Ashok Menon, Chairperson:— The Borrowers are in Appeal challengg the impugned order dated 09.01.2023 in I.A. No. 280/2022 in Securitization Application No. 280/2022 on the files of the Debt Recovery Tribunal-III, Mumbai (D.R.T.), wherein the prayer of the Appellants seeking a stay to the further Sarfaesi measures was declined.
2. The Appellants had admittedly borrowed money from the Respondent Bank and notice u/s 13 (2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARAFAESI Act”, for short) demanded a sum of Rs. 1.18 crores from them together with future interest. Thereafter the bank had allegedly taken symbolic possession of the property u/s 13 (4). Since the entire amount was not paid and the property was put up for auction conducted on 15.02.2022. The property was sold and the entire debt due was recovered. The Sale certificate was issued to be auction purchaser on 04.07.2022. Physical possession of the property is yet to be handed over to the auction purchaser. The Respondent Bank had filed an application under Sec. 14 of the SARFAESI Act which was allowed and the taking over of possession is scheduled for 03.03.2023.
3. The Appellants filed the Securitization Application before the D.R.T. challenging all the Sarfaesi measures starting from the demand notice u/s 13 (2). It is alleged that the notice does not give a breakup of the principal and the interest due as required under Sec. 13(3). It is further contended that the notice was not properly served. The subsequent possession notice u/s 13 (4) is also challenged. The Appellant would contend that they had paid Rs. 36 lakhs towards the amount due subsequent to the issuance of the demand notice but the same has not been accounted for. The application filed before the District Magistrate u/s 14 of the SARFAESI Act is also defective.
4. The Appellants also contented that Security Interest (Enforcement) Rules pertaining to auction sale have been violated and therefore, the auction sale is also challenged. The Appellants would contend that the 1 Appellant was running a business that ran at a loss and that he is presently employed on a salary, and therefore, not able to pay the 50% of the amount required to be paid u/s 18 (1) of the SARFAESI Act. The first Appellant has produced the Income Tax Returns to prove their lack of income and that they have a very good prima facie case to set aside Sarfaesi measures initiated by the Respondent Bank. It is also pointed out that the notice issued u/s 13 (2) is signed by a person referred to as the Authorized Officer without indicating his post or position, which would nullify the notice as it does not comply with the mandatory requirement.
5. The Ld. Counsel appearing for the Respondent Bank has vehemently opposed the application and stated that the appeal is not maintainable. The outstanding amount as of the date of filing the appeal is Rs. 1.55 Crores and the Appellants are not entitled to any concession, And therefore, no indulgence is to be shown to reduce the amount from the mandatory 50% require by the law.
6. After having anxiously considered the pleadings on both sides, I find that the Appellants have raised important issues challenging the Sarfaesi measures which of course, needs to be considered in detail by the D.R.T. in the S.A. that is still pending consideration. The Appellants have also succeeded to some extent in proving impecuniousness. However, they are not entitled to get the amount to reduce a minimum of 25% going by the pleadings. It is also pertaining that the sale is already taken place.
7. Under the circumstances, the Appellant is directed to deposit the sum of Rs. 60 lakhs towards the pre-deposit. The Ld. Counsel for the Appellant submits that today the Appellant is the deposit of Rs. 35 lakhs by way of a Demand Draft. The balance amount of Rs. 25 lakhs shall be payable within the period of three weeks on or before 23.03.2023. Since the Appellant deposit more than the 50% amount directed to be paid, they are entitled to stay of protecting their possession till further order.
8. The amount shall be deposited in the form of a Demand Draft with the Registrar of this Tribunal.
9. As and when the said amounts are deposited, they shall be invested in term deposits in the name of Registrar, DRAT, Mumbai, with any nationalized bank, initially for 13 months, and thereafter to be renewed periodically.
10. 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.
11. Post on 24.03.2023 for reporting compliance regarding the payment.