Ashok Menon, Chairperson
1. The matter is taken up for hearing by way of praecipe filed by the appellants for seeking urgent relief.
The appellant is a sole proprietor who has challenged the order dated 03.01.2024 in I.A. No.3567/2023 in Securitisation Application No.251/2023 (S.A.) on the files of Debts Recovery Tribunal-I, Mumbai (D.R.T) filed by the appellant challenging the Sarfaesi measures initiated by the respondent bank for recovery of money allegedly due from him under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short).
2. The appellant had filed the S.A. when the respondent, armed with an order from the Ld. Chief Metropolitan Magistrate u/s 14 of the SARFAESI Act, attempted to take physical possession of the secured asset. The D.R.T. was not enthused by the allegations made in the S.A. and declined to grant any protection. The appellant is aggrieved and hence, in appeal.
3. To entertain this appeal, the appellant will first have to comply with the mandatory requisite of making pre-deposit u/s 18(1) of the SARFAESI Act. The appellant contends that he is entitled to a total waiver of the pre-deposit for the reason that there is no security interest created in favour of the respondent bank as there is no mortgage and therefore, the entire Sarfaesi action will have to fail. Because of this, the appellant contends that the total waiver of the pre-deposit has to be granted to him. The appellant contends that there is no security interest created and the loan was allegedly availed on hypothecation of stocks and book debts and that in the absence of the creation of any mortgage in favour of the respondent bank, the Sarfaesi action will not be maintainable.
4. In the impugned order, the Ld. Presiding Officer did not find a prima facie case in favour of the appellant and failed to grant any relief.
5. The Ld. Counsel appearing for the respondent submits that there was a security interest created concerning the subject property and that there are sufficient documents to prove that. It is stated that the appellant has produced only selective documents and has also submitted that the sanction letter mentions that the security would be that of hypothecation of stock and book debts and a collateral security by way of equitable mortgage created in respect of the subject property is also mentioned.
6. The appellant has also a case that prior to availing the loan from the respondent there was already a loan availed originally from Union Bank of India which on transfer of debt is presently held by Maximus ARC Ltd. and they have the mortgage right executed in favour of them and therefore, it is not possible for the respondent to have granted the mortgage.
7. The appellant also relies on the arbitration award which was passed in this matter which does not mention anything about the mortgage and only a personal award for realization of the amount from the appellant is passed by the arbitrator.
8. The Ld. Counsel appearing for the respondent submits that the arbitrator cannot adjudicate about the mortgage and therefore, no award to realize the amount from out of the mortgaged property could have been passed by the arbitrator and therefore, only a personal decree and hypothecation decree is passed in the award. For the realization of the amount by way of proceeding against the property, the respondent is at liberty to proceed under the SARFAESI Act and submit the Ld. Counsel appearing for the respondent. The Ld. Counsel has also relied on the sanction letter which indicates that there is a right of securitisation available under the SARFAESI Act mentioned in the sanction letter and that at the time of determination of the S.A. all relevant records would be produced to indicate that there is a security interest created.
9. The appellant has produced only documents which are favourable to him and relies upon the absence of evidence regarding the mortgage on the part of the respondent.
10. Considering the circumstances, I find that to adjudicate on whether a mortgage interest was created or not, the Appeal will have to be entertained and for entertaining the appeal, the appellant will have to first fulfil the pre-requisite of making the pre-deposit. Apart from the contention that the appellant is not liable to pay any amount in the absence of the security interest, there is no specific plea or evidence regarding the financial strain of the appellant. As a consequence, I find that the appellant is not entitled to any indulgence under the 3rd proviso to Section 18(1). The sale of the property is scheduled tomorrow and the auction sale notice indicates the outstanding dues as ₹ 4,36,49,265.313. Given the latest decision of the Hon’ble Supreme Court in M/s. Sidha Neelkanth Paper Industries Pvt. Ltd. & Anr. Vs Prudent ARC Ltd. & Ors. 2023 SCC OnLine SC 12, when a sale notice has been issued, the amount demanded in the sale notice should be taken as the threshold amount for calculation of the pre-deposit. The appellant will have to pay ₹ 2,18,24,632.66 as a pre-deposit for the appeal to get entertained. The appellant is granted three weeks i.e. on or before 25.11.2024 to pay the said amount.
11. Upon deposit of the amount of the pre-deposit, the execution proceedings before the Recovery Officer shall stand stayed till the next date of hearing.
12. 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.
13. 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.
14. 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.
15. 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 26.11.2024 for reporting compliance of the payment of pre-deposit.
