Allowed

Prime Downtown Estates Pvt. Ltd. v. Yes Bank

DRAT30 Jan 2025IA/118/2022

Case brief

AI extract

What is this about?

The Debts Recovery Appellate Tribunal held that a mortgagor defined as a borrower under the SARFAESI Act must pay a pre-deposit under Section 18(1) based on the total debt claimed by creditors, not limited to the mortgagor's specific liability, directing the payment of the fifty per cent in instalments.

What did the court decide?

Appellant directed to pay pre-deposit of ₹248,45,08,646/- in three instalments by specified dates; default entails dismissal of appeal.

Prime Downtown Estates Pvt. Ltd. versus Yes Bank — Contract and Commercial Disputes | DRAT (2025)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr. Justice Ashok Menon, Chairperson I.A. No. 118/2022(WoD)

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Misc. Appeal No. 40/2022

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Between

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Prime Downtown Estates Pvt. Ltd. … Appellant/s V/s.

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Yes Bank Ltd. & Ors. …Respondent/s

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Mr Rohit Gupta along with Mr Bhavesh Poojary, i/b M/s MDP Partners, Advocate for Appellant.

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Mr Ayush Kothari, Advocate for Respondent No. 3.

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Ms Somya Tripathi, i/b M/s T. N. Tripathi & Co., Advocate for Respondent No. 6.

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The appellant is the company carrying on business in real estate. The order in Interlocutory Applications (I.A.) Nos. 429 & 578 of 2021 in Securitisation Application (S.A.) No. 46 of 2021 on the files of the Debts Recovery Tribunal-II, Mumbai (DRT) stands challenged.

¶11

The appellant had filed the aforesaid S.A. under Sec. 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act", for short) and the applications to injunct the first respondent bank and its authorised officer from taking further steps under the SARFAESI Act and take possession of the secured asset which is 14,456.04 sq. mts. of land known as Old Victoria Mills Compound in Girgaon, Mumbai and also further to restrain the first respondent and its officers to take steps

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to e-auction the aforesaid property in furtherance of the notice dated 17.02.2021 and also to quash and set aside the sale notice and to maintain the status quo concerning the subject property. I.A. No. 578 of 2021 is to prevent the respondent from proceeding with the sale notice dated 12.05.2021 and taking possession of the property and similar other reliefs.

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Pending the hearing of the S.A., the sale was successful and confirmed. Yes Bank the original creditor, assigned the debt to M/s J. C. Flower Asset Reconstruction Pvt. Ltd., the 7^th Respondent and in turn, J. C. Flower Asset Reconstruction Pvt. Ltd. assigned the debt to M/s Omkara Asset Reconstruction Pvt. Ltd., the 9^th Respondent herein.

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After considering the applications, the DRT found that the contentions raised against the Sarfaesi measures are not sustainable prima facie, and hence, the applications were dismissed.

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Aggrieved by that, the appellant filed this appeal. The present application concerns the payment of pre-deposit contemplated under Sec.18(1) of the SARFAESI Act.

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The appellant is the mortgagor and had mortgaged the property to secure the debt incurred by the principal borrower which is the 3^rd respondent. Respondents Nos. 4, 5 and 6 are the guarantors of the loan.

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The appellant had filed I.A. No. 118 of 2022 for a waiver of the pre-deposit required to be made for entertaining the appeal under the provisions of Sec. 18(1) of the SARFAESI Act.

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There is no dispute that the appellant being the mortgagor comes within the definition of a “borrower” under Sec. 2(f) of the SARAFAESI Act. The appellant contends that he is not liable to pay any amount as pre-deposit because the mortgage deed restricts the extent of the liability and that there is a specific covenant that the appellant shall not be liable to pay the money.

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A reading of the 2^nd proviso to Sec. 18(1) would be relevant for the disposal of this I.A. It reads thus:

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“Provided further that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent of the amount of the debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less;”

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Proviso does not state that the borrower or the mortgagor is only liable to the extent of the liability created. The pre-deposit has therefore to be made based on the amount of the debt it is due from the borrower, as claimed by the secured creditors or determined by the DRT, whichever is less. In the instant case, the debt is not yet determined by the DRT and therefore, the appellant being a mortgagor coming with the definition of the borrower is liable to pay the pre-deposit on the debt due.

¶24

In the instant case, the sale has already taken place and the amount due as of the date of filing of the appeal should be taken as the threshold amount for payment of pre-deposit as held by the Hon’ble Supreme Court in M/s Sidha Neelkanth Paper Industries Pvt. Ltd. & Ano. vs. Prudent ARC Limited & Ors, 2023 SCC OnLine SC 12. As per the material available, the outstanding dues as of 30.04.2024 are ₹496,90,17,292/-.

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The appellant has not produced any document to prove their financial strain. The contention that the demand notice issued under Sec. 13(2) does not give a bifurcation and that there is no CERSAI registration in favour of the transferee are contentions which can be prima facie found sustainable in the facts and circumstances of this case.

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Hence, the appellant is directed to deposit ₹248,45,08,646/-as pre-deposit for entertaining this appeal. The aforesaid amount shall be deposited in three instalments within a gap of two weeks each as stated hereunder.

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Numbers of Instalments Pay	ment on or before
1^stInstalment₹82,81,69,548/-	13.02.2025
2^ndInstalment₹82,81,69,548/-	27.02.2025
3rd Instalment₹82,81,69,550/-	13.03.2025

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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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It is submitted that the sale has already been confirmed and payments made towards sale consideration. Since the appellant has challenged the sale, the grounds taken by the appellant for setting aside the sale will have to be considered in the S.A. Hence, there is no need for any order of status quo to be maintained till the disposal of the appeal. It is, however, made clear that the sale would be subject to the ultimate decision taken by the DRT in the S.A.

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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

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shall be communicated to the Registry for verification and intimated to the counsel for the respondents.

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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 nationalized 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 the Appeal with an advance copy to the other side.

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For reporting compliance regarding the first instalment, call on 14.02.2025.

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Sd/-

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mks-01

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Prime Downtown Estates Pvt. Ltd. v. Yes Bank

Case brief

What is this about?

What did the court decide?

Prime Downtown Estates Pvt. Ltd. v. Yes Bank

Case brief

What is this about?

What did the court decide?

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