Allowed

Strowberry Retailing Pvt. Ltd. v. Shriram City Union Finance Limited

DRAT29 Aug 2023IA/421/2023

Case brief

AI extract

What is this about?

The DRAT allowed an appeal against a notice of possession under the SARFAESI Act but fixed the pre-deposit at ₹25 lakhs in two instalments. The court accepted the prima facie case regarding notice defects but rejected claims of financial strain due to lack of evidence.

What did the court decide?

Appeal allowed with a direction to deposit ₹25 lakhs in two instalments as pre-deposit; proceedings stayed upon payment.

Strowberry Retailing Pvt. Ltd. versus Shriram City Union… — Banking and Recovery | DRAT (2023)

¶1

BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr Justice Ashok Menon, Chairperson I.A. No. 421/2023(WoD) In

¶2

Appeal on Diary No. 750/2023

¶3

M/s Strowberry Retailing Pvt. Ltd. & Ors. … Appellant/s V/s.

¶4

Shriram City Union Finance Ltd., Through its Authorised Officer. Mr Puneet Gogad, Advocate for Appellants. Mrs Uma Fadia, Advocate for Respondent.

¶5

…Respondent/s

¶6

-: Order dated: 29/08/2023:-

¶7

The Appellants are in appeal impugning the order dated 17.04.2023 in Interlocutory Application (I.A.) No. 755 of 2023 in Securitisation Application (S.A.) No.304 of 2022 on the files of the Debts Recovery Tribunal-II, Mumbai (D.R.T.) where the Ld. Presiding Officer declined to grant any interim reliefs to the Applicant therein to stall the Sarfaesi measures intended to be taken by the Respondent Financial Institution. The Appellants admittedly had taken a loan from the Respondent by mortgaging their Flat No. 13 and had created a security interest. On defaulting repayment of the loan, the Respondent issued a demand notice under Sec. 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’, for short) demanding a sum of ₹55,93,490/-. The Appellant did not pay the amount as a consequence of which steps under Sec. 14 of the SARFAESI Act were initiated and

¶8

¶9

an order obtained on 28.06.2022 to take physical possession of the secured asset. The Advocate Commissioner appointed by the Chief Metropolitan Magistrate (CMM) issued a notice on 08.09.2022 to take physical possession of the property. The Appellants approached the D.R.T. by filing S.A. No. 304 of 2022. The earlier notice of taking physical possession did not fructify and hence, yet another notice was issued on 27.03.2023 intending to take physical possession of the secured asset on 17.04.2023. At this point, the Appellants filed the aforementioned I.A. No. 755 of 2023 seeking interlocutory relief to prevent taking over physical possession of the secured asset. The application was also filed as I.A. No. 754 of 2023 for amendment of the S.A. in consequence of the subsequent notice received by the Appellants.

¶10

The Appellants challenged the Sarfaesi measures under various grounds among which is that the notice under Sec. 13(2) does not comply with the mandate of Sec. 13(3) and does not give a breakup of the principal amount, interest and cost which is claimed by the Respondent. It is also stated that the mortgage is created on the basis of an unregistered agreement for sale in favour of the Appellants and therefore, the mortgage is defective. That apart, there is an objection raised that the notice issued under Sec. 13(2) does not mention the designation or the name of the authorised officer who has issued it, so as to indicate that the person is competent to issue the demand notice. 3. The Appellants contend that they are under financial strain. The first Appellant company is running at a loss and does not file any Income Tax Returns. Appellants Nos. 2 to 4 have only hand-to-mouth

¶11

¶12

existence and have little income to pay the mandatory pre-deposit. The fifth Appellant is a housewife without any sort of earnings. Hence, the Appellants pray that the indulgence may be shown by exercising the jurisdiction of this Tribunal under the 3^rd provision to Sec. 18(1) of the SARFAESI Act by keeping the amount to the minimum of 25% of the amount demanded.

¶13

The Respondent has filed a reply stating that the contentions are not tenable and that despite having received a notice under Sec. 13(2) of the SARFAESI Act, the Appellants did not send any reply seeking clarification regarding the breakup of the amount demanded. Hence, they have waived their right to challenge the validity of the notice for non-compliance with Sec. 13(3) of the SARFAESI Act. It is further contended that the Appellants have entered into a registered mortgage deed creating a simple mortgage with regard to the secured asset and therefore, they cannot now contend that the mortgage is defective. It is further contended that the balance sheet of the first Appellant company and the Income Tax Returns of the rest of the Appellants have not been produced so as to substantiate the contention of the Appellants that they are under financial strain. Hence, the Ld. Counsel appearing for the Respondent submits that the Appellants are not entitled to any indulgence and may, therefore be directed to deposit 50% of the amount due and claimed from them.

¶14

After having heard both sides. I find that the Appellants have made out an arguable case with regard to non-compliance with Sec. 13(3). The contention of waiver for not having responded to the demand notice under Sec. 13(2) may not lie in view of the decision of

¶15

¶16

the Bhavdipbhai Arunbhai Dave vs. Kotak Mahindra Bank Ltd. MANU/GJ/0273/2022 which is relied upon by the Ld. Counsel appearing for the Appellants. The Ld. Counsel for the Appellants has submitted that the demand notice demands a sum of ₹ 55,93,490/and considering the prima facie case and the financial strain undergone by the Appellants, the amount may be restricted to 25% of the aforesaid amount shown in the demand notice, submits the Ld. Counsel.

¶17

Though the Appellants have succeeded in establishing a prima facie case with regard to the inadequacy of the notice under Sec. 13(2), I am not convinced about the contention regarding the inadequacy of the mortgage that was created. The Appellants are admittedly in possession of the property and enjoying as the title holder of the property and it is a simple mortgage which is created which just does not require the deposit of the title deeds for a validity mortgage. As regards the financial strain, I am not so convinced because the Appellants have not produced either the Income Tax Returns of the company or Appellants Nos. 2 to 4 nor have they produced the balance sheet of the company which would have indicated that the company is running at loss. The Appellants are, therefore, not entitled to the indulgence of this Tribunal to keep the pre-deposit at 25%.

¶18

Considering the entire facts and circumstances of this case, I direct the Appellants to deposit a sum of ₹25 lakhs as pre-deposit in two equal instalments. The first instalment of ₹12.50 lakhs shall be deposited within two weeks i.e. on or before 12.09.2023 and the second instalment of ₹12.50 lakhs shall be payable within three weeks

¶19

¶20

therefrom i.e. on or before 03.10.2023. Failure to pay the amount shall entail in dismissal of the appeal without any further reference to this Tribunal.

¶21

On the payment of the said amount, the further proceeding under the SARFAESI Act shall stand stayed.

¶22

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

¶23

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.

¶24

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

¶25

Post on 13.09.2023 for reporting compliance concerning the first instalment.

mks-3

Sd/-

Chairperson

Strowberry Retailing Pvt. Ltd. v. Shriram City Union Finance Limited

Case brief

What is this about?

What did the court decide?

Strowberry Retailing Pvt. Ltd. v. Shriram City Union Finance Limited

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

All orders in this case

Similar cases

Dr. Jagdish Chhotelal Sharma versus Indian Bank

Nagar Urban Co. Operative Bank versus Mr Nitinkumar and Ors.

Dr. Jagdish Sharma versus Indian Bank and Ors.

Strowberry Retailing Pvt. Ltd. versus Shriram City Union Finance Limited

M/s. Ashwin Crane & Construction versus Asset Reconstruction Company(India) Limited & Ors.

Ramadevi R. Prajapati versus Idfc First Bank Ltd.