M/s. Shree Pharma Engineering Works and Ors vs Indian Bank & Ors

Ashok Menon, Chairperson

This is an application for waiver of deposit u/s. 18 (1) of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’, for short). The Appellants are the borrowers, mortgagors and guarantors and they have filed aforesaid Securitisation Application(S.A.) No. 212/2020 u/s. 17 for stalling the Sarfaesi measures initiated with respect to the secured assets. The Appellants had sought an interlocutory relief to stall the Sarfaesi measures pending the S.A. and vide order dated 23.12.2022, the Ld. P.O., Debts Recovery Tribunal-I, Ahmedabad(D.R.T.) declined to grant any relief. The Appellants are aggrieved and hence in appeal.

The Appellants have challenged the Sarfaesi measures on various grounds impugning collusion and fraud on the part of the bank and the others. It is also stated that the notice u/s. 13 (2) of the SARFAESI Act is defective. There is a violation of Sec. 13 (3) of the SARFAESI Act for necessary details brought in furnish that apart the Appellants are also contented that there is non-compliance of Rules 8 (1) and 8 (2) of the Security Interest (Enforcement) Rules, 2002. Further, there is non-compliance with Rules 8 (5), 8(6) and 8 (7) as well as 9 (1) of the Rules. It is also submitted that the reserve price fixed for the secured properties is very much below the market price.

Per contra the Ld. Counsel appearing for the first Respondent Bank has filed a reply contradicting all the allegations stating that none of the allegations is sustainable. According to the Ld. Counsel appearing for the first Respondent, the property has already been sold after the fourth attempt, and the outstanding dues of the Appellant are ₹ 91,87,478/- as of date inclusive of interest and after adjusting the amount which is paid by them.

The Appellants have in this application for waiver of deposit contended that they are entitled to the amount for which the property has been auctioned and the subsequent payments which have been earlier paid to be deducted from the total amount that is due.

After hearing both sides therein going through the available records, I find that prima facie the contention of the Appellants that they are entitled to the auction amount to be deducted from the amount due for the purpose of the calculation of the pre-deposit is not acceptable. That position is no longer res-integra. and even in the latest decision of the Hon’ble Supreme Court in Sidha Neelkanth Paper Industries Pvt Ltd Vs Prudent Arc Ltd LAWS(SC)-2023-1-11) it is held that the auction amount cannot be deducted from the total debt for purpose of calculation of the pre-deposit. Moreover, the Appellants have not pleaded any financial strain. They have not produced any income tax returns to prove that they are under financial stress.

Under the circumstances, I find no reason to invoke the discretionary jurisdiction under the third proviso to u/s. 18(1) of the SARFAESI Act. The Appellants are, therefore, directed to deposit a sum of ₹ 46,00,000/- as pre-deposit to be paid in two equal instalments. The first instalment shall be payable within two weeks on or before 02.02.2023 and the second instalment shall be payable within two weeks on or before 16.02.2023. In default, the Appeal shall stand dismissed, without any 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 03.02.2023 for reporting compliance concerning the payment.