Disposed

khodal cotton processing Pvt. Ltd. and Ors. v. State Bank of India

DRAT10 Nov 2023IA/730/2023

Case brief

AI extract

What is this about?

The DRAT disposed of an I.A. before entertaining the appeal by directing the appellants to deposit ₹3.75 Crore as pre-deposit under Section 18(1) SARFAESI Act in two instalments and deferred possession takeover until compliance.

What did the court decide?

Dirtecting deposit of ₹3.75 Crore in two instalments (₹30 lakhs today, ₹1.2 Crore by 01.12.2023, ₹2.25 Crore by 22.12.2023), and deferring possession until next hearing.

khodal cotton processing Pvt. Ltd. and Ors. versus State… — Insolvency and Bankruptcy | DRAT (2023)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr. Justice Ashok Menon, Chairperson I.A. No. 730/2023 (WoD)

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Appeal on Diary No. 1965/2023 Between Khodal Cotton Processing Pvt. Ltd. & Ors. … Appellant/s V/s.

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The Authorized Officer, …Respondent/s State Bank of India An Advocate for the Appellant is present.

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Mr. Sanjay D. Kelkar along with Mr. Omkar S. Kelkar, Advocate for Respondent.

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-: Order dated: 10/11/2023:-

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The Appellants are in appeal impugning the order dated 23.10.2023 in Securitization Application (S.A.) No. 237/2020 on the files of the Debts Recovery Tribunal-II, Ahmedabad (D.R.T.) wherein the Ld. Presiding Officer declined to grant any interlocutory relief with regard to the taking over possession of the secured assets which consist of several items of the properties. The Sarfaesi measures were initiated initially on 24.12.2018 by the issuance of a demand notice u/s 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 ₹ 7,46,77,395.27. It is the contention of the Appellants that the notice was issued to the Appellants excluding Appellant No.9 but no further Sarfaesi measures were initiated thereafter. The Appellants had sent an objection to the said notice on 03.03.2019 and the bank replied only on 16.01.2020 which according to the Ld. Counsel appearing for the Appellants is in contravention of the provision u/s 13 (3A) of the

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SARFAESI Act. The second notice u/s 13 (2) was issued only to Appellant No.9 on 07.03.2020 demanding the very same amount to which he sent the objection on 30.06.2020 but there was no reply by the creditor bank and therefore, there is again a violation of the mandatory provisions u/s 13 (3A) with regards to the 2^nd demand as well.

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Thereafter, the Respondent took steps for symbolic possession of the properties and it was allegedly taken on 18.06.2020. The Appellants have objections regarding the said measures as well, and it is contended that the notices and procedures as required under Rules 8 (1) and 8 (2) of the Security Interest (Enforcement) Rules, 2002, have not been complied with and therefore, the Appellants approached the D.R.T. by filing an aforesaid S.A. During the pendency of the S.A., the Respondent bank took steps u/s 14 for taking physical possession of the properties and obtained an order from the Chief Juridical Magistrate, Rajkot on 29.05.2023 u/s 14 of the SARFAESI Act.

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Thereafter, the Appellants have also filed an application raising the challenge to the order u/s 14 the said application is pending consideration before the D.R.T. On 10.11.2022 an auction notice was issued for auctioning the properties on 05.12.2022. Only one item of property was sold, and it is alleged that the sale certificate has also been issued to the auction purchaser. Taking over physical possession of the property is still pending. It is contended that the physical possession of the property is intended to be taken on 19.11.2023. The Appellants, therefore, apprehend that they may be dispossessed of that property and approached this Tribunal

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challenging the impugned order and seeking setting aside of the impugned order.

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The Appellants will first have to comply with the mandatory provision u/s 18 (1) of the SARFAESI Act for the appeal to be entertained. The Respondent has filed a reply to the application for waiver of pre-deposit in which it is contended that the Appellants should be directed to deposit 50% of the amount which is mentioned and demanded in the demand notice u/s 13 (2). The item of the sold property fetched the price of ₹1.95 Crore. The Ld. Counsel appearing for the Respondent submits that the possession of the property which has already been sold to the auction as early as 2022 may be permitted to the handed over to the auction purchaser. The Appellants would contend that they are under financial strain and income tax returns of Appellant Nos. 2, 4, and 9 have been reduced to indicate that they do not have sufficient income to pay the 50% amount debt due. It is stated that the Appellants have a good case in challenging the Sarfaesi measures on the ground which have been mentioned earlier.

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In view of the fact that the Appellants have challenged the sale of one item of the property, the Appellants will have to deposit the amount based on the amount that is due as of the date. But in view of the fact that the Respondent has only mentioned the total amount as stated in the demand notice u/s 13 (2), and the amount that is due as of date has not been forthcoming, I would direct the Appellants to deposit a sum of ₹ 3.75 Crore as pre-deposit. The Ld. Counsel appearing for the Appellants is furnishing a demand draft of ₹30

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lakhs today. The balance of ₹3.45 Crore shall be paid in two equal instalments as hereunder.

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Numbers of Instalments	Payment on or before
1^stInstalment of₹1,20,00,000/-	01.12.2023
2^ndInstalment of₹2,25,00,000/-	22.12.2023

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In view of the payment of the ₹ 30 lakhs, the possession shall stand deferred till the next date of hearing.

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Default in payment of any of the instalments shall entail in dismissal of the appeal 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 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 is at liberty to file a reply in the Appeal with an advance copy to the other side.

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Post on 04.12.2023 for reporting compliance regarding the payment of the 1^st instalment.

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psa-4

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khodal cotton processing Pvt. Ltd. and Ors. v. State Bank of India

Case brief

What is this about?

What did the court decide?

khodal cotton processing Pvt. Ltd. and Ors. v. State Bank of India

Case brief

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