Dismissed

Sairus J Rangoonwala And Ors. v. the Mogaveera Co-Operative Bank Ltd.

DRT15 Sept 2023SA/159/2023

Case brief

AI extract

What is this about?

The applicant challenged a possession notice under the SARFAESI Act, contesting the appointment of a new court commissioner and the timing of NPA declaration. The court rejected both objections, finding the commissioner change lawful and the NPA declaration valid against RBI circular criteria.

What did the court decide?

Application along with IA No. 2869/2023 is dismissed; notice is not quashed; objection to NPA declaration is rejected.

Sairus J Rangoonwala And Ors. versus the Mogaveera… — Execution and Attachment | DRT (2023)

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SA 159 of 2023

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15/09/2023	Ex. No.	Before Presiding Officer Dr. Rekha G. Dhakar, DRT-1, Mumbai. SA 159 of 2023 *Sairus J Rangoonwala and Ors Vs The* *Mogaveera Co-operative Bank Ltd*	Next date
		Advocate Gaurang Kinkhabwala appeared for the Applicant. Advocate Shreesh Oak i/b SC Legal appeared for the Respondent Today the matter is listed for order. Introduction 1. The Applicants have filed the present SA on 17/08/2023 and prayed that notice dated 21/07/2023 issued by the Advocate Commissioner in persuasion of order dated 05/11/2022 and 06/05/2023
		be declared as null and void and to quash and set aside. Further, Respondent may be directed to restore back the possession of the property i.e. Flat No. 71 B, 7^thfloor, Grand Paradi Apartments, August Kranti Marg, Mumbai, 400036 (hereinafter
		referred to as “property in question”). By

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Page 1 of 13

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SA 159 of 2023

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IA No. 2869/2023 the Applicants challenged the present notice dated 31/08/2023 for taking possession of the Property in question.

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Submission of the Applicants

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During the course of argument, Ld. Counsel for the Applicants mainly raised the objection that vide order dated 05/11/2022 Ld. ACMM appointed Ms. Medha Mahadeo Rane as the Court Commissioner for taking possession of the property in question. However, now Applicants received the possession notice by Ms. Amruta Mahaparalkar. Thus, he contends that the present notice dated 31/08/2023 issued by Ms. Mahaparalkar is liable to be quashed as Ms Mahaparalkar is having no proper authority to execute the order of Ld. ACMM. He drawn my attention to the order dated 05/11/2023 of Ld. ACMM Esplanade, Mumbai and contends that by the said order Ms. Rane has been appointed as Court Commissioner. However, Ms. Mahaparalkar in her letter

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Page 2 of 13

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SA 159 of 2023

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has stated that she was appointed vide order dated 05/11/2022. Thus, said contention is absolutely wrong and therefore Ms. Mahaparalkar is not entitled to conduct the commission which is scheduled on 16/09/2023. He also stated that Ld. ACMM as such has no power to recall his own order and the writ of commission. Therefore, also the present notice for taking possession may be quashed.

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The second limb of argument of Ld. Counsel for the Applicants is that the Respondent bank has wrongly declared the account as NPA. He contends that the account was declared as NPA on 31/12/2020 whereas as per RBI circular dated 06/08/2020 and 05/05/2021 there was a period of moratorium for declaration of NPA. Thus, the declaration of NPA in the present matter is against the RBI circulars as well as judgments of Hon’ble Apex Court in Gajendra Sharma V/s Union of India and another and also Small Scale Industrial Manufacturer Association v. Union of India and Others.

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Page 3 of 13

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SA 159 of 2023

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Ld. Counsel for the Applicant contended that as per the order dated 03/09/2020 Hon’ble Apex Court has categorically observed that the accounts which were not declared as NPA till 31/08/2020 may not be declared as NPA till further orders. He also drawn my attention on the judgement of Hon’ble Apex Court in Small Scale Industry ( supra ) and submitted that by the said judgement which was decided on 23/03/2021, the interim relief regarding the moratorium for declaration of NPA was vacated therefore, he contends that since Respondent Bank declared the account as NPA on 31/12/2020 thus the same is liable to be quashed being against to the judgment of the Hon’ble Supreme Court. He also clarified that the judgement of Small Scale (supra) was having various other writ petitions by different stakeholder therefore, the judgement of Hon’ble Supreme Court in Small Scale ( supra ) would be applicable for all the stakeholder and therefore the declaration of NPA in the present matter is wrong

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Page 4 of 13

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SA 159 of 2023

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and hence, the entire edifice of the SARFAESI measures of the Respondent bank would automatically fall. 5. In rebuttal, Ld. Counsel for the Respondent strongly objected to the contention of the Ld. Counsel for the Applicants and contends that the present application is filed with an intention to frustrate the recovery of the Respondent bank. He also submits that vide order dated 05/11/2022 Ld. ACMM after considering the application of the Respondent bank, allowed the said application under Section 14 of the SARFAESI Act, 2002 thus the order on the application of the Respondent bank under Section 14 was on passed 05/11/2022 by the Ld. ACMM. He also submits that the appointment of the Commissioner is not an adjudication function. He also stated that since the earlier court commissioner Ms. Rane was having personal difficulty to conduct the commissioner therefore on request of the Respondent bank, Ld. ACMM has appointed Ms. Mahaparalkar as new

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Page 5 of 13

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SA 159 of 2023

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court commissioner. Thus, he contends that it is absolutely wrong to say that the Ld. ACMM has recalled its order. It is only a court commissioner that has been changed vide order dated 06/05/2023 thus, objection of the Applicants for the appointment of the commissioner is highly misleading and thus the same may be declined.

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He also contended that the accounts of the Applicants were irregular since 2019, therefore Applicants are entitled to get the benefit of the RBI circulars. He submits that even otherwise as per RBI circular dated 23/10/2020 eligibility criteria for availing the ex-gratia payment of difference between compounded interest and simple interest dated 01/03/2020 to 31/08/2020 was for the accounts where the outstanding amount was not exceeding Rs. 2 Crores (aggregate of facility with the lending institution). However, admittedly in the present matter the amount involved in the facilities to the Applicants herein was much higher than Rs. 2 Crore. Thus, he

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Page 6 of 13

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SA 159 of 2023

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contends that the said RBI circulars will not help the Applicants in any manner. Therefore, he contends that present SA may be dismissed. Consideration 7. Considered the rival contention of the parties and gone through the record. 8. In the present matter the Applicant mainly raised two issues firstly that appointment of Ms. Mahaparalkar is wrong and therefore the impugned notice is liable to be quashed and secondly the account was wrongly declared as NPA. Now hereinafter I would like to decide both the issues Applicant herein. (i) Insofar as the issue of appointment of Ms. Mahaparalkar is concerned. Record reveals that Ld. ACMM, Esplanade, Mumbai vide order dated 05/11/2022 passed an order in case No. 27/SA/2022 which was filed by the Applicant under Section 14 of the SARFAESI Act, 2002. Vide said order dated 05/11/2022 Ld.

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Page 7 of 13

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SA 159 of 2023

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ACMM after satisfaction allowed the same and also appointed Advocate Medha Mahadeo Rane as Court Commissioner, for taking possession of the property in question however, subsequently Ms. Rane has shown her difficulty to conduct commission therefore, on the application of the Respondent bank, Ld. ACMM appointed a fresh Court Commissioner to Ms. Mahaparalkar vide order dated 06/05/2023. It is important to note here while changing the earlier Court Commissioner vide order dated 06/05/2023 Ld. ACMM did not modify the judicial / effective part of the order dated 05/11/2022 and vide order dated 06/05/2023 he only replaced the earlier Court Commissioner by a new Court Commissioner thus contention of the Applicants that the Ld. CMM recalled its earlier order is not sustainable.

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Further, the Applicants herein already filed an application before the Ld. ACMM regarding the appointment of the new court commissioner however in its

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Page 8 of 13

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SA 159 of 2023

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order dated 11/08/2023 Ld. CMM has already recorded that there is no illegality in the order dated 06/05/2023.

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It is also important to note here that the present Court Commissioner has issued the first Notice for taking possession on 21/07/2023 however, the same was not ultimately executed. Present Notice to take possession is the second notice by the same Court Commissioner. Importantly the Court Commissioner was appointed vide order dated 06/05/2023, the Applicants were having sufficient time to challenge the change of Court Commissioner, but no effective immediate efforts were taken by the Applicants.

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In view of the above discussion, I do not find merit in the objection raised by the Applicants hence, declined accordingly. (ii) As far as objection pertaining to the moratorium / wrongly declared NPA is concerned, according to Ld. Counsel for the Applicants despite RBI circular as well as direction of Hon’ble Supreme

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Page 9 of 13

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SA 159 of 2023

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Court the Respondent arbitrarily declared the Account as NPA on 31/12/2020. He relied upon the judgment of Hon'ble Supreme Court in Gajendra Sharma (Supra) as well as Small Scale Industrial (supra) and stated that these two judgements clearly established that the period of moratorium was vacated on 23/03/2021. However in the present matter NPA was declared prior to vacation of the moratorium. Therefore entire proceedings under the SARFAESI Act, 2002, are liable to be quashed.

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A thorough reading of the Hon’ble Supreme Hon’ble Supreme Court in Gajendra Sharma (Supra) as well as Small Scale Industrial (Supra) reveals that both the matters were disposed of by Hon'ble Supreme Court on the basis of RBI circular dated 23/10/2020. As per the RBI circular dated 23/10/2020 (Exhibit 12 & 13 of SA) RBI has specifically provided the eligibility criteria for ex-gratia payment which is extracted herein below:

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Page 10 of 13

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SA 159 of 2023

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“ Eligibility criteria under the scheme. Borrowers in the following segments/classes of loans, who have loan accounts having sanctioned limits and outstanding amount of not exceeding Rs. 2 Crores (aggregate of all facilities with lending institutions) as on 29/02/2020 shall be eligible under the Scheme”

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(i) MSME loans

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(ii) Education loans (iii) Housing loans (iv) Consumer durable loans (v) Credit card dues (vi) Automobile loans (vii) Personal loans to professionals (viii) Consumption loans”

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(emphasis provided)

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Thus, any borrower whose aggregate of all facilities with lending institutions is more than Rs. 2 crore (sanctioned limits or outstanding amount) will not be eligible for ex-gratia payment under this scheme. Thus, RBI has clearly set out the condition for the ex-gratia payment and declaration of NPA however since the aggregated of the total facility in favour of the Applicants is much higher than two crores therefore, admittedly case of the Applicant do not fall within the

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Page 11 of 13

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SA 159 of 2023

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criteria as provided by the RBI circular dated 23/10/2020.

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10.It is also a matter of record that accounts of the Applicants were irregular since August, 2019, therefore, the Applicants as such in no manner entitled for any benefit of the RBI circulars. 11.It is also important to note here that general guidelines for asset classification and moratorium were provided by the RBI vide circular DOR.No.BP.63/21.04.048/2019-2020 dated April 17, 2020 read with circular DOR.No.BP.BC.71/21.04.048/2019-2020 dated May 23, 2020. By these two circulars RBI provided the moratorium for the period from 01/03/2020 to 31/08/2020. Whereas in the present matter NPA was declared on 31/12/2020 which is beyond the said period.

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12.It is further important to note that the RBI has issued a fresh circular DOR . .STR.REC.4/21.04.048/2021-22 dated 0 7/04/2021 after the judgment of Hon’ble Supreme Court in Small Scale

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Page 12 of 13

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SA 159 of 2023

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Industrial ( supra ) and clarify the
conditions of asset classification. The said
circular provides that the moratorium
was available till 31/08/2020 only.
13.In these facts and circumstances, I do not
find merit in the objection that the
account was wrongly declared as NPA
therefore, the same is hereby rejected.
Conclusion
14.In view of the above, the present SA
alongwith IAs are hereby dismissed.
15.File be closed and consigned to record
room.
P.O.
DRT-I

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Sgj/-78

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Page 13 of 13

Sairus J Rangoonwala And Ors. v. the Mogaveera Co-Operative Bank Ltd.

Case brief

What is this about?

What did the court decide?

Sairus J Rangoonwala And Ors. v. the Mogaveera Co-Operative Bank Ltd.

Case brief

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What did the court decide?

What the court decided

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