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BEFORE THE DEBTS RECOVERY
APPELLATE TRIBUNAL, AT: MUMBAI
Present: Mr Justice Ashok Menon, Chairperson I.A. No. 779/2024(WoD)
In
Misc. Appeal on Diary No.2353/2024 Between
Devngi Jewellers Pvt Ltd. & Ors. … Appellant/s V/s.
HDFC Bank Ltd …Respondent/s
Mr Charles De'souza, along with Mr Rupak Sawangikar and Mr Kushal Sawant, i/b Mr Puneet Gogad, Advocate for Appellants. Mr Rajesh Nagory, along with Mr Indrajeet Deshmukh, i/b M/s. Vidhii Partners, Advocate for Respondent.
-: Order dated: 07/11/2024:-
The 1stappellant is a company, and the rest of the appellants are Directors/Guarantors/Mortgagors who are aggrieved by the order of the Debts Recovery Tribunal-II, Ahmedabad (D.R.T) dated 22.10.2024 in Securitisation Application No. 729/2023 granting them protection only on condition to pay 60% of the amount which was outstanding as debt and out of that, 30% was to be paid on or before 10.11.2024 and balance within three weeks. The Sarfaesi measures initiated by the respondent bank for recovery of debt allegedly due under the provision of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the
"SARFAESI Act" for short) was to continue on failure to comply with this conditional order. The Presiding Officer had relied upon the decision of the Hon'ble High Court of Bombay ASREC (India)
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Ltd V/s. Fastgrowth Hospitality LLP, Writ Petition (Lodg) No. 39107 of 2022 to justify the insistence on conditional order of protection.
2. The appellants have challenged the Sarfaesi measures initiated by the respondent bank on various grounds. It is stated that the demand notice u/s. 13(2) does not give a breakup of the variable interest and relied on a sanctioned letter and renewal letters from time to time, which indicate that the interest rate varies from 9.55% to 12.35% and therefore, the respondent bank was obliged to give a breakup of the interest portion to convenience the appellants that the interest has been levied properly in accordance with the sanctioned letter and the renewals made thereafter. It is further contended that the designation of the authorized officer is not shown in the demand notice which is essential because only that would convince the appellants about the competency of the officer who has sent the demand notice.
3. The appellants raised their objection in detail regarding these aspects by letter dated 23.01.2023 to which the respondent did send a reply u/s. 13(3A) but it is pointed out that they have not addressed the concerns raised by the appellants in their reply and therefore, there is no satisfactory compliance of u/s. 13 (3A) of the SARFAESI Act.
4. It is further contended that the account was classified as Non- Performing Assets (NPA) on 24.11.2020 which is during the moratorium period declared by the Reserve Bank of India and the Hon'ble Supreme Court and therefore, it is illegal. It is also contended that post classification of the account as NPA till
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27.02.2023 the appellants have been making regular payments towards the debt due and a total amount sum of ₹ 3.24 crores have been paid by them. On the date of classification of the account as NPA, the outstanding debt was above ₹ 7.80 crores. On the date of issuance of the demand notice, the amount demanded was ₹ 7,66,12,427/-. The Ld. Counsel submits that the appellants are not willful defaulters and have been making regular payments and efforts to see that the debt is clear.
5. It is also pointed out that there are defects in the procedure adopted for taking symbolic possession of the subject property and that it is not in accordance with the rules and it is based on that symbolic possession that subsequently an order was obtained u/s. 14 of the SARFAESI Act from the District Magistrate on 28.07.2023.
6. The Ld. Counsel appearing for the appellants submits that the appellants are not willful defaulters they have valid grounds to challenge the Sarfaesi measures they are presently under financial strain because of the impact created by the Covid-19 pandemic and are yet to recover from that. The Income Tax returns of the 1st appellant company and also the rest of the appellants have been produced. It is pointed out that the company is running at a loss and the rest of the appellants have a minimum income of less than ₹ 5 lakhs per annum therefore, the appellants are justified in seeking the indulgence of this Tribunal under the third proviso of Sec. 18(1) of the SARFAESI Act to waive 25% of the pre-deposit contemplated u/s. 18(1) of the SARFAESI Act.
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7. The Ld. Counsel appearing for the respondent has vehemently opposed the application and has stated that the appellants are not entitled to any indulgence from this Tribunal that the present dues are about ₹ 9 crores approximately and that the appellants are obliged to deposit 50% of the amount which is demanded u/s. 13(2) of the SARFAESI Act which takes into consideration all these aspects that the impugned order directs them to deposit 60% of the amount outstanding. There is no infirmity in that order submits the Ld. Counsel for the respondent.
8. The Ld. Counsel appearing for the respondent also points out that the income tax returns are not sufficient to give a true picture of the financial status of the appellants. The balance sheet of the company is not produced and the stock in trade is yet to be revealed. It is pointed out that the respondent bank has time and again asked the appellants to produce the details regarding the stock in trade which they have not complied with so far. It is a running business and therefore, it cannot be believed that the entire stock in trade, which is jewellery, would be empty and there would be nothing available for the appellants to deal with. It is also pointed out that all the rest of the appellants who are guarantors/mortgagors have income and their total income will have to be considered for ascertaining their entitlement to get a concession of getting the pre- deposit amount reduced.
9. It is seen that the 13(2) notice gives a breakup of the principal amount, interest as well as penal interest. Indeed, it does not give a further breakup of the interest portion based on the variable rate of
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interest from time to time, and the reply given by the respondent bank u/s. 13(3A) also will not be clarified but there is no dispute that even if the variables are considered there will not be much difference and I am sure that the demand notice u/s. 13(2) is not expected to give details of the change in interest rate every day as long as there is a breakup of the principal amount, interest penal interest and other charges given in the demand notice there is sufficient compliance of Sec. 13(3) of the SARFAESI Act. Seeking a breakup of the interest based on variable interest could only be too pedantic, and I am not inclined to adopt such a view.
10. Regarding the incompetence of the authorized officer who issued the notice, it is seen that the name of the officer is given. During the trial before the DRT, the respondent would be under obligation to prove the competency of the person who has issued the notice and therefore, that also cannot be taken as a ground at present to find that the appellants have a good prima facie case. It is settled law that there is no dichotomy between symbolic possession and physical possession. Rules will have to be complied and the respondent has the opportunity to produce evidence regarding the compliance with those rules. Hence, prima facie there is also no serious violation as far as the compliance of the rules about taking over of possession is concerned.
11. Regarding the income tax returns also, I agree with the Ld. Counsel appearing for the respondent that the appellants have not to a great extent satisfied regarding their impecuniosity and financial strain. The circumstances indicate that the appellants are not entitled
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to get a 25% waiver of the pre-deposit. But because they have an arguable case which would stand scrutiny during the trial of the S.A. before the DRT, and also the positive of income reflected by income tax returns, I would give them some concession. The threshold amount is taken as ₹ 7,66,12,427/- which is mentioned in the demand notice.
12. The appellants are directed to deposit a sum of ₹ 2.5 crores as a pre-deposit for entertaining this appeal. The Ld. Counsel appearing for the appellants submits that a demand draft of ₹ 50 lakhs is being produced today. The balance ₹ 2 crores would be paid in two equal instalments within a gap of three weeks each, as stated hereunder. Numbers of Instalments Payment on or before
1stInstalment 28.11.2024
2ndInstalment 19.12.2024
13. Given the payment of ₹ 50 lakhs today, the possession schedule on 10.11.2024 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.
14. 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.
15. 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.
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16. 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 29.11.2024 for reporting compliance regarding 1stinstalment. Sd/-
Chairperson
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