Ashok Menon, Chairperson
1. The appeal impugns the dismissal of I.A. No. 1538 of 2023 in Securitisation Application (S.A.) No. 158 of 2021 vide order dated 11.07.2023 by the Debts Recovery Tribunal, Pune (D.R.T.) refusing to grant any protection against the Sarfaesi measures initiated by the respondent financial institution (FI) for recovery of debt allegedly due from the appellants under the provisions of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short).
2. To entertain this appeal, the appellants will have to comply with the mandatory provisions of making a pre-deposit under Sec. 18 (1) of the SARFAESI Act. The appellants have therefore filed the aforesaid I.A. seeking a waiver of 25% of the mandatory pre-deposit required to be deposited by them. The facts, and brief required for disposal of the I.A., are thus:
The 1st appellant M/s Karne Hospital Pvt. Ltd. is a company of which the rest of the appellants are the directors. The hospital had borrowed ₹ 10 crores from Bajaj Fin Serv, a Non-Banking Financial Institution (NBFC) to modernise the hospital. An additional funding of ₹3 crores was also advanced to the 1st appellant. The appellants had allegedly defaulted in repayment and the account was classified as non-performing assets (NPA) on 01.02.2019. A demand notices were issued on 31.07.2019 under Sec. 13 (2) of the SARFAESI Act. Out of the three facilities, the appellants settled two facilities for which, they had to sell one of the hospitals at Hadapsar, Pune. A sum of ₹ 6,84,60,634/-was demanded. The appellants raised objections to the demand notice on 25.09.2019. The FI had charged excessive interest and debited illegal charges and was, therefore, directed to furnish a statement of account to the appellants. The FI did not give a proper reply to the objections raised by the appellants and thus violated the provisions of Sec. 13(3-A) of the SARFAESI Act. The breakup of the amount demanded in the demand notice is not given and thus, the provisions of Sec. 13(3) have been violated. The appellants had made a settlement proposal and on receipt of ₹5.18 crores, two of the loan facilities were closed.
3. Regarding the only remaining loan facility, the FI took measures under Sec. 13(4) of the SARFAESI Act and allegedly to symbolic possession of the secured asset on 10.01.2020. The possession notice was not served on the appellants. The publication of the possession notice was however made only on 19.01.2020 stating that the symbolic possession was taken only on 14.01.2020. The publications were made in newspapers published from Mumbai for property situated in Pune. The appellants preferred the S.A. before the D.R.T. challenging the Sarfaesi measures. The debt was transferred to Dewan Housing Finance Corp. Ltd. (DHFL). During the pendency of the appeal, DHFL became Piramal Capital & Housing Finance and a necessary amendment to the cause title was brought about.
4. When the S.A. came up for hearing before the D.R.T., the appellant had filed I.A. No. 1732 of 2022 to get the taking over of possession by the Tahsildar in accordance with the order passed under Sec. 14 of the SARFAESI Act by the District Magistrate stalled. The Counsel appearing for the appellants submitted that the subject property is the hospital having more than 35 in patients. Hence, it was requested that the taking over of possession may be deferred. The D.R.T. vide order dated 11.10.2022 directed the appellants to pay a sum of ₹50 lakhs and directed the FI to deposit the said amount in a “No Lien account”. The appellants were also directed to make an OTS proposal with the FI within two weeks, and the FI was directed to consider the proposal as per its policy.
5. When the matter came up again for hearing before the D.R.T. on 11.07.2023, it was submitted by the appellants that the FI intends to take possession of the subject property and therefore, filed I.A. No. 1538 of 2023 to grant the stay the taking over of possession. The D.R.T. observed that there was an outstanding dues of more than ₹12 crores and the appellants have not taken any steps for settlement of the loan account after the passing of the order in I.A. No. 1732 of 2022. Hence, it was observed that the appellants are not entitled to any relief. I.A. 1538 of 2023 was dismissed. The appellants are aggrieved and hence in appeal.
6. Heard the Ld. Counsel appearing for the appellants Mr Girish Untangle and Mr R. L. Motwani, the Ld. Counsel for the respondent FI.
7. The grievance of the appellants is that the protection granted to them earlier on paying ₹50 lakhs to the respondent was vacated because they could not succeed in making the respondent FI agree to the OTS proposal submitted by them. The D.R.T. has not gone into the merits of declining the protection.
8. To succeed in getting a waiver of 25% of pre-deposit, the appellants will have to convince this Tribunal about having a prima facie case and also need to prove their financial strain.
9. The appellants have raised several grounds of challenge to the Sarfaesi measures in their S.A. as stated above. One of the main objections is regarding the demand notice not giving a breakup of the amount demanded. A perusal of the demand notice would belie that contention, at least prima facie. There are some breakups of the principal amount, interest and charges given in the demand notice. It is stated that the rate of interest as applicable from time to time has not been detailed. A demand notice under Sec. 13(2) does not determine the amount payable. There is no adjudication regarding the amount payable by the appellants arising for consideration in the S.A. Hence, the objection on that count is not sustainable prima facie. The appellants had raised an objection to the demand notice to which the respondent FI had sent a reply under Sec. 13(3-A). The objection is that the reply does not address the objections raised by the debtors. It cannot be now decided whether the reply is sufficient or not. Prima facie, there is a reply and therefore, there is due compliance of Sec. 13(3-A).
10. The contention regarding the non-compliance of Rules 8(1) & (2) is also raised with vehement by the Ld. Counsel appearing for the appellants. It is contended that the notice was not personally served on all the appellants as required under Rule 8(1). The respondent has produced evidence regarding service of notice which needs to be examined in detail in the S.A. Prima facie, there appears to be due compliance. It is contended that publication of the possession notice was made in two newspapers published from Mumbai and not from Pune and therefore, there is no sufficient compliance. What Rule 8(2) insists is only publication in two newspapers one of which should be in the vernacular having wide circulation in the locality. It does not insist on the newspaper being published from the locality. The respondent has sufficient time to produce evidence regarding the circulation of the newspapers in the locality and therefore, that objection is not sustainable prima facie.
11. Yet another objection raised regarding the non-compliance of Rule 8(2) is that the publication was made only on 19.01.2020 while the symbolic possession was taken on 10.01.2020 and therefore, the publication was not done within seven days as contemplated under Rule 8(2). The publication made indicates that the date of possession was on 14.01.2020 and if that is true, the publication is made within time. Evidence may be required to establish whether the possession was taken on 10.01.2020 or on 14.01.2020. Prima facie, the evidence is not in favour of the appellants.
12. The appellants have also raised a contention that the memorandum of deposit of the title deed has two dates. It is also pointed out that on stamp papers obtained from Maharashtra, the deed was executed in Coimbatore. Ex-facie, this creates a cloud regarding the deposit of the title deed and the creation of mortgage. However, it is too early to conclude on the validity of the mortgage. The finding on that is relegated to the trial stage before the D.R.T. The respondent will have to be given an opportunity to explain the discrepancies pointed out.
13. The appellants have not produced any documents to prove their impecuniosity. Under the circumstances, the appellants are not entitled to a total waiver of 25% of the pre-deposit, though some concession needs to be given. ₹6,84,60,634/- is the threshold amount shown in the demand notice. Since the Sarfaesi measures are still at the stage of Sec. 13(4), the aforesaid amount is taken for calculation of pre-deposit. The appellants have already deposited ₹2,22,50,000/- as pre-deposit. They are directed to deposit a total sum of Rs.3 crores towards pre-deposit. The balance amount of ₹77,50,000/-shall be deposited within the period of two weeks i.e. on or before 15.10.2024. In view of the deposit made, there shall be an interim stay of the Sarfaesi measures till the next date of hearing.
14. Failure to pay the instalment/amount within the time stipulated would entail in dismissal of the appeal without any reference to this Tribunal.
15. In view of the deposit made, there shall be an interim stay of the Sarfaesi measures till the next date of hearing.
16. 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.
17. 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.
18. With these observations, the I.A. is disposed of. The respondent is at liberty to file a reply in this appeal with an advance copy to the other side.
Post on 16.10.2024 for reporting compliance regarding the payment of ₹77,50,000/-.
