Allowed

M/s Shree Tirupati Enterprises v. Bank of India

DRAT6 Jan 2023IA/7/2023

Case brief

AI extract

What is this about?

In an appeal against dismissal under the SARFAESI Act regarding valuation and auction price insufficiency, the tribunal held that the appellant has an arguable case on valuation. A pre-deposit of Rs 4 crores was ordered as a condition to allow the appeal to proceed further.

What did the court decide?

Waiver of pre-deposit u/s 18(1) allowed subject to payment of Rs 4 crores within six weeks.

M/s Shree Tirupati Enterprises versus Bank of India — Banking and Recovery | DRAT (2023)

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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. 07/2023 (WoD) In Appeal on Diary No. 1454/2022

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Between

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M/s. Shree Tirupati Enterprises & Ors. … Appellant/s V/s. The Authorized Officer, …Respondent/s Bank of India & Anr.

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Mr Atul Pande, Advocate for Appellant.

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Ms Pallavi Chari along with Mr O.A. Das, Advocate for Respondent No.1

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Mr R.K. Thakker, Advocate for Respondent No.2

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The matter is taken up for hearing by way of Praecipe filed by the Appellants seeking urgent relief.

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This is an Appeal filed under Sec.18(1) of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interests Act, 2002 (‘SARFAESI Act’, for short) by the borrowers/guarantors/mortgagors who were the Applicants in the Securitisation Application (S.A.) No. 157/2021 on the files of the Debts Recovery Tribunal (D.R.T.), Nagpur, impugning the Judgment dismissing the S.A. which was filed raising several contentions opposing the securitisation measures initiated by the Respondent Bank. The classification of debt as NPA, the flaws in the demand notice u/s 13 (2) issued on 02.07.2021, and the subsequent

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auction sale, were all challenged. The main contention raised by the Appellant in this Appeal is regarding the insufficiency of the price for which the property was sold in the auction.

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The learned counsel appearing for the Appellant pointed out that the two valuation reports that the bank obtained in 2019 valued the secured assets at ₹ 17 crores and ₹ 17.45 crores respectively. Subsequently, another valuation report obtained by the bank in 2021 shows the valuation as ₹ 9.50 crores, which according to the Appellants is an under-valuation. It is also pointed out in the recorded minutes of the meetings of the Bank held in 2019 and in 2020, the valuation as per the reports in 2019 was held to be appropriate valuation for the property, indicating that the value of the property would be between ₹ 17 crores and ₹ 17.45 crores. The auction notice was published in the newspaper on 01.02.2022 in which, the reserve price is shown of ₹ 10.29 crores only, and ultimately, the property sold for ₹ 10,29,33,000/- which accordingly to the Appellants is highly insufficient, and they contend that the sale was a result of a collusion between the Respondent Bank and the auction purchaser who is second Respondent herein.

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It is further pointed out that at the time of registration of the sale, a valuation report was obtained by the bank and produced along with the sale certificate indicating the value of the property at ₹18,39,21,378/-. The learned counsel appearing for the Bank submits that he is not aware of any such valuation done by the valuer Mr Tarun V Hindocha on 16.03.2022 and that the bank has not instructed him in this regard. It is very surprising that the Ld. counsel

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holding brief for the Bank who appears and argues before this Tribunal on behalf of the Bank in a waiver of deposit application, is not instructed properly by the officers of the bank, and has been kept in the dark. The officer of the bank who is in charge has to be held responsible for such laches.

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The learned counsel for the Appellants submits that the Appellants are under financial stress. The RBI had issued guidelines during the pandemic to infuse capital into the business and restructure the loans, so that the businesses may revive and overcome the aftermath of the pandemic. It was in consequence of such a direction, that an additional loan of 20% was sanctioned to borrowers suffering the ill effects of the pandemic on the economy. Accordingly, a further loan of ₹ 2.22 Crores was sanctioned to the Appellants too, but unfortunately, that amount did not reach the hands of the Appellants because it was adjusted towards clearing the outstanding amount towards the debt. And practically nothing changed for the Appellants to revive their business.

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The Appellants had pleaded in the application that because of the pandemic, and because of the paucity of capital required for the revival of their business, they were not able to earn any amount from the business. They had addressed the bank officials on 15.01.2021, and again on 24.01.2021 to restructure the loan, but it fell on deaf ears, and there was no response from the Respondent Bank to help them revive their business by restructuring the loan.

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The learned counsel for the Appellants has submitted that though the income tax returns for the recent years have not been

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produced, the Balance Sheet produced by the bank for the year ending 2019 March indicates that their income was only ₹ 63,976/for the year ending March 2020, this would show that even before the pandemic, their income was meagre, though they had sufficient capital assets running to the tune of ₹ 35 crores. The Ld. counsel appearing for the auction purchaser submits that he has paid the entire amount due towards sale consideration and that the money has got blocked in litigation preventing his use of the property which he could otherwise have been put to profitable use.

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The total amount that was claimed as of 30.06.2021 in the Demand notice is ₹ 10,13,89,055.81/- together with an interest rate of 11.55% and accordingly to the Ld. counsel appearing for the Respondent Bank as of today the amount due is ₹ 14,20,33,000/-. But no statement of the account duly certified as per the banker group of evidence group bank has been produced to indicate the exact amount that is due. The Ld. counsel appearing for the Appellants would point out, that by any modest calculation at the aforesaid rate of interest, the amount due as of date would be ₹11,98,85,459/-. There is not much difference because the amount as per calculation made by the Respondent Bank would be ₹ 14 crores and the amount calculated as per the Appellant would roughly come to ₹ 12 crores. There is only a difference of ₹ 2 crores between the two. On evaluating the rival submissions, and after anxiously considering the contentions raised by both sides, I am of the opinion that the Appellants have got an arguable case with regard to the valuation of the property which needs to be given an opportunity to

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be heard in detail in the Appeal. The financial strain has also been pleaded.

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Under the circumstances, I am inclined to exercise jurisdiction under the 3rd proviso to section 18 (1) of the SARFAESI Act and direct the Appellant to deposit the sum of ₹ 4 crores towards the pre-deposit u/s 18 (1). The learned counsel for the Appellant submits the Demand Draft for ₹ 1.25 Crores today and seeks time to pay the balance amount. The balance amount shall be paid within six weeks from today, on or before 17.02.2023. Failure to deposit would entail dismissal of the Appeal. The possession of the property if not already handed over to the auction purchaser shall be protected.

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The amount shall be deposited in the form of a Demand Draft with the Registrar of this Tribunal. 10. 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.

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With these observations, the I.A. is disposed of. The Respondents are at liberty to file a reply in the Appeal with an advance copy to the other side.

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Post on 22.02.2023 for reporting compliance concerning the payment.

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Sd/Chairperson

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psa-04

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M/s Shree Tirupati Enterprises v. Bank of India

Case brief

What is this about?

What did the court decide?

M/s Shree Tirupati Enterprises v. Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

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