Disposed

Reliable Polyesters Private Ltd. v. Bank of Baroda

DRAT3 Sept 2024IA/40/2022

Case brief

AI extract

What is this about?

The tribunal rejected the appellants' application to waive 25% of the mandatory pre-deposit under the SARFAESI Act. Relying on Supreme Court precedent, the court affirmed that the demand notice amount is the correct threshold. The appellants failed to prove financial incapacity despite mounting a challenge to recovery measures.

What did the court decide?

Application for waiver of 25% of pre-deposit rejected; pre-deposit amount remains at 50% of debt due as previously ordered.

Reliable Polyesters Private Ltd. versus Bank of Baroda — Banking and Recovery | DRAT (2024)

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

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I.A. No. 40/2022(WoD) In Misc. Appeal No. 14/2022

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Between

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M/s Reliable Polyesters Private Limited & Ors. … Appellant/s V/s. Bank of Baroda …Respondent/s

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Ms Sonali Jain, Advocate for Appellants. Mr A.R. Bamne, i/b M/s A.R. Bamne & Co., Advocate for Respondent Bank.

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-: Order dated: 03/09/2024:-

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The aforesaid application is filed by the appellants under Sec. 18 (1) of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short) for waiver of mandatory predeposit contemplated under the 2^nd proviso to Sec. 18 (1) of the SARFAESI Act. The appeal impugns the interlocutory order dated 27/01/2022 of the Debts Recovery Tribunal-II, Ahmedabad in Securitisation Application (S.A.) No. 435 of 2020 declining to grant any protection to the appellants against the Sarfaesi measures initiated by the respondent Bank of Baroda for recovery of debt under the provisions of the SARFAESI Act.

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This Tribunal had vide order dated 01/06/2022 determined the threshold amount for calculating the pre-deposit as ₹7,75,64,475.67 being the “debt due” inclusive of interest as on the date of filing of the appeal and had directed the appellants to deposit ₹2.50 crores as pre-deposit. A sum of ₹57 lakhs lying with the bank in a “No Lien Account” was directed to be produced before this Tribunal for being considered as part of the pre-deposit and the balance amount of ₹1.93 crores was directed to be deposited in tranches. The appellants twice

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sought an extension of time to deposit the amount, and this Tribunal granted the extensions to deposit the amount and accordingly, the entire amount was deposited, and the Misc. Appeal was directed to be taken on file.

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The appellants, being aggrieved by the order of this Tribunal, preferred a Special Civil Application No. 10802/2022 before the Hon’ble High Court of Gujarat. The challenge was dismissed vide order dated 29/06/2022. The appellants preferred R/Letters Patent Appeal No. 1002 of 2022 before the Division Bench of the Hon’ble High Court of Gujarat challenging the decision of the single bench as also the order of this Tribunal dated 01/06/2022.

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The Hon’ble Division Bench vide judgment dated 04/01/2023 observed that to calculate pre-deposit under Sec. 18 (1) of the SARFAESI Act, the sum of ₹6,20,41,349/-as claimed in the demand notice under Sec. 13 (2) has to be taken as the threshold amount and that the finding of this Tribunal calculating the threshold amount as ₹7,75,64,475.67 is an erroneous finding. Consequently, the impugned order of the single bench of the High Court as also the order of this Tribunal was set aside and the matter was remitted back to pass suitable orders, keeping in mind the observations made in the judgment of the Hon’ble Division Bench.

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Heard the Ld. Counsel for the appellants Ms Sonali Jain and Mr A.R. Bamne for the respondent bank. Records perused.

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The Hon’ble Division Bench has opined that the amount mentioned in the demand notice under Sec. 13 (2) of the SARFAESI Act is to be taken as the threshold amount for calculation of the pre-deposit under Sec. 18 (1). This position has now been settled by the Hon’ble Supreme Court in the decision Sidha Neelkanth Paper Industries Pvt. Ltd. & Ano vs. Prudent ARC Ltd. and Ors. 2023 SCC OnLine SC 12 wherein it is held thus:

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“34……Therefore, whatever amount is mentioned in the notice under Section 13(2) of the SARFAESI Act, in case steps taken under Section 13(2)/13(4) against the secured assets are under challenge before the DRT will be the ‘debt due’ within the meaning of the proviso to Section 18 of the SARFAESI Act………”

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Coming to the facts of this case, the amount demanded as the debt due

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from the appellants is ₹6,20,41,349/-. Under the circumstances, the pre-deposit has to be calculated based on the aforesaid amount as the threshold. To claim a waiver of 25% of the pre-deposit invoking the jurisdiction of this Tribunal under the 3^rd proviso to Sec. 18 (1), the appellants are required to prove that they have a good prima facie case and that they are under financial strain and incapable of paying the mandatory pre-deposit. The Hon’ble Bombay High Court has in Sterlite Technologies Ltd vs. Union of India and others 2011 SCC OnLine Bom 170 held that for the limited purpose of considering whether a dispensation should be granted, the prima facie case and the question of financial hardship would have to be considered by the Appellate Tribunal.

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9. I have gone through the pleadings in I.A. No. 40 of 2022 (WoD) the appellants have raised contentions challenging the Sarfaesi measures starting from the classification of the account as a non-performing asset (NPA). It is contended that the classification was made during the COVID-19 pandemic in contravention of the guidelines of RBI. 10. The appellants had also contended that on 18/11/2021 they had proposed a one-time settlement of debt for ₹5.70 crores and the bank had vide letter dated 17/12/2021 accepted that offer on certain terms and conditions. After negotiations, the OTS proposal was cancelled by the bank on 24/12/2021. 11. The appellants would also contend that they are entitled to benefits and concessions granted to MSME. Thus, the appellants would urge that they have a good prima facie case and seek a waiver of 25% of pre-deposit. 12. Applying the decision of the Hon’ble Bombay High Court in Sterlite Technologies Ltd (supra), the appellants are bound to prove both the conditions required for a waiver of 25% of pre-deposit. The appellants may have an arguable case concerning the challenges raised to the Sarfaesi measures but they have not pleaded or proved their financial strain and hence, they are not entitled to get a pre-deposit amount reduced to the minimum of 25% of the debt due. Considering the threshold amount as ₹6,20,41,349/-, the 50% would come to ₹3,10,20,674.50. The appellants have deposited ₹2.50 crores which would be

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around 40% of the debt due and demanded as per the demand notice. I do not find any reason to alter that amount of pre-deposit ordered by me and complied by the appellants.

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The application for waiver is disposed of as above. The misc. appeal be listed for hearing on 12.11.2024.

Sd/-

Chairperson

mks-01

Reliable Polyesters Private Ltd. v. Bank of Baroda

Case brief

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Reliable Polyesters Private Ltd. v. Bank of Baroda

Case brief

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