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Judgment
Ashok Menon, Chairperson
This is an application filed under Sec. 18(1) of the Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’, for short) by the Appellants seeking the indulgence of this Tribunal to waive and reduce the mandatory pre-deposit to the minimum of 25% of the debt due.
The first Appellant is a company which is the principal borrower and Appellants Nos. 2 to 4 are its directors as well as personal guarantors for the debt.
The Appellants challenge the order dated 04.08.2023 in the Securitisation Application (S.A.) No. 151 of 2023 on the files of the Debts Recovery Tribunal-I, Mumbai (D.R.T.) wherein the Ld. Presiding Officer declined to grant any interlocutory reliefs to the Appellants protecting them from the Sarfaesi measures initiated by the Respondent bank against the secured assets.
The Appellants had availed a loan from the Respondent bank. The initial facility was ₹4.5 crores which was later reviewed and reduced to ₹3 crores. There was a default in re-payment resulting in the account being classified as a non-performing asset (NPA). A recall notice was issued on 12.12.2014 calling upon the Appellants to pay a sum of ₹3,88,05,064.78. Original Application (O.A.) No. 691 of 2015 was filed for recovery of the amount and the application is still pending consideration. On 06.02.2015, a demand notice was issued under Sec. 13(2) of the SARFAESI Act demanding a sum of ₹3,95,64,000/-. The Appellants sent an objection to the demand notice on 27.03.2015. The Respondent rejected the objection vide reply dated 09.05.2015. Thereafter, a possession notice was issued on 03.12.2015 intending to take possession of the property on 17.12.2015. The Appellants filed S.A. No. 342 of 2016 on 15.01.2016 but the same was dismissed on 10.11.2020.
Thereafter, the Respondent obtained an order under Sec. 14 from the Additional Chief Metropolitan Magistrate on 04.01.2018 directing the Court Commissioner to take physical possession of the secured assets. The Appellants received a notice on 10.07.2023 from the Commissioner intending to take possession of the secured assets on 04.08.2023. The Appellants filed the present S.A. No. 151 of 2023. Interim relief sought by the Appellants was rejected. The Appellants are aggrieved and hence, in appeal.
The Appellants have a number of contentions against the Sarfaesi measures. It is contended that the charge over the property is not created by a registered document and therefore, there is no valid security created. There are two dates of NPA mentioned in the application under Sec. 14 as 30.06.2014 and 30.10.2014. The demand notice under Sec. 13 (2) does not comply with the mandate under Sec. 13(3A) and is, therefore, bad. There is no bifurcation of the principal amount and interest. The designation of the authorised officer who issued the demand notice is not stated.
The Appellants would contend that a sum of ₹1.95 crores was paid subsequent to the demand notice. A sale notice issued on 16.09.2023 intending to sell the property by way of auction on 23.10.2023 mentions an outstanding amount of ₹3,94,64,000/-. The property is sold and the sale is challenged. The Appellants contend that they have a strong prima facie case and they are under financial strain. The first Appellant company is not functioning. The Income Tax Returns of the rest of the Appellants indicate the paucity of income. Hence, the Appellants pray that the amount to be deposited under Sec. 18(1) of the SARFAESI Act may be kept at a minimum of 25%.
The Ld. Counsel appearing for the Respondent bank has vehemently opposed the application stating that the Appellants do not have any prima facie case and that the outstanding amount as of date is more than ₹12 crores.
The Ld. Counsel appearing for the Appellants Mr Kinkhabwala submits that the account statement is not proper. Penal interest has been capitalised illegally and the amount due is highly exaggerated.
Heard the rival contentions of the parties. The Appellants had earlier filed S.A. No. 342 of 2016 raising contention regarding the insufficiency of the demand notice that S.A. was dismissed. The Appellants cannot, therefore, resort to those contentions again. The present S.A. No. 151 of 2023 was filed consequent to the receipt of the notice of dispossession issued under Sec. 14 of the SARFAESI Act. There does not appear to be any serious contention regarding proceedings under Sec. 14 and therefore, I do not find a strong prima facie case for the Appellants. It is true that the Appellants have succeeded to some extent to establish their impecuniosity. Under the circumstances, the Appellants are not entitled to get the pre-deposit amount reduced to 25%.
Considering the entire facts and circumstances of this case, the Appellants are directed to deposit a sum of ₹4 crores as pre- deposit based on the threshold amount taken as over ₹12 crores. The said amount shall be deposited in four equal instalments of ₹1 crore each within a gap of two weeks each as mentioned hereunder.
Numbers of Instalments
Payment on orbefore
1st Instalment of ₹1,00,00,000/-
19.12.2023
2nd Instalment of ₹1,00,00,000/-
02.01.2024
3rd Instalment of ₹1,00,00,000/-
16.01.2024
4th Instalment of ₹1,00,00,000/-
30.01.2024
Default in payment of any of the instalments entails in dismissal of the appeal without any further reference to this Tribunal.
The sale has been confirmed and therefore, I do not intend to stall the proceedings any further.
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 20.12.2023 for reporting compliance regarding the first instalment.