Dismissed

Late Govindbhai Khodabhai Pansuirya Through his Legal Heir Kamleshbhai Govindbhai Pansuriya v. Indusind Bank Limited

DRAT23 Sept 2024IA/637/2024

Case brief

AI extract

What is this about?

The DRAT addressed an appeal challenging the DR-T's refusal to grant protection against SARFAESI action regarding residential premises. The Tribunal rejected contentions regarding invalidity of the demand notice due to borrower decease and interest breakup calculations. It upheld the necessity of a deposit despite financial claims, deferring possession of the property.

What did the court decide?

Appellants directed to deposit ₹90 lakhs as pre-deposit; possession of residential premises deferred; other objections rejected.

Late Govindbhai Khodabhai Pansuirya Through his Legal Heir… — Banking and Recovery | DRAT (2024)

¶1

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

¶2

I.A. No. 637/2024(WoD) In Appeal on Diary No. 1917/2024

¶3

Between

¶4

Legal heirs of Govindbhai Khodabhai Pansuirya & Ors.

¶5

… Appellant/s

¶6

V/s.

¶7

The Authorised Officer, IndusInd Bank Ltd.

¶8

…Respondent/s

¶9

Ms Neeta Pandit, i/b M/s A.R. Gupta & Associates, Advocate for Appellant appeared through Video Conferencing. Mr Puneet Gogad, Advocate for Respondent Bank.

¶10

-: Order dated : 23/09/2024 :-

¶11

The appellants impugn the order dated 08.08.2024 in the Securitisation Application (S.A.) No. 592 of 2022 on the files of the Debts Recovery Tribunal-II, Ahmedabad (D.R.T.) declining to grant any protection about the Sarfaesi action initiated by the respondent bank against secured assets under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short) for recovery of the debt allegedly due from the appellants. The appellants have various contentions in their challenge to the Sarfaesi measures initiated by the bank. It is contended that the principal borrower who had borrowed the money expired on 26.07.2019 and this fact was intimated by his legal representative who is the 6^th appellant on 25.11.2019. Despite this, the respondent bank did not issue a demand notice under Sec. 13(2) afresh to the legal representatives of the deceased borrower and therefore,

¶12

the demand notice under Sec. 13(2) is bad, contends the appellant. The Ld. Counsel appearing for the appellants relied on the decisions of the Hon’ble High Court of Madras in S. Subaina Banu & Ors vs. Indian Bank ARM Branch & Ors. MANU/TN/3149/2010 to argue for the proposition that once a demand notice under Sec. 13(2) is issued to the borrower and the borrower dies then it is incumbent upon the creditor to issue a fresh demand notice to the legal representatives of the deceased because the action against the deceased borrower abates. It is also pertinent to note that the application under Sec. 14 of the SARFAESI Act was filed before the District Magistrate, Rajkot on 30.12.2019. The deceased principal borrower is mentioned as the first respondent and therefore, the proceedings as well as the order which was obtained on 04.05.2022 against the dead person also invalidates that order. It is further contended by the appellants that the demand notice issued under Sec. 13(2) is also invalid for the reason that it does not give a breakup of the interest which is demanded. There is a schedule attached to the demand notice which gives a breakup of the principal amount, interest, and penal interest but the breakup of the interest depending on the fluctuating rate of interest is not specifically mentioned in the demand notice and therefore, it is bad. The objection was raised by the appellants and the deceased borrower to the demand notice specifying the objections and the bank has also sent the reply to that under Sec. 13(3A) of the SARFAESI Act but the reply also does not give a breakup of the interest portion taking into account the fluctuating rate of interest and therefore, the demand made under Sec. 13(2) is bad. The Ld. Counsel for the appellants also points out that no nine-pointer affidavit was filed as required under Sec. 14. The certified

¶13

copies of all records were obtained but consequently, the copies of the affidavit allegedly filed by the respondent bank were not received, and therefore, it has to be assumed that the application was not accompanied by an affidavit as contemplated under Sec. 14 and therefore, the order under Sec. 14 is bad. Another contention taken up by the appellants is that there was no CERSAI registration before proceedings under Sec. 26D of the SARFAESI Act. It is further contended that it is an agricultural loan that was availed by the appellants and therefore, the classification of the debt as a non-performing asset (NPA) is not in accordance with the RBI guidelines.

¶14

The Ld. Counsel appearing for the appellants submits that for the reasons mentioned above, the appellants have a very good prima facie case and they are also under financial strain. The 6^th appellant has produced the Income Tax Returns to indicate that he does not have sufficient income to pay 50% of the demanded amount. The rest of the appellants do not have sufficient income and therefore, their Income Tax Returns have also not been filed, submits the Ld. Counsel for the appellants. Hence, the Ld. Counsel for the appellants submits that 25% of the pre-deposit amount made therefore be waived. It is also submitted that the appellants have voluntarily surrendered the first item of the secured assets consisting of the factory and premises and have consented to sell the property for the realisation of the debt. The second item consists of the residential house which they are to protect. The appellants have offered to pay a sum of ₹27 lakhs to exclude the residential premises from the secured assets, submits the Ld. Counsel for the appellants and it

¶15

is stated that the factory and premises would be more than sufficient to take care of the debt i.e. allegedly due from the appellants.

¶16

The respondent bank has appeared and has filed the reply to the application for waiver of deposit. It is contended that the appellants have surrendered the first item of the secured assets consisting of the factory and premises but have not surrendered the residential premises. Attempts were made by the bank to sell the factory and premises. Five attempts were made by them but failed to attract any bidders even though the reserve price of the property was being reduced each time and the property was ultimately valued at ₹1.05 crores. Even then, it did not attract any buyers. The Ld. Counsel appearing for the respondent bank therefore submits that the fact that the factory premises were not sold indicates that that property is not worth satisfying the entire debt i.e. due from the appellants and therefore, the residential premises will have to be proceeded against for realisation of the debt. The appellants were granted interim protection on certain conditions by the D.R.T. vide order dated 24.07.2023 but subsequently when the bank failed to realise the amount from the attempted sale of the factory and premise, a fresh notice was issued for proceedings against the residential premises and therefore, the appellants insisted on protection about residential premises as well which was declined by the D.R.T. vide the impugned order.

¶17

The Ld. Counsel for the respondent bank submits that appellant No. 6 was not only a legal heir of his father the principal borrower but he was also a guarantor and co-borrower. Notice was admittedly served upon him under Sec. 13(2). The only two other legal heirs who have been let out were his sisters. The Ld. Counsel for the respondent bank also points

¶18

out that the principal borrower is the owner of only item No. 1 which has admittedly been surrendered by the appellants to be proceeded against by the bank. Their objection is only regarding the residential premises over which neither the deceased borrower nor appellant No. 6 or his sisters had any existing rights. Admittedly, all the owners of the residential premises have been served with a notice under Sec. 13(2) and they have also sent a reply acknowledging the receipt of that notice to the bank. Therefore, the contention of the appellants that the demand notice has to be issued afresh to the legal heirs of the deceased borrower is not justifiable. The Ld. Counsel appearing for the respondent bank points out that when proceedings have been initiated against a deceased person and also against one of his legal representatives, non-impleading of the other legal representatives will not nullify the entire proceedings since there is a substantial representation of the deceased person by at least one of the legal representatives. He relies on the judgment of the Hon’ble Punjab and Haryana High Court in which the Hon’ble Punjab and Haryana High Court has relied upon the decision of the Hon’ble Supreme Court in N.K. Mohd. Sulaiman Sahib vs. N.C. Mohd. Ismail Saheb & Ors. 1966 AIR SC 792, which would substantiate the argument regarding substantial representation in a proceeding. 5. The Ld. Counsel appearing for the respondent also submits that the compulsion for registration under CERSAI came up by way of a Notification which came into effect from 24.01.2020 and therefore, the non-mentioning the CERSAI registration in the earlier proceedings by issuing demand notice under Sec. 13(2) and filing the proceedings under Sec. 14, the mentioning regarding CERSAI registration will not be fated.

¶19

It is also pointed out that subsequently the CERSAI registration has been done and therefore, there is no infirmity in the proceedings initiated by the respondent bank. The Ld. Counsel also points out that there is a bifurcation as required under Sec. 13(3) of the SARFAESI Act in the demand notice which indicates the amount of principal and interest and also the penal interest i.e. due. The fact that the rate of interest which was fluctuating is also mentioned in the demand notice as well as the reply which was sent by the bank under Sec. 13(3-A) of the SARFAESI Act and therefore, there is no infirmity whatsoever in the demand notice under Sec. 13(2) of the SARFAESI Act. The Ld. Counsel also points out that the appellants have not come with clean hands because the fact regarding the death of the principal borrower was not intimated to the concerned branch of the bank at Ahmedabad. The proceedings after the classification of the account as a non-performing asset (NPA) were all initiated from the Ahmedabad branch and the appellants were aware of it, which is why the reply to the demand notice under Sec. 13(2) is issued on behalf of the appellants to the Ahmedabad branch of the bank but surprisingly, the intimation regarding the death of the principal borrower by the sixth appellant is sent directly to the Rajkot branch of the bank, and therefore, the branch at Ahmedabad which had initiated the proceedings under Sec. 14 who was not aware of the death of the principal borrower.

¶20

The Ld. Counsel appearing for the respondent bank points out that there is no case made out by the appellants in their challenge to the Sarfaesi action. Apart from the financial strain of the sixth appellant, the income statements of none of the other appellants have been produced.

¶21

Under the circumstances, no indulgence whatsoever may be shown to the appellants by reducing the mandatory 50% of the pre-deposit amount and they may not be granted any waiver of the deposit, submits the Ld. Counsel for the respondent bank.

¶22

After having considered the entire facts and circumstances of this case, I find that the appellants were now concerned with the residential premises because they voluntarily surrendered item No. 1 consisting of the factory and premises to the bank and consented to the proceedings against that item of the property. The second item of property which is the residential house does not belong to the principal borrower and therefore, it is doubtful whether the contentions regarding his legal heirs have not been served afresh with the demand notice under Sec. 13(2) of the SARFAESI Act would be sustainable. It is also pertinent to note that the sixth appellant is the son of the deceased borrower and he has a guarantor/mortgagor and issued with a demand notice under Sec. 13(2) and he is also a party to proceedings under Sec. 14 and therefore, there is a substantial representation of the deceased person held in the decision of the N.K. Mohd. Sulaiman Sahib (supra). Under the circumstances, I do not find a serious infirmity in not proceedings against all the legal representatives of the deceased borrower.

¶23

The demand notice issued also does not contain any serious infirmity. The demand notice in a separate schedule gives the breakup of the principal amount, interest and also the penal interest. The rate of interest has indeed fluctuated but the bank cannot be expected to give a breakup of the interest each time there is a fluctuation of the interest and such an argument would be very pedantic which is not acceptable. It is

¶24

also pertinent to note that the appellants impugned appellant No. 6 had sent an objection to demand notice for which the respondent bank sent a reply giving the details of the objection raised as required under Sec. 13(3A) of the SARFAESI Act, and moreover, the objection regarding CERSAI registration also would not be entertainable since it was introduced by way of amendment and notification much later. None of the objections raised by the appellants are sustainable. I do not find a prima facie case in favour of the appellants. The financial strain of the appellants excluding appellant No. 6 is actually not concerned with the residential property because he has absolutely no right title or interest over that property and the property belongs exclusively to appellants Nos. 2 to 5 and their impecunious situation has not been proved. The appellants are, therefore, directed to deposit a sum of ₹90 lakhs as pre-deposit for entertaining the appeal. The Counsel appearing for the appellants is submitting a demand draft of ₹15 lakhs today. The balance amount shall be deposited in two instalments within a gap of two weeks each as detailed

¶25

hereinunder:

¶26

Number of Instalments	Payment on or before
1^stInstalment of₹37,50,000/-	07.10.2024
2^ndInstalment of₹37,50,000/-	21.10.2024

¶27

Failure to pay the instalment/amount within the time stipulated would entail in dismissal of the appeal without any reference to this Tribunal.

¶28

In view of the deposit of ₹15 lakhs today, the taking over of possession of the residential premises tomorrow i.e. 24^th instant shall stand deferred till the next date of hearing.

¶29

The amount shall be deposited in the form of a Demand Draft/RTGS with the Registrar of this Tribunal. Payment by RTGS shall be communicated to the Registry for verification.

¶30

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.

¶31

With these observations, the I.A. is disposed of. The respondent is at liberty to file a reply in this appeal with an advance copy to the other side.

¶32

Post on 08.10.2024 for reporting compliance regarding the payment of the first instalment.

¶33

Sd/Chairperson

¶34

mks-09

Late Govindbhai Khodabhai Pansuirya Through his Legal Heir Kamleshbhai Govindbhai Pansuriya v. Indusind Bank Limited

Case brief

What is this about?

What did the court decide?

Late Govindbhai Khodabhai Pansuirya Through his Legal Heir Kamleshbhai Govindbhai Pansuriya v. Indusind Bank Limited

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Livein Aqua Solutions Pvt. Ltd. versus Hdfc Bank

Axis Trustee Services Limited and Another versus Reliance Infrastructure Limited

Prabhatabhai Rice Mill and Ors. versus Icici Bank Limited

Gyanshyambhai Jivanbhai Survaiya versus Dhanalakshmi Bank

Ecl Finance Ltd. versus Anil Tarachand Sharma

Anila Santaram Mohinekar versus Bharat Cooperative Bank Mumbai Limited