Disposed

Ms Kamala Mills Ltd. v. India Bulls Housing Finance Ltd.

DRAT19 Apr 2024IA/242/2024

Case brief

AI extract

What is this about?

The DRAT examined an interim application regarding pre-deposits for an appeal against the Debts Recovery Tribunal. The Court directed the appellant to deposit 50% of the outstanding loan balance as pre-deposit, noting no evidence of financial strain. Possession of a flat was deferred pending payment.

What did the court decide?

Directing the appellant to deposit Rs. 5,63,35,662/- as pre-deposit within a week, with possession of the flat deferred until compliance.

Ms Kamala Mills Ltd. versus India Bulls Housing Finance Ltd. — Banking and Recovery | DRAT (2024)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr Justice Ashok Menon, Chairperson I.A. No. 242/2024 (WoD) In

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Appeal on Diary No. 706/2024

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Between

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M/s Kamala Mills Ltd. … Appellant/s V/s.

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India Bulls Housing Finance Ltd. & Ors. …Respondent/s

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Mr. M. S. Bhardwaj along with Mr Puneet Gogad and Mr Ashraf Ahmed Shaikh, i/b M/s Raj Dani, Advocate for Appellant. Senior Counsel, Mr Nitin Thakkar along with Ms Priyanka Dubey and Ms Megha Gupta, i/b M/s Hedgehog and Fox LLP, Advocate for Respondent No. 1.

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The Appellants are in appeal impugning the dismissal of the Securitisation Application (S.A.) No. 244 of 2023 by the Debts Recovery Tribunal-I, Mumbai (D.R.T.) vide judgment and order dated 13.03.2024. The Appellants will have to cross the hurdle of making a pre-deposit under Sec. 18(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act, for short) to entertain this appeal. They have filed Interlocutory Application (I.A.) No. 242 of 2024 for waiver of predeposit.

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The Appellants are the borrowers/guarantors/mortgagors. They had borrowed a sum of ₹26,93,86,846/- from the first

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Respondent creating a mortgage of several flats. The repayment was defaulted and the account was classified as a non-performing asset (NPA). The Respondent issued a demand notice under Sec. 13(2) of the SARFAESI Act and initiated steps under Sec. 13(4) and also obtained an order from the Chief Metropolitan Magistrate (CMM) to take physical possession of the secured assets under Sec. 14 of the SARFAESI Act.

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When an attempt was made to take physical possession of the flats, they filed I.A. No. 3473 of 2023 for protection from being dispossessed. The D.R.T. dismissed that application vide order dated 27.12.2023. The Appellants came on appeal by filing an Appeal on Diary No. 2339 of 2023 and also filed I.A. No. 835 of 2023 for waiver of deposit.

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The Appellants had expressed willingness to surrender two of the secured flats and also agreed to the creditor proceeding to sell one of the flats for recovery of the amount due from them. The Appellants were directed to deposit ₹7 crores as pre-deposit. On an upfront payment of ₹1 crore towards the pre-deposit, the Respondent was restrained from taking possession of the flats scheduled on 28.12.2023 except for two flats which were undertaken to be surrendered. On submissions made by the Ld. Counsel for the Respondent that the possessions may be taken at any time during the course of the day, it was clarified that the injunction would be effective provided the possession of the flats was not taken by 12.30 pm. The Appellants deposit the entire ₹7 crores towards pre-deposit. The Respondent would contend that six out of the total number of 7 flats were already

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taken. The possession of Flat No. 602 of Violette Valley alone remains to be taken possession of.

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The Respondent challenged the order by filing Writ Petition (L) No. 4350 of 2024 challenging the order of this Tribunal. The Writ Petition was disposed of with a direction to the D.R.T. to decide S.A. No. 244 of 2023 expeditiously. The pre-deposit of ₹7 crores was agreed to be withdrawn by the Respondent to be adjusted towards the debt and the appeal was to be treated as disposed of as withdrawn.

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The D.R.T. considered the S.A. on merits and vide the impugned order dismissed it. The Appellants are aggrieved and hence, in appeal.

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The Ld. Counsel appearing for the Appellants would contend that more than 50% of the debt due as demanded in the demand notice has already been paid to the Respondent. Hence, there is no further payment to be made, the appeal may be taken on file. It is also contended that the D.R.T. has committed an error in dismissing the S.A.

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The Appellants have raised several contentions in their challenge to the Sarfaesi measures taken by the Respondent. The demand notice under Sec. 13(2) is not proper and no calculation to justify the demand has been made. The bifurcation of the interest and principal as required under Sec. 13(3) is not stated. It is further contended that there is a breach of Rules 2(a), 4(1) as well as Rule 8 (1) & (2) of the Security Interest (Enforcement) Rules, 2002. The Respondent did not affix the notice at the secured assets and failed to publish the notice in two leading newspapers as mandated. The order of the CMM under

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Sec. 14 is also challenged.

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Per contra, The Respondents submitted that the Appellants and their group of companies had availed six loan facilities totalling ₹120,52,00,000/-. Further, five loan accounts were assigned to the second Respondent. The group loans are interlinked by way of declaration cum undertaking executed by the group entities. The Appellants are, therefore, bound to close all loan accounts simultaneously. The Respondent is entitled to withhold the title deeds of the properties till satisfaction of all the loans. The Appellants have concealed these facts and filed the S.A. It was also contended that the S.A. was barred by limitation as no action was taken within 45 days from taking of symbolic possession of the secured assets. There is no application filed for condonation of delay.

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The Ld. Presiding Officer did not find favour with any of the contentions raised by the Appellant in S.A. and hence, dismissed it. 11. The Appellants would contend that they have a strong prima facie case and therefore, they may not be asked to make a pre-deposit all over again.

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Mr Nitin Thakkar, Senior Counsel appearing for the first Respondent submits that after appropriating ₹7 crores towards the debt due, the remains an outstanding balance of ₹11,26,71,324/- in this facility. There is no pleading of any for the financial strain of the Appellants.

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The Ld. Counsel appearing for the Appellant Mr. M. S. Bhardwaj submits that even if the payment of ₹7 crores cannot be taken as predeposit, the said amount will have to be deducted from the amount

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mentioned in the demand notice which is ₹13,48,29,851.05. The predeposit has to be made only based on the balance due.

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The Ld. Counsel appearing for the Appellant relied on the decision of Sidha Neelkanth Paper Industries Pvt. Ltd. & Ano. V/s Prudent ARC Limited & Ors., 2023 SCC OnLine SC 12 to argue that the amount mentioned in the demand notice under Sec. 13(2) is to be taken as the threshold amount for payment of pre-deposit.

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Per contra, the Ld. Senior Counsel Mr Thakkar submits that a reading of the entire decision of the Hon’ble Apex Court would not indicate that 50% of the amount demanded under Sec. 13(2) alone need to be paid as pre-deposit. The Ld. Counsel relies on the decision of the Hon’ble Bombay High Court in Sony Mony Developers Pvt Ltd & Ors vs. Asset Care and Reconstruction Enterprises and Ano., Writ Petition No. 797 of 2024 wherein the judgment of the Hon’ble Supreme Court was interpreted by holding that the “debt due” would be the debt inclusive of interest. Moreover, The Ld. Senior Counsel would also submit that the entire debts due from the group will have to be considered for payment of pre-deposit. The amount due from all the group loans is ₹142,17,39,819.41. Hence, it is argued that 50% of that amount needs to be deposited to entertain the appeal.

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After having anxiously considered the rival submissions, I find that there is no plea or material of any financial strain to the Appellants. They are, therefore, directed to deposit 50% of ₹11,26,71,324/- as pre-deposit for entering this appeal. There are also other appeals preferred concerning the group loans. Those appeals shall be considered separately for pre-deposit to be made therein.

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The sum of ₹5,63,35,662/- shall be paid within a week from today i.e. on or before 26.04.2024. The ld. Counsel appearing for the Appellants submits that ₹ 3 crores would be deposited today. For the deposit of the balance, some time may be granted.

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Given the deposit of ₹3 crores today, the taking of possession

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of Flat No. 602 Violette Valley scheduled today, shall stand deferred till the next date of hearing. The balance amount shall be paid within a week, i.e; on or before 26.04.2024, failing which 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/RTGS 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 are at liberty to file their replies in the Appeal with an advance copy to the other side.

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Post on 29.04.2024 for reporting compliance regarding the payment.

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Sd/Chairperson

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mks-01

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Ms Kamala Mills Ltd. v. India Bulls Housing Finance Ltd.

Case brief

What is this about?

What did the court decide?

Ms Kamala Mills Ltd. v. India Bulls Housing Finance Ltd.

Case brief

What is this about?

What did the court decide?

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