice was not served on the first Respondent Company at its registered office at Jalna. The serving of the notice on the director as claimed by the Respondent may not be sufficient and hence the Appellants seek interference in the Appeal. The Ld. Counsel for the Respondent Bank has relied on the decision reported in Sunil Poddar & Ors. V/s Union Bank of India (2008) 2 SCC 326 wherein it is held that where the defendants had notice of the date of hearing, sufficient time to appear and answer the claim, he cannot plead non-service of the summons as a ground for setting aside the ex-parte by invoking Order 9 Rule 13 of the Code of Civil Procedure in a matter pending under the RDB Act.

Considering the entire facts and circumstances of this case, I find that the Appellants will have to be heard about their case of insufficiency of the summons and hence the Appeal needs to be entertained for that purpose. The amount as of the date of Appeal due from the Appellants is approximately ₹6 crores. The Appellants are not entitled to get the amount reduced to 25% by any means. I would, therefore, direct the Appellants to deposit a sum of ₹2 crores in two equal instalments as pre-deposit under Sec. 21 of the RDB Act within a period of six weeks. The first instalment of ₹1 crore shall be deposited on or before 28.11.2022 and the second instalment of ₹1 crore deposited on or before 19.12.2022. The status quo as of date shall be maintained in case of the payment of the first instalment on time. The status quo shall be vacated and the Appeal dismissed in case of default of the payment of any of the instalments without further reference to this Tribunal.

The amount shall be deposited in the form of 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 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 29.11.2022 for reporting compliance concerning the 1st instalment.