Bansari Alloys Pvt. Ltd. & Anr Vs Chief Manager and Authorised Officer, Indian Bank

Ashok Menon, Chairperson

1. This is an application filed under Sec. 18 (1) of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (the “SARFAESI Act” in short) for a waiver of 25% of the mandatory pre-deposit required to entertain entertaining the appeal.

2. The appellants assail the disposal of the Securitisation Application (S.A.) No. 230 of 2021 by the Debts Recovery Tribunal-I, Ahmedabad (D.R.T.). The facts can be encapsulated thus:

The 1st appellant is a company which is the principal borrower, the 2nd appellant is the director of that company and the mortgagor/guarantor. Security interest was created in favour of the respondent bank for availing a loan of ₹33.80 crores. Repayment of the loan was defaulted resulting in the account being classified as a non-performing asset (NPA) on 27/02/ 2021. The respondent bank issued a demand notice under Sec. 13 (2) of the SARFAESI Act on 13/04/2021 demanding ₹ 10,18,40,068/-due towards the debt. The appellants failed to pay the amount resulting in symbolic possession of the secured asset being taken by the bank under Sec. 13 (4) of the SARFAESI Act on 30/11/2021. The appellants filed the S.A. on 04/12/2021.

3. During the pendency of the S.A., the subject property was put up for sale six times. All the attempts to auction failed for want of bidders. The respondent bank applied under Sec. 14 of the SARFAESI Act before the Additional Chief Judicial Magistrate and obtained an order that was passed on 19/04/2024 to take physical possession of the subject property. The court commissioner issued notice to take physical possession of the subject property on 21/07/2024.

4. The appellants contend that after receiving the demand notice, the appellant had paid a total sum of ₹ 6,68,00,000/-. It was submitted before the D.R.T. that the appellants do not wish to prolong litigation and are ready and willing to pay the entire outstanding dues towards the debt by 31/12/2024. They undertook to pay ₹50 lakhs within 15 days and thereafter to pay ₹50 lakhs every month till the entire dues was paid. On making such an undertaking, the appellants wanted a restraining order against the bank from proceeding under the SARFAESI Act. The appellants had also requested to permit them to operate their current account to enable them to continue with their business activities and repay the amount on time as agreed.

5. Per contra, the respondent bank submitted that in Original Application (O.A.) 184 of 2024 filed by the bank against the appellants they were already allowed to settle the entire dues and even consent terms were filed. As of 29/08/2024, there was an outstanding balance of ₹ 7,38,04,585/-the appellants had undertaken to deposit 25% of the outstanding dues within 7 days and required 45 days to pay the balance. It was conceded in the consent terms that in case of default in payment, the bank had the liberty to proceed further in the matter in accordance with the law. The appellants have now moved a pursis seeking time till 31/12/2024 to pay off the entire debt.

6. Considering the admission made by the appellants, the Learned Presiding Officer directed the appellants to pay the admitted dues of ₹ 73,804,585/-within a period of two months together with interest, if any, for the said period and also directed them to pay ₹ 50 lakhs within 7 days from the date of order, upfront. The respondent bank was directed to hold itself from taking any coercive action against the secured assets during the said period.

7. The appellants are aggrieved for the reason that the four months sought by them were not granted by the D.R.T. Hence this appeal. The appellants have already complied with the directions of the D.R.T. to pay ₹ 50 lakhs upfront.

8. The appellants have raised contentions regarding the Sarfaesi measures taken by the respondent bank by submitting that the account was classified as NPA during the moratorium issued by the Hon’ble Apex Court from 31/08/2020 to 23/03/2021. According to the Ld. Counsel appearing for the appellants, Mr Prashant Pandit, the account could never have been classified as NPA during the moratorium and therefore, the entire Sarfaesi measures are defective. It is also stated that the appellants have deposited a considerable amount after receipt of the demand notice. They have also produced the income tax returns to prove that they are under financial strain. Hence, it is prayed that 25% of the pre-deposit may be waived. The Ld. Counsel submits that after paying amounts after receiving of demand notice, the outstanding dues would be only ₹ 24,633,491/-and therefore, the appellants be permitted to deposit 25% of the said amount as pre-deposit. Mr Pandit also requested that directions be given to the bank to permit the appellants to operate their current account to enable them to proceed with their business.

9. The Ld. Counsel, Ms Vaishali R. Bhilare appearing for the respondent bank has vehemently opposed the application and stated that as per the NPA management policy and the guidelines issued, on the classification of accounts as NPA, the appellant cannot be permitted to operate their current account. According to the Ld. Counsel, as of 15/10/2024, there was still an outstanding amount of ₹ 6,99,36,162/-due and payable by the appellants.

10. Because the appellants agreed to pay the entire outstanding dues and had sought time by filing a consent term in the O.A. and had also filed a Pursis in the S.A. undertaking to pay the outstanding amount, it has to be considered that the appellants have intentionally relinquished their challenges to the Sarfaesi action. The Hon’ble Supreme Court has in ARCE Polymers Private Limited vs. Alphine Pharmaceuticals Private Limited & Ors. (2022) 2 SCC 221 held that the waiver is an intentional relinquishment of a known right. Waiver applies when a party knows the material facts and is cognizant of the legal rights in that matter, and yet for some consideration consciously abandons the existing legal rights, advantage, benefit, claim, or privilege. Waiver can be contractual or by express conduct in consideration of some compromise. However, a statutory right may also be waived by implied conduct, like, by wanting to take a chance of a favourable decision. In the instant case, the appellants had submitted a consent term and had also filed the Pursis undertaking to pay the amount to the respondent bank within the stipulated time. The dispute was only regarding the extent of the time to be granted for payment.

11. The appellants, therefore, do not have any prima facie case. The income tax returns of the company have been produced. There is also a report of the chartered accountant auditor of the company. The individual income tax returns of the 2nd appellant are not been produced. The appellants are, therefore, not entitled to any indulgence to get the pre-deposit waived. However, I am not inclined to non-suit the appellants at the threshold. Hence, they are directed to deposit a sum of ₹3.5 crores as a pre-deposit for entertaining this appeal. The said amount shall be deposited in three instalments as stated here under:

12. On deposit of the first instalment, there shall be a stay of the further Sarfaesi action concerning the property till the next date of hearing.

13. 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 and intimated to the counsel for the respondent.

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 Nationalized bank, initially for 13 months, and thereafter to be renewed periodically.

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 19.11.2024 for reporting compliance regarding the payment of the 1st instalment.