Partly allowed

M/S Swastik Trading Company v. the Authorised Officer, Canara Bank

DRAT14 Nov 2024IA/805/2024

Case brief

AI extract

What is this about?

ITM issued a conditional order staying the disposal of an I.A. challenging a DRAT ruling to remove movables from auctioned property, contingent upon the appellants filing a 25% pre-deposit within a week as proof of impecuniosity.

What did the court decide?

Stay of impugned order subject to payment of a special deposit of 25% of the debt (approx. 19 lakh rupees) in two instalments within a week and two weeks respectively.

M/S Swastik Trading Company versus the Authorised Officer… — 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.805/2024 (WoD)

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Misc. Appeal on Diary No.2422/2024

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Between

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M/s. Swastik Trading Company & Ors. … Appellant/s V/s. The Authorized Officer, …Respondent/s

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The Authorized Officer, Canara Bank & Anr.

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Ms Sonali Jain, Advocate for Appellants.

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Mr Bidan Chandran along with Ms Mittal Parekh, Advocates for Respondent No.1.

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-: Order dated: 14/11/2024:-

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The matter is taken up for hearing by way of a praecipe filed by the appellants for seeking urgent relief.

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The appellants have appealed impugning the order dated 04.11.2024 in I.A. No.2248/2024 which was filed by the respondent bank in the Securitisation Application No.362/2022 (S.A.) before the Debts Recovery Tribunal, Pune (D.R.T) filed by the appellants challenging the Sarfaesi measures initiated by the bank under the provisions of the Securitisation& Reconstruction of Financial Assets & Enforcement of Security Interests Act, 2002 (“SARFAESIAct”, in short).

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The appellants had filed an interlocutory application for getting the sale of the subject property stalled. The D.R.T. passed an order directing them to pay the entire debt within a stipulated time and

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approach the bank with an OTS. The appellants were not successful in clearing the debt by way of an OTS as it was rejected by the bank. The bank proceeded with the sale, the sale was confirmed and the sale certificate was also issued in favour of the successful auction purchaser. The physical possession of the subject property was also taken by the bank in consequence of an order obtained from the District Magistrate u/s 14 of the SARFAESI Act. In the process of handing over the subject property to the successful auction purchaser, it was found that certain movables belonging to the appellants were lying in the property which required to be removed. The bank’s attempt to remove the movables with police assistance did not succeed. Therefore, they filed present I.A. No.2248/2024 for getting those movables articles removed to enable them to hand over vacant possession of the subject property to the successful auction purchaser. The appellants raised objections to that I.A. but the Ld. Presiding Officer found that the objections were not sustainable and therefore, directed the appellants to remove the articles within two weeks. The appellants are aggrieved and hence in Appeal.

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To entertain this appeal, the appellants will first have to comply with the mandatory requisite u/s 18(1) of the SARFAESI Act by making the pre-deposit. The appellants pray that they have a very good prima facie case and they are also under financial strain. And therefore, 25% of the pre-deposit be waived exercising jurisdiction under the 3^rd proviso to Section 18(1) of the SARFAESI Act.

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The Ld. Counsel appearing for the respondent bank submits that the appellants have absolutely no case to maintain this appeal. The

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Sarfaesi measures are not challenged in this appeal. It is an interlocutory order directing the appellants to remove the movables which are now being challenged. Subsequently, the appellants have also allegedly filed an interlocutory application to challenge the concluded sale. But it is pointed out that there is no application filed u/s 17 of the SARFAESI Act challenging the sale based on the fresh cause of action nor have they filed any application for amendment of the pending S.A. incorporating a challenge to the sale. It is pointed out that the rejection of their application by the D.R.T. against this sale was not challenged in appeal and has, therefore, had become final. They cannot now challenge the sale before this Tribunal and that has to be adjudicated before the D.R.T. on appropriate grounds.

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The Ld. Counsel appearing for the appellants submits that such an application directing them to remove the movables is not maintainable because there is no provision under the SARFAESI Act to give such a direction to the appellants.

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Section 19(25) of the Recovery of Debts & Bankruptcy Act,1993 (“RDB Act”) empowers the Tribunal below to make appropriate orders to meet the needs of justice and to enforce the orders passed. The D.R.T. had already rejected the application made by the appellants to stall the sale and they were directed to settle the debt which they did not succeed and it is in consequence of the failure of the OTS proposal that the respondent bank sold the property confirming the sale and issued the sale certificate. The S.A. challenging the Sarfaesi measures is still pending and therefore, I find that there is no embargo in entertaining the application filed by the bank directing the

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appellants to remove the movables from the property which has also been sold to the highest bidder. The challenge to the sale is an independent action and a challenge to that has to be by appropriately entertained by the D.R.T. on a proper action taken by the borrower and that does not in any way preclude the D.R.T. from passing an order facilitating the handing over of vacant possession of the subject property which has already been successfully sold to an auction purchaser.

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Under the circumstances, I do not find any prima facie case in favour of the appellants. The Ld. Counsel appearing for the appellants has laboured much in arguing the infirmities in the Sarfaesi action which in this appeal which does not fall within this Tribunal’s jurisdiction in this appeal, is not called upon to adjudicate. The scope of this appeal is limited to the order passed by the D.R.T. on 04.11.2024 allowing I.A. No.2248/2024 and therefore, there is no prima case in favour of the appellants.

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The appellants have produced documents to indicate their financial strain. The 1^st appellant is a partnership firm and the 2^nd and 3^rd appellants are its partners. There is another partner who is arrayed as the 3^rd respondent. The partners are jointly and severally liable to pay the debt and therefore, the 3^rd respondent’s income is also pertinent for ascertaining the impecuniosity. Appellants Nos.2 and 3 have not produced their Income Tax Returns stating that they do not have any taxable income. The Income Tax Returns of the firm alone are produced to indicate that the firm is running at a loss and has no substantial income. I find that the materials produced are not

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sufficient to find the impecuniosity of the borrowers and therefore, on that account also, the appellants would not succeed.

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The amount that is due and payable to the respondent bank is ₹77,44,596/-. The appellants will have to pay 50% of that amount for the appeal to be entertained and therefore, they are directed to pay ₹38,72,298/- for entertaining this appeal. The appellants’ counsel seeks time to pay the amount and submits that a sum of ₹ 3 lakhs shall be paid by way of RTGS today (the amount of ₹ 3 lakhs is not paid yet). Considering the total amount payable by the appellants, ₹ 3 lakhs would be highly insufficient and therefore, in case the appellants deposit 25% of debt i.e., ₹19,36,149/- within a week, the impugned order shall stand stayed till the next date of hearing. The balance. ₹ 19,36,149/- shall be paid within two weeks therefrom. Payments to be

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paid are as stated hereunder:

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Numbers of Instalments	Payment on or before
1^stInstalment of₹19,36,149	21.11.2024
2^ndInstalment of₹19,36,149	13.12.2024

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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

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nationalised bank, initially for 13 months, and thereafter to be renewed periodically.

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11.. 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 22.11.2024 for reporting compliance of the payment of 1^st instalment.

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Chairperson

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nrp-07

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M/S Swastik Trading Company v. the Authorised Officer, Canara Bank

Case brief

What is this about?

What did the court decide?

M/S Swastik Trading Company v. the Authorised Officer, Canara Bank

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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