Ashok Menon, Chairperson
1. The appellants impugn the dismissal of Securitisation Application (S.A.) No. 244 of 2023 by the Debts Recovery Tribunal-I, Mumbai (D.R.T.) vide judgment and order dated 13/03/2024. The appeal was entertained consequent to the appellants depositing ₹5,63,35,622/-as directed by this Tribunal as pre-deposit under Sec. 18 (1) of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short). The present application is to stay the effect, implementation, operation, and execution of the impugned judgment and order dated 13/03/2024 pending a hearing in final disposal of the appeal.
2. The facts essential for the disposal of this application in brief are thus:
The appellants had borrowed ₹26,93,86,846/-from the 1st respondent in July 2018 by offering flats Nos. 101, 602, 901, 1101, 1201, 1202, 501, 601, 701, 801 and 901, Violette Valley/Presidency, Bandra (West), Mumbai. The appellants allegedly defaulted in repayment of the debt resulting in the classification of the account as non-performing assets (NPA) followed by the issuance of a demand notice under Sec. 13 (2) of the SARFAESI Act demanding a sum of ₹13,48,29,851/-. The appellants claim to have repaid ₹23,29,75,743/-towards the debt. Out of the 12 flats which were mortgaged, the respondent had already issued a no-objection certificate for the sale of 5 flats. Yet all the mortgaged flats are mentioned in the demand notice as secured assets. The 1st respondent also obtained an order from the Court of the Chief Metropolitan Magistrate under Sec. 14 of the SARFAESI Act to take physical possession of the assets. On receiving notice of dispossession, the appellants the D.R.T. with the S.A. challenging the Sarfaesi measures. When the appellants failed to get interim protection against dispossession, they filed a miscellaneous appeal before this Tribunal. They were directed to deposit ₹7 crores as pre-deposit for entertaining the appeal. On deposit of the initial amount of ₹1 crore, interim protection from being dispossessed of the secured assets was granted provided the possession was not taken by 12:30 PM subject to the condition that the appellants would voluntarily surrender two flats one of which could even be sold for the realisation of the debt due. The respondent took possession of all the flats except flat No. 602. The 2nd respondent preferred a Writ Petition No.(L) 4350/24 before the Hon’ble High Court of Bombay. The appeal before this Tribunal was disposed of with a direction to the D.R.T. to dispose of the S.A. on merits expeditiously. The pre-deposit amount of ₹7 crores was allowed to be withdrawn by the 2nd respondent. Subsequently, the S.A. was heard and disposed of by the impugned order. The appellants are thus in possession of all the secured assets except flat No. 602.
3. While considering the application for waiver of deposit (I.A. No. 242 of 2024) this Tribunal directed a deposit of ₹ 5,63,35,662/-as pre-deposit for entertaining the appeal. On depositing ₹3 crores, towards this amount, protection was granted to the appellants concerning the taking over possession of flat No. 602. The entire pre-deposit was made and the prohibitory order was made absolute till the disposal of this appeal.
4. The appellants have raised several contentions regarding their challenge to the Sarfaesi measures. After appropriating the amounts received by the 2nd respondent, stated that the outstanding amount due towards the debt towards this facility was ₹11,26,71,324/-. The appellants had made the pre-deposit based on the aforesaid threshold amount. The respondents had contended that a total of six loan facilities were availed by the appellants and their group concerns totalling ₹ 120,52,00,000/-and that the pre-deposit has to be made taking the entire debt as the threshold amount. However, this Tribunal considered the debt due for Sec. 18 (1) as the amount mentioned in the demand notice reduced by the amount paid by the appellants.
5. On 30/05/2024, the 2nd respondent issued a sale notice for the sale of flats bearing Nos. 101, 901, 1101, 1201 and 1202 in Violette Valley, and also flat No. 1101 in Presidency for realisation of a total debt of ₹ 164,29,84,554/-. The sale is scheduled for 02/07/2024. Apprehending that the flats may be sold pending the appeal, the appellants seek a stay of the impugned order and grant them protection against the sale of the properties.
6. Mr Rohit Gupta, the Ld. Counsel appearing for the appellants submits that after having deposited 50% of the debt due, the appellants are entitled to get the sale of the properties deferred till the appeal is disposed of. It is also contended that the properties were offered as security for the loan facility No. HHLLPM00467815 alone in the outstanding dues towards the debt is only ₹11,26,71,324/-and therefore, issuing a sale notice for the outstanding amount of all the six facilities is illegal.
7. The Ld. Senior Counsel, Mr Nitin Thakkar appearing for the respondents submits that the appellants had given an undertaking to repay the entire debt. In that undertaking, it was specifically admitted that on repaying the debt due on a particular facility alone, the creditor is at liberty to retain the documents of the property offered as security for that facility and treated as security for the rest of the facilities. Hence, the respondents are at liberty to proceed against the total amount due towards all the loan facilities availed by the appellants. Hence, there is no embargo in proceeding to sell all the assets.
8. The subject properties were offered security for only one of the facilities. Even if by the undertaking given by the appellants, the creditor is entitled to retain the subject properties for other facilities as well, a demand notice under Sec. 13 (2) of the SARFAESI Act is a condition precedent. The sale notice does not refer to all the demand notices issued by the creditor for the other facilities. The creditor is indeed entitled to retain the property as security for the other facilities despite the debtor clearing the entire debt due towards one of the facilities, the mandatory requisite of a demand notice mentioning the secured assets intended to be proceeded against cannot be dispensed with. The creditor has in the instant case issued separate demand notices for each of the loan facilities and mentioned the security interest created concerning those facilities separately. Hence, prima facie, the appellants have a good case for the challenge raised regarding the sale notice.
9. The Ld. Counsel appearing for the appellants submits that the appellants are willing to deposit before this Tribunal the entire outstanding debt due demanded towards the concerned facility. 50% of the debt due has been deposited as pre-deposit, and the appellants agree to deposit the rest of the 50% as security to stall the further Sarfaesi measures. They are also making earnest attempts to clear the entire debt due towards the other facilities as well.
10. The appellants had in the first round of appeal agreed to the sale of one of the flats for realising the entire dues towards the facility. The sale notice has shown the reserve price fixed for each of the flats. That also would indicate that the sale of one of the flats would be sufficient. It is settled law that only that much extent of property needs to be sold as much is essential for the realisation of the debt. A sale is vitiated exfacie by fraud as it is against the mandate under Order 21 Rule 64 of the Code of Civil Procedure which mandates the court to sell only so much of the property of the judgment-debtor required to satisfy the decree debt. It is the obligation of the court conducting the sale to ensure that only such portion of the attached property to satisfy the decree shall be sold and not the whole extent of his properties even if it had been attached for sale. Though, indeed, the provisions of C.P.C do not apply to the sale under the SARFAESI Act, the principles of sale contemplated under O21 R64 C.PC would have to be imported.
11. Under the circumstances, in the interest of justice, I find that the appellants are entitled to a stay of the operation of the impugned order of the D.R.T. till disposal of this appeal subject to deposit of the balance 50% of the debt due being ₹ 5,63,35,662/-within one week i.e. on or not before 09.07.2024. However, given the consent given by the appellants to sell one of the flats taken possession of by the respondents, the 2nd respondent is at liberty to proceed to sell flat No. 1201 as per the sale proclamation made and appropriate the amount received by the sale of the flat towards the debt due. The sale of the rest of the flats and taking possession of flat No.602 shall stand deferred till the disposal of the appeal, subject to deposit as mentioned above. The Ld. Counsel for the respondents submits that it may not be possible to foresee which flat would have bidders, and it may not be necessary that a particular flat may be sold during the auction sale. The respondent is not without remedy under such circumstances.
12. The amount shall be deposited in the form of a Demand Draft/RTGS with the Registrar of this Tribunal.
13. 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.
14. With these observations, the I.A. is disposed of. The respondents are at liberty to file a reply in this appeal with an advance copy to the other side.
Post on 10.07.2024 for reporting compliance regarding the payment.
