Dismissed

Dinesh Rikabchand Kothari v. State Bank of India

DRAT6 Dec 2022IA/236/2022

Case brief

AI extract

What is this about?

Appeal against dismissal of an application for waiver or reduction of pre-deposit under SARFAESI Act Section 18(1). The Tribunal held that as a guarantor acting as a borrower, the appellant was eligible for notice duty under Section 13(2) and thus liable for pre-deposit, but failed to prove financial inability, leading to a direction to deposit a sum of 1.50 crores.

What did the court decide?

Appellant directed to deposit ₹1.50 crores as pre-deposit in two equal instalments by specified deadlines; appeal stayed only upon deposit.

Dinesh Rikabchand Kothari versus State Bank of India — Banking and Recovery | DRAT (2022)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr Justice Ashok Menon, Chairperson

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I.A. No. 236/2022 (WoD)

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In Appeal on Diary No. 427/2022

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Between

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Dinesh Rikabchand Kothari … Appellant/s V/s.

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State Bank of India …Respondent/s Mr Sidharth S, i/b Ms Bhagyashree K., Advocate for Appellant. Ms Merlyn Monteiro, Advocate for Respondent Bank.

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-: Order dated: 06/12/2022:-

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This is an application filed by the Appellant under Sec.18(1) of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (‘SARFAESI ACT’ for short) for waiver of the mandatory pre-deposit contemplated under the second proviso to Sec.18(1).

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The facts, in brief, are thus:

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The applicant’s properties were proceeded against under Sec. 14 of the SARFAESI Act and possession was sought to be taken following the orders of the District Magistrate. On enquiry, the applicant comes to know that he has stood as guarantor for the debt of the principal debtor, and hence, his property is being proceeded against.

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It is submitted that the applicant has not been served by the secured creditor and Respondent the State Bank of India with a demand notice issued under Sec. 13(2) of the SARFAESI Act

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demanding ₹2,99,04,581/- as of 24/06/2020. The order of the District Magistrate is also found at fault with and challenged. It is also contended that the description of who is the Authorized officer representing the S.B.I. has also not been revealed in the notice. The applicant, therefore, filed Securitisation Application (S.A.) 67/2022 before the Debts Recovery Tribunal-I, Mumbai under Sec.17 of the SARFAESI Act challenging the Sarfaesi measures. An application was also filed as I.A. No. 642/2022 for interlocutory reliefs to stall the Sarfaesi measures by means of a restraint order.

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The Ld. Presiding Officer had, vide the impugned order dated 03/06/2022 dismissed the I.A. as also the S.A. holding that the applicant was not an aggrieved person coming within the purview of Sec. 17 of the SARFAESI Act, having locus to file the application. 4. The Appellant is aggrieved and hence in appeal. He asserts that he is a guarantor and has executed deeds of guarantee. Hence, it was incumbent upon the creditor S.B.I. to serve him a notice under Sec. 13(2) of the SARFAESI Act. The consequent actions under Sec. 13(4) are also challenged.

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The S.B.I. has opposed the application by filing a reply. It is contended that the applicant has no locus and therefore, cannot maintain the application and the appeal. He was only a corporate guarantor in the first instance, and thereafter, the renewed documents do not include him as a personal guarantor. It is also contended that the subject property was mortgaged by Pisabai Rikachand Kothari as the proprietor of Kothari Metal& Alloys.

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After having perused the records available and on hearing the Ld. Counsel appearing for the parties, I find that applicant himself

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claims to be a guarantor for the debt incurred by the principal borrowers. He cannot blow hot and cold by contending that based on the stand taken by the creditor, he is not a guarantor, and therefore, he is to be exempted from payment of the pre-deposit. The outstanding amount due from the borrower is more than ₹ 4,15,08,924/- as of 05/07/2022.

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In case the appellant is a guarantor as he claims himself to be, and he has executed a deed of guarantee, then he would fall within the definition of a ‘borrower’, and therefore, entitled to be served with a notice under Sec.13 (2) of the SARFAESI Act. For that reason, he is also liable to make the pre-deposit. Under such circumstances, I find that though the applicant has made a prima facie case, he has not pleaded his inability to pay the pre-deposit on grounds of financial strain. He is, therefore, neither entitled to get a total waiver of the pre-deposit nor is he entitled to get it reduced to the minimum by this Tribunal exercising its discretion under the third proviso to Sec. 18 (1) of the SARFAESI Act.

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The applicant/appellant is directed to deposit a sum of ₹1.50 crores as pre-deposit into two equal instalments. The 1^st instalment of ₹ 75 lakhs shall be paid within 4 weeks, on or before 03.01.2023 and the second instalment of ₹75 lakhs shall be paid in another 3 weeks, on or before 24.01.2023. In default, the Appeal shall stand dismissed, without any further reference to this Tribunal.

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The amount shall be deposited in the form of a Demand Draft with the Registrar of this Tribunal.

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As and when the said amounts are deposited, they shall be

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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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On deposit of the amount, there shall be a stay of further proceedings with regard to the property.

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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.

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Post on 04.01.2023 for reporting compliance concerning the 1^st instalment.

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Chairperson

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psa-01

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Dinesh Rikabchand Kothari v. State Bank of India

Case brief

What is this about?

What did the court decide?

Dinesh Rikabchand Kothari v. State Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

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