State Bank Of India vs VEE ESS Jewellers Pvt. Ltd.

Ranjit Singh, J

Two securitization applications bearing Nos. 40/2010 titled as VEE ESS Jewellers (Pvt.) Ltd. vs. State Bank of India and 41/2010 titled as M/s Ashoka Woolen Mills vs. State Bank of India have been disposed of by a common order dated 30.5.2011 by DRT-II, Delhi. Two separate appeals (Nos. 311/2011 and 312/2011) are directed against this common order.

The facts as noticed from Appeal No. 311/2010 would show that M/s VEE ESS Jewellers (Pvt.) Ltd., a partnership firm was granted credit facilities to the tune of Rs. 22.20 crores by the appellant bank on 14.2.2005. All the partners gave their personal guarantees and different properties were mortgaged equitably in favour of the bank for securing the repayment of the loan/ credit facilities. Anil Kumar Bagai and Anirodh Kumar Bagaj deposited title deeds of a commercial property at 6-A, Chikambarpur Village, Pargana Loni Tehsil, District Ghaziabad, Uttar Pradesh, measuring 4800 sq. yds. for securing the loan.

On 21.12.2006, credit limit was enhanced to Rs. 35 crores on request made by the respondent. Limit was further enhanced to Rs. 45 crores on 26.10.2007. The charges on the commercial property noted above were extended by the respective guarantors/ mortgagors/ owners from time to time for the enhanced loan/ credit facilities. Appellant firm availed the aforesaid facilities but neglected its repayment. The outstanding amount and the liability is even acknowledged in the balance sheet. The bank wrote various letters to the borrower/guarantors/mortgagors to regularize the account and to maintain the financial discipline, but still they failed to do so. On 28.8.2009, notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the SARFAESI Act) was issued to the borrower, its guarantors and mortgagors. Still, they did not remit the outstanding amount. A sum of Rs. 58,56,05,224/-, besides interest at contractual rate together with incidental expenses, costs, charges etc. was claimed in the notice under section 13(2) of the SARFAESI Act.

The appellant filed a representation in response to the said notice dated 28.10.2009. This was received by the bank on 31.10.2009. The appellant bank immediately responded to the same on 4.11.2009 and thus on 25.01.2010, the bank was constrained to file O.A. titled as State Bank of India vs. VEE ESS Jewellers (P) Ltd. & Ors. for the recovery of Rs. 62,23,88,916.80 from the borrower/ guarantors/ mortgagors. In pursuance of the proceedings initiated under the SARFAESI Act, the appellant bank took physical possession of the secured assets. Respondents then filed S.A. No. 40/2010 and S.A. No. 41/2010 before the Tribunal below. Appellant bank filed reply along -with relevant documents. The Tribunal has disposed of these two S.As by the common order dated 30.5.2011 holding that the notices under sections 13(2) and 13(4) of the SARFAESI Act are valid, effective and enforceable, but, at the same time, has ordered that the possession of commercial property referred to above be restored to the Director Mr. Sanjeev Verma subject to filing undertaking as recorded in the impugned order. The bank accordingly has approached this Tribunal through these two appeals to challenge that part of the order whereby the possession of the commercial property bearing No. 6-A, Chikambarpur Village, Pargana Loni Tehsil, District Ghaziabad, U.P. has been ordered to be restored to the Director as noticed. As per the appellant, this part of the order is neither justified in law nor in equity and accordingly would pray that the same be set aside/modified/quashed. It is specifically pleaded that the prayer in the present appeals is restricted only to that part of the order which contains direction against this property and not to any other part of the impugned order.

When this appeal came up for hearing before this Tribunal, the contentions on the above lines, advanced by the counsel for the appellant, were noticed. This Tribunal, while issuing, notice, stayed the impugned order to the extent the possession of the property was handed over. As a result thereof, this property is still in possession of the bank.

On 23.11.2011, Ms. Badra Munir appeared for respondents as proxy counsel for Mr. Sudheer. There was no Vakalatnama filed before this Tribunal and accordingly Ms. Munir prayed for time to file Vakalatnama within a week. On 24.1.2012, which was the next date, Mr. B.P. Nahar appeared along Ms. Badra Munir and prayed for time on the ground that the copy of the paper book of the Appeal No. 312/2011 was not received by him. The case was adjourned to 11.4.2012 with the direction to the appellant to supply the appeal paper book to him within four weeks.

On 11.4.2012, the Tribunal has noticed that some of the properties have already been sold and the bank had recovered a substantial amount, as the appellant bank was allowed to sell 5 out of 6 properties mortgaged. Counsel appearing for the appellant prayed for time to seek instructions. The case was then adjourned for arguments a few times. When no one appeared on behalf of respondents on 30.1.2013, the case was adjourned giving a last chance to the respondents to address final arguments. On 8.5.2013 also the case was adjourned to 18.9.2013 for final arguments and then again to 10.2.2014 noticing that the respondents are being proceeded ex parte. Today~ also none has appeared for the respondents.

In view of what has been noticed above, the respondents are not required to be shown any further indulgence. Despite the cases having been adjourned on more than one occasion, none has chosen to put in appearance on behalf of the respondents. Respondents have also not taken any action to get the ex parte proceedings against them set aside in any manner. Accordingly, I deem it proper to hear the final arguments and decide the appeals.

The learned counsel appearing for the appellant, has taken me through the impugned order. A perusal of the impugned order would show that gold having value of Rs. 20 to 22 crores was found to be in the process of confiscation by the Department of Revenue Intelligence, Govt. of India for evasion of Customs / Excise duty. This gold was hypothecated to the bank. The Tribunal below has accordingly observed that the bank would be entitled to the sale proceeds after the sale of the seized gold. The Tribunal has also observed that this issue could only be determined at appropriate stage once the proceedings pending before the DRI are over. In addition to this, the mortgaged property is having value of Rs. 10 to 12 crores were available. The amount recoverable by the bank was approximately Rs. 60 crores besides the interest. The bank had made an attempt to put these properties to sale, but despite best efforts in this regard for over a period of one year, the bank could not succeed to sell the properties. The bank only succeeded, that too with great efforts, to bring a buyer in respect of one property C-1/306, Ansals, Palam vihar, Gurgaon, who was ready to purchase the same for a bit higher price than the reserve price. Respondents herein had given their express consent to this proposal and had surrendered other properties for sale for the recovery the amount as per law. The Tribunal found this action on the part of the respondents herein to be bona fide and noticed submission made by the counsel appearing for them that they wanted to revalidate and revive their business so that they could pay the balance amount due. For this purpose, they prayed before the Tribunal for release of two properties.

The Tribunal, in my view, softly considered this request, as it thought it could balance the equities in the interest of justice. Equity is one of the considerations which the Courts and Tribunals can always show to a deserving litigant. The respondents in this case had not raised any dispute in regard to their liability. They have, however, not shown any financial discipline and intention to repay the loan. Out of the 6 properties mortgaged 5 did not fetch any amount to recover the liability which was to the tune of Rs. 60 crores approx. To show equity in such a case, more sincerity and efforts could be expected from the respondents. In this back ground, the action of the Tribunal in releasing one property, though by imposing certain conditions, may not appear to be well-balanced one even in equity. Simply on account of the prayer made by' the counsel appearing for the respondents, this indulgence has been shown to them. Otherwise, the impugned notice has been declared, valid, effective and enforceable. If that is so, then release of the property would appear a bit of contradiction. The bank was held' entitled and free to sell the properties except this commercial property, the possession of which has been handed over to one of the Directors/Mortgagor. No doubt, he was required to file an undertaking that he shall hold and possess this property for six months as a Receiver of the Court and that he shall further undertake not to alienate, transfer or create any third party interest in respect of this property and that he shall not take any action so as to cause or do any act which may deteriorate or cause any loss to the value of the property, but the release of the same still cannot be held justified. The operation of this part of the order had been, stayed and perhaps this will explain the absence of the respondents here to defend the appeals. I do not find any justifiable reason to up hold this part of the order and would accordingly allow the prayer made in the appeal and set aside the direction given in para 23(e) of the order impugned. Rest of the findings and directions issued by the Tribunal below, however would stand without any affect.

Both the appeals are allowed in the above terms. There shall be no order as to costs.

Copy of this order be furnished to the parties as per law.