Partly allowed

Crescent Exports Limited v. Kotak Mahindra Bank Limited

DRAT19 Nov 2024IA/802/2024

Case brief

AI extract

What is this about?

DrAT Mumbai dismissed application for waiver of full 25% pre-deposit in an appeal against rejection of stay. Court allowed partial concession and directed deposit of Rs. 20 Cr in instalments to entertain appeal pending substantive hearing on embargo issue.

What did the court decide?

Appellant directed to deposit Rs. 20 Crores as pre-deposit in three instalments within two weeks gap to entertain appeal.

Crescent Exports Limited versus Kotak Mahindra Bank Limited — 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. 802/2024 (WoD)

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Misc. Appeal on Diary No. 2293/2024 Between

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Crescent Exports Ltd. & Anr. … Appellant/s V/s. Kotak Mahindra Bank Ltd. & Ors. …Respondent/s

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Kotak Mahindra Bank Ltd. & Ors. Mr Rishabh Shah, Advocate for appellant. An Advocate for Respondent Bank is present.

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The appellants are in appeal impugning the dismissal of I.A. No. 1938/2024 in the Securitisation Application (S.A.) No. 41/2024 by the Debts Recovery Tribunal-I, Mumbai (D.R.T) vide order dated 19.09.2024 declined to grant any protection concerning the Sarfaesi action taken by the respondent for recovery of the debt allegedly due from the appellants under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short).

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The main objection which has been raised by the appellants in their S.A. to challenge the Sarfaesi action is the violation of the provisions u/s. 13(9) of the SARFAESI Act because the respondent has only a 15% stake in the total dues whereas IDBI Bank has 85% of the debt which has now been assigned to SASF and Omkara ARC and therefore, without getting the consent of the secured creditors representing not less than 60% of the debt, they could not have exercised their right under the Sarfaesi action. The other contention

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taken is that the action is barred by limitation because the account was classified as Non-Performing Assets (NPA) as early as in August 2005 and this action after more than 12 years is barred by limitation and that under Sec. 36 of the SARFAESI Act measures are to be taken within the period of limitation.

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The Ld. Presiding officer has not delved deep into these aspects but has observed that an O.A. was filed in 2005 and is still pending consideration. Moreover, an OTS proposal was made by the appellants in the year 2022 offering to settle the debt for ₹ 3.3 crores and these two actions of filing an O.A., as well as the OTS proposal, would tantamount to saving the period limitation running against the respondent. It is also observed that the embargo under Sec. 13(9) may not apply because it is an internal matter between the creditors. Both the objections were found untenable as a result of which no protection was granted to the appellants. Aggrieved by this, the appellants are in appeal.

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The Ld. Counsel for the respondent bank has vehemently opposed the present application for waiver of deposit which is to be complied with as a condition precedent for entertaining this appeal u/s. 18(1) of the SARFAESI Act.

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As regards the question of limitation, I agree with the findings in the impugned order that there is no prima facie bar of limitation since an O.A. has been filed and there is also an acknowledgement by way of offering to settle the debt. Under the circumstances, it cannot be said that the Sarfaesi action is barred by limitation at least prima facie. Regarding the contentions of embargo u/s. 13(9), it appears that the other creditor has admittedly more than 68% of the share of the

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debt due from the appellants and therefore, it appears that the appellants are precluded from proceeding under the provisions of the SARFAESI Act without the consent of the other creditor. However, the Ld. Counsel appearing for the respondent submits that he is willing to counter that contention given the settled precedents of the Hon'ble High Court of Punjab and Haryana as well as the Hon’ble Delhi High Court to the effect that it is an internal matter between the creditors and the borrower cannot take benefit of that.

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This question will have to be delved deep in the appeal or the S.A. Hence, I am not concluding on the question of embargo under Sec. 13(9) while considering this application for waiver of deposit. Since the Sarfaesi measures are at the stage of sale notice issued u/s. 13(4), the amount mentioned as due in the said notice will have to be taken as the threshold amount in view decision of the Hon’ble Supreme Court in M/s. Sidha Neelkanth Paper Industries Private Limited and Another versus Prudent ARC Limited and Others 2023 SCC OnLine SC 12 . The amount mentioned in the sale notice is ₹ 47,49,02,045/-. The appellants have not produced any documents or evidence to indicate their financial strain and therefore, they are not entitled to get a waiver of 25% of the debt due. Because there is some material regarding their challenge maintainability of the Sarfaesi action u/s. 13(9) which will have to be decided later, some concession is to be granted to them though not a waiver of 25% of the debt due. The appellants are directed to deposit a sum of ₹ 20 Crores as pre-deposit for entertaining this appeal. The amount of ₹ 20 Crores shall be paid as stated hereunder.

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Numbers of Instalments

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Payment on or before

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1^stInstalment of₹6,00,00,000	03.12.2024
2^ndInstalment of₹6,00,00,000	17.12.2024
3^rdInstalment of₹8,00,00,000	31.12.2024

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The amount shall be paid in three instalments within a gap of two weeks each. On payment of the 1^st instalment, further Sarfaesi measures shall stand stalled till the next date of hearing. Default in payment of any of the amount/instalment 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. Payment by RTGS shall be communicated to the Registry for verification.

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As and when the said amount is deposited, it 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 respondent is at liberty to file a reply in the Appeal with an advance copy to the other side.

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Post on 04.12.2024 for compliance regarding the 1^st instalment.

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rm-06

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Crescent Exports Limited v. Kotak Mahindra Bank Limited

Case brief

What is this about?

What did the court decide?

Crescent Exports Limited v. Kotak Mahindra Bank Limited

Case brief

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What did the court decide?

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