Allowed

Assets Reconstuction Company India Ltd. v. Mrs Sudha Satish Mahendre

DRAT28 Nov 2022REGULAR APPEAL/42/2014

Case brief

AI extract

What is this about?

The Appellant filed an appeal against a DRT order that directed appropriation of a deposited sum and granted reliefs not sought. The Tribunal held the order unsustainable as DRT lacks adjudicatory powers under SARFAESI and allowed the appeal.

What did the court decide?

The impugned order is set aside; the Sacfaesi application is dismissed. Any deposited amount shall be credited towards the debt due to the secured creditor.

Assets Reconstuction Company India Ltd. versus Mrs Sudha… — 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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Appeal No. 42/2014

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Between

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Assets Reconstruction Company India Ltd. … Appellant/s V/s. Mrs Sudha Satish Mahendre & Anr. …Respondent/s Mr R.L. Motwani, Advocate for Appellant.

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-: Order dated: 28/11/2022:-

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This is an Appeal filed u/s 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’ for short). The Appellant is the assignee of the debt which was advanced by ICICI Home Finance Ltd to the Respondent way back on 26.09.2003. A sum of ₹ 4,75,000/- lakhs was disbursed towards the security of a flat belonging to the second Respondent that was mortgaged.

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Respondent had agreed to repay an amount of ₹ 4580/towards 240 equated monthly installment. On 30.06.2008 the original creditor assigned the debt to the Appellant. The Respondent defaulted payment of the amount due. The debt was classified as NPA and in consequence, the demand notice u/s 13 (2) of the SARFAESI Act was issued to the Respondent on 17.11.2009 demanding a sum of ₹ 8,38,736.39/-.

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The Respondent did not pay any amount within the statutory period of 60 days and hence, the Appellant filed an application u/s

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14 of the SARFAESI Act before the District Magistrate concerned, for taking physical possession of the property. The notice was served on the Respondent and the Respondent challenged the Sarfaesi measure u/s 14 by filing S.A. No. 63/2012 before the Debts Recovery Tribunal, Nagpur (‘DRT’ for short ).

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The Appellant appeared before the DRT and challenged the maintainability of the Securitization Application. Prior to the filing of the S.A., there was a pre-litigation settlement between the parties, and the Respondent had agreed to pay the outstanding amount in installments. Certain payments were made, but thereafter, it defaulted. And therefore, the terms of the settlement failed. As a consequence, the Appellant intended to proceed with the Sarfaesi measures.

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During the pendency of the S.A., the learned Presiding Officer directed the Respondent herein to deposit a sum of ₹ 5 lakhs for the grant of ad-interim order, and accordingly a sum of ₹ 5 lakh was deposited. After considering the contention raised by both sides the impugned order was made on 29.10.2013. The impugned order directs that the second Respondent therein shall collect the amount deposited by the Applicant with the Registry of the Tribunal and appropriate the same against the outstanding dues and the S.A. was disposed of to extend that the disbursed amount along with interest at the rate of 8% simple on reducing the balance.

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The Appellant is aggrieved and hence, the Appeal. The Respondent appeared and even filed a reply, but thereafter stopped

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appearing, and was ultimately, set ex-parte. The learned counsel for the Appellant was heard. Records perused.

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The learned counsel points out that at the very outset, the impugned order is not sustainable because the learned Presiding Officer had exceeded his jurisdiction U/s 17 of the SARFAESI Act which states that any person including the borrower aggrieved by any of the measures referred to in sub-section 4 of section 13 taken by the secured creditor or his Authorized Officer may make an application to the DRT having jurisdiction of the matter within 45 days from the date on which such measure has been taken. (emphasis supplied) In the instant case, even though the Respondent had initially filed an application challenging the measures of taking over possession of the property u/s 14 of the SARFAESI Act, there is no specific plea as to what was infirmity in that order. Nowhere in the application is it pleaded specifically as to what irregularity was committed in the Sarfaesi measures initiated by the Appellant.

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The specific prayer in the application was for quashing the proceedings initiated against her and to declare that the action of Respondent No.1 Bank u/s 13 (4) of the SARFAESI Act is illegal. The other prayer is to the effect that the action of the first Respondent bank to proceed against the applicant does not survive because she has not denied the existence of the loan sanction by the first Respondent Bank and she has also not denied his liability to pay the same. The Appellant has requested the Respondent Bank for settlement giving effect to the circulars of the RBI as is applicable to the applicant

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In the impugned order, reliefs which had not been sought were granted. There is no provision u/s 17 of the SARFAESI Act empowering the DRT to adjudicate the amount or direct payment of the amount. In case the Sarfaesi measure is found to be faulty, it can be set aside and the application allowed. The proceeding under the SARFAESI Act is not an adjudicatory proceeding as under the RDB Act and, therefore, the impugned order directing a Respondent Bank to the appropriate amount which has been deposited during the interregnum period for granting interim relief towards the amount due and get satisfied with it at the rate of interest determined by the Tribunal.

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The direction to appropriate only interest at the rate of 8% simply of reducing balance would also be apparently erroneous because the DRT exercising jurisdiction under the SARFAESI Act could not have made such an order. Under the circumstances, I find that the impugned order is unsustainable, and requires to be set aside. The Appeal is, therefore, allowed and the impugned order in S.A. No. 63/2012 dated 29.12.2013 is set aside and the SA is dismissed since the Respondents have not proved any insufficiency in the Sarfaesi measure initiated by the Appellant Bank. The amount if any deposited by the borrower before the D.R.T. shall, however, be credited towards the amount due from her towards the debt due to the secured creditor.

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The Appeal is allowed as above.

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Sd/Chairperson

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psa-32

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Assets Reconstuction Company India Ltd. v. Mrs Sudha Satish Mahendre

Case brief

What is this about?

What did the court decide?

Assets Reconstuction Company India Ltd. v. Mrs Sudha Satish Mahendre

Case brief

What is this about?

What did the court decide?

What the court decided

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