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Judgment
Ashok Menon, Chairperson
The matter is taken up for hearing by way of a praecipe filed on 16.01.2024 by the Appellants for seeking urgent relief.
The Appellants are in appeal impugning the order dated 03.01.2024 dismissing the Securitisation Application (S.A.) No. 27 of 2020 by the Debts Recovery Tribunal-I, Ahmedabad (D.R.T.). The Appellants had filed an application under Sec. 17 of the Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’, for short) seeking to quash the Sarfaesi measures initiated by the Respondent bank on various counts which includes the challenge to the classification of the account as non-performing asset (NPA). It is stated that the classification was not in conformity with the RBI guidelines that the Ld. Presiding Officer had gone wrong in classifying the account as NPA. That apart, it is also contended that the reserve price for the secured asset which has been sold ultimately for ₹41.40 lakhs was low and did not fetch more than the reserve price and that is squarely in violation of the second proviso to Rule 9(2) of Security Interest (Enforcement) Rules, 2002 (‘Rules’, for short). It is submitted that the property was valued on the basis of a valuation report which was more than a year old. It is also pointed out that several attempts to sell the property have failed and therefore, the property was ultimately sold at the reserve price. The Ld. Presiding Officer was not enthused with the contentions raised by the Appellants in challenge to the Sarfaesi measures and hence, declined to grant any reliefs and ultimately dismissed the S.A. The Appellants are aggrieved and hence, in appeal.
It is submitted that the Appellants have a strong prima facie case and they are also under financial strain. The Income Tax Returns of the second Appellant have been produced which does not indicate the huge income for the second Appellant. The first Appellant which is a sole proprietorship represented by the proprietor has not produced the Income Tax Returns nor the statement of account produced about the proprietorship.
The Ld. Counsel appearing for the Respondent bank submits that the notice was served only two days ago and therefore, sufficient time may be granted for getting instructions from the bank. No reply being, therefore, filed.
The Ld. Counsel appearing for the Appellants submits that the possession of the secured asset is scheduled to take place on the 28th instant and therefore, by that time a reply is filed, the Appellants would be dispossessed from the property and hence, insists on an urgent relief. The Appellants have an arguable case regarding the validity of the classification of debt as NPA. There is also an arguable case regarding the sale of the property at the reserve price because no consent of the borrower was obtained for selling the property at the reserve price and nothing more. It is also pertinent to note that the property was sold on the basis of a valuation which was obtained more than a year ago. But at the same time, it also cannot be forgotten that the property was put up for sale more than once and there were no takers. It is for that reason and therefore, the property had to be ultimately sold at the reserve price. The Ld. Counsel appearing for the Appellants would submit that the property had no bidders because the auction had taken place during the COVID period and it was but natural that none would have participated.
Taking the entire facts and circumstances into consideration, I find the Appellants need not be restrained from agitating their contentions before this Tribunal at the threshold. Since the Appellants have challenged proceedings including the sale the amount as of date should be taken as the threshold amount for making a pre-deposit. The amount mentioned in the sale notice dated 28.02.2023 is ₹42,68,526.24. There would have been some interest accrued thereon. Since the Ld. Counsel appearing for the Respondent bank has been unable to get instruction on that. The amount is taken as approximately ₹45 lakhs. The Appellants are not entitled to get the benefit of getting the pre-deposit amount reduced to 25% but they also need not pay 50%. Since they have an arguable case and also to some extent established that they are under financial strain. Hence, the Appellants are directed to deposit a sum of ₹20 lakhs as pre-deposit. Ld. Counsel appearing for the Appellants submits that a demand draft for ₹10 lakhs would be paid today towards the pre-deposit amount. The balance of ₹10 lakhs shall be deposited within three weeks i.e. on or before 09.02.2024.
Default in payment of any of the instalments entails in dismissal of the appeal without any further reference to this Tribunal.
8 Given the payment of Rs.10 lakhs today, taking over possession of the property scheduled on the 28th instant shall stand deferred till the next date of hearing.
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 12.02.2024 for reporting compliance regarding the second instalment.