Disposed

Mr. Selva Kumar Muthuswamy Nadar & Anr. v. State Bank of India

DRAT11 Jul 2024MISC APPLICATION/550/2016

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal held that the appellants must comply with the mandatory pre-deposit under the second proviso to Sec. 18(1) of the SARFAESI Act to entertain their appeal against the dismissal of their securitisation application challenging fraudulent mortgage measures.

What did the court decide?

The appellants were directed to deposit ₹20,31,40,000 as pre-deposit in three instalments within specified weeks.

Mr. Selva Kumar Muthuswamy Nadar & Anr. versus State Bank of… — Company and Corporate | DRAT (2024)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr. Justice Ashok Menon, Chairperson M.A. No. 550/2016 (WoD) In Appeal No. 10/2019

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Between

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Selva Kumar Muthuswamy Nadar & Anr. … Appellant/s V/s.

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State Bank of India & Ors.

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…Respondent/s

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Mr Sachin Kaikini, Advocate for Appellants.

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Mr Umar F. Azam, i/b M/s M. V. Kini & Co., Advocate for Respondent No. 1 Bank.

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The appellants challenge the dismissal of the Securitisation Application (S.A.) No. 47 of 2015 filed by them under Sec. 17 (1) of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short) by the Debts Recovery Tribunal-III, Mumbai vide judgment and order dated 20/04/2016.

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The aforesaid Misc. Application is filed by the appellants to get a waiver of the mandatory pre-deposit contemplated under Sec. 18 (1) of the SARFAESI Act. The appellants contend that they are neither borrowers nor guarantors or mortgagors. The 1^st appellant is the owner of shop rooms bearing Nos. 1, 3, 4, and 10 situated in Ramnath Mishra Chawl, Aarey Road, Goregaon West, Mumbai (subject properties) where the 2^nd appellant, who is the father of the 1^st

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appellant was conducting “Shendur Bar and Restaurant” since 1950. As the 2^nd appellant was suffering from a heart ailment for the last 5 years, he moved out of Mumbai for his treatment at Chennai, and the bar and restaurant were shut down. The premises were owned by Byramjee Jeejeebhoy Pvt. Ltd. The 1^st appellant together with 3 others purchased it from the owner. The shop rooms were divided among the assignees and were being enjoyed by them separately for the individual businesses. The appellants state that they had never mortgaged their property to anyone, nor did they avail loan from the 1^st respondent State Bank of India (SBI). The appellants came to know that the SBI had in collusion with the rest of the respondents fraudulently created a mortgage concerning the shop rooms belonging to the appellants. Based on fraudulent and forged documents, an order was obtained by the first respondent from the Chief Metropolitan Magistrate under Sec. 14 of the SARFAESI Act and intended to take possession. The appellants filed the S.A. to quash the Sarfaesi measures initiated by the respondent bank.

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The Ld. Presiding Officer found that the appellants do not have any reason to get the Sarfaesi measures quashed and hence dismissed the S.A. The appellants are aggrieved and hence in appeal. 4. Though the appellants claim to be the owners of the subject property, they do not have any document of title with them. They are not able to explain how the original title deed came into the possession of the bank. Per contra, the 1^st respondent bank states that the 2^nd respondent company had borrowed money as the principal debtor with the rest of the respondents and the 1^st appellant as

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guarantors/mortgagors. The title deeds were deposited and an equitable mortgage was created concerning the subject properties. The repayment of the loan was defaulted and hence the SBI proceeded to recover the debt by proceeding against the subject properties under the provisions of the SARFAESI Act. For recovery of the debt due, an original application was also filed by the SBI as O.A. No. 225 of 2015 under the RDDB Act.

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The appellants had filed a complaint before the court of the Metropolitan Magistrate, Borivali and an inquiry was initiated under Sec. 202 of the Cr.P.C. by the Goregaon police Station and the final report was submitted on 30/01/2016. The appellants would contend that they did not create any mortgage in favour of the bank and hence they cannot be saddled with the responsibility of discharging the mortgage.

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To entertain the appeal, the appellants will first have to comply with the mandatory provisions of the 2^nd proviso to Sec. 18 (1) of the SARFAESI Act. The case of the appellants is that they had not knowingly executed any agreement or created any mortgage in favour of the 1^st respondent bank. However, the original title deed of the subject properties is with the bank. The 1^st appellant is also a mortgagor. The D.R.T. refused to accept the case of the appellants that they were not aware of the mortgage and hence dismissed the S.A. The appellants are not able to give an explanation about how the original title deed came into the possession of the bank. Prima facie, the 1^st appellant is a mortgagor and therefore, to entertain the appeal, compliance of making a pre-deposit is mandatory.

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As per the demand notice issued under Sec. 13 (2) of the SARFAESI Act, the amount demanded from the debtors is ₹40,62,81,139.34. The appellants have not produced any document to prove that they are under financial strain. They also do not have any prima facie case. Hence, the appellants are directed to deposit 50% of the amount demanded in the notice as pre-deposit. The appellants are directed to deposit ₹ 20,31,40,000/-as pre-deposit. The amount shall be deposited in 3 tranches, within a gap of 2 weeks each as detailed herein under:

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Number of Instalments Payment on or before
1^stInstalment of₹7.00 crore 25.07.2024
2^ndInstalment of₹7.00 crores 08.08.2024
3^rdInstalment of₹6,31,40,000 22.08.2024

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Failure to pay the instalments/amount within the time stipulated would entail in dismissal of the appeal without any 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 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.A. is disposed of. The respondents are at liberty to file a reply in this appeal with an advance copy to the other side.

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Post on 26.07.2024 for reporting compliance regarding the payment of the first instalment.

Sd/-

Chairperson

mks-01.

Mr. Selva Kumar Muthuswamy Nadar & Anr. v. State Bank of India

Case brief

What is this about?

What did the court decide?

Mr. Selva Kumar Muthuswamy Nadar & Anr. v. State Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

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