Dismissed

Prashant Kishor Mehta & Ors. v. Phoenix Arc Pvt. Ltd.

DRAT29 Mar 2022REGULAR APPEAL/12/2022

Case brief

AI extract

What is this about?

The DRAT analyzed an applicant's application for stay of a property auction in debt recovery proceedings. The court rejected the plea, noting the applicants had repeatedly failed in their defenses over two decades and dismissed the application to prevent prolongation of litigation.

What did the court decide?

Application for stay of the impending public auction scheduled on 31.03.2022 was dismissed.

Prashant Kishor Mehta & Ors. versus Phoenix Arc Pvt. Ltd. — 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. 34/2022 In

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Appeal No. 12/2022

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Between

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Mr. Prashant Kishor Mehta & Anr. … Applicant/s V/s. Phoenix ARC Pvt. Ltd. …Respondent/s

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This I.A. coming up for hearing before me in the presence of Mr. G. Kinkhabwala along with Ms. Sonali Jain, Advocate for Applicants.

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Mr. Rohit Gupta along with Mr. Nikhil Rajani and Ms. Shobha Chavan, i/b M/s V. Deshpande & Co., Advocate, representing Respondent.

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-: Order dated : 29/03/2022 :-

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The Appellants are the original Defendant Nos. 7 & 8 in O.A. No. 303 of 2002 on the files of DRT-I, Mumbai. The entire proceeding has a very checkered history and the Appellants herein have been pursuing their defence tenaciously right from commencement of the proceedings before the Recovery Officer DRT-I Mumbai upto the Apex Court. The DRT had initially decreed the O.A. on 24.07.2006. There were a number of Defendants, against some of them, there was a specific decree and were directed to pay entire amount, while the Appellants herein were held responsible for having mortgaged their Flat No. 37 on the 18^th Floor, Usha Kiran, 15, Carmichael Road, Mumbai400 026, for a sum of ₹5 Crores and interest that had accrued thereon. Each and every proceedings before the Recovery Officer and the DRT were challenged throughout by Appellants. They filed an appeal challenging the original decree before this Tribunal and during the pendency of that appeal, the parties

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including Appellants arrived at a settlement and executed Consent Terms dated 01.10.2013. The defendants including the Appellants herein agreed and undertook to pay a lesser amount of ₹27,31,04,000/- on or before 30.09.2014. Recording the terms of consent, the Appeal was disposed of, observing that the consent terms shall form part of the decree. A specific clause was incorporated in the Consent Terms stating that in case of default in payment of the reduced amount, the entire decree amount as per Original Recovery Certificate could be realized together with interest from the Judgment Debtors including Appellants, and their assets proceeded against.

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The Judgment Debtors including Appellants failed to pay the amount within the time stipulated, and as a result of that, the 1^st Decree Holder who had purchased the decree from Oriental Bank of Commerce approached the Recovery Officer seeking direction to proceed with Recovery Proceedings. The aforementioned Flat which is a subject property of equitable mortgage, was not handed over for recovery when the possession was attempted to be taken over. The order to hand over possession was challenged unsuccessfully before Hon’ble Bombay High Court by filing a Writ, and also before the Apex Court by way of a Special Leave Petition. All the objections raised stood overruled and dismissed. Ultimately the subject flat was handed over to the Tribunal Receiver. The Appellants approached the DRT by filing Appeal No. 06 of 2021. They also filed an application for a waiver of mandatory deposit stipulated under Sec.30A of the RDB Act. Their challenge was three pronged. They stated that there was no monetary decree against Appellants. Secondly, that one of Defendants, the Respondent No. 7 viz. Rajiv Mehta had entered into a settlement offering his Flat No. 47 in the same building, Usha Kiran, and thereby he and his wife were discharged from their liability. The last ground taken by the Appellant was that the entire amount has been discharged and they also relied on calculation of a Chartered

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Accountant which indicates that the Decree Holder has collected a sum of ₹16.51 Crores above the decretal amount due to them.

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The Application for waiver could not have been considered by DRT since it has no power to do so, nevertheless it was argued that the basis of no liability existing and for the reason stated above, mandatory pre-deposit need not be waived. The Ld PO, DRT-I was not enthused by arguments and pleadings raised by Appellants and rightly declined to entertain the waiver application and directed them to pay the 50% of the amount due. The Appellants once again approached the Hon’ble High Court with a Writ Petition and that too was dismissed with costs and met a similar fate in the SLP filed before the Apex Court. Taking shelter under the order dated 02.12.2021 of the High Court of Bombay in Writ Petition (L) 24293 of 2021 containing a general instruction stay of impugned Orders of recovery, in view of most DRTs and DRATs being unmanned, on deposit of 25% of the outstanding liability, the Appellants approached this Tribunal depositing ₹1.25 Crores stating that it would be 25% of ₹5 Crores, the amount allegedly due from them, and filed a pursis seeking stay before the Recovery Officer, DRT-I Mumbai. Under the impression that the order of the Hon’ble High Court was applicable, the sale scheduled for 27.12.2021 was postponed. The 1^st Respondent had indicated that there was outstanding liability of ₹270,28,51,260/- and that ₹1.25 Crores would not suffice 25% of pre deposit mandated. Both the 1^st Respondent and Appellants approached the Hon’ble Bombay High Court by filing Writ Petitions Nos.46 of 2022 and 2537 of 2021respectively. The contention of the Appellants is that the Recovery Certificate does not create any personal liability and that it only declares the outstanding to the extent of ₹5 Crores and interest thereon secured by an equitable mortgage over the subject flat. After having considered the contention, pleadings and arguments raised on behalf of on the either sides, Hon’ble Bombay High Court observed that the Appellants have been lighting to prevent payment of the amount due from them and had approached the

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Hon’ble High Court as well as the Apex Court multiple times and suffered dismissal together with exemplary costs. Hon’ble High Court also deprecated the action of the Recovery Officer in finding that 25% of ₹5 Crores has been deposited by Appellants as pre-deposit required under the statute, therefore, the sale needs to be postponed.

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The Hon’ble High Court observed thus : “From the above chronology of events it does not need much prescience to note that at every stage it has been confirmed that the liability of the petitioners is not restricted to the extent of ₹5 Crores only and it is co-extensive with other respondents”. It is further stated, “We are aghast to note that the Recovery Officer, DRT-I, Mumbai was oblivious of the sale notice whereby the claim as determined by him a sum of ₹270,28,51,260/-(₹270.29 Crores). Incidentally, we may also note that the said sale proclamation, which is well within the knowledge of the petitioners, is not challenged before any forum till date. Apparently, on one hand the Recovery Officer issued a sale notice whereby the claim as determined by him is a sum of ₹270.29 Crores while on the other he blindly accepted the submission of the petitioners that the claim is only ₹5 Crores. This is a classic case of approbation and reprobation. As a matter of fact, the amount due and determined by the DRT is in excess of ₹2,70,28,51,260/- and 25% of such sum was required to be deposited by the petitioners.”

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Hon’ble High Court refused to go into nitty-gritty and nuances of pending/ outstanding dues since it is something which lies in its domain of this Tribunal. Ultimately, it was concluded that the Appellants have not been able to establish and maintain their worth and are knowingly and deliberately flying against all the material on record and that it appears to be no more than a brazen exercise, once again to frustrate the auction process. The Writ Petition filed by Appellants was, therefore, dismissed with costs, while the Writ Petition filed by the 1^st Respondent herein was allowed and the stay imposed on conducting the public auction was removed.

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Ld. Counsel appearing for Appellants would submit that the Reserve Price for property which is put up for auction is the maximum that can be realized from their property and they are willing to deposit that sum as security, and therefore the order may be passed to stay the impending auction which is scheduled on 31.03.2022.

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After having heard the arguments on both sides, and going through record in extenso, I find that Applicants have been swimming against the tide though relentlessly. By virtue of the consent agreement they have entered into and subjected themselves to the entire liability due from the Decree Debtors even though there was no specific money decree made against them. It may be true that the property is not worth the entire decretal amount, but that can be subjected to sale and the amount realized to satisfy the Decree Debt, to whatever extent possible. Appellant cannot come up with repeated applications and appeals to thwart auction proceedings. No indulgence can be shown to them since they have been fighting the case for about two decades and failed miserably at every corner. This application for stay of the auction is yet another ruse to protract the litigation, extending the sufferings of the Judgment Debtors. The very intention of implementing special statutes for the recovery of debts due to banks and financial institutions was to take them out of the purview of Civil Courts, such litigation for it is well known that the misery of the Decree Holder starts from the date of obtaining a decree. This Tribunal cannot be a party in adding to the misery of Decree Holders any further.

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The application for stay is, therefore, dismissed.

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Sd/Chairperson

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dpj

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Prashant Kishor Mehta & Ors. v. Phoenix Arc Pvt. Ltd.

Case brief

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Prashant Kishor Mehta & Ors. v. Phoenix Arc Pvt. Ltd.

Case brief

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