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Judgment
Ashok Menon, Chairperson
The matter is taken up for hearing by way of a praecipe filed by the appellants for seeking urgent relief.
The appellants are in appeal impugning the order dated 22.11.2024 in Securitisation Application(S.A.) No. 587/2024 by the Debts Recovery Tribunal-II, Ahmedabad (DRT) directing the appellants to deposit 40% of the debt due as on that date in two tranches of 20% each within one week and two weeks respectively and subject to that condition of deposit, an injunction was granted as against the Sarfaesi measures.
Aggrieved by this order of deposit and conditional order of injunction, the appellants are in appeal.
The 1st appellant is a proprietorship of which the 2nd appellant is the sole proprietor. Appellants 3 and 4 are the guarantors. The appellants have admitted the existence of the debt and are also admitting that there are dues to be paid by them. The challenge to the Sarfaesi actions is on various grounds. It is stated that the 1st appellant is an MSME and therefore, the classification of the debt as a non-performing asset(NPA) was not in accordance with the rules applicable to an MSME. It is further contended that the demand notice issued u/s 13(2) on 01.06.2024 demanding the sum of ₹1,01,39,741.90 by the authorized officer is not proper for want of description regarding the name and designation of the authorized officer and hence, the competency of the office who has issued the demand notice is doubtful.
It is also contended that the appellants had objected to the demand notice on 04.07.2024 raising their concerns about the demand made by the respondent bank. To that, the respondent bank sent a reply on 16.07.2024 without addressing any of these concerns raised by the appellants.
It is also submitted that the demand notice is issued only in the name of the 1st appellant proprietorship and copies are marked to the rest of the appellants which would be improper because a demand notice is to be addressed to all the borrowers/guarantors/ mortgagors and on that count also, the notice is defective. There is further contention that the nine-pointer affidavit accompanying the application u/s 14 of the SARFAESI Act is defective for the reason that it does not state anything regarding the response and objection by the appellants to the demand notice. The falsity in the affidavit is proved by the production of the copy of the objection as well as the reply sent by the respondent bank on 16.07.2024 acknowledging the receipt of the objections. Symbolic possession of the subject property was taken on 14.10.2024 and order u/s 14 was obtained on 21.09.2024. Thereafter, the notice to take physical possession of the subject property was issued by the commissioner appointed by the District Magistrate. The Ld. Presiding Officer has in the impugned order observed that the appellants have triable issues which need to be adjudicated by the Tribunal after giving an opportunity of leading evidence, and hearing both sides. But despite that, the appellants were directed to deposit 40% of the debt due as of date for an injunction order, relying upon the decision of the Hon’ble Bombay High Court in ASREC (I) Ltd. vs Fastgrowth Hospitality LLP and Ors. 2023 SCC OnLine Bom 174.
The Ld. Counsel appearing for the appellants submits that the appellants have a good prima facie case. They are also facing financial strain. The Income Tax Returns of the 2nd appellant are produced to indicate that he does not have sufficient income to pay 50% of the debt due and hence it is prayed that 25% of the debt due as pre-deposit may be waived and the appeal be entertained on deposit of only 25% of the debt due.
The Ld. Counsel appearing for the respondent bank has vehemently opposed the application for waiver of deposit and has submitted that the appellants do not have any substantial case in challenging Sarfaesi measures. Replies have been filed to the S.A. and the D.R.T. has observed that the matter will have to be adjudicated on its merits. It is pointed out that as of date, the outstanding dues is ₹1,00,56,218.90 and therefore, the appellants may be directed to deposit 50% of the said amount as pre-deposit for entertaining this appeal u/s 18(1) of the SARFAESI Act. On considering the entire facts and circumstances of this case, I find that the demand notice issued only in the name of the proprietorship which has no legal existence is prima facie questionable. Only a copy is marked to the rest of the appellants. Whether marking a copy would be sufficient to demand is an arguable question which will have to be decided by the D.R.T in the S.A. Since the notice is drawn only in the name of the proprietorship which is not a legal entity and cannot sue or be sued in its name. As regards the objections about the non-description of the designation and the name of the authorized officer it is to be held that it is curable and the respondent bank is at liberty to adduce evidence regarding the competence of the authorised officer to issue the demand notice. It is also relevant that the bank has not answered any of the objections which have been raised about the reply sent to the appellants on 04.07.2024. It is just an evasive reply which is doubtful of sufficient compliance u/s 13(3A) of the SARFAESI Act. Moreover, even after sending the reply to the objections in the nine-pointer affidavit, it is stated that the borrowers have not raised any objections which is apparently false.
Considering all these factors, I find that the appellants may also have a prima face case but there is no sufficient evidence regarding the impecuniosity of the appellants. The Income Tax Returns of the 2nd appellant alone is produced. The Income Tax Returns of the rest of the appellants are not produced. Under the circumstances, the appellants are not entitled to a waiver of 25% of the debt due as a pre-deposit. But they are entitled to certain concessions. Taking the threshold amount as ₹1,00,56,218.90, the appellants are directed to deposit a sum of ₹40 lakhs as pre-deposit. The Ld. Counsel appearing for the appellants submits that the demand draft of ₹10 lakhs is being produced today and the balance ₹30 lakhs shall be paid in two equal instalments within two weeks each as stated hereunder.
Numbers of Instalments
Payment on or before
1st Instalment of ₹ 15,00,000
19.12.2024
2nd Instalment of ₹ 15,00,000
02.01.2025
On payment of ₹ 10 lakhs towards the pre-deposit, the taking over of the possession scheduled on 07.12.2024 shall stand deferred till the next date of hearing.
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.
As and when the said amount is deposited, it 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 20.12.2024 for reporting compliance of 1st instalment of payment of pre-deposit.