Disposed

Messer Deccan Sugar Pvt. Ltd. v. Messer Mallikarjun Distilleries Pvt. Ltd.

DRAT12 Apr 2024IA/225/2024

Case brief

AI extract

What is this about?

DTAT Mumbai stayed the lower court order directing restoration of possession to borrowers in a Securitisation Application. The Bench appointed an Advocate Commissioner to verify the asset's status and restore possession to the bank's authorized officer, allowing reimaging to the Appellant as the auction purchaser after pleadings are completed. Relief granted to any party. 13.

What did the court decide?

Stay of impugned order; possession restored to authorized officer pending appeal; ombudsman appointed to verify asset status; liberty to hand over possession to Appellant after pleadings. I.A disposed

Messer Deccan Sugar Pvt. Ltd. versus Messer Mallikarjun… — Company and Corporate | DRAT (2024)

¶1

BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present Mr Justice Ashok Menon, Chairperson

¶2

I.A. No. 225/2024(Stay) In

¶3

Appeal No. 22/2024

¶4

Between

¶5

M/s Deccan Sugar Pvt. Ltd. … Appellant/s V/s. M/s Mallikarjun Distilleries Pvt. Ltd. & Ors. …Respondent/s

¶6

Mr Charles De Souza, i/b Mr Puneet Gogad, Advocate for Appellant. Mr Rishabh Shah along with Mr Anshul Anjarlekar, i/b M/s RavalShah & Co., Advocate for Respondent Nos. 1 to 3.

¶7

Mr Rohit Gupta (through video conferencing) i/b Ms Vaishali Bhilare along with Ms Kadambari Patil, Advocate for Respondent Nos. 4 & 5.

¶8

Order dated: 12/04/2024:-

¶9

The Appellant is the auction purchaser of the secured asset which is the subject matter of the Securitisation Application (S.A.) No. 98 of 2016 on the files of the Debts Recovery Tribunal, Aurangabad (D.R.T.). The S.A. was allowed by the D.R.T. vide order dated 02.01.2024, setting aside the auction sale dated 08.11.2016 in favour of the Appellant by the Authorised Officer of the fifth Respondent bank. The Appellant is aggrieved and hence in appeal.

¶10

The aforesaid S.A. was filed by Respondents Nos. 1 to 3 under Sec. 17 (1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARAFAESI Act”, for short) for quashing and setting aside the sale of the subject property in favour of

¶11

¶12

the Appellant company.

¶13

The facts and brief are thus:

¶14

Respondents Nos. 1 to 3 are the borrowers/guarantors/mortgagors who had borrowed money from the fifth Respondent Union Bank of India. The repayment of the loan was defaulted and as a result of which, a demand notice under Sec. 13(2) of the SARFAESI Act was issued on 01.07.2011 to the borrowers after the account was classified as a non-performing asset (NPA). Objection was filed by the borrower on 25.08.2011 to which the Respondent bank responded on 06.09.2011. Order was obtained under Sec. 14 of the SARFAESI Act from the District Magistrate on 11.04.2012 and in consequence, possession of the secured asset was taken by the bank on the 12^th & 14^th of June, 2012.

¶15

Being aggrieved by the Sarfaesi measures taken by the bank concerning the secured assets, the borrowers filed S.A. No. 53 of 2012 on 02.07.2012. All Sarfaesi measures till that date were challenged. The D.R.T. dismissed the aforesaid S.A. vide order dated 31.12.2012. The said order has become final and has not been challenged.

¶16

Several OTS proposals were made by the borrowers to the bank which failed. The bank thereafter took action to sell the property and the sale notice was issued. The borrower challenged the sale notice by filing S.A. No. 49 of 2016. The attempted sale failed and hence, the said S.A. was disposed of by the D.R.T. as infructuous.

¶17

The auction sale that took place on 08.11.2016 consequent to the e- auction notice dated 03.10.2016 was successful and the Appellant was declared the highest bidder. The sale was confirmed after the Appellant paid the entire sale consideration. The Sale Certificate was issued on 06.12.2016 and physical possession of the subject property was handed over to the Appellant on 10.12.2016. Ever since the Appellant has been in

¶18

¶19

possession of the subject property.

¶20

The borrowers filed the present S.A. No. 98 of 2016 on 06.12.2016 seeking a relief to quash and set aside the notice dated 06.12.2016 under Sec. 13(4) and the auction sale dated 08.11.2016 with regard to the subject properties.

¶21

After hearing the rival contentions, the Ld. Presiding Officer held that notice under Rule 8(6) of the Security Interest (Enforcement) Rules was not served and hence bad in law. The auction sales held subsequently were therefore invalid and set aside. The earnest money deposited by the auction purchaser was directed to be forfeited and the possession and all the auctioned properties were directed to be restored to the Applicants/borrowers. It was also observed that the Authorised Officer had failed to comply with the mandate of law by not preparing an inventory and thereby causing loss to the borrowers. The Authorised Officer was, therefore, directed to pay the amount of ₹20 lakhs to the Applicants/borrowers towards compensation to be adjusted against the amount due to the bank. The Authorised Officer of the bank and the bank were further directed to pay ₹50,000/- to the District Bar Association, Aurangabad towards costs within a month from the date of uploading the order for having failed in performing their doing their duty. The concerned Police Authority was directed to provide police help in restoring the possession of the properties. Apart from that, the documents dated 10.11.2016 produced by the bank were found to be ‘made up documents’, and copies were directed to be sent to the Chief Vigilance Officer to take action against the official concerned who has created the documents. The parties were given the liberty to settle the matter OTS if they so desired. 9. Consequent to the impugned order, the borrowers issued a letter to the bank dated 13.02.2024 dispatched on 24.02.2024 claiming possession

¶22

¶23

of the properties. Even before that, on 16.08.2024, they had addressed the Superintendent of Police to provide police assistance to take possession of the properties. The superintendent of Police granted the request on 21.02.2024. The borrowers addressed yet another letter to the bank on 23.02.2024.

¶24

With active police assistance, the borrower managed to take physical possession of the secured assets. They are now in possession of the properties. The Appellant would contend that having had possession of the factory premises for over 7 years, they have expended crores of rupees on upkeep and maintenance as well as renovation of the factory and the machinery.

¶25

In the impugned order, the Ld. Presiding Officer has granted the relief of possession to the borrowers/applicants even without asking for it. The specific prayer in the S.A. was only to set aside the sale. Even if the sale is set aside, having not challenged the taking over of the possession of the properties by the bank, Ld. Presiding Officer could not have granted such a relief. It is also pertinent to note that the earlier S.A. No. 53 of 2012 and S.A. No. 49 of 2016 challenging all Sarfaesi measures up to conducting the sale were found to be unacceptable and dismissed. The Ld. Presiding Officer seems to have overlooked all those facts and granted a relief of restoration of possession under Sec. 17(3) which could not have been allowed nor was it sought for. At the most, on finding that the sale in favour of the Appellant was improper, it could have been set aside. The only order that could have been passed in the S.A. was to re-auction the property after restoring the possession of the bank. The act of the Ld. Presiding Officer in directing restoration of possession to the borrowers was illegal and uncalled for. The operation of the impugned order shall stand stayed.

¶26

Given the ex-facie illegality in the order, the possession of the property

¶27

¶28

shall be restored to the authorised officer of the bank. The authorised officer is at liberty to hand it over to the Appellant as a receiver since the Appellant was in actual possession of the property till being illegally dispossessed by force. An inventory regarding the present status of factory premises shall be taken by an Advocate Commissioner to be appointed by the D.R.T. The remuneration to the Commissioner shall also be determined and fixed by the D.R.T. I.A. No. 225 of 2024 disposed of as above.

¶29

The Respondents are at liberty to file a detailed reply to the appeal. The legality of setting aside the sale shall be considered in the appeal after the pleadings are completed.

¶30

List the matter on 05.07.2024 for hearing along with the connected appeal filed by the bank.

¶31

Sd/Chairperson

¶32

mks-01

¶33

Messer Deccan Sugar Pvt. Ltd. v. Messer Mallikarjun Distilleries Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

Messer Deccan Sugar Pvt. Ltd. v. Messer Mallikarjun Distilleries Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Gulam Nabi Khanyari versus Jammu and Kashmir Bank Limited

Bank of Baroda versus M/s. Shalimar Exhibitors

Mufg Bank Ltd. ( Formerly Known as the Bank of Tokyo-Mitsubishi Ufj Ltd. versus Klen & Marshalls Manufacturers and Exportes Ltd.

Ms Surbhi Chem Care and Ors. versus Union Bank of India

Shri Manojbhai Ramanbhai Nair versus Shri Ram City Union Finance Ltd. and Ors.

Prime Downtown Estates Pvt. Ltd. versus Yes Bank

What is this about?

What did the court decide?

What is this about?

What did the court decide?

What the court decided

A compact analysis

Gulam Nabi Khanyari versus Jammu and Kashmir Bank Limited

Bank of Baroda versus M/s. Shalimar Exhibitors

Mufg Bank Ltd. ( Formerly Known as the Bank of Tokyo-Mitsubishi Ufj Ltd. versus Klen &amp; Marshalls Manufacturers and Exportes Ltd.

Ms Surbhi Chem Care and Ors. versus Union Bank of India

Shri Manojbhai Ramanbhai Nair versus Shri Ram City Union Finance Ltd. and Ors.

Prime Downtown Estates Pvt. Ltd. versus Yes Bank

Mufg Bank Ltd. ( Formerly Known as the Bank of Tokyo-Mitsubishi Ufj Ltd. versus Klen & Marshalls Manufacturers and Exportes Ltd.