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Judgment
Ashok Menon, Chairperson
The Appellants are the Applicants in Securitisation Application No. 292 of 2021 on the files of the Debt Recovery Tribunal-II (D.R.T.), Ahmedabad and impugn the interlocutory order of the Ld. P.O dated 22/08/2022.
The 1st Appellant is a company and as the principal borrower, availed a cash credit facility to the tune of ₹9.90 crores from the Respondent Bank on the security of the hypothecated movables including the plant and machinery and on the collateral security of the hotel building and the land on which it stood situated in plot No. 38 new survey No. 23, Parsi Colony, Devka beach road, Daman. The rest of the Appellants who were directors of the company stood as guarantors/mortgages for the debt.
The Appellants defaulted repayment of the debt, which resulted in the account pertaining to the company being classified as a Non-Performing Asset (NPA) on 08/12/2020. The Respondent issued on demand notice under Sec. 13 (2) of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’ for short) on 11/12/2020, demanding a sum of ₹9,71,87,207/- as of 08/12/2020 due from the Appellants on four accounts maintained with the bank. Following this, when the Appellants failed to pay the amount demanded, the Respondent Bank took symbolic possession of the secured assets referred to above by issuing a possession notice under Sec. 13 (4) of the SARFAESI Act, dated 03/06/2021. The Respondent further issued a demand notice on 30/03/2021, demanding a sum of ₹9,74,71,385/- as of 08/12/2020 and again issued a possession notice on 21/06/2021 and took symbolic possession of the property again.
According to the Appellants, the financial facilities described at serial numbers 2 to 4 in the demand notices were never supported by any security documents and no security interest were created for those loans. Moreover, it is also contended that the 2nd demand notice could not have been issued without withdrawing the 1st notice. The Appellants had submitted a letter to the Respondent Bank on 22/12/2020 on receipt of the 1st demand notice. After they received the 2nd demand notice, they submitted an OTS proposal to the Bank on 11/05/2001. The Respondent Bank has initiated action under Sec.14 of the SARFAESI Act against the Appellants for physical possession of the property, and the 1st Appellant company had submitted a response to the proceedings before the District Magistrate, Daman. It is contended that the application before the District Magistrate does not comply with the requirements of the nine-pointer affidavit, which is mandatory. Action was taken against the Appellants for violation of the CRZ Regulation. The Appellants had approached the Hon’ble High Court and obtained an order of maintaining the status quo with regard to the action intended to be taken for the aforesaid violation.
The Appellants would contend that they were not able to proceed with their business because of the action taken against them for the alleged violation of CRZ Regulation. Under the circumstances, they were not able to complete construction, run the hotel and generate revenue to pay off the debts. The Appellants had also requested the Bank to restructure the loan. The Appellants had prayed for an interlocutory order to stall the Sarfaesi measures initiated against them. The Ld. P.O. declined to grant any interlocutory order in favour of the Appellants, and hence, this appeal, impugning the said order dated 22/08/2022.
The Respondent Bank denies all the allegations made by the Appellants and submits that they had considered the request made by the Appellants to restructure the loan but despite that, the Appellants defaulted on payment of the dues as a result of which, the demand notice was issued. The 1st demand notice was withdrawn and a 2nd demand notice was issued to the Appellants demanding the outstanding dues. Symbolic possession was taken on 21/06/2021 in compliance with the Rules. The application filed for physical possession was allowed by the District Magistrate on 23/08/2021. It is also pointed out that the Appellants had admitted their entire liability in the OTS proposal made by them on 11/05/2021. There is no infirmity in the application filed before the District Magistrate under Sec. 14 of the SARFAESI Act. The Respondent contends that as of date, the outstanding dues from the Appellants are ₹11,07,47,331/-. It is submitted that the Appellants have no reason to seek any indulgence in getting the mandatory pre-deposit reduced.
I am not enthused about the prima facie case put up by the Appellants. However, the financial stress into which the Appellants were put, has been established. The Income Tax Returns filed by Appellants Nos. 2 to 5 are produced to prove the same. Because of the action taken by the administration against the Appellants for alleged CRZ Regulation violation, they were not able to start the business and earn income. Taking into consideration the entire facts and circumstances, I direct the Appellants to deposit a sum of ₹3 crores as pre-deposit under Sec. 18(1) of the SARFAESI Act. The said amount shall be paid in two equal instalments of ₹1.5 crores each. The first instalment shall be payable within three weeks from today, on or before 01.02.2023. And, the second instalment shall be payable within three weeks therefrom, on or before 22.02.2023. 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 nationalized bank, initially for 13 months, and thereafter to be renewed periodically.
On payment of the first instalment within the stipulated time, the Appellants shall be entitled to stay of the further Sarfaesi measures initiated by Respondent Bank.
With these observations, the I.A. is disposed of. The Respondent Bank is at liberty to file a reply in the Appeal with an advance copy to the other side.
Post on 02.02.2023 for reporting compliance concerning the payment of the first instalment.