Allowed

Modella Textiles Industries Limited v. Edelweiss Asset Reconstruction Company

DRAT27 Jul 2022MISC APPEAL/98/2022

Case brief

AI extract

What is this about?

The Appellate Tribunal allowed this appeal, setting aside the impugned interlocutory order. The Tribunal held that the lower court failed to record reasons justifying the direction to produce asset details, as no satisfaction of the statutory conditions under Section 19(3A) was recorded. The matter was remanded for fresh hearing.

What did the court decide?

The impugned order dated 22.11.2021 was set aside. The application I.A. No. 260/2021 is to be heard afresh in compliance with the requirements of Section 19(3A) of the RDB Act.

Modella Textiles Industries Limited versus… — Civil Procedure and Limitation | DRAT (2022)

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

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Misc. Appeal No. 98/2022

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Between

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Modella Textiles Industries Ltd … Appellant/s V/s.

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Edelweiss Asset Reconstruction Co. Ltd. & Ors. … Respondent/s

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Mr. Rajesh Nagori, i/b M/s. MDP Partners., Advocate for Appellants.

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Mr. Bhalchandra Palav, a/w Mr. Aniket Dighe, M/s. Bhal & Co., Advocate for Respondent.

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-: Order dated: 27/07/2022:-

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Heard the learned counsel appearing for the Appellant and the Respondent. The Appeal is filed challenging the impugned order dated 22.11.2021 on Interlocutory Application (I.A.) No. 260/2021 in O.A. No. 218/2021 on the files of D.R.T.-I, Mumbai, wherein the Applicant/Respondent No.1 has sought two prayers. The first prayer is that Defendant No.6 shall be directed to give advance intimation of 7 days to the D.R.T. as well as to the Applicants therein before travelling abroad. However, that part of the order has not been assailed in this Appeal. It is the second prayer about which the Appellant has a grievance, wherein, it was directed that Defendant No.1, & 6 should be directed to file an Affidavit regarding their other assets which are not secured assets. That part of the order is what stands challenged and assailed in the present Appeal.

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The learned counsel has drawn my attention to Sub-Section 3 (A) to Section 19 of the Recovery Of Debts And Bankruptcy Act,

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1993 (‘RDB Act’ for short) which specifically states that if the estimated value of the security is not sufficient to satisfy the claim, particulars of other assets owned by the Defendants, if any, have to be furnished. The learned counsel appearing for 1^st Respondent submits that even without an application filed by the creditor under Sub-section 3 (A) to Section 19, the D.R.T. has sufficient powers u/s Sub-section 4 of Section 19 of the RDB Act to direct the Defendants to furnish the details of assets other than the secured assets. And in the impugned order, the Ld. P.O. has issued Summons to Defendant Nos.1, 5, and 6 as per the Form-4 with a direction to file a Written Statement within 30 days and also directed furnishing the details of other assets..

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There is no dispute that the D.R.T. has suo-moto powers to invoke the provision of Section (4) to 19 on being satisfied that the secured assets mentioned in the application are not sufficient to satisfy the claim made in the application. In the instant case, the claim is for a sum of Rs.691,62,69,161/- as of 30.11.2020, and admittedly the estimated value of the mortgaged property mentioned in the application is Rs.906.30 Crores which indicates that the secured asset is valued more than Rs.200 Crores over the claim made by the Applicant. Moreover, even though the Respondent has mentioned in the O.A. that the secured assets may not be sufficient to satisfy the claim made by the Applicant, that averment is vague and is not specific and in view of the contradictory statement made in the Schedule that the property is worth more than Rs.960.30 Crores, an explanation to that effect was required which has not been given. It is only in the subsequent application filed as I.A. No.

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260/2021 that the Applicant claims that the assets would not be sufficient to satisfy the claim of the Applicants and, therefore, the Defendants have to be directed to file an Affidavit regarding their assets.

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After having heard both sides at much length on I.A. No. 260/2021 the Ld. Presiding Officer had ordered Defendant Nos.1, 5, and 6 to file an Affidavit regarding their assets other than the secured mortgaged assets.

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But the no reasons justifying the directions are stated in the impugned order. The order passed by the Ld. P.O. should be a speaking order, and since Sub-section 4 to Section 19 states that even on filing an application u/s 19 (1) or (2), the D.R.T. can direct the Defendants to furnish details regarding other assets provided it is satisfied that the requirements u/s 3 (A) to Section 19 clauses (a) and (b)(emphasis is mine). There is no recital recorded in the impugned order regarding the Ld. P.O. getting satisfied with the requirement of Clauses (a) and (b) to Sub-section 3 (A) to Section 19 of the RDB Act.

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Under the circumstances, the impugned order is not sustainable and hence the Appeal is allowed and the order of the Ld. P.O. dated 22.11.2021 is set aside with a direction that the Application i.e. I.A. No. 260/2021 may be heard afresh, and if there are reasons to justify the direction to Defendant Nos.1, 5, and 6 directing them to produce the details of the assets, the Ld. P.O. is at liberty to do so, but only in compliance with the requirements under clauses (a) and (b) of Sub-section 3 (A) to S.19 of the RDB Act.

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The Respondent is at liberty to produce necessary documents to support their claim before the D.R.T.

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With the above observations, the Appeal is disposed of.

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All Miscellaneous Applications, if any, are dismissed as infructuous.

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Sd/Chairperson

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dpj-4

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Modella Textiles Industries Limited v. Edelweiss Asset Reconstruction Company

Case brief

What is this about?

What did the court decide?

Modella Textiles Industries Limited v. Edelweiss Asset Reconstruction Company

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Statutes considered

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