Disposed

Royal Traders v. Assets Reconstruction Company of India Ltd.

DRAT4 Jun 2024IA/247/2024

Case brief

AI extract

What is this about?

Debts Recovery Appellate Tribunal directed the appellant to deposit a pre-deposit of 50% (subject to a waiver request) of the amount demanded in the respective demand notices to entertain three appeals challenging SARFAESI measures. The court observed discrepancies in the demanded amounts but relied on the specific notices for thresholds.

What did the court decide?

Direction to deposit specific pre-deposit amounts in installments to entertain appeals; appellant to pay within stipulated deadlines.

Royal Traders versus Assets Reconstruction Company of India… — Banking and Recovery | DRAT (2024)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI

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Present: Mr Justice Ashok Menon, Chairperson I.A. No. 246/2024 (WoD) In Appeal on Diary No. 703/2024
Between
Royal Traders … Appellant/s V/s.
Asset Reconstruction Company of India Ltd. …Respondent/s

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AND
	I.A. No. 247/2024 (WoD) In
	Appeal on Diary No. 704/2024

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Between
Royal Traders V/s.	… Appellant/s
Asset Reconstruction Company of India Ltd.	…Respondent/s

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AND

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I.A. No. 248/2024 (WoD)
In
Appeal on Diary No. 705/2024

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Between

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Royal Traders … Appellant/s V/s. Asset Reconstruction Company of India Ltd. …Respondent/s

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Mr Rohit Gupta along with Mr Charles D’Souza & Mr Ashraf Ahmed Shaikh, i/b M/s Raj Dani, Advocate for Appellant.

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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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-: Common Order dated: 04/06/2024:-

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The appellant is a firm named Royal Traders which has filed these three appeals challenging the common judgement and order of the Debts Recovery TribunalII, Mumbai (D.R.T.) dated 11/03/2024 dismissing Securitisation Applications (S.As.) Nos. 271, 272 and 273 of 2022 filed under sec. 17 (1) of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 ("SARFAESI Act", in short) challenging the measures initiated by the original creditor Indiabulls Housing Finance Ltd. for recovery of the debt allegedly due from the appellant. The debt was assigned to the present respondent, Asset Reconstruction Company (India) Ltd.

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To entertain the appeals the appellant will first have to comply with the mandatory provisions of the second proviso to sec. 18 (1) of the SARFAESI Act by making the mandatory pre-deposit. The appellant has filed the aforementioned Interlocutory Applications (I.A.) seeking a waiver of 25% of the pre-deposit exercising jurisdiction of this Tribunal under the third proviso to sec. 18 (1).

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The appellant firm its partners and Kamala Mills Ltd. had approached the original creditor for financial assistance against the mortgage of properties, and on 22/06/2016 the loan was sanctioned. The title deeds of the property of Kamala Mills described as the 3^rd floor lower level and upper level building A, trade house, Kamala City Lower Parel, Mumbai were deposited concerning the loan account number HLAPLPM00277931.

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The appellant and its sister concerns approached for a second loan which was also sanctioned on 25/03/2017 and title deeds of Flats Nos. 601, 602, 701 and 702 in Ashachandra Sagar building, Worli Tekdi Griha Nirman Sanstha Ltd., Worli Mumbai were deposited and mortgage created in respect of loan account number HLAPLPM00324852.

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Kamala Mills once again approached the creditor requesting further financial assistance and the same was sanctioned on 29/07/2017 and a further

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mortgage concerning the property situated in Lower Parel was created in respect of loan account number HLAPLPM00353 6643.

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Repayment of the loans was defaulted and all the three accounts referred to above were classified as non-performing assets (NPA). Three demand notices were issued in respect of the three loans demanding ₹32.58 crores, ₹20.23 crores and ₹20.34 crores respectively. Symbolic possession of the properties was taken on 29/03/2022 by the authorised officer and thereafter, a sale notice was issued on 30/07/2022 under Rule 8 (6) of the Security Interest (Enforcement) Rules, 2002 (Rules) to conduct an e-auction of the property situated in Worli on 06/09/2022 fixing a reserve price of ₹25 crores. The appellant challenged the Sarfaesi measures by filing the above-mentioned S.As.

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The main contention raised by the appellant was that the demand notice is defective insofar as it does not disclose the name and designation of the authorised officer. The authorised officer also failed to give a breakup of the demanded amount as required under Sec. 13(3). The demand notice and notice for possession under Sec. 13(4) mention the same amount, though the demand notices are dated 08.05.2021 and possession notices are dated 29/03/2022. The sale notice under Rule 8(6) was issued on 30/07/2022 and all the sale notices contain amounts at variation with the demand notices and possession notices. It is further pointed out that the deed of assignment by Indiabulls to ARCIL executed on 01/12/2022 shows a decreased amount. A deed of rectification was executed on 07/02/2024 which altered the deed of assignment concerning the amount due and it is once again enhanced. According to the appellant, there is no uniformity about the demand made and the respondent is not sure about the exact amount that is due.

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Per contra, the respondent had submitted that the objection raised in the application was an afterthought and that the Applicant had waived their challenge to the Sarfaesi measures as they had offered to settle the entire debt. Reliance was placed by the Ld. Senior Counsel Mr Nitin Thakkar on the decision

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of Arce Polymers Pvt. Ltd. vs. Alphine Pharmaceutical Pvt. Ltd. & Ors. (2022) 2 SCC 221 . The e-auction scheduled to be held on 06/09/2022 had failed for want of bidders and therefore, the relief challenging the sale notice has become infructuous. It is also pointed out that the debtors had approached the Respondent with an OTS proposal which was rejected on 09/02/2024.

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The Ld. Presiding Officer had in the impugned common order observed that the applicant did not challenge the creation of a mortgage. There was also no pleading regarding the defective classification of accounts as a nonperforming asset (NPA) nor were the demand notices challenged. After the symbolic possession was taken on 29/03/2022, there was an inordinate delay in filing the S.As. It was also observed that the appellant did not approach the Tribunal with a clean hand and is guilty of suppressing material facts concerning the letter dated 13/08/2021. The Ld. P.O. also observed that the respondent could not have been forced to implement to OTS proposal made by the appellant and rejected by the respondent. Hence, the S.As were dismissed leading to the filing of these appeals.

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After having heard Mr Rohit Gupta and Mr Charles D’Souza, the Ld. Counsel for the appellant, and Mr Nitin Thakkar, the Ld. Senior Counsel for respondent No. 1, I find that there are certain discrepancies concerning the amount demanded in the demand notices and the other documents. The respondent had claimed that the amount due on six different accounts concerning the appellant and the sister concerns would add up to ₹142,17,39,819.41. However, the breakups are not available. To get a waiver of 25% of the pre-deposit amount, the appellant would have to satisfy the existence of a prima facie case and also establish financial strain in paying 50% of the amount due for entertaining the appeal. The appellant has created some doubts regarding the validity of the claim put forth by the respondent which would, at best, be an arguable case and cannot be said to be a strong prima facie case in favour of the Appellant. The fact regarding the appellant not challenging the

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measures and thus waiving its right is also of concern. However, it is admitted that the OTS proposal was not accepted. There is no evidence regarding any financial strain. For the payment of pre-deposit, this Tribunal relies on the demand notices for determining the threshold amount.

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In I.A. No. 246 of 2024, the amount demanded is ₹20,34,63,530.23. The appellant is directed to deposit a sum of ₹10 crores as pre-deposit in that appeal. The said amount shall be paid in two equal instalments of ₹5 crores each within a gap of two weeks each as stated hereinunder.

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Number of Instalments	Payment on or before
1^stInstalment of₹5.00 crores	18/06/2024
2^ndInstalment of₹5.00 crores	02/07/2024

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Concerning I.A. No. 247 of 2024, the amount demanded is ₹20,23,05,050.20 and therefore, the appellant is directed to deposit ₹10 crores as pre-deposit in that appeal. The said amount shall be paid in two equal instalments of ₹5 crores each within a gap of two weeks each as stated hereinunder.

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Number of Instalments	Payment on or before
1^stInstalment of₹5.00 crores	18/06/2024
2^ndInstalment of₹5.00 crores	02/07/2024

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As regards I.A. No. 248 of 2024, the amount demanded is ₹32,58,68,775.79 and hence, the appellant is directed to deposit a sum of ₹16 crores as pre-deposit for entertaining that appeal. The said amount shall be paid in two equal instalments of ₹8 crores each within a gap of two weeks each as stated hereinunder.

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Number of Instalments	Payment on or before
1^stInstalment of₹8.00 crores	18/06/2024
2^ndInstalment of₹8.00 crores	02/07/2024

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On the payment of the first instalment on time, further Sarfaesi measures shall stand deferred till the next date of hearing.

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Default in payment of any of the instalments/amount on time shall entail the dismissal of the appeal 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.As. are disposed of. The Respondent is at liberty to file a reply in these Appeals with an advance copy to the other side.

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Post on 19/06/2024 for reporting compliance regarding the payment of the 1^st instalment.

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Sd/-

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mks-02 to 04.

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Royal Traders v. Assets Reconstruction Company of India Ltd.

Case brief

What is this about?

What did the court decide?

Royal Traders v. Assets Reconstruction Company of India Ltd.

Case brief

What is this about?

What did the court decide?

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