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Judgment
Ashok Menon, Chairperson
This is an application filed by the appellants in Misc. Appeal (D) No. 629/2024 to restore the appeal disposed of based on consent terms, filed and recorded, and the I.A. No. 218/2024 the application for a waiver of deposit, to the files.
Vide order dated 30.04.2024, the appeal was disposed of recording the consent terms submitted by the appellants and the respondent bank. The third respondent is the auction purchaser. Objections have been filed by the respondents to this application for restoration of the appeal stating that the application is not maintainable and that the pre-deposit as required to be paid u/s 18(1) of the SARFAESI Act has not been paid. The auction purchaser has contended that she was not a party either to the consent terms or to the disposed appeal and that the consent terms are not binding upon her. Hence, the appeal cannot be restored to file. It is further stated that the auction purchaser has paid the entire sale consideration for which the property was purchased in the public auction.
Heard the Ld. Senior Counsel, Mr Tushad Cooper appearing for the appellants, The Ld. Senior Counsel, Mr Nitin Thakkar, appearing for the 3rd respondent and Mr Rafeeq Peermohideen, the Ld. Counsel appearing for the 1st respondent bank. The records perused.
The reliefs sought in this application for restoration are that the Misc. Appeal along with the interlocutory application for waiver of deposit and the application for stay of the Securitisation Application (S.A.) be restored to file. It is further prayed that the sum of ₹ 14 crores which was agreed to be deposited towards pre-deposit vide order dated 30.04.2024 be accepted after extending the six weeks to pay the amount and that this Tribunal may be pleased to entertain and dispose of the Misc. Appeal on its merits. The applicants would also seek prayer to restrain the respondent from alienating, encumbering or transferring the subject property or taking any further steps to confirm the sale in favour of the 3rd respondent, issuing the sale certificate in her favour and registering the sale. Respondents Nos. 1 & 2 may also be restrained by an order of injunction from handing over possession of the subject property to respondent No. 3, submit the applicants.
The appellants are admittedly borrowers who had defaulted on repayment of the debt resulting in Sarfaesi measures being initiated against them for recovery of dues. The property was put up for sale and the appellants moved the Debts Recovery Tribunal-II, Mumbai (D.R.T.) by filing I.A. No. 530/2024 in Securitisation Application No. 84/2024 (S.A.) for protection against the coercive steps. The D.R.T., vide order dated 19.03.2024 rejected the application. As per the demand notice issued u/s 13(2), a sum of ₹ 12,89,40,209.24 was due. The appellants had raised several contentions challenging the Sarfaesi action. However, in this application for restoration, I do not find it relevant to mention those contentions.
When the appeal had come up for hearing on the waiver of pre-deposit to be paid for entertaining it, the appellants and the bank filed a consent terms which was recorded by this Tribunal, and the appeal was disposed of without going into the merits. It was agreed that the appellants would within three months, deposit with the Registrar, DRAT, Mumbai an amount of ₹ 14 crores and until then, the bank shall not proceed further to conclude the sale of the secured asset. It was also agreed that on such deposit being made, the 1st respondent bank shall be entitled to forthwith withdraw the entire amount of ₹14 crores unconditionally as full and final settlement towards all dues claimed by the respondent bank from the appellants.
Clause 7 of the consent term reads thus:
“AGREED, DECLARED, CONFIRMED AND ORDERED that in the event of the said deposit of 14,00,00,000/- (Rupees Fourteen Crores Only) is not affected by the Appellants within a period of three months from the date of this Order, then the captioned Appeal shall stand dismissed and the Respondent No. 1 bank shall be unconditionally at liberty to proceed with the auction sale of the secured asset”.
Clause 10 reads thus,
“AGREED DECLARED, CONFIRMED & ORDERED that in view of the present Order, the captioned Appeal as well as the Securitisation Application (D) No. 359 of 2024 is accordingly disposed of as per the terms and conditions mentioned herein and all Interim Applications filed in the captioned Misc. Appeal and Securitisation Application do not survive and are disposed of accordingly”.
When the appeal was taken up for consideration by this Tribunal, a counsel proposing to appear for the auction purchaser sought to intervene, but it was made clear that without an intervention application being filed by the auction purchaser, or an application for impleadment being filed by the appellants it was not possible to hear the auction purchaser. On the filing of the consent terms, the appeal was disposed of by recording thus,
“The appeal came up for hearing on I.A. No. 218/2024 for waiver of deposit. The parties have arrived at a settlement and drawn consent terms which have been submitted before this Tribunal. The parties are all present here and they have agreed that the appeal as well as the S.A. at Diary No. 359/2024 on the files of the D.R.T. be accordingly disposed of in terms with the conditions mentioned in this consent terms.
An amount of ₹ 14 crores is being deposited in the name of the Registrar of this Tribunal towards pre-deposit. Liberty is granted to the Respondent bank to withdraw that amount under the terms which are recorded and the appeal is disposed of recording the consent terms”.
As per the consent terms, a sum of ₹ 14 crores was to be deposited in the name of the Registrar, DRAT, Mumbai within three months. Hence, the amount ought to have been deposited before 30.07.2024. The appellants would contend that they were precluded from paying the amount because the 3rd respondent had filed a Writ Petition (L) No. 17703/2024 before the Hon’ble Bombay High Court which directed the status quo to be maintained vide order dated 24.06.2024 and therefore, the appellants were not in a position to pay the amount. It is urged by the Ld. Sr.Counsel for the appellant that the 3rd respondent was aware of the proceedings before this Tribunal, and also addressed the bank for an extension of time to pay the balance sale consideration given the time granted to the appellants to pay the debt in accordance with the consent terms.
Anticipating the cancellation of the sale without her being made a party to the settlement terms, the auction purchaser approached the Hon’ble High Court to preclude the bank from doing so. The bank however agreed to accept the balance sale consideration from the auction purchaser and issued the sale certificate. Following this, the aforesaid Writ Petition was withdrawn on 03.09.2024. By that time, the time for depositing ₹ 14 crores as per the consent terms had expired.
The Sr Ld. Counsel appearing for the appellants states that the bank had colluded with the 3rd respondent to prevent them from making the payment agreed upon as per the consent terms, and therefore, the appeal needs to be restored to file. The withdrawal of the Writ Petition was opposed by the appellants before the Hon’ble Bombay High Court on the ground that under the consent terms, certain rights were created in favour of the appellants. However, the Hon’ble Bombay High Court did not find any reason to prevent the 3rd respondent from withdrawing the Writ Petition in light of the statement made by the Ld. Counsel appearing for the Writ Petitioner and the bank. It was however clarified that all rights and contentions of all parties including the appellants herein are kept open for being urged in appropriate proceedings if they seek to claim rights on the basis of the consent terms or seek restoration of the appeal before this Tribunal.
The appellants thereafter approached the Hon’ble Supreme Court in Special Leave Petition No. 27290/2024 (S.L.P) and it was disposed of with the direction that all the remedies available to the petitioners will remain open notwithstanding the impugned order including the remedy of challenging the action u/s 14 of the SARFAESI Act. All contentions of the petitioners on that behalf were kept open.
Given the observations made by the Hon’ble Supreme Court as well as the Hon’ble Bombay High Court granting an option to the appellants to get the appeal restored and contest the validity of the consent terms, the appellants now seek to restore the appeal.
It is pertinent to note that nothing precluded the appellants from depositing ₹ 14 crores within three months, the time prescribed as per the consent terms. The appellants would contend that because of the Writ Petition filed by the 3rd respondent on 07.06.2024 and the status quo order, the appellants were precluded from depositing the amount. The 3rd respondent had approached the Hon’ble Bombay High Court to direct the bank to accept the balance sale consideration from them and issue the sale certificate and to order maintaining a status quo. However, the status quo would not have prevented the appellants from depositing the amount before this Tribunal. They could even have sought the consent of the Hon’ble Bombay High Court to deposit the amount within the time stipulated within the consent terms, subject to the decision in the Writ. But that was not done.
To entertain an appeal, it is incumbent upon the appellants to comply with the order of making the mandatory pre-deposit which they failed to do and therefore, the appeal could not have been entertained without the pre-deposit amount coming in. It is also pertinent to note that redemption of the secured asset is not possible after the issuance of the auction sale notice, given the settled position in Celir LLP vs Bafna Motors (2023) CR 53. The balance sale consideration was paid by the 3rd respondent on 21.06.2024. The fact that they had sought a further extension of time to deposit the amount given the consent terms does not in any way preclude them from exercising their right to seek an extension of time as contemplated under Rule 9 of the Security Interest (Enforcement) Rules. The consent terms cannot bind the auction purchaser as long as she was not made a party to it or the appeal that was disposed of. I find that the appellants are not entitled to any relief in this application to get the appeal restored to file.
The application is, therefore, dismissed.