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Judgment
Ashok Menon, Chairperson
The matter is taken up for hearing by way of a praecipe filed by the appellant for seeking urgent relief.
The appellant is in appeal impugning the order dated 14.08.2024 in I.A. No. 2286/2024 in S.A. No. 75/2024 on the files of the Debts Recovery Tribunal-III, Mumbai (D.R.T), wherein the Ld. Presiding Officer declined to grant any protection to the appellant against the Sarfaesi measures initiated by the respondent bank for recovery of debt allegedly due from them under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. (“ the SARFAESI Act” for short).
The appellant had raised various grounds challenging the Sarfaesi action taken by the bank. It includes a challenge to the demand notice issued u/s. 13(2) and it is pointed out that the notice does not comply with the mandatory requisite of giving a bifurcation of the demanded amount u/s. 13(3) of the SARFAESI Act. There were five facilities availed by the appellant and a total sum of ₹ 1,20,87,337.09 is demanded. The breakup of each of the facilities is given but it is not given a breakup of the principal amount, interest and the charges levied therefore, the appellant would point out that this notice is defective.
The appellant had also objected to the demand notice to which the bank respondent u/s. 13(3-A) but the query puts in the objection who are not answered to the point and a very evasive reply is given which according to the appellant is not sufficient and therefore, there is a violation of Sec. 13(3-A). It is further contended that the nine-pointer affidavit accompanying the application u/s. 14 of the SARFAESI Act does not contend any verification. The facts stated in the application are also not true and the specific fact of the appellant sending an objection to the demand notice and the reply are not specifically stated in the application of the appellant.
The appellant has also objected to the bank not producing evidence regarding CERSAI registration that is required u/s. 26 B and 26 D of the SARFAESI Act. When the matter came up for consideration before the Debts Recovery Tribunal, (D.R.T) on 20. 02.2024, the D.R.T kept in view the decision of Asrec (India) Ltd V/s. Fastgrowth Hospitality LLP, 2023 SCC OnLine Bom 174, directed the appellant to make payment of ₹ 10 lakhs forthwith, a further amount of ₹ 10 lakhs within a week and thereafter, make a payment of ₹ 5 lakhs to the bank within 15 days. A conditional stay was granted to the appellant against the Sarfaesi measures.
The appellant paid a sum of ₹ 10 lakhs forthwith on the date of order. They were not able to comply with the payment of the balance two tranches of ₹ 10 lakhs and ₹ 5 lakhs within the time and therefore, I.A. No. 950/2024 seeking an extension of time of 90 days to pay the balance of ₹ 15 lakhs. On 03.04.2024, when this application came up for consideration before the D.R.T. It is recorded that the balance amount has already been paid by that date and therefore, it is also submitted on behalf of the appellant that they are in the process of settlement as directed by the D.R.T. in its earlier order.
However, the matter came up again for consideration on 14.08.2024, it was recorded in the order that in the earlier application the applicant had assured to settle the account within three months and the outstanding amount as of date was ₹ 1.20 crores and since the appellant had failed to comply with that order of settling the account within three months and no prima facie case is made out. I.A. No. 2286/2024 is devoid of any merits and was therefore dismissed. The appellant is aggrieved and hence, in appeal.
I have gone through the records and the application made also the interlocutory order passed by the D.R.T., it appears that the appellant was directed to pay a sum of ₹ 25 lakhs for the conditional order of protection on 20.02.2024, there was some delay in paying the amounts but nevertheless, the amounts were paid by 03.04.2024 and it appears that the delay in payment was condoned but at the same time the appellant was directed to attempt to settle the entire dues which they were not able to comply.
It is submitted by the Ld. Counsel appearing for the respondent that the appellant had made an OTS proposal which was rejected by the respondent. The application filed by the appellant does not give an assurance of settling the accounts within three months as is observed in the impugned order and therefore, this observation by the D.R.T. does not appear to be correct.
After having granted protection on payment of ₹ 25 lakhs the protection cannot be recalled merely on the ground that the appellant could not settle the entire dues within three months. The D.R.T. is expected to pass orders after going into the merits of the contentions raised in challenging the Sarfaesi measures. Nowhere in the orders passed by the D.R.T is there an adjudication on the merits of the challenge raised against the Sarfaesi measures. Despite that, it is concluded that the appellant has failed to make out a prima facie case.
On perusal of the demand notice u/s. 13(2), it appears that there is no bifurcation as required u/s. 13(3). The amount in each facility has been mentioned but it only states that it includes the principal and interest till that date and also the charges. As per requirement of u/s. 13(3) a breakup of the amount which is demanded has to be specifically stated.
The appellant has specifically objected on that ground which has been responded to by the bank but in their reply u/s. 13(3-A), but they have not addressed this dispute raised by the appellant and have failed to give a breakup and bifurcation of the amount demanded which they could have given in their reply and therefore, a prima facie, I find that there is some defect in the demand notice issued 13(2). As regards the application filed u/s. 14 before the District Magistrate, it is seen that the bank has not specifically stated the objection raised by the appellant to the demand notice.
The Ld. Counsel appearing for the respondent submits that there is a CERSAI registration and therefore, probably that objection may not be sustainable. However, considering the entire facts and circumstances, I find that the appellant has made out a prima facie case in their challenge to the Sarfaesi action. The appellant has also produced their income tax returns which would indicate that they are under financial strain. There is no production taking place in their unit though they are making earnest attempts to revive the production. Hence, an opportunity has to be granted to entertain this appeal on its merits.
Given the decision of the Hon’ble Supreme Court of India Sidha Neelkanth Paper Industries Pvt. Ltd. & Ano. vs. Prudent ARC Ltd & Ors., 2023 OnLine SC 12, the amount mentioned in the demand notice is to be taken as a threshold amount for calculation of the pre-deposit which the appellant is to comply with as stipulated u/s. 18(1) of the SARFAESI Act.
Given the fact, that the appellant has made out a prima facie case and also been able to satisfy to some extent regarding their financial strain. The appellant is entitled to some concession to get the total amount reduced from the mandatory 50%. However, I am not inclined to reduce the amount to 25% exercising jurisdiction under the third proviso of Sec. 18 (1) of the SARFAESI Act.
The appellant is therefore directed to deposit a sum of ₹ 35 lakhs as pre-deposit. The Ld. Counsel appearing for the appellant submits that a sum of ₹ 10 lakhs is being produced by way of RTGS today. The subject to deposit of that amount before 4.00 pm today with intimation to the Ld. Counsel appearing for the respondent and also to the Registry, the taking over of possession scheduled for today shall stand deferred till the next date of hearing. The balance amount of ₹ 25 lakhs shall be paid in two instalments within a gap of three weeks each, as stated hereunder.
Numbers of Instalments
Payment on or before
1st Instalment ₹ 10 lakhs
11.09.2024
2nd Instalment ₹ 15 lakhs
03.10.2024
Default in payment of any of the amount/instalment on time shall entail the dismissal of the appeal without any further reference to this Tribunal.
The amount shall be deposited in the form of a Demand Draft/RTGS with the Registrar of this Tribunal. Payment by RTGS shall be communicated to the Registry for verification.
18 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 12.09.2024 for reporting compliance regarding the 1st instalment.