Mr Rohit Gupta along with Mr Dhruva Gandhi and Mr Mayank Tripathi, i/b M/s. Hedgehog and Fox L.L.P., Advocate for Appellant. Mr Dinesh Purandare along with Mr T. N. Tripathi, i/b M/s. T. N. Tripathi & Co., Advocate for the Respondent No. 1.

¶11

-: Order dated: 19/10/2022:-

¶12

This is an application filed under section 18 (1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’ for short) by the Applicant seeking to invoke the jurisdiction of this Tribunal to invoke the discretionary jurisdiction to keep the mandatory pre-deposit at the minimum under the 3^rd proviso.

¶13

The above-mentioned appeal is filed by the Appellant challenging the order in I.A. No. 1690 of 2022 in Securitisation Application (D) No. 2155/2022 on the files of the Debts Recovery Tribunal, Pune (‘D.R.T.’ for short). The Appellant as Applicant in the Securitisation Application

¶14

had sought a stay of the Sarfaesi measures under section 13 (4) preventing the secured creditor 1^st Respondent financial institution from taking physical possession of the secured assets. The learned Presiding Officer dismissed the application vide order dated 28/09/2022 observing that the demand under section 13 (2) of the SARFAESI Act is for a sum of ₹42 crores, and in case the Applicant is directed to pay a percentage of the amount demanded he would not be able to pay the same, it was held that the taking over of possession of the property would be frustrated. Holding that there is no prima facie case for the Applicant, the prayer to stall the Sarfaesi measures was declined.

¶15

Aggrieved by this order, The Appellant has approached this Tribunal. The 2^nd proviso to section 18 (1) of the SARFAESI Act insists on a free deposit of 50% of the debt due from the borrower, as claimed by the secured creditors, or determined by the Debts Recovery Tribunal, whichever is less. The Appellant is the mortgagor and would therefore come within the definition of a “borrower” in the Statute. Hence, he is liable to pay the mandatory pre-deposit.

¶16

The contention of the Appellant in his application for waiver of the pre-deposit is that though the demand notice dated 25/09/2021 is for a sum of ₹ 429,091,636/-, the Applicant has not been a beneficiary or recipient of the sanctioned loan amount, and therefore, he has no monetary liability to repay the defaulted amount towards the loan availed by the 2^nd Respondent company. Furthermore, by no stretch of the imagination can it be said that the demand notice could exceed the value of the mortgaged property belonging to the Applicant. The Appellant

¶17

states that the actual value of the subject property is approximately ₹ 8 crores and therefore, he cannot be expected to pay the entire defaulted loan amount ₹ 429,091,636/-, since, even if the mortgaged property is sold, the proceeds would not cover the entire defaulted sum as it stands today. That apart, the Appellant also contends that the mortgage deed purportedly executed in favour of the 1^st Respondent financial institution was neither executed nor registered. The Applicant expresses his readiness and willingness to deposit 10% to 15% of the current ready reckoner value of the mortgaged property to show his bona fides.

¶18

According to the Appellant he had only extended his property as a mortgage in good faith to help the directors of the company. It is submitted that the Appellant's liability cannot supersede or go beyond the value of his mortgage. That apart, the Appellant has also raised contentions about the illegalities in the Sarfaesi measures initiated by the 1^st Respondent financial institution.

¶19

An affidavit in reply to the waiver application has been filed by the 1^st Respondent. It is submitted that the amount mentioned in the demand notice together with interest accrued subsequently has now swelled to ₹ 60.02 crores as on the date of filing the appeal. The Appellant is, therefore, liable to pay 50% of the said amount. The Appellant has neither pleaded nor established any financial hardship. He is the managing director and CEO of Zee enterprises. He is the elder son of Essel group chairman Mr Subash Chandra Goenka. He is also the director of as many as nine active media companies. He has not proved that he has any prima facie case apart from financial hardship, and under

¶20

the circumstances, he is not entitled to any indulgence from this Tribunal to get the mandatory pre-deposit amount reduced. It is further contended that being a mortgagor he falls within the definition of a “borrower” as defined under section 2 (1) (f) of the SARFAESI Act. Having admitted the existence of a mortgage, the Appellant is misconstruing the legal position that the liability of a mortgagor would be restricted to the value of the mortgaged property. Statutory, the mortgagor binds himself personally to pay the mortgage money to the mortgagee. It is also pointed out that the Applicant had earlier filed a Securitisation Application No. 185 of 2021 challenging the Sarfaesi measures and the same was dismissed as withdrawn. No leave of the D.R.T was obtained at the time of withdrawal of the application and, therefore, under Order 23 Rule 1 (4) (b) of the Code of Civil Procedure, 1908 there is a bar in filing a fresh application. To contradict the statement in the application that the subject property is worth only ₹ 8 crores, the 1^st Respondent points out that the in the earlier Securitisation Application No. 185 of 2021, the very same Applicant had objected to the reserve price for the mortgaged property being fixed at only ₹ 45 crores on 01/10/2021 as the same being inadequate and on the lower side. Having admitted in the earlier proceeding between the same parties that the subject property is worth more than ₹ 45 crores, the Applicant is now estopped from stating that the property is worth only ₹ 8 crores. The 1^st Respondent, therefore, contends that the application is to be dismissed and the Applicant be directed to pay 50% of the amount that is due from him.

¶21

Heard Mr Rohit Gupta, the learned counsel appearing for the Applicant/Appellant and the Mr Dinesh Purandare, the learned counsel appearing for the 1^st Respondent. The 2^nd Respondent company which is the principal borrower did not appear to contest. Records produced.

¶22

The Appellant admits that he is a mortgagor and has offered his property as a mortgage for the loan availed by the 2^nd Respondent company. Mr Rohit Gupta argues that the mortgage deed has not been registered or even executed by the Appellant. The mortgage deed has not been produced by the 1^st Respondent submits the learned counsel. It is now contended that the mortgage is created by deposit of title deeds, but even for that, there is no evidence. It is also submitted that the memorandum of deposit of title deeds is compulsorily registrable in the state of Maharashtra. Hence the mortgage itself is faulty and no claim against the Appellant would, therefore, lie on the basis of the purported mortgage. Mr Purandare argues that in view of the admission by the Appellant that he is a mortgagor, he cannot now be heard to say that there is no valid mortgage. I am not inclined to go into the details of the mortgage since it is something to be considered by the D.R.T. while disposing of the Securitisation Application. In view of the admission by the Appellant that he is a mortgagor, it has to be construed that he is a “borrower” coming within the purview of the definition in section 2 (1) (f). It is immaterial whether he had availed the loan himself, or that he was a beneficiary of the loan advanced to the 2^nd Respondent. The decision of the Bombay High Court in Keystone Constructions vs. State Bank of India 2013 SCC OnLine Bom 2098 would also support this view.

¶23

The next question that would arise for consideration is whether the Appellants have to deposit 50% of the amount of debt due, as claimed by the secured creditor or whether he is entitled to the concession of paying a percentage of the value of the subject property alone. A reading of the 2^nd proviso to section 18 (1) of the SARFAESI Act leaves no room for doubt that it contemplates a deposit of 50% of the amount of debt due from the borrower, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less. The argument of Mr Rohit Gupta that the Appellant is liable to pay only a percentage of the value of the property mortgaged, is, therefore, fallacious.

¶24

It is true that the Appellant has not pleaded any financial hardship in making the pre-deposit. The essential requirements while considering an application for waiver under section 18 (1) of the SARFAESI Act according to the decision of the Hon’ble Bombay High Court in M/s Sterlite Technologies Ltd. Vs. Union of India2012 (4) All MR784 are the existence of a prima facie case and the financial condition of the Applicant. The Appellate Tribunal has at least for the limited purpose of considering whether a dispensation should be granted, to evaluate as to whether a prima facie case is made out and the reasons which are to be formulated have to be confined only that determination. In considering as to whether a waiver should be granted, both the elements of prima facie case and the question of financial hardship would have to be evaluated by this Tribunal.

¶25

In view of the decision of the Hon’ble Bombay High Court in MRB Roadconst. Pvt. Ltd. vs. Rupee Co-op Bank Ltd. 2016 SCC OnLine Bom 85 , the amount of debt due would have to be determined on the basis of the amount of debt due from the borrower to the secured creditor on the date when the appeal is filed before this Tribunal. The amount would, therefore, include the amount demanded in the notice under section 13 (2) together with the accrued interest. The argument of Mr Rohit Gupta that the notice under section 13 (2) is defective in view of non-compliance of subsection 3 to section 13 is something to be considered in the Securitisation Application hence, I am not expressing myself on that point apart from evaluating it for the purpose of finding a prima facie case. The Appellant seems to have established a prima facie case to let the appeal be entertained, and therefore, not I am not inclined to non-suit the Appellant at the threshold. In view of my finding that the Appellant is not entitled to get the amount restricted to the value of the property, he has to deposit amount in accordance with the debt that is due on the date of appeal. It comes to ₹ 60.02 crores and 50% of that would come to approximately ₹ 30 crores. Although the Appellant has not pleaded financial hardship, I do not insist on payment of the aforesaid sum and exercising the discretion under the third proviso to section 18(1) of the SARFAESI Act, I am inclined to restrict the predeposit amount to ₹ 20 crores.

¶26

The Appellant is directed to deposit the said amount in two equal instalments. The 1^st instalment of ₹ 10 crores shall be paid within 3 weeks on or before 09.11.2022 and the 2^nd instalment of ₹ 10 crores

¶27

shall be paid in another 3 weeks, on or before 30.11.2022. Failing with the Appeal shall stand dismissed, without any further reference to this Tribunal.

¶28

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

¶29

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.

¶30

On deposit of the payment within the stipulated time, all further proceedings to be initiated by Respondent under the SARFAESI Act shall stand stayed.

¶31

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.

¶32

Post on 10.11.2022 for reporting compliance concerning the 1^st instalment.

¶33

Sd/Chairperson

¶34

mks-02

P S Goenka v. Indiabulls Comercial Credit Limited

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P S Goenka v. Indiabulls Comercial Credit Limited

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