Disposed

Mrs Asha Rupnarain Chand v. Phoenix Arc Private Limited

DRAT20 Dec 2022REGULAR APPEAL/38/2022

Case brief

AI extract

What is this about?

In this stay application, the Debt Recovery Appellate Tribunal directed the appellants to deposit ₹10 crores as pre-deposit under Section 18 of the SARFAESI Act. The court held that despite the appellants' challenge regarding mortgage validity and lack of financial strain, a prima facie case existed for permission to invoke the third proviso but significant financial strain was not proved. The app

What did the court decide?

Direction to deposit ₹10 crores as pre-deposit in two equal instalments. Stay of further proceedings under SARFAESI Act upon deposit.

Mrs Asha Rupnarain Chand versus Phoenix Arc Private Limited — 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. at Diary No. 458/2022 (WoD) In

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Appeal No. 38/2022

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Between

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Mrs. Asha Rupnarain Chand & Anr. … Appellant/s V/s. Phoenix ARC Pvt. Ltd. & Ors. …Respondent/s

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Mr Sunil A. Humbre, i/b Mr Ganesh S. Rajput, Advocate for Appellants.

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Mr Charles Dsouza, i/b M/s Meraki Chambers, Advocate for Respondent No.1.

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-: Order dated: 20/12/2022:-

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This is an application filed under Sec. 18 of the SARFAESI Act seeking the indulgence of this Tribunal to invoke the third proviso to Sec. 18 and to keep the mandatory pre-deposit at the minimum. 2. The Appellants are the applicants in S.A. No. 666 of 2016 on the files of the Debts Recovery Tribunal No. II, Mumbai and are aggrieved by the dismissal of the aforesaid S.A. by the D.R.T. vide order dated 19.12.2020.

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The Appellants claim to be absolute owners of two shop rooms in Amber Building, Four Bungalows, Andheri (West), Mumbai (the secured assets). In their application under Sec. 17 of the SARFAESI Act, they contend that the actions taken by the first Respondent Financial Institution for the realization of the amount under the SARFAESI Act are defective for various reasons. The

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Sarfaesi measures taken by the first Respondent are challenged on the ground that the demand notice issued is not proper. The possession of the property taken under sub-section (4) of section 13 is also flawed and the statutory rules are not complied with. And therefore, the Appellants sought quashing of the Sarfaesi measures initiated by the first Respondent and also to restore possession of the secured assets to them.

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It is contended by the Appellants that they are neither borrowers nor guarantors. They also have no privity of contract with the first Respondent. The Appellants had purchased the secured assets by way of an agreement executed on 18.04.2001 from Mohid Constructions. The borrowers are Respondent Nos. 2 to 4. The contention of the Appellants is that strict compliance with Sarfaesi measures is required to sustain the action. A Power of Attorney is allegedly used to deposit the title deeds pertaining to the secured assets with the creditor. There is no such Power of Attorney executed in favour of anyone. Under the circumstances, there is no valid mortgage in favour of the first Respondent, contends the Appellants.

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The first Respondent objected to the maintainability of the application under Sec. 17. The title deeds pertaining to the secured assets were deposited in accordance with the law, and Sarfaesi measures were taken when there was a default of payment. There is no flaw in any of the measures initiated by the creditor, states the Respondent.

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The secured assets were allegedly mortgaged in the year 2009 by the second Respondent Company in connection with a loan

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availed from Saraswat Co-operative Bank Ltd. The sanctioned financial assistance was for ₹14.55 crores. The secured assets were provided as mortgages for the loan and the personal guarantee was provided by Respondent Nos. 3 & 4. The secured assets were purchased jointly by the Applicants and the fourth Respondent. The second Respondent Company failed to pay the outstanding dues and the account was classified as a non-performing asset (NPA) on 30.06.2012. A demand notice was issued on 08.10.2012 under Sec. 13(2) of the SARFAESI Act demanding a sum of ₹12,54,66,872.41. The first Respondent herein is the assignee of the loan. Since there was no response to the demand notice, the first Respondent took physical possession of the subject property on 22.04.2013 after complying with statutory requirements. Thereafter, action is being taken for the sale of the property under Sec. 13(4) of the SARFAESI Act. The principal borrower second Respondent Company had filed a Writ Petition No. 248 of 2013 before the Hon’ble Supreme Court of India on 18.02.2013 and there was a direction in the Writ directing the second Respondent to pay some amount within a time frame. Default in payment of the amount entailed in vacating the stay granted by the Hon’ble Apex Court. The borrowers failed to pay the amount. The contention of the first Respondent is that the Appellants had filed S.A. in order to stall the Sarfaesi measures after the rest of the Respondents failed to get the subject property salvaged.

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In the impugned order, the Ld. P.O. has brushed aside all contentions raised by the Applicants in challenging the Sarfaesi measures. Resultantly, the S.A. was dismissed.

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Heard the Ld. Counsel for the Appellants as also the Ld. Counsel appearing for the first Respondent. Records perused.

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A deposit of the title deed can be made by either the mortgagor himself or through some agent. It is not essential that the mortgagor himself has to present himself to deposit the title deed for the creation of a valid mortgage. The delivery of the title deed with the intention to create a mortgage is what is important. The first Appellant has signed the guarantee deed and the Ld. Counsel appearing for the Appellants fairly admits that it would be binding on her. However, his contention is that the mortgage would bind only the first Appellant and not the second Appellant who is a non-resident Indian. A power of attorney is purportedly executed by him but the same was neither produced nor proved.

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The Ld. Counsel for the Respondent invites my attention to the various documents which have been signed by the first Appellant and the others. It is also pointed out that the Appellants did not have any case that the Power of Attorney is not executed or valid. Under the circumstances, it cannot now be argued in the Appeal that the documents executed by the POA are not valid or binding on the Appellants.

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On going through the entire documents available on record, I do not find the Appellants having a prima facie case in their favour. There is also no financial strain pleaded or proved by the Appellants, so as to exercise the discretion under the third proviso to section 18 of the SARFAESI Act. The amount as of 30.09.2012 demanded in the notice under Sec. 13(2) was ₹12,54,66,872.41 subsequent interest also would have accrued. As on the date of filing

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of the Appeal, inclusive of interest the amount would be approximately around ₹20 crores. The Appellants are, therefore, directed to deposit a sum of ₹10 crores as pre-deposit under the second proviso to Sec. 18 of the SARFAESI Act in two equal instalments of ₹5 crores each. The first instalment of ₹5 crores shall be payable within two weeks on or before 03.01.2023 and the second instalment of ₹5 crores shall be payable in two weeks thereafter on or before 17.01.2023. 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 payment within the stipulated time, all further proceedings to be initiated by Respondent No.1 under the SARFAESI Act shall stand stayed.

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With these observations, the I.A. at Diary is disposed of. Respondent No.1 is at liberty to file a reply in the Appeal with an advance copy to the other side.

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Post on 04.01.2023 for reporting compliance concerning the payment of the 1^st instalment.

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Sd/Chairperson

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mks-2

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Mrs Asha Rupnarain Chand v. Phoenix Arc Private Limited

Case brief

What is this about?

What did the court decide?

Mrs Asha Rupnarain Chand v. Phoenix Arc Private Limited

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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Case details

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