Disposed

Ms Sahjanand Jewellers v. Indian Bank

DRAT23 Feb 2024IA/130/2024

Case brief

AI extract

What is this about?

Appeal filed against an order declining protection in SARFAESI proceedings. The Appellate Tribunal found prima facie infirmities but directed the appellants to deposit a 10% pre-deposit amount of Rs. 70 lakhs to obtain a stay on dispossession pending the hearing of the appeal.

What did the court decide?

Staying of dispossession of secured assets scheduled for 25th February 2024, conditional upon deposit of Rs. 70 lakhs pre-deposit.

Ms Sahjanand Jewellers versus Indian Bank — Contract and Commercial Disputes | DRAT (2024)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr Justice Ashok Menon, Chairperson I.A. No. 130/2024 (WoD) In

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Appeal on Diary No. 344/2024 Between

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Sahjanand Jewellers & Ors. … Appellant/s V/s.

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The Authorized Officer, Indian Bank …Respondent/s Mr. Dhrumit Chauhan, Advocate for Appellants. An Advocate for the Respondent is present.

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-: Order dated: 23/02/2024:-

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

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The Appellants are in appeal impugning the order dated 15.02.2024 in S.A. No. 62/2024 on the files of Debts Recovery Tribunal-II, Ahmadabad (D.R.T) whereby the Ld. Presiding Officer declined to grant any interlocutory relief of protection to the Appellants who are facing Sarfaesi action under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. (“SARFAESI Act”, for short) initiated by the Respondent Bank for recovery of debt due from the Appellants.

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The Appellants contend that Sarfaesi measures have been challenged on various grounds which include the challenge to the 13(2) notice for non-compliance of mandatory provisions of u/s. 13 (3). It is also submitted that the classification of the account as a Non-Performing Asset (NPA) was not proper and by rules. It is further contended that the demand notice is signed by a person

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whose name and designation are not revealed in the notice, to establish that he is the person who is authorised by the bank.

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It is further contended that the order of the Chief Metropolitan Magistrate, Surat does not show that there is an application of mind before ordering the taking over of physical possession u/s. 14 of the SARFAESI Act. The Ld. Presiding Officer after hearing both sides was not convinced about the prima facie case and, therefore, declined to grant any protection to the Appellants. The Appellants are facing the threat of being dispossessed of the secured assets on the 25th instant and hence, are in appeal.

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The Ld. Counsel appearing for the Respondent Bank submits that the notice was received only yesterday therefore, the reply to the application for waiver of deposit could not filed as the bank is situated in Ahmadabad and hence, requires time.

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Given the impending dispossession of the secured assets, the Ld. Counsel for the Appellant insisted on a hearing and the matter has been heard today. The Sarfaesi measures are at the stage of proceedings u/s. 13(4). Given the decision of the Hon’ble Supreme Court of India Sidha Neelkanth Paper Industries Pvt. Ltd. & Ano. vs. Prudent ARC Ltd & Ors., 2023 OnLine SC 12, the amount mentioned in the demand notice u/s. 13(2) will have to be taken as a threshold amount for directing payment of the mandatory pre-deposit u/s. 18(1) of the SARFAESI Act. The amount mentioned in the 13(2) notice is ₹ 1,74,33,537/- as of 27.01.2023.

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The perusal of the demand notice indicates that the bifurcation with regards to the principal amount and interest is not seen, the loan is disposed under three facilities, and the total outstanding amount as per those three facilities is mentioned and the total amount is also stated. There is no account statement accompanying being demand notice and therefore, prima facie appears that Respondent bank has not complied with the mandatory provisions u/s. 13(3).

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The Ld. Counsel appearing for the Respondent bank also could not clarify this position. Regarding the challenge raised in the order of the Chief Metropolitan Magistrate (CMM), I find that the CMM has applied his mind referring to a catena of decisions of the Hon’ble Apex Court and has come to the conclusion. Hence, I do not find, that there is prima facie evidence that the CMM has not recorded his satisfaction regarding the compliance of the provisions under the SARFAESI Act by the Respondent bank.

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The Ld. Counsel appearing for the Respondent has vehemently submitted that the S.A. itself is barred by limitation because the Appellants did not challenge the measures soon after the symbolic possession was taken on 11.04.2023. It is stated that only on receiving the notice of dispossession issued by the Commissioner appointed by the Ld. Chief Metropolitan Magistrate did they approach by filing the S.A.

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The Ld. Counsel appearing for the Appellants would state that each measure taken u/s. 13 is a new cause of action and once, the

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last cause of action is challenged, the entire cause of action starting from the classification of NPA can be challenge therefore, there will not be any bar of limitation.

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However, I am not entering into a finding regarding the bar of limitation because the Ld. Presiding Officer, will have to determine the bar of limitation if raised by the Respondent before the D.R.T. Regarding the impecuniosity of the Appellants, they have produced income tax returns which would indicate that most of the Appellants have income less than around ₹ 5 lakhs per annum or less than that and therefore, they have contended that they are under financial strain.

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The Ld. Counsel appearing for the Respondent bank submits that the income tax returns alone would not show the true picture of the financial status of the Appellants. It is pointed out that there are capital assets of the 1^st Appellant proprietorship which also includes a fixed deposit in the bank and jewellery including gold and silver. Moreover, the others are all members of the family, and their income is derived from a common partnership firm which has been distributed amongst them thus bringing the individual income of the partners below the taxable limit.

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Pointing out these facts and circumstances the Ld. Counsel submits that these income tax returns may not be considered to assess the financial capacity of the Appellants. Taking the entire facts and circumstances of this case, I find that the Appellants have a

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prima facie case, and have successfully established to a certain extent that there is some infirmity to the Sarfaesi measures initiated by the Respondent bank. I am not delving deep into the merits of the case since at present it is only the application for waiver of deposit which is being considered and the Ld. Presiding Officer will have to determine all the contentions raised in the S.A. on its merits.

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Taking the amount mentioned in the demand notice as a threshold, the Appellants are directed to deposit a sum of ₹ 70 lakhs as a pre-deposit. The Ld. Counsel appearing for the Appellants submits that a demand draft for ₹ 15 lakhs is being produced today towards the pre-deposit. The balance of ₹ 55 lakhs shall be paid in two instalments within a gap of three weeks and two weeks as stated under.

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Numbers of Instalments	Payment on or before
1^stInstalment₹27,50,000/-	15.03.2024
2^ndInstalment₹27,50,000/-	29.03.2024

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Given the deposit of the initial amount of ₹ 15 lakhs, the possession scheduled to take place on the 25th instant shall stand deferred till the next date of hearing. In default, the Appeal shall stand dismissed, 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 Respondent is at liberty to file a reply in the Appeal with an advance copy to the other side.

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Post on 18.03.2024 for reporting compliance regarding 1^st instalment.

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Sd/Chairperson

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rm-7

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Ms Sahjanand Jewellers v. Indian Bank

Case brief

What is this about?

What did the court decide?

Ms Sahjanand Jewellers v. Indian Bank

Case brief

What is this about?

What did the court decide?

What the court decided

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Cases cited

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