Partly allowed

Koushalyadevi Anilkumar Agarwal v. Dcb Bank Limited

DRAT12 Dec 2023IA/802/2023

Case brief

AI extract

What is this about?

The Appellant sought to reduce the pre-deposit for staying auction proceedings under the DRAT Act, relying on failure to serve a Section 13(2) SARFAESI notice to a legal heir. The chairperson rejected the request to reduce the deposit to 25%, directing a deposit of ₹1.5 crore in installments, while allowing deferral of possession pending payment.

What did the court decide?

Appellant directed to deposit ₹1,50,00,000/- as predeposit; possession deferred pending first instalment payment; failure to comply will result in dismissal.

Koushalyadevi Anilkumar Agarwal versus Dcb Bank Limited — Execution and Attachment | DRAT (2023)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr Justice Ashok Menon, Chairperson I.A. No. 802/2023(WoD)

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Appeal on Diary No. 2226/2023

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Between Koushalyadevi Anilkumar Agarwal. … Appellant/s V/s.

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Authorised Officer, DCB Bank Ltd. …Respondent/s

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Mr Rafeeq P., along with Mr Ronak Shah and Mr Jay Mehta, i/b M/s. Ronak Shah & Co., Advocate for Appellant.

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Mr Charles De'souza, along with Mr. Vinay Deshpande and Mr. Rupak Sawangikar, i/b M/s. V. Deshpande & Co., Advocate for Respondent Bank.

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-: Order dated: 12/12/2023:-

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The matter is taken up for hearing by way of a praecipe filed by the Appellant for seeking urgent relief.

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The Appellant is in appeal impugning the order dated 21.11.2023 in I.A. No. 2589/2023 in Securitisation Application(S.A.) No. 527/2023 on the files of the Debt Recovery Tribunal, Pune (D.R.T.). The Appellant and her daughters had challenged the Sarfaesi measures initiated by the 1^st Respondent bank concerning the property owned by the Late Anil Kumar Agarwal the deceased husband of the Appellant and his brothers. The Appellant's son was also one of the borrowers.

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It is contended that the Appellant was not issued any notice u/s. 13 (2) of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short) even though, on the date of issuance of the notice on 28.12.2022, the Appellant's husband was already dead, and she with

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his other legal heirs had inherited the property belonging to him. He died in July 2012 and this fact was known to the bank. Hence, he has been referred to in the demand notice as Late Shri Anilkumar Agarwal represented by his known and unknown legal heirs.

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It is submitted that the measures under u/s. 13(4) of the SARFAESI Act also proceeded without notice to the Appellant and therefore, the Appellant challenged the Sarfaesi measures when steps were taken for auctioning the property.

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The Appellant would therefore contend that the entire Sarfaesi measures would have to fail for the reason that the Appellant being one of the owners of the property was not served with a demand notice u/s. 13 (2) to enable her to settle the debt demanded by the Respondent bank.

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The Ld. Presiding Officer vide the impugned order declined to grant any protection to the Appellant about the auctioning of the subject property mainly on the ground that the Appellant was aware of the mortgage of the property by her husband. It is also observed that the Appellant herself along with the other Respondent had mortgaged property once again in the year 2020 and availed a loan from a different bank.

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Deceased Anil Kumar Agarwal and his brothers as well as his son had taken a loan from Citi Consumer Financial Services Ltd. in 2007 and had mortgage subject property. The loan was assigned to the Respondent No. 1. Bank in the year 2012. The Appellant is a legal heir of deceased Anil Kumar Agarwal together with her brothers and Respondent Nos. 6 and 13 to 15.

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The Ld. Counsel appearing for the Appellant submits that

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non-issuance of 13 (2) demand notice to the legal heir of the original mortgagor is a defect which cannot be cured and would therefore affect the entire Sarfaesi proceedings. The Ld. Counsel relies on a decision of the Madras High Court in his argument S. Suhaina Banu and Ors. V/s Indian Bank ARM & Ors 2010 SCC Online Mad 6566 :(2011) 1 CWC 448 wherein it is held that the notice u/s. 13 (2) should be issued to the legal heirs of the deceased borrower/guarantor afresh in the event said borrower/guarantor dies after the service of notice u/s. 13(2) of the SARFAESI Act. The object of the provisions of Sub Sec. 2 of Sec. 13 mainly required the borrower/guarantor by notice to discharge his liabilities to the secured creditor within 60 days from the date of notice. Failing which, the secured creditor shall be entitled to exercise all or any right under Sub Sec. 4 of Sec. 13 of the SARFAESI Act.

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Drawing an analogy between the facts of the cited decision to the facts of the present case in hand, the Ld. Counsel submits that even though the bank was aware that one of the deceased borrowers was dead. No attempt was made to identify and serve notice on all his legal heirs. Indeed, his son was served with notice but the son was made a party to the notice by his being one of the borrowers and not as a legal heir of the deceased borrower.

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To entertain the appeal, the Appellant will first have to comply with the mandatory provisions u/s. 18(1). The sales of his mentioned the outstanding amount of ₹ 4,13,00,000/- and as of today the amount is ₹ 4,16,00,000/-. The Ld. Counsel appearing for the Appellant submits that the Appellant has little source of income. The Income Tax Returns produced indicate that her income would not

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be sufficient to pay 50% of the amount due to the 1^st Respondent and therefore, she seeks the indulgence of this Tribunal by exercising the jurisdiction under third proviso u/s. 18 (1) to keep the amount of deposit at the minimum of 25%. The Ld. Counsel points out that because of the reasons for non-service of notice u/s. 13(2) and the notice concerning the subsequent Sarfaesi measures, the Appellant has a very good prima facie case and therefore, is entitled to the indulgence from this Tribunal.

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The Ld. Counsel appearing for the Respondent bank vehemently opposes the application and states that there are no reasons for any reduction of the pre-deposit amount. It is pointed out that the Appellant was aware of the proceedings initiated against her husband. She was also aware that the property was mortgaged by her husband as early as 2007 and that steps were being taken for recovery of the sale.

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It is also pertinent to note that her son who is residing with her in the same address as hers has been served with the notice u/s. 13(2) and therefore, there is no possibility of her not knowing about the Sarfaesi measures initiated by the bank. It is also submitted that notice was published in the newspaper and symbolic possession u/s. 13(4) was taken on 14.03.2023 but the S.A. was filed only in June 2023.

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It is also pointed out that since the Appellant did not challenge the measures initiated u/s. 13(4) taking symbolic possession of the secured property. She has waived her right to challenge the sale, and the S.A. is not filed within the period of limitation. The Ld. Counsel also relies on two decisions one of the Andhra Pradesh High Court

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and the other decision of the Kerala High Court to substantiate his argument that when the appellant or the applicant is aware of the Sarfaesi measures initiated against the original borrower, the fact that no separate notice was issued u/s. 13(2) to the legal heir is not of any consequence. In the decision of the Andhra Pradesh High Court reported in Hotel Peral City V/s. Debts Recovery Tribunal APHC 213 , it is observed that the original borrower was served with a notice and had even responded to the notice and contested it. The facts in the cited decision point out that after the demise of the borrower, his wife approached the bank to settle the account and therefore, the Andhra Pradesh High Court has distinguished the judgment of the Madras High Court by holding that in the case in hand, the widow of the deceased borrower was well informed about the Sarfaesi measures and therefore, cannot pretend to be ignorant of it and insist on a separate notice u/s. 13(2).

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The judgment of the Kerala High Court reported in Authorised Officer, Tamilnad Mercantile Bank Ltd & Ors. Vs Devi Prasad MANU/KE/3721/2019 it was held that the deceased borrower was the managing partner of a firm in which all his legal heirs including his wife and children were partners, and the deceased was served with a notice u/s. 13(2). There is no possibility of the other partners of the firm not knowing about the Sarfaesi measures taken by the bank. Hence, it was held that a separate notice u/s 13(2) consequent to the demise of the original borrower is not essential.

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After having heard the rival submissions, I find that the Appellant has come up with certain contentions which need to be considered even though those contentions may not be projecting

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towards a very strong prima facie case. There is still an arguable case which needs to be considered in the appeal or the S.A. as and when it is disposed of. The Appellant has to some extent succeeded in establishing that he has no sufficient income going by the income tax returns which are filed by her. However, the Appellant is not entitled to get the deposit amount reduced to a minimum of 25%.

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Considering the entire facts and circumstances of the case I direct the Appellant to deposit some of ₹ 1,50,00,000/- as predeposit. The Ld. Counsel for the Appellant submitted that he is transferring ₹ 25,00,000/- by RTGS today. The balance of ₹ 1,25,00,000/- shall be deposited in three instalments, as stated hereunder.

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Numbers of Instalments	Payment on or before
1^stInstalment (₹50,00,000/-)	02.01.2024
2^ndInstalment (₹50,00,000/-)	23.01.2024
3^rdInstalment (₹25,00,000/-)	06.02.2024

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Given the payment of ₹ 25,00,000/- today, the possession shall be deferred till the next date of hearing. In default, the Appeal shall stand dismissed, without any further reference to this Tribunal. 17. 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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