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Judgment
Ashok Menon, Chairperson
The Appellants are in appeal impugning the order dated 24.11.2023 in Interim Application (I.A.) No. 3652/2023 in Securitization Application (S.A.) No. 273/2023 on the files of the Debts Recovery Tribunal-III, Mumbai (D.R.T.) wherein the Ld. Presiding Officer refused to grant any stay concerning the taking over of possession of the property by the Tahsildar in compliance with the orders u/s 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act” for short). The secured assets namely, Flats Nos. 3, 8, and 24 have already been sold and the sale has been confirmed. What remains is the handing over of possession to the auction purchaser. The Appellants filed the S.A. challenging the Sarfaesi measures stating that they are victims of fraud and that their guarantee was only to the extent of ₹15 crores and not to the entire loan which was availed of by the principal borrower.
It is also contended that the order of u/s 14 of the SARFAESI Act is not sustainable for the reason that the Authorized Officer who has applied u/s 14 has not produced any letter of the authority. It is pointed out that the Ld. Chief Metropolitan Magistrate (CMM) had directed the bank to produce the letter of authority and certain other documents which the bank had purportedly complied, but the letter of authority pertains to someone else and not a person who has applied u/s 14 is the contentions raised by the Appellants. Hence, it is submitted that the order u/s 14 will have to be quashed and set aside.
During the pendency of the S.A. the properties were sold and the Ld. Counsel appearing for the Appellants submits that the Appellants have incorporated the challenge to the sale of the property pointing out the insufficient price for which it was sold and application for the amendment is pending consideration.
The Appellants have filed I.A. No. 841/2023 for waiver of pre-deposit. The prayer is for a complete waiver of pre-deposit which by any means is not possible. To seek indulgence by this Tribunal to reduce the pre-deposit amount to the minimum of 25% as contemplated under the 3rd proviso to section 18 (1) of the SARFAESI Act, the Appellants will have to prove a prima facie case and will also have to establish that they are under financial strain.
From the impugned order it seems that the bunch of documents which was allegedly produced before the District Magistrate were also produced before the D.R.T. and the Ld. P.O. was convinced that there is a proper authority for the person who approached the District Magistrate with an application u/s 14. It is on that basis that the Ld. Presiding Officer refused to grant any protection to the Appellants from being dispossessed from the property.
Regarding the commission of the fraud and other contentions raised by the Appellants concerning the Sarfaesi measures the matter will have to be inquired in detail which would be done in the S.A. which has been filed by them. At this stage of considering the application for waiver of pre-deposit, it is not possible to go into those details. The demand notice u/s 13 (2) demanded a sum of ₹51,46,83,780.54 but since, the Appellants are also challenging the sale, as per the decision of the Hon’ble Supreme Court of India in Sidha Neelkanth Paper Industries Pvt. Ltd. & Ano. vs. Prudent ARC Ltd & Ors., 2023 SCC OnLine SC 12, the threshold amount for payment of the pre-deposit would be the amount of debt inclusion of the interest till date. As of 31.12.2023, the outstanding amount is around ₹106 crores and therefore, that would be the threshold amount for calculation of the pre-deposit. The Appellants have not produced any documents to indicate that they are under financial strain, though there are few pleadings to that effect.
Under the circumstances, the Appellants are directed to deposit the ₹50 crores as pre-deposit for entertaining this appeal within four weeks, on or before 01.02.2024. The Ld. Counsel appearing for the Appellants seeks time to pay the pre-deposit amount. The aforesaid amount shall be paid within four weeks. The Ld. Counsel appearing for the Appellants submits that he is willing to deposit a sum ₹2 crores within four weeks. That proposal is not acceptable 8. Default in payment of the entire amount shall entail dismissal of the appeal 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 Respondents is at liberty to file a reply in the Appeal with an advance copy to the other side.
Post on 02.02.2024 for reporting compliance