Dismissed

M/s Khayati Steel Indutries Pvt. Ltd. v. Ms Vedik Ispat Pvt. Ltd.

DRAT14 Dec 2023REGULAR APPEAL/20/2022

Case brief

AI extract

What is this about?

The Debts Recovery Appellate Tribunal dismissed the appellant's appeal against a DRT order that set aside a sale notice for not complying with Security Interest Enforcement Rules, holding the appeal to be an abuse of process as the appellant sought specific performance (outside DRT jurisdiction) and had previously received funds refunding the deposit.

What did the court decide?

The appeal is dismissed with costs.

M/s Khayati Steel Indutries Pvt. Ltd. versus Ms Vedik Ispat… — Banking and Recovery | DRAT (2023)

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RA (SA) 20/2022

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 14^th of December, 2023

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PRESENT: Hon’ble Mr. Justice S. Ravi Kumar CHAIRPERSON

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RA (SA) 20/2022

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(SA 116/2021on the file of DRT-II, Bengaluru)

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Between

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M/s. Khayati Steel Industries Pvt Ltd., Represented by its Authorised Signatory D-33, Gulzaar, 4^th Main V.V. Mohalla, Mysore 570002 Karnataka.

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……Appellant

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Vs.

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1.M/s. Vedik Ispat Pvt Ltd., No.707, 22^nd Cross, 19^th Main, Banashankari II Stage Bengaluru 560070 Represented by its Director Mr. Narendra Kumar Bhutara.

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2.Mr. Narendra Kumar Bhutara S/o. Mr. Sugan Chand Bhutara No.707, 22^nd Cross, 19^th Main, Banashankari II Stage, Bengaluru 560 070.

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RA (SA) 20/2022

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Mr. Sharad Bhutara S/o. Mr. Rajaram Bhutara No.555, ‘New Hope’, 22^nd A Cross, 13^th Main, Banashankari II Stage, Bengaluru 560 070.

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4.Mr.Rambilas Bhutara S/o. Mr. Sugan Chand Bhutara No.569, ‘Shashwat’, 23^rd Cross, 14^th Main, Banashankari II Stage, Bengaluru 560 070.

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Mr. Rajaram Bhutara S/o. Mr. Sugan Chand Bhutara No.555, ‘New Hope’ 22^nd A Cross, 13^th Main, Banashankari II Stage, Bengaluru 560 070.

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Mr.Mahendra Kumar Bhutara S/o. Mr. Sugan Chand Bhutara ‘Bhutara Bhavan’ Sendra Road, Beawar, Rajasthan.

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7.Mrs. Sarla Bhutara W/o. Mr.Rajaram Bhutara No.555, ‘New Hope’ 22^nd A Cross, 13^th Main, Banashankari II Stage, Bengaluru 560 070.

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8.Mrs. Sarita Bhutara

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W/o. Narendra Kumar Bhutara No.707, 19^th Main, 22^nd Cross, Banashankari II Stage, Bengaluru 560 070.

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RA (SA) 20/2022

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9.M/s. Shah Foils Limited Regd. Office at B-25, 3^rd Floor, Galaxy Signature, Science City Road Sola, Ahmedabad, Gujarat-380060.

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Represented by Authorised Signatory Mr. Karthik Ramesh Shah, Managing Director

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M/s. Shree Simandharaswami Warehousing Private Limited Maitri Bhavan, Plot No.18 Sector 8, Gandhidham, Kutch 370 201 Represented by Authorised Signatory Mr. Karthik Ramesh Shah

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11.Shri Bajrang Power and Ispat Ltd., VII, Boorjhara, Urla- Guma Road, Urla Growth Center, Raipur 495 221.

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M/s State Bank of India Bangalore City Branch No.22, JC Road Bengaluru 560 002. Represented by its Chief Manager.

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13.The Authorised Officer, M/s. State Bank of India SAMB Branch (Consortium Lead Bank) Bengaluru – 560 001.

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. ……Respondents

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Counsel for Appellant. : Mr. K.S. Sundar Counsel fo r R-1 To R-5, R-7 & R-8 : Mr. Sharanjith Shetty Counsel for R13 : Mr. K.P.Sanjeev Kumar

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RA (SA) 20/2022

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O R D E R

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This Appeal is against Order dated 31.08.2021 of DRT-II, Bengaluru, in SA 116/2021.

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Brief facts leading to this Appeal are as follows:-

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Respondents 1 to 8 herein, filed SA 116/2021

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challenging Sale Notice dated 04.02.2021 issued by Respondents 12 and 13. During the pendency of said Application, Appellant herein filed an Application to implead it as one of Respondent, and as per Order of DRT dated 22.04.2021 in IA 840/2021, Appellant is impleaded as 5^th Respondent to SA 116/2021. Appellant filed its objections to Securitisation Application and Tribunal below on a consideration of contentions and rival contentions of all parties, held that Sale Notice dated 04.02.2021 is not in consonance with Rule 8(6) of Security Interest (Enforcement) Rules, 2002 [hereinafter called the Rules, 2002] and set

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RA (SA) 20/2022

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aside the same, and directed Bank to refund 25% of bid amount deposited by Appellant herein together with interest; aggrieved by the Order of Tribunal below, Appellant preferred present Appeal.

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Heard arguments.

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Advocate for Appellant submitted that the Tribunal below went wrong in setting aside the Sale Notice dated 04.02.2021 as Bank strictly followed the Rules, 2002. He further submitted that the Appellant is declared as highest bidder for bid amount of Rs.15.74 Crores as against reserve price of Rs.13.29 Crores and deposited 25% of bid amount on 12.03.2021 which includes EMD amount of Rs.1,32,90,000/- deposited on 10.03.2021. He submitted, Appellant is always ready to pay the remaining balance, but the same could not be done due to pendency of Securitisation Application and Interim Orders passed thereon. He submitted, Appellant purchased the property

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RA (SA) 20/2022

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by paying Rs.2.45 Crores more against the reserve price and Appellant was the highest bidder where there were 49 bid increments of Rs.5 Lakhs each.

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On the other hand, Advocate for Bank submitted that Bank is taking fresh steps by issuing a fresh Auction Notice in respect of secured assets and Bank repaid Rs.3,93,50,000/-, being 25% deposited by Appellant on 18.09.2021 and also paid a sum of Rs.12,37,753/- on 17.05.2022 towards interest as per orders of DRT in SA 116/2021. He submitted that Appellant received said amount without any protest.

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When Learned Advocate for Appellant repeatedly referring the Appellant as Auction Purchaser, this Tribunal requested him to clarify under what provision of Securitisation Act, the Appellant is vested with any legal right, for which, Learned Advocate for Appellant is not able to say anything. From the pleadings and material on record,

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RA (SA) 20/2022

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the Appellant is only a highest bidder, who paid only 25% of bid amount, as required under Rule 9 (3) of Rules, 2002.

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In the definitions given to Securitisation Act and Rules,

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2002, Auction Purchaser is not at all defined. But, as per Rule 9(6) of Rules, 2002, on confirmation of Sale by the Secured Creditor and if the terms of payment have been complied with, the Authorised Officer exercising the power of Sale shall issue a certificate of sale in favour of purchaser in the form given in Appendix V. So, only on completion of terms of payment in accordance with Rules, purchaser is entitled for a Sale Certificate. Here, admittedly, Appellant paid only 25% and the remaining 75% is not paid even till today. As per Rule 9 (4) of Rules, 2002, the balance purchase price i.e. 75% shall be paid by purchaser on or before fifteenth day of confirmation of Sale. Therefore, a close reading of Sub-rules (1) to (6) of Rule 9 of Rules, 2002, the Appellant is only a highest bidder and cannot be termed as Auction Purchaser, having not paid the full amount, in

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RA (SA) 20/2022

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terms of conditions imposed in Sub-rules 2, 3 and 4 of Rule 9 of Rules, 2002.

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As seen from the grounds of Appeal, the Appellant challenged the Order of Tribunal below contending that the Sale Notice dated 04.02.2021 is in accordance with Rules, and that Tribunal below wrongly applied Section 13(9) of SARFAESI Act, 2002 on the ground that inter se pari passu agreement cannot override Section 13(9) of SARFAESI Act, 2002. But, Appellant, being the highest bidder, cannot be allowed to raise these contentions, particularly when Bank has not challenged these findings (namely, holding that Sale Notice dated 04.02.2021 is not in accordance with Rules, holding that, there is no 30 days gap and that Bank did not obtain consent from other creditors), on the other hand, it has accepted the findings, and stated that it is taking steps to issue a fresh Notice. As already referred to above, the original Securitisation Application is filed against Bank only, and the Appellant, on its own, filed a Petition to implead it

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RA (SA) 20/2022

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as a party, and after impleading, an opportunity was given to it to file its objections, but, the fact remains the relief claimed by Respondents 1 to 8, is only to set aside Sale Notice dated 04.02.2021. Tribunal below minutely examined every aspect and considered every objection raised on behalf of Respondents to Securitisation Application including this Appellant, and overruled them by recording cogent and convincing reason.

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As seen from the grounds of Appeal and relief claimed in the Appeal, it appears that, Appellant indirectly seeking for a specific performance of Sale in its favour, which is not within the jurisdiction of DRT under the provisions of SARFAESI Act, 2002.

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On a overall scrutiny of entire material, I am of the considered view that this Appeal is nothing but an abuse of process of law, particularly when the Appellant received back 25% of the bid amount together with interest in compliance of directions given in the impugned Order.

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RA (SA) 20/2022

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For the above reasons, it is held that the Appeal is

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devoid of merits and liable to be dismissed.

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1. In the result : The Appeal RA (SA) 20/2022 is

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dismissed with costs. All pending IAs, if any, stand closed.

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[Dictated to Athistamani, PS, transcribed by her, corrected, signed and pronounced by me in open court, this 14^th of December, 2023]

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[ Justice S. Ravi Kumar] CHAIRPERSON

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M/s Khayati Steel Indutries Pvt. Ltd. v. Ms Vedik Ispat Pvt. Ltd.

Case brief

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M/s Khayati Steel Indutries Pvt. Ltd. v. Ms Vedik Ispat Pvt. Ltd.

Case brief

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