Disposed

Paresh Shantilal Shah v. Edelweiss Asset Reconstruction Company Limited

DRAT28 Nov 2022IA/340/2022

Case brief

AI extract

What is this about?

The Tribunal rejected an application for waiver of mandatory pre-deposit under the SARFAESI Act. Finding that the debt amount was not finally determined and alleging disingenuous conduct by the borrower, the Director refused exemption and directed a deposit while staying further measures pending compliance.

What did the court decide?

Stay of further SARFAESI measures granted conditional upon deposit of ₹40 crores by the appellant in two equal installments by specified dates.

Paresh Shantilal Shah versus Edelweiss Asset Reconstruction… — 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. 340/2022 (WoD)

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Appeal on Diary No. 505/2021

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Between

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Paresh Shantilal Shah … Appellant/s

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V/s.

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Edelweiss Asset Reconstruction Company Ltd. & …Respondent/s Anr.

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Mr Rafeeq Peermohideen, i/b Mr Alok Mishra, Advocate for Appellant.

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Mr Rohit Gupta along with Mr D. U. Chavrasia, i/b M/s. M.K. Ambalal & Co., Advocate for Respondent.

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This is an application filed under Sec. 18 (1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’ for short) seeking waiver of the mandatory pre-deposit under the second and third provisos to Sec. 18(1).

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The Appeal impugns the Judgment dated 31/08/2021 in Securitisation Application (SA) No.128/2017 on the files of the Debts Recovery Tribunal-I, Mumbai (‘DRT’ for short), dismissing the SA.

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For entertaining the appeal, a mandatory pre-deposit has to be made. The appellant has filed this I.A. to get an exemption on the ground that nothing is due from the appellant, though he is admittedly a borrower.

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The facts essential for the disposal of this Interlocutory Application, in brief, are thus:

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The Tourism Finance Corporation of India Ltd. (‘TFCI’ for short) sanctioned a Term Loan of ₹ 5 crores to the company named Nishiland Park Ltd. (the second respondent herein) repayable in twenty quarterly installments vide sanction letter dated 24/09/1996. It is alleged that out of the sanctioned amount, ₹ 4.75 Crores alone was disbursed to the company. Title deeds pertaining to immovable properties were claimed by way of mortgage, which consisted of the Nishiland Water Theme Park situated in Raigad. On defaulting payment of the installments, TFCI recalled the Term loan and demanded payment of ₹ 6.34 crores, on 23/06/1998. TFCI filed Original Application No. 280/1999 before the DRT Delhi for recovery of ₹ 7,96,49,202/- together with interest, with a declaration mortgage over the aforesaid water theme park. TFCI also took Sarfaesi measures for ₹ 15,46,72,971/- as of 15/07/2002 under the provisions of the SARFAESI Act. A second demand notice was issued on 14.01.2003 demanding payment of ₹ 17,09,54,711/- as of 31/12/2002. The Appellant and the second Respondent company made representations requesting restructuring and settlement of the liability vide letter dated 12/02/2003. There was no response to that request from the TFCI. Thereafter, a third demand letter under Sec. 13(2) of the SARSFAESI Act was sent on 28/11/2011, demanding a sum of ₹ 112,35,81,067/- due as of 15/10/2011. That apart another notice was issued on 23/01/2012 calling upon the Appellant to pay the aforesaid sum and threatening to take action under the provisions of the Sarfaesi Act. Aggrieved by the action, the Appellant and the

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2nd Respondent filed SA No. 77 of 2012 before the DRT Delhi in respect of the water theme property. Several interlocutory orders were passed in that SA and appeals are preferred against that order. The TFCI also connected the auction of the property, but after depositing the initial amount of ₹ 6 crores the balance was not deposited by the purchaser, resulting in forfeiture of the said amount towards the amount due from the 2nd Respondent company as submitted by the Ld. counsel for the Appellant. Physical possession of the property consisting of the water theme park was taken by TFCI on 09/08/2012. The possession so taken was not in accordance with the provisions of the SARFAESI Act. Pursuant to the assignment of the debt by TFCI, the possession of the property was handed over to the 1st Respondent. DRT Delhi returned the Securitisation Application for want of territorial jurisdiction on 25/03/2013. Thereafter, the SA was filed before DRT-III, Mumbai as SA No. 606 of 2013. The said application was dismissed for default and the Appellant is in the process of getting it restored. Thereafter, the 2nd Respondent company once again approached TFCI to amicably resolve the dispute and to get the property released. A proposal was made for settlement of the entire debt on payment of ₹ 14.50 crores in the letter dated 28/06/2014 sent by TFCI. The Appellant and the 2nd Respondent approached the asset reconstruction division of Kotak Mahindra Bank Ltd. for financing the 2nd Respondent company to pay the amount due to TFCI by way of a one-time settlement. All the actions taken by the Appellant in the 2nd Respondent to bail out the company from the debt did not materialize. SA No. 128/2017 was dismissed by the Ld. PO and

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the Appellant have come in an appeal challenging the same.

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In this appeal, the Appellant has filed this application for waiver of deposit contending that he has a very good prima facie case it is pointed out that the loan was recalled vide notice dated 23/06/1998, and the purported mortgage deed was executed after 14 years of recall of loan as well as action and measures initiated by the 1st Respondent was barred by the law of limitation. It is also contended that the mortgage in any event was limited to ₹ 5 crores and out of that ₹ 9,73,75,000/-has already been paid/realized. It is also the consistent case of the Appellant that the notice under section 13 (2) of the SARFAESI Act dated 13/12/2014 was not served on the Appellant. In any event, the demand of ₹ 112, 35,91,067/- in the notice is ex-facie illegal. The contention of the Appellant is that vide order dated 04/08/2020, the DRAT Delhi has adjudicated the claim amount as ₹ 79,649,202/-and the recovery certificate was issued by DRT-I, Delhi in OA No. 280 of 1999. Since the Appellant and the 2nd Respondent have paid amounts to the tune of ₹ 9,73,75,000/-nothing remains to be paid and therefore, the requirement of deposit under section 18 of the SARFAESI Act 2002 stands complied.

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The Appellant claims to be a senior citizen aged 74 years. He is also not keeping good health and is suffering from high diabetes and hypertension. The Appellant does not have any regular income and earns his income from sub-letting a shed taken on lease from a third party and the net annual income of the Appellant is ₹ 12 lakhs. After providing for various expenses including substantial interest payment on personal loans, it is not sufficient to satisfy the basic needs of the

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Appellant's family as well as for his medical expenses. It is, therefore, submitted that he is not in a position to deposit any amount under section 18 of the SARFAESI Act hence it is prayed that the deposit may be waived.

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The 1st Respondent appeared and vehemently opposed the application for waiver stating that the Appellant has been attempting to avoid payment of the huge amount that was due from the Appellants and the 2nd Respondent company since 1996. The learned counsel appearing for the 1st Respondent sought time to file a detailed reply to this application for a waiver. However, the learned counsel for the Appellant was anxious about the impending Sarfaesi measures to be taken on 28/11/2022 and insisted on hearing the application immediately without even affording an opportunity to the 1st Respondent to file a reply. Under the circumstances, both sides were heard and available records were perused.

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The antecedents of this transaction between the 2nd Respondent company and the TFCI, the assignor of the debt to the 1st Respondent herein indicate that consistent efforts have been made by the borrower company to stall the Sarfaesi measures one way or the other by filing Securitisation Applications before DRT Delhi, DRT-II Mumbai, and DRT-I Mumbai. The entirety of the facts and circumstances of this case reflects upon the disingenuous conduct on the part of the borrower to gain an indulgence. Unfulfilled assurances and promises, and their unwillingness to pay are explicit. They have been very successfully thwarting the Sarfaesi measures to avoid payment of the public money that is due from them to the financial institutions. The learned counsel for the 1st

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Respondent has pointed out that the assignment of the debt was made with the consent of the Appellant and the 1st Respondent company and they had by way of admission consented to the amount that was due from them. There is a huge amount due from the Appellant. The 1st Respondent could not get the opportunity to file a reply giving the details of the amount that is due as of date but even as per the demand notice issued under section 13 (2) of the SARFAESI Act the amount it is due is ₹112,35,95,067/-. The contention of the Appellant debtor that the amount for which the recovery certificate has been issued following the orders of the DRAT Delhi is to be taken as the threshold for calculating the amount payable under section 18 (1) of the SARFAESI Act is not acceptable. The contention that the Appellant is liable only to the extent of ₹ 5 crores being the value of the mortgaged property is also not acceptable, because it is the debt demanded and due to the creditor or the among determined, that is pertinent for the provision. The debt due from the borrower on the date of appeal is to be calculated for the purpose of determining the pre-deposit that has to be made. The amount mentioned in the recovery certificate issued consequent to the orders of the DRAT Delhi cannot be taken as the final amount because interest thereon is also due and not yet determined. The determination of the interest is to be made by the DRT Delhi and the proceedings are still pending consideration. It cannot, therefore, be said that the amount due from the Appellant has been determined. Partial determination cannot be said to be a final determination as required under the provisions of section 18 (1) of the SARFAESI Act. I am, therefore, not inspired by the

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arguments raised by the learned counsel appearing for the Appellant that no amount is payable by the Appellant to the 1st Respondent. The Appellants are directed to deposit a sum of ₹ 40 crores in two equal installments under section 18 (1) of the SARFAESI Act within a period of six weeks. The first installment of ₹ 20 Crores shall be paid within three weeks, on or before 19.12.2022 and the second installment of ₹ 20 Crores shall be paid in another three weeks, on or before 09.01.2023. 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 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.

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On deposit of the amount as directed, there shall be a stay of the further Sarfaesi measures with regard to the secured assets.

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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 20.12.2022 for reporting compliance regarding payment of the first installment.

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Sd/Chairperson

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psa-01

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Paresh Shantilal Shah v. Edelweiss Asset Reconstruction Company Limited

Case brief

What is this about?

What did the court decide?

Paresh Shantilal Shah v. Edelweiss Asset Reconstruction Company Limited

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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