Disposed

Vippin Aggarwal v. Indian Overseas Bank and Ors.

DRAT29 Nov 2022IA/344/2022

Case brief

AI extract

What is this about?

DrAT Mumbai dismissed an appeal seeking discretion to waive or reduce pre-deposit under SARFAESI Act. The court rejected the appellant's claim that an uncle's OTS payment and auction proceeds should reduce dues, as OTS conditions were unfulfilled and proceeds were contested.

What did the court decide?

Direction to the Appellant to pay a sum of Rs. 15 crores as pre-deposit within three weeks. Appeal taken on file for future compliance.

Vippin Aggarwal versus Indian Overseas Bank and Ors. — Execution and Attachment | 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. 344/2022 (WoD) In Appeal on Diary No. 486/2022

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Between

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Mr. Vippin Aggarwal … Appellant/s V/s. Indian Overseas Bank & Ors. …Respondent/s

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Mr Puneet Gogad, Advocate for Appellant.

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Ms Vaishali Bhilare, Advocate for Respondent Bank.

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Mr Nishant Rana along with Ms Rupa Patel & Ms Chinmayee Ghag, i/b Zastriya, Advocate for Respondent No. 4 to 6.

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This is an application filed by the Appellant under section 18 (1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (‘SARFAESI Act’ for short) seeking a complete waiver of the mandatory pre-deposit under the 2nd proviso to section 18 (1) of the SARFAESI Act and in the alternative to reduce the amount to the minimum of 25% exercising discretion of this Tribunal under the 3rd proviso to section 18 (1).

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The appeal impugns the order of DRT-II, Mumbai in IA No. 425/2021 in SA No. 118 of 2022 dated 20/05/2022 dismissing the aforesaid interlocutory application seeking an amendment to the SA on the basis of a subsequent event of issuance of sale notice and conducting of sale of the secured assets.

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This application was disposed of by this Tribunal on

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01/09/2022 directing the Appellant/Applicant to deposit a sum of ₹ 15 crores after assessing the threshold limit of the amount due, at ₹ 40 crores. The Appellant challenged the order by filing a writ petition No. 10896/2022 and vide order dated 14/09/2022, the Hon’ble High Court of Judicature at Bombay quashed and set aside the order of this Tribunal referred to above and directed disposal of the Interlocutory Application afresh after considering the contention as to whether the Appellant would be liable to pay anything by way of pre-deposit taking into consideration the fact that the bank has settled the claim with the principal borrower (the 3rd Respondent herein).

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Under the circumstances, the application was heard afresh and additional affidavits and rejoinders filed by the parties perused. The demand notice issued by the 1st Respondent bank under section 13 (2) of the SARFAESI Act was issued by the bank for a sum of ₹ 37,59,77,921.09/- as of 31/01/2020. Consequent to that, steps were initiated under section 13 (4) as also under section 14 of the SARFAESI Act for taking possession of the property. The possession notice was issued on 24/06/2020 wherein the outstanding balance due to the 1st Respondent bank is described as ₹ 39,18,47,488.38/-. The property has been sold and purchased by the highest bidders who are Respondents No. 4 to 6 herein.

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IA No. 425/2021 is an application for amendment of the SA in view of the subsequent event of the sale of the property seeking to incorporate a plea challenging the legality of the auction notice and the consequent sale. Vide the impugned order, the Ld. PO has

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dismissed and an application on various grounds. The sustainability of this will have to be determined in this appeal. The Appellant had also filed I.A. No. 424/2021 for stalling the Sarfaesi measures pending the S.A. That application was also dismissed by the Ld. P.O. The challenge raised by the Appellant before the Hon’ble Bombay High Court as also by way of an SLP before the Hon’ble Supreme Court proved to be futile. In the absence of any stay, the bank proceeded with the Sarfaesi measures which ended in confirmation of the sale in favour of the auction purchasers.

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The 1st Respondent bank has filed a further affidavit stating that the as of 28/02/2021 the outstanding balance was ₹ 43,44,11,258.38/- and adding interest at the rate of 13.90% to that the balance as of 21/06/2022 comes to ₹ 51,34,88,389/-. 7. The 3rd Respondent is the principal borrower. He is the brother of the Appellant who jointly owns the secured asset which was sold in an auction by the 1st Respondent bank for the realization of the amount due. An OTS proposal was moved by the 3rd Respondent on 02/07/2021 after the subject property was sold on 24/03/2021 for ₹ 30,28,00,000/-. Accepting the OTS proposal, the bank agreed to settle the debt subject to payment of a sum of ₹ 13.10 crores more by the 3rd Respondent. This proposal was made by the 3rd Respondent alone on agreeing to accept the sale of the property after adjusting the sale proceeds received.

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The contention of the Appellant is that the amount of ₹ 13.10 crores paid by the 3rd Respondent towards the OTS will have to be taken into account for calculating the threshold limit under section

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18 (1) of the SARFAESI Act. By such calculation, there would be no balance payable towards the debt and therefore, the Appellant cannot be asked to deposit any further amount as pre-deposit.

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Per contra the counsel for the Respondents points out that the OTS proposal was accepted subject to certain conditions. One of the conditions was that all cases filed against the Sarfaesi measures initiated by the bank are to be withdrawn. The next condition was that peaceful possession of the subject property was to be handed over to the auction purchaser without any demur. There was also a clause to the effect that the ‘No Dues Certificate’ is to be issued only consequent to the full payment of the amount agreed upon and after the peaceful transfer of the physical possession of the subject property to the auction purchaser. Although the 3rd Respondent paid the amount of ₹ 13.10 crores, the peaceful physical possession of the subject property has not been handed over. Nor were the pending cases withdrawn. And therefore, the Appellant cannot take advantage of the amount paid by the 3rd Respondent nor can he take into account the amount which has been received by way of the auction sale. The conditions stipulated in the OTS proposal are yet to be accomplished in their entirety.

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There is no dispute that the amount which has come by way of auction sale cannot be considered for the purpose of calculating the amount payable under section 18 (1) of the SARFAESI Act for the purpose of pre-deposit since the Appellant is challenging the sale. 11. The argument of the learned counsel appearing for the Respondents that the amount of ₹ 13.10 crores also cannot be deducted because the OTS proposal has not come into effect as the

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conditions are not fulfilled, appears reasonable. It is the 3rd Respondent who came up with a proposal to pay a sum of ₹ 13.10 crores towards the outstanding debt after acknowledging the sale of the property and agreeing to hand over peaceful possession of the subject property to the auction purchaser. The condition regarding withdrawal of the case qua Sarfaesi measures was also not complied with. Under the circumstances, the OTS proposal has fallen apart. It is for the 3rd Respondent to seek a refund or appropriation of the amount that was paid by him. The Appellant cannot challenge the sale, distancing himself from the OTS proposal, and still take advantage of the purchase price paid by the auction purchaser and the amount paid by the 3rd Respondent. The arguments advanced by the learned counsel appearing for the Appellant are, therefore, not inspiring and cannot be accepted.

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The Appellant has challenged the statement of outstanding dues submitted by the 1st Respondent bank by contending that it is not a statement of account certified under the provisions of the Banker’s Book of Evidence Act as required under Regulation 4 (2) of the DRT Regulations. The learned counsel for the Appellant also submits that the extracts from accounts are not “account books” falling under section 34 of the Evidence Act for want of certification and hence not acceptable. The learned counsel has relied upon the decision of the Hon’ble Supreme Court in Ishwar Dass Jain (dead) through Lrs vs. Sohan Lal (dead) by LRs (2000) 1 SCC 434 to bolster his argument.

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I had earlier determined the threshold amount for calculation of pre-deposit at ₹ 40 crores. The 1st Respondent has submitted a statement indicating that the amount is actually ₹ 51,34,88,389/-. In view of the fact that I had earlier directed the Appellants to pay the pre-deposit of ₹ 15 crores, I am not inclined to enhance the amount on the basis of the fresh statement which is produced. Under the circumstances, the acceptability or otherwise of the account statement is of no consequence.

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In the result IA No. 344/2022 is disposed of with a direction to the Appellant to pay a sum of ₹15 crores as pre-deposit within a period of three weeks on or before 20.12.2022. 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, the Respondents No. 4 to 6 who are the auction purchaser in possession of the subject property shall not create any third-party interest.

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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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On deposit of the said amount, the appeal shall be taken on file if there are no other defects to be cured.

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Post on 21.12.2022 for reporting compliance of payment.

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Chairperson

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psa-01

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Vippin Aggarwal v. Indian Overseas Bank and Ors.

Case brief

What is this about?

What did the court decide?

Vippin Aggarwal v. Indian Overseas Bank and Ors.

Case brief

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What did the court decide?

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