Dismissed

Ms Trident Impex v. Kotak Mahindra Bank Limited

DRT14 Mar 2023SA/311/2022

Case brief

AI extract

What is this about?

This application challenged Symbolic possession of mortgaged assets under SARFAESI Act. The Tribunal dismissed the application, holding the NPA classification was valid, the challenge to possession was time-barred, and no benefit existed under the MSME Act as registration was granted during proceedings.

What did the court decide?

Securitisation Application No.311 of 2022 stands dismissed with costs. All interim applications were disposed of without order.

Ms Trident Impex versus Kotak Mahindra Bank Limited — Banking and Recovery | DRT (2023)

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Presented on : 04.10.2022 Registered on : 06.10.2022 Decided on : 14.03.2023 Duration : Y M D 00 05 10

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IN THE DEBTS RECOVERY TRIBUNAL No.2, MUMBAI

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SECURITISATION APPLICATION NO.311 OF 2022

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TOTAL CLAIM AMOUNT: Rs.37,01,310.86

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M/s. Trident Impex, Sole Proprietary Concern: Through its Proprietor Mr Bipin Shinde having address at 14/B, Vrindavan CHS Ltd. Marol Naka, Chimat Pada, Andheri – East Mumbai – 400 059.

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Mrs Purva Bipin Shinde, (Coborrower), having address at Flat No.903, 9^th Floor, C-Wing, Nilgiris CHS, Off Marol Road, Bamandaya Pada, Andheri East, Mumbai- 400 072.

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Mr Bipin Paswanath Shinde, (Coborrower), having address at Flat No.903, 9^th Floor, C-Wing, Nilgiris CHSL, Off Marol Road, Bamandaya Pada, Andheri East, Mumbai – 400 072. Versus

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… Applicants

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Kotak Mahindra Bank Ltd., A Banking Company, having its registered office at 27 BKC, c-27, G- Block, Bandra-Kurla Complex, Bandra East, Mumbai – 400 059.

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Ms Shwetha Kamath, Authorised Officer, Kotak Mahindra Bank,

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Having office at Samsung Blg., Mezzanine Floor, 159-A, C.S.T. Road, Kalina, Santa Cruz (East), Mumbai – 400 098.

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1. The Union of India, Represented by Secretary Dept. of Banking Ministry of Finance, 3^rd Floor, Jeevan Deep Building, Sansad Marg, New Delhi, 110 001.

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1. Ministry of Micro Small & Medium Enterprises, Represented by its Secretary, Department of Banking, Ministry of Finance, 3^rd Floor, Jeevan Deep Building, Sansad Marg, New Delhi – 110 001.

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1. State of Maharashtra, Represented by its Chief Secretary, Mantralaya, Mumbai 400 032.

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1. Chairman, Committee for Stress Micro, Small & Medium Enterprises Having its offices at TJSB House, Plot No.5B, Road No.2, Wagle Estate, Thane (West).

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1. The Chief Metropolitan Magistrate, 3^rd Court, Esplanade, C.S.T. Nagar Chowk, Mumbai – 400 001.

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1. Ms. Madhavi Joshi, The Court Commissioner, Off. Pranay Shopping Complex, Shop No.15, Santoshi Mata Road, Kalyan (W) – 421 301

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1. The Senior Inspector, Marol Police Station, Andheri East, Mumbai – 400 059 …Defendants

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APPEARANCES For the Applicant : Mathews J. Nedumpara, Advocate Hemali Kurne and Advocate B.S. Munday i/b Page 2 of 68

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M/s. Nedumpara & Nedumpara. For Defendant : Rajesh Nagori i/b Advocate Raju Shinde.

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Shri Deepak M Thakkar Presiding Officer

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JUDGMENT RESERVED ON : 2^nd March 2023. JUDGMENT PRONOUNCED ON : 14^th March 2023

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J U D G M E N T

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(1) This is an application under Section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, ‘ the SARFAESI Act’ ) read with Security Interest (Enforcement) Rules, 2022 (for short, ‘ the said Rules’ ).

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(2) The 1^st applicant carries on the business in the name and style of M/s. Trident Impex as the sole proprietor thereof, and the 2^nd applicant is the coborrower. The applicants are the borrowers and the mortgagors who feel aggrieved by the action and measures initiated by the secured creditor under the SARFAESI Act read with Security Interest (Enforcement) Rules, 2002 (for short, ‘the said Rules).

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(3) 1^st defendant is the secured creditor, 2^nd

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defendant is the authorised officer, 3^rd defendant is the Union of India, 4^th defendant is the Ministry of Micro, Small and Medium Enterprises, the 5^th defendant is the State of Maharashtra, 6^th defendant is the Chairman in the Committee for Stressed Micro, Small & Medium Enterprises, the 7^th defendant is the Chief Metropolitan Magistrate, the 8^th defendant is the Court Commissioner and the 9^th defendant is the Senior Inspector, Marol Naka Police Station.

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(4) It is the applicants’ case that they approached the 1^st defendant seeking financial assistance for business expansion. Based on the loan application made by the applicants, on 12^th September 2017, the 1^st defendant sanctioned the overdraft facility in the sum of Rs.40 lakhs. On 31^st October 2017, the applicants signed and executed the loan and security documents. To secure the overdraft facility, the applicants created a mortgage of Flat no.903, 9^th Floor, C-Wing, Nilgiri CHSL, off Marol Road, Bamandaya Pada, Andheri East, Mumbai– 400072 (for short, ‘ the secured assets ). The Securitisation Application proceeds on the footing that the applicants made payments only till COVID-19. After that, the applicants were unable

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to pay the EMIs but showed their willingness to pay the balance. It further proceeds on the footing that the applicants were desirous of rescheduling or re-structuring the loan. However, the 1^st defendant did not re-schedule or re-structure the loan. According to the applicants, defendants 1 and 2 adopted a shortcut method of invoking the provisions of the SARFAESI Act. After the filing of the Securitisation Application, the applicants moved Interlocutory Application No.1 to 2023 to amend the Securitisation Application to challenge the NPA classification of the applicants under the MSME Act. The applicants originally asked for relief in terms of prayer clause 6(i) to 6(vi) and after amendment, introduced prayers (vii) to (xvii) which are reproduced below:

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i. That this Hon’ble Tribunal be pleased to order and restrain the Respondent from taking any further steps in respect of property in furtherance of notice dated 15.09.2022 may kindly be stayed during the pendency of the present application.

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ii. That this Hon’ble Tribunal be pleased to set aside that notice issued under Section 13(2) dated 17.11.2020 on the ground of non-

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compliance for requirements of Section 13(3A).

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iii. That this Hon’ble Tribunal be pleased to set aside the Notice of possession issued under section 13(4) shall be set aside on the ground that provisions of section 13(3A) have not be complied in spirit and letters.

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iv. Bank to be issued direction to comply with mutually agreed Loan Restructuring Agreement approved by Hon’ble Tribunal.

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v. For costs and;

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vi. For such other and further reliefs as this Hon’ble Forum deems fit.

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vii. Declare that the MSME Act in so far as it has not created a special forum/tribunal to enforce the rights and obligations/remedies which it has created in addition to those rights/obligations/remedies recognized by the common law, the jurisdiction of the Civil Court is not ousted;

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viii. Declare that the Applicants are covered by the provisions of the MSME Act, 2006, and are entitled to the nursing and care provided under the notifications issued there under and in particular Notification S.O.1432(E) dated 29.5.2015 which provides for a framework of

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rehabilitation of MSMEs, since MSME Act is special and later law qua the SARFAESI Act and the latter has not application so far as the instant Applicants are concerned;

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ix. Declare that the Applicants are entitled to be compensated from the Respondent Bank for the loss and injury which it has suffered on account of the gross breach of trust, culpable negligence, and malicious and tortuous action at the hands of the Bank and its officers, which loss and injury far exceeds the very claim of the Bank as against these Applicants;

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x. Declare that the Respondents are vested with no enforceable rights as against these Applicants in as much as the loss, injury and damages suffered by these Applicants on account of the gross breach of contract, malicious and tortuous action of the Respondent Bank far exceeds the claim of the Respondent Bank as against these Applicants;

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xi. Declare that the Respondent Bank is vested of no enforceable cause of action, right or remedies as against the Applicants/Borrowers since the loss and injury caused to these Applicants is far in excess of the claim of the

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Banks as against the Applicants, in other words, the Applicants owe no amount to the Respondent Bank, the claim of the Bank being set-off/adjusted against the claim of the Applicants for damages and compensation;

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xii. To award a compensation of Rs.50 lacs which would include all claims of set-off, counter claim and damages in terms of (xi) above;

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xiii. Without prejudice to prayers (ix) to (xii) above and in furtherance and addition thereto, grant a perpetual mandatory and/or prohibitory injunction, restraining and prohibiting the Reserve Bank of India/banks and financial institutions from initiating or continuing any proceedings whatsoever to declare theses Applicants as a wilful defaulter;

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xiv. Grant a permanent mandatory injunction in favour of Applicant and against the Respondent Bank, restraining their agent, servants, officers, representatives and/or anyone from taking any action whatsoever under the SARFAESI Act for the recovery of the amounts which the Respondent Banks falsely claim to be due;

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xv. Declare that the entire proceedings under

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Sections 13(2), 13(4) and 14 of the SARFAESI Act and the Security Interest Enforcement Rules, are all rendered void ab initio;

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xvi. To call for the entire record, minutes and proceedings leading to the classification of the Applicant’s account as NPA, so too of the applications and other proceedings instituted under Section 14 of the SARFAESI Act, and under the Negotiable Instruments Act, and to quash and set aside the same;

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xvii. Grant cost of the above Application and/or any other consequential relief.

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(5) The application is opposed by defendants 1 and 2 who filed a reply affidavit (exhibit-17). It is stated that on 12^th September 2017, the 1^st defendant sanctioned the overdraft facility in the sum of Rs.40 lakhs and to secure the facility the applicants mortgaged flat no.903. Since the applicants failed and neglected to make the payment, the 1^st defendant classified the applicants’ account as NPA on 30^th June 2020. On 17^th November 2020, defendants nos.1 and 2 issued the 13(2) notice, calling upon the applicants to pay Rs.37,01,310.86. The 2^nd defendant dispatched the demand notice on 27^th

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November 2022. Defendants 1 and 2 have placed the proof of prepaid postal receipt on record. The 2^nd defendant did not receive the acknowledgement card from the postal department but has placed the tracking report showing the delivery of the articles. The tracking report is produced on record. Defendants1 and 2 say that it is not the applicants’ case that they did not receive the 13(2) notice. It is incorrect to say that the applicants made representation. The applicants did not adduce any evidence to show that they objected to the 13(2) or delivered upon defendants 1 and 2 the objection-cumrepresentation. It is defendant nos.1 and 2’s case that the applicants failed to pay within sixty days. They did not raise any objection to the demand notice. Therefore, defendants 1 and 2 had no option but to initiate measures under Section 13(4) by taking symbolic possession of the secured assets on 9^th February 2021. On 11^th February 2021, defendants 1 and 2 dispatched the possession notice for service upon the applicants. Defendants 1 and 2 have placed on record the proof of postal request dated 11^th February 2021. Defendants 1 and 2 published the possession

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notice in two newspapers viz. Marathi and English. On 9^th February 2021, the 2^nd defendant pasted on the conspicuous part of the secured asset the possession notice. The applicants neither objected nor protested to the pasting of the symbolic possession notice. Defendants 1 and 2 have placed the proof of pasting by way of photographs on the record. After that, the defendants obtained an order dated 12^th July 2022 passed by the learned District Magistrate under Section 14. Defendants 1 and 2 support the Section 14 order stating that the learned Chief Metropolitan Magistrate rightly passed the order after verifying the Section 14 application, ninepointer affidavit and the material placed on record. The learned Chief Metropolitan Magistrate also appointed the secured creditor to take physical possession of the secured assets. On 11^th October 2022, that is, during the Securitisation Application’s pendency, the 2^nd defendant took physical possession of the secured asset. (6) Defendants 1 and 2 responded to the amended Securitisation Application to state that it is incorrect that the 1^st defendant did follow the provisions of the MSME Act for NPA classification

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of the applicants’ account. Before NPA classification, the 1^st defendant identified as SMA, SMA-1, SMA-2 as taken under the Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises Circular No.S.O.1432(E), dated 29^th May 2015, 1. Identification of incipient stress, the applicants’ current record falls under doubtful two. The 1^st defendant verified all the RBI Guidelines regarding NPA classification during COVID-19. The 1^st defendant asserts that it did not breach or violate any guidelines or invocation issued in this regard. The applicants have not filed any application to the Committee for the Corrective Action Plan or to restructure the account. The objection concerning the RBI Circular and notification for NPA classification and various circulars on MSME Act is not sustainable in law. Therefore, the allegations that the 1^st defendant wilfully neglected to renew or restructure by granting the benefit to the applicants do not arise. The applicants have failed to adduce any evidence in support of their case based on a Corrective Action Plan or restructuring of the applicants' loan account. The applicants have neither pleaded nor established the case to grant

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compensation and damages. The applicants have failed to show that the physical possession taken by defendants 1 and 2 is invalid. Defendants 1 and 2 reiterate that the applicants visited the 1^st defendant and handed over by delivering and depositing the original title deeds concerning flat no.903 with the intent to create a mortgage.

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(7) In paragraph no.5(i) of the Securitisation Application, the applicants admit (i) the overdraft facility, (ii) the mortgaged of flat no.903. But by the amended Securitisation Application, the applicants took a contradictory stand by disputing the mortgage. The original title deeds of the secured assets are in the 1^st defendant’s custody. The mortgage is valid, substantive and binding. The applicants have not pointed out any illegality relating to the mortgage. The 2^nd defendant took symbolic possession of the secured assets on 19^th February 2021 and the applicants filed the Securitisation Application on 4^th October 2022, therefore, the prayer challenging symbolic possession is time-barred. Defendants 1 and 2 took the physical possession through the learned Chief Metropolitan Magistrate and therefore, it is valid and legal. As of 20^th February 2023, there

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was owing, due and payable by the applicants to the secured creditor the sum of Rs.50,86,824.01. It is, therefore, necessary to sell the secured asset and recover the secured creditor’s long outstanding dues. Flat No.903 is a common security. In the loan taken by Bipin Paswanath Shinde, A/C No.HF37582100 and CBM43931031 (housing loan). Flat no.903 is mortgaged for the credit facilities granted to M/s. Trident Impex also. As of 20^th February 2023, the outstanding housing loan account on Bipin Paswanath Shinde is Rs.43,69,933.66. The applicants' Securitisation Application is meritless and therefore, the defendants prayed to dismiss the Securitisation Application.

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(8) The applicants filed a rejoinder affidavit (exhibit18). In paragraph no.6 of the rejoinder affidavit, the applicants state that during the pandemic period, the 1^st defendant wrongfully and illegally declared the applicants’ account as NPA on 20^th June 2020. The 1^st defendant did not communicate the NPA declaration. The applicants relied upon the circular to state that it applies to all fund based loan account including the 1^st applicant’s firm for a value of less than Rs.25

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crores. The intent of the RBI circular is referred in paragraph no.9 to protect the MSME units. The 1^st defendant ought not to have re-classified the 1^st applicant’s standard account as NPA as per circular dated 6^th August 2020. According to the applicants, since NPA classification is wrong, the question of making the payment within sixty days as section 13(2) notice does not arise. The applicants state that defendants 1 and 2 did not bother to annex the tracking report of the service of 13(4) notice dated 9^th February 2021. According to the applicants, it is necessary for defendant nos.1 and 2 to physically serve the 13(2) notice so also the 13(4) on 9^th February 2021 during the 3^rd Pandemic (Omicron Wave). The applicants states the male fides of defendant nos.1 and 2 to grab the mortgaged property without giving the applicants a fair chance to defend. The Section 14 order passed by the learned Chief Metropolitan Magistrate as wrongful and illegal. The applicants managed to procure the certified copy of the Section 14 only on 11^th January 2023. The applicants state that the defendants mislead the learned Chief Metropolitan Magistrate with incomplete facts. Defendants 1 and 2 did not

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annex the statement of account. The 13(2) notice lacks particulars. Defendant nos.1 and 2 did not annex the mandatory certificate under Section 65(B) of the Evidence Act. There is nothing in the reply affidavit to suggest that 1^st defendant verified the due process of SMA, SMA-1 and SMA2. The applicant denied that the present Securitisation Application is time-barred. The court commissioner issued notice on 23^rd September 2022 and took physical possession of the mortgaged flat on 11^th October 2020 giving, therefore, cause of action to approach DRT under Section 17(1). The loan of Rs.50 lakhs is at a conservative estimate of loss due to defendants 1 and 2’s malicious actions. The applicants deny that the amount of Rs.50,86,824.01 is outstanding as of 20^th February 2019. (9) Based on the aforesaid facts, the applicants, defendants 1 and 2 proceeded to argue the Securitisation Application finally along with pending IA’s. The applicants' counsel filed notes of arguments (exhibit-18), and defendants 1 and 2 have filed written arguments (exhibit-19).

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(10) Applicants’ submissions :

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Date	Particulars

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2015	The Ministry of Micro Small &
	Medium Enterprises issued
	Government of India Notification No.SO 1432 (E) dated 29.05.2015 in exercise of the powers under section
	9 & 10 of the MSMED Act, 2006
	towards protection and promotion of MSME units and towards grant of
	favourable credit facilities.
31.10.2017	The Applicant No.1 through the Application No.2 Sole Proprietor and the Applicant No.3 Guarantor approached the Respondent No.1
	Bank for loan facilities. Accordingly, the Respondent Bank granted an overdraft loan facility to the tune of
	Rs.40 lacs secured against Flat
	No.903, 9^thFloor, C-Wing, Nilgiri
	CHSL, Off Marol Road, Andheri
	East, Mumbai – 400 072.
2017-2019	The Applicant No.1 being an MSME under MSMED Act, continued to
	service the loan facilities despite
	facing difficulties of a small
	business and made 20 EMI

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	payments towards the Loan.	overdraft
11.02.2020	Reserve Bank of India	came out
	with Circular dated	11.02.2020
	permitting One Time Re	structuring
	by eligible MSME u	nits. This
	circular directed Banks accounts that were stan 01.01.2020 as NPA accou	not declare dard as on nts.
March,	The Global Pandemic hit	the entire
2020	world resulting in a	worldwide
	lockdown and shut dow	n of many
	small businesses. The	Pandemic
	severely hit the busines Applicant No.1.	ses of the
30.06.2020	Respondent Bank dec	lared the
	account of the Applican	ts as NPA
	during the pandemic pe	riod when
	the country has just em	erged from
	nationwide lockdown. No	intimation
	was ever give to the Ap	plicants of
	the declaration as NPA no	w were the
	applicants given an opp rectify/restructure and ac	ortunity to counts.
06.08.2020	RBI issued fresh circu	lar dated

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	06.08.2020 extending the directions
	given in the circular dated
	11.02.2020 in view of the pandemic.
17.11.2020	Respondent Bank issued Demand
	Notice u/s 13(2) of the SARFAESI
	Act, 2002 demanding principal of
	Rs.36,85,559.83 towards principal
	and Rs.15,750.93 as interest
	without extending the mandatory
	facilities directed by the circulars of
	the aforesaid circulars of the RBI
	and the 2015 notification of the
	Government of India.
09.02.2021	The Respondent Bank purportedly took action of symbolic possession
	under section 13(4) of the
	SARFAESI Act, 2002. The said
	notice was never served upon the
	Applicants who in absence of
	intimation of steps taking under
	13(4) of the Demand Notice were
	unable to approach the DRT under
	section 17(1) of the SARFAESI Act, 2002 seeking relief.
12.07.2022	The Learned Chief Metropolitan

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	Magistrate, Esplanade Court,
	Mumbai passed order in
	CC.653/SA/2021 under section 14
	of the SARFAESI Act, 2002
	appointing the court commissioner for taking physical possession of the secured asset. The Applicants were completely unaware of these
	proceedings since they were not
	served notice by the Respondent Bank.
15.09.2022	The Court Commissioner issued
	notice for taking physical
	possession of the Secured asset on
	11.10.2022. For the first time the
	Applicants came to be aware of the
	SARFAESI proceedings by the
	Respondent Bank to take physical possession of the secured asset.
04.10.2022	The Advocate for the Applicants
	filed the SA before DRT-1 as per
	jurisdiction.
04.10.2022	Notification issued by the Government of India reassigning the matters between various DRTs.

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11.10.2022	The instant SA was fresh	filed	and
	moved for interim relief.
11.10.2022	Physical possession was	taken	by
	the Respondent bank
	The present SA.

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SHORT WRITTEN SUBMISSIONS:

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No.	Submissions Head	Reasons
1.	Wrongful	There is nothing in	the
	Declaration	Affidavit-in-Reply filed	in
	of NPA-	reply to the Securitiz	ation
	Declaration	Application to establish	that
	as NPA is	the Respondent Bank	ever
	illegal and	intimated about	the
	void.	declaration of the Appl	icant
		No.1 Sole Proprieto	rship
		allegedly on 30.06.202	0.In
		absence of conclusive	proof
		that the given notic	e to
		recall the loan and/o	r to
		regularize the facility,	the
		alleged declaration	on
		30.06.2020 during	the
		pandemic period	was

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		completely contrary to
		legislative intent protect
		MSME units and
		consequently illegal and
		void as averred in para 7 in
		page 3 of the Affidavit in
		Rejoinder dated 24.02.2023.
		Valid and proper
		declaration of a loan
		account as NPA is a
		mandatory requirement for
		invoking SARFAESI Act,
		2002. In absence of proper
		declaration the entire
		proceedings are null & void,
		non est and do not exist in
		the eyes of the law.
2.	MSME Status	The Applicant being a
	of Applicant	Micro-Small-Medium-
	No.1-	Enterprise (MSME)
	protection of	registered under the
	the Applicant	MSMED Act, 2006 ought to
	No.1 under	have been protected under
	the	the MSMED Act. Section 9
	provisions of	& 10 of the MSMED Act,

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Section 9 &	2006 read along with the
10 of the	various circulars issued
MSME Act,	from time to time by
2002.	Government of India and
	Reserve Bank of India
	establish the predominance
	of the MSMED Act, 2006
	over the SARFAESI Act, 2002. Section 9 of the MSMED
	Act, 2002 reads as follows: “…9. Measures for promotion and development.-The Central Government may,
	from time to time, for the
	purposes of facilitating the
	promotion and development
	and enhancing the
	competitiveness of micro,
	small and medium
	enterprises, by way of
	development of skill in the
	employees, management and
	entrepreneurs, provisioning
	for technological

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upgradation, marketing
assistance, or infrastructure
facilities and cluster
development of such
enterprises with a view to
strengthening backward and
forward linkages, specify,
by notification, such
programs, guidelines or
instructions, as it may deem
fit.
Section 10 of the MSMED
Act, 2002 reads as follows:
“…10. Credit Facilities.- The
policies and practices in
respect of credit to the
micro, small and medium
enterprises shall be
progressive and such as
may be specified in the
guidelines, or instructions
issued by the Reserve Bank,
from time to time to ensure,
timely and smooth flow of
credit to such enterprises,

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		minimize the incidence of
		sickness among and
		enhance the competitiveness of such enterprises…”
3.	Non	In exercises of the powers
	Adherence by	under Section 9 & 10 of the
	Respondent	MSMED Act, 2006, the
	Bank to the	Ministry of Micro, Small &
	provisions of	Medium Enterprises issued
	the MSME	notification no.S.O.1432(E)
	Master	dated 29.05.2015. The said
	Circular	circular inter alia provided
	dated	for (a) Framework for
	29.05.2015	resolution of Stressed
	including	Assets (b) Formation of
	facility of	Committee to implement the
	one-time	Framework (c) Provision of a
	restructuring	Corrective Action Plan for
	of loan	eligible MSMEs (d) Provision
	account:	for Restructuring of the
		eligible MSME loan account.
		The Applicant No.1 sole
		proprietorship was never
		given the benefit of the
		aforesaid circular as

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		averred in the instant SA on paragraph No.5(viii) on page No.5B of the instant SA.
3.	Non-	As per the aforesaid
	adherence to	provisions of the Section 10
	the beneficial	of MSMED Act, 2006, the
	provisions of	Reserve Bank of India
	circulars	issued a slew of circulars
	issued by RBI	from time to time
	issued during	immediately prior to and
	COVID-19:	during the pandemic period.
	Respondent	The Circulars are as
	bank	follows:
	declared the	i. RBI Circular dated
	loan Account	11.02.2020 [Exhibit G-
	as NPA	Page 35H-35I of the
	during COVID	Compilation of
		Documents]: This
		circular provided for
		one-time restructuring
		of MSME Loan
		accounts of upto 25
		crores that were
		standard until
		01.01.2020. The

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	Applicant No.1 loan
	account outstanding
	was less than 1 crore
	and was standard
	account as on
	01.01.2020. Despite
	this the Respondent
	bank did not extent the
	benefit of this circular
	and allow one-time
	restructuring.
ii.	RBI Circular dated
	06.08.2020 [Exhibit H-
	Page 35J-35K of the
	Compilation of
	Documents]: This
	circular extended the
	coverage of the
	11.02.2020 circular
	and called upon Banks
	not to classify the
	exissting standard
	accounts as NPA in
	view of the pandemic.
	Despite this circular

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	the Respondent Bank
	did not extend the
	benefit of this circular
	and allow one-time
	restructuring. Furthermore, the
	Respondent Bank
	illegally issued notice
	dated 12.11.2020 u/s
	13(2) of SARFAESI Act
	2002 despite being
	legally bound not to
	declare the loan
	account as NPA.
iii.	RBI Circular dated
	05.05.2021 [Exhibit I-
	Page 35L-35Q of the
	Compilation of
	Documents]: This
	comprehensive circular
	provided further
	directions to Banks to
	grant facilities which
	inter alia included (a)
	rescheduling of loan

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		repayment (b) conversion of interest
		accrued into any other
		credit facility (c)
		revisions in working capital sanctions, and
		(d)grant of moratorium.
		None of the above
		facilities were provided
		to the Applicant No.1.
		The Respondent Bank
		has allegedly taken
		symbolic possession of
		the 09.02.2021 which
		was in clear violations
		of the aforesaid
		Circulars which has
		the force of law and
		predominated over the
		provisions of
		SARFAESI.
4.	Non service of	Without prejudice to what is
	Notice under	stated above, even
	Section 13(4)	otherwise the Applicants
	of SARFAESI	were never served with

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¶106

	Act, 2002.	Notice dated 09.02.2021
		u/s 13(4) of the SARFAESI
		Act, 2002 whereby the
		Respondent Bank allegedly
		took symbolic possession of
		the secured asset. In
		absence of intimation
		regarding measures u/s
		13(4) the Applicants were
		not able to exercise their
		statutory remedy under
		section 17(1) of the
		SARFESI Act, 2002 as
		averred inparagraph 13 on
		page 6 of the Affidavit in
		Rejoinder dated 24.02.2023 filed by Applicants.
5.	Non Provision	The 13(2) Demand Notice
	of Details in	does not provide any details
	the 13(2)	of the loan. Section 13(3) of
	Demand	SARFAESI Act, 2002 clearly
	Notice	provided that “…(3) The
		notice referred in sub-
		section (2) shall give details
		of the amount payable by

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¶108

the borrower and the
secured assets intended to
be enforced by the secured
creditor in the event of non-
payment of secured debts by
the borrower….” The
Respondent Bank has
neither provided any details
of the outstanding claimed
in the 13(2) notice, nor
thereafter provided the
outstanding account
statements of the overdraft
account despite repeated
representations. Lack of
statutory details renders
the 13(2) Demand Notice
arbitrary, illegal and void
and results in the entire
SARFAESI proceedings
falling to the wayside as
averred in paragraph 17 on
page 8 of the Affidavit in
Rejoinder dated 24.02.2023
filed by the Applicants.

¶109

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¶110

CASE LAWS:

¶111

M/s. Transcore v. Union of India & Another – (2006) 5 CTC 753

¶112

24. …However, under Section 17(2), the DRT is required to consider whether any of the measures referred to in Section 13(4) taken by the secured creditor are in for enforcement of security accordance with the provisions of the NPA Act and the Rules made thereunder. If the DRT, after examining the facts and circumstances of the case and the evidence produced by the parties, comes to the conclusion that any of the measures taken under Section 13(4) are not in accordance with the NPA Act, it shall direct the secured creditor restore the possession,/management to the borrower (vide Section 17(3) of NPA Act).

¶113

: Defendants 1 and 2’s written arguments

¶114

(11) It is respectfully submitted on behalf of the respondent Nos. 1 and 2 that the Applicant No.1 had availed the OD facility of Rs.40.00 lakhs vide sanction letter dated 12.09.2017 and it is further admitted that in order to secure the aforesaid facility the Flat No. 903, 9^th Floor, C-wing, Nilgiri CHSL, Off Marol Road, Bamandaya Pada, Andheri

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¶116

East, Mumbai – 400 072 is mortgaged in the favour of the Respondent Bank.

¶117

(12) It is submitted on behalf the Respondent no.1 and 2 that the Applicant No.1 had availed the OD facility but had failed and neglected to repay the overdue amount, principal and interest and the account has been declared NPA on 30.06.2020 as per the RBI Guidelines and before the Hon’ble Supreme Court had passed the interim order.

¶118

(13) It is submitted on behalf the Respondent no.1 and 2 that the 13 (2) Notice dated 17.11.2020 for a sum of Rs.37,01,310.86 is issued by the Authorised Officer and the same is dispatched on 27.11.2020 to the Applicants which is filed alongwith the Affidavit in reply to the S.A.

¶119

(14) That the Respondent Bank had not received the Acknowledgement from the postal receipts regarding the packet containing the said demand notice sent to Applicants, the Respondent no.1 Bank has obtained the Tracking report from the Official website of the Postal department and as per the said Report all the 4 articles sent to Applicant nos.1 to 3 has been delivered, which is filed alongwith reply to the S.A.

¶120

(15) It is submitted that as per said Tracking report

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¶122

the Demand notice is duly served upon the Applicants. It is not a case of the Applicants that the Demand Notice is not served upon them. That it is alleged by the Applicants that they had received the Demand Notice and had given the representation and Respondent Bank had not complied with the section 13 (3A) which is incorrect as the Applicants had not annexed the alleged reply/ representation which is nothing but a vague and irresponsible statement without any documentary evidence. That the Respondent no.1 has not received any reply to the 13 (2) demand notice as claimed by them.

¶123

(16) It is submitted on behalf of Respondent no.1 and 2 the Applicants had failed and neglected to repay the outstanding dues within 60 days from the date of demand notice and the Applicants has not raised any objection to the said Demand Notice as per section 13 (3A) and therefore the Respondent bank have no option, but to proceed further under Securitization Act and therefore the Respondent Bank through Authorized Officer took the symbolic possession of the secured assets on 09.02.2021.

¶124

(17) It is submitted that the 13 (4) Possession Notice dated 09.02.2021 was sent to Applicants by

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¶126

Registered A/d. on 11.02.202 on the last known address which is mentioned in the said Notice. It is pertinent to mentioned herein that the Demand Notice under section 13(2) is received by the Applicants on the same address.

¶127

(18) It is submitted that the Respondent Bank had published the said Possession Notice in one of the local daily newspaper [MARATHI] namely Business Standard (English) and Tarun Bharat (Marathi) Dated 15.02.2021 and in one of the local daily newspaper (English) namely BUSINESS STANDARD dated 15.02.2021 and the said Possession Notice dated 09.02.2021 is pasted upon the secured assets on 09.02.2021 during that time none of the Applicants took objections nor they protested.

¶128

(19) With reference to the additional parties added by way of amendment, it is submitted that the Respondent no.2 is the authorised officer of the Respondent No.1 Bank. The Applicant has made the Respondent no.1 as necessary party through its authorised officer and therefore there is no need to make Respondent no.2 as necessary party twicely. With reference to Respondent nos.3 to 9 who are added as necessary party by way of

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¶130

amendment, but there is no reliefs against the said respondents.

¶131

(20) It is submitted on behalf of the Respondent nos.1 and 2 that the Applicants has admitted availment of credit facilities. That the Applicants had received the 13(2) Demand notice and therefore they had annexed the copy of the said notice under Exhibit “A” to the Securitisation Application. That the Applicants has also received the order dated 12.07.2022 Hon’ble Addl. Chief Metropolitan Magistrate and the same is annexed to the present Securitisation application.

¶132

(21) It is submitted on behalf of the Respondent nos.1 and 2 that the Applicants had amended the Securitisation Application after going through the Affidavit in reply filed by the Respondent no.1 to the Interim Application, which is nothing but after thought.

¶133

(22) It is submitted on behalf of the Respondent nos.1 and 2 that it is not correct to say that the respondent no.1 bank has not followed the provisions of MSME Act for classification of account as NPA. The account of Trident Impex having account number – 2912759960 & CRN – 229609080 was classified as NPA on 26/09/2020.

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¶135

Before the account was classified as NPA the account was identified as SMA, SMA – 1 & SMA - 2 (as defined under The Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises – S.O. 1432(E), dated 29^th May, 2015, 1. Identification of incipient stress). The current category the account falls under is Doubtful– 2. That the Respondent nos.1 & 2 had followed all the RBI guidelines regarding classification of NPA during the Covid 19 period and there is no violation/ breach of any guidelines and notifications issued from time to time. It is pertinent to mention herein that the Hon’ble Supreme Court in the Writ Petition (Civil ) no. 825 of 2020 in the matter of Gajendra Sharma v/s Union of India had tagged several matters regarding the NPA and had passed the common Order dated 03.09.2020, wherein it was held that the account which were not declared NPA till 31.08.2020 shall not be declared NPA till further order and the said Order was vacated vide Order 23.03.2021 and the Account of the Applicant no.1 was declared as NPA on 30.06.2020.

¶136

(23) It is submitted on behalf of the Respondent nos.1 & 2 that they had not violated the circular dated

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¶138

11.08.2020, 6.08.2020 and 05.05.2021. With reference to the MSME Act, the Applicants has not filed any application to the Committee for the Corrective Act plan or for restructuring the account and therefore there is no question of wilfully negligent for rectification and restructuring benefit. There is no case made out by the Applicants that the Respondent no.1 & 2 has not followed the MSME Act.

¶139

(24) With reference to the compensation and damage claimed by the Applicants there is not case made out by the Applicants that the physical possession taken by the Respondent nos.1 & 2 is illegal. That the Respondent nos.1 & 2 has obtained the Order under section 14 for taking physical possession of secured assets by putting all the correct facts, relevant documents and compliance Affidavit.

¶140

(25) With reference to dispute regarding the mortgage, the Applicants had createe mortgage of his/her Residential property being Flat No. 903, 9^th Floor, C-wing , Nilgiri CHSL, Off Marol Road, Bamandaya Pada, Andheri East, Mumbai – 400 072 and deposited the Original title deeds and the Original title deeds are in the custody of Respondent no.1 Bank.

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¶142

(26) It is pertinent to note that the Applicants in para no.5.(i) of the Securitisation Application had admitted about the availment of the credit facilities and had stated and admitted that the above mentioned financial assistance was secured by property situated at Flat No. 903, 9^th Floor, C- wing , Nilgiri CHSL, Off Marol Road, Bamandaya Pada, Andheri East, Mumbai – 400 072, but on contrary at the time of amendment the Applicants are deliberately disputing the mortgage by making vague statements. Once the creation of mortgage is admitted the Applicants do not have any right to dispute about the mortgage by amending the Securitisation application.

¶143

(27) That the Original title deeds of the secured are in the custody of the Respondent No.1 Bank and the mortgage created in favour of the Respondent No.1 Bank is valid and the contentions raised by the Applicants are false and fabricated.

¶144

(28) That one of the ground is that the Applicants has submitted the objections under section 13 ( 3 A) have not been considered at all, it is also stated that the Applicants has paid around 20 EMI and he is willing to pay the remaining EMI. After going through the aforesaid grounds everything is

¶145

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¶146

admitted by the Applicants but there is no illegality pointed out by the Applicants in the grounds. After amendment the Applicants has taken various grounds regarding the RBI Circulars and notifications, classification of account as NPA and various circular of MSME Act. The grounds taken by the Applicants are not sustainable in law and the Respondent nos.1 & 2 has already dealt with the contentions raised in the said ground in the above mentioned paragraphs hereinabove.

¶147

(29) It is submitted on behalf of respondent nos.1 & 2 that they took the Symbolic possession of the secured assets under section 13 (4) on 19.02.2021 and the present Securitisation Application is filed on 04.10.2022 and therefore the said prayer/relief sought by the Applicants are barred by law of limitation.

¶148

(30) With regard to the prayer of compensation of Rs.50 Lakhs, the Applicants has not made out any case for the said reliefs, as the Respondent no.1 and 2 has legally took the physical possession through the Hon’ble CMM Court.

¶149

(31) That the Applicants are playing all tactics and creating hurdle to delay the recovery proceeding/measures taken by the Respondent

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Bank against the secured assets by filing the present Application.

¶152

(32) It is submitted that the present total outstanding dues are Rs.50,86,824.01(Rupees Fifty Lakhs Eighty Six Lakhs Eight Hundred and Twenty Four and Paise One Only) as on 20.02.203 and therefore it is necessary to sell the secured assets in order to recover the outstanding dues. It is pertinent to note that Account name - Bipin Paswanath Shinde having account number HF37582100 & CRN – 43931031 has the property having address – ‘Flat No. 903, 9^th Floor, C-wing , Nilgiri CHSL, Off Marol Road, Bamandaya Pada, Andheri East, Mumbai – 400 072’ is mortgaged against it, thus the account of Trident Impex and Bipin Paswanath Shinde share a common collateral. The present total outstanding of Account name - Bipin Paswanath Shinde is Rs.43,69,933.66/- (Rupees Forty Three Lakhs Sixty Nine Thousand Nine Hundred and Thirty Three and Paise Sixty Six Only) as on 20.02.2023.

¶153

(33) It is submitted on behalf of the Respondent nos.1 & 2 that there is no merits in the Securitisation Application and the same is liable to be dismissed with heavy cost.

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¶155

(34) It is further submitted that the Applicants have not made any grounds and therefore the Applicants arenot entitled for the reliefs sought in the said Securitisation Application.

¶156

(35) It is respectfully submitted that the measures taken by Respondent No.1 and 2 for enforcement of security are in accordance with the provisions of the Securitization Act and the rules made thereunder and therefore the Applicants are not entitled for any relief from this Hon’ble Tribunal.

¶157

(36) In view of the above premises, it is humbly prayed that the Securitisation Application no.311 of 2022 may be dismissed with heavy cost.

¶158

(37) Defendant nos.1 and 2 filed pursis (exhibit-20) to state that the applicants’ counsel argued only on MSME Act and did not argue any facts under the SARFAESI Act.

¶159

Findings:

¶160

(38) NPA: According to the applicants, the 1^st defendant wrongfully or illegally classified their MSME units as NPA contrary to the RBI guidelines and MSME Act. The Securitisation Application as originally filed contains only three paragraphs, that is, 5(i) to 5(iii). It is necessary to reproduce paragraph nos. 5(i) to 5(iii):

¶161

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¶162

i. Applicant states that Kotak Mahindra Bank, Kalina, Santacruz East, Mumbai Branch, granted financial assistance in the form of Credit Facility amounting to Rs.40,00,000 vide loan account number HF2912759960 by a sanctioned letter dated 12.09.2017 and Loan agreement dated 31^st October, 2017 to the borrower Mrs.Purva Bipin Shinde and Mr.Bipin Paswanath Shinde. The abovementioned financial assistance was secured property situated at Flat No.903, 9^th Floor, C- Wing, Nilgiri CHSL, off Marol Road, Bamandaya Pada, Andheri East, Mumbai-400 072.

¶163

ii. Applicant states that Kotak Mahindra Bank, Kalina, Santacruz East, Mumbai Branch, issued a notice dated 17.11.2020, under Section 13(2) of SARFAESI Act, 2002, demanding a sum of Rs.37,01,310.86/(Rupees Thirty Seven Lac One Thousand Three Hundred Ten and Paise Eighty Six Only) as on 17.11.2020, with future interest at the contractual rate, on the aforesaid sum together with incidental expenses, costs, charges, etc. to be paid, failing which, bank

¶164

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¶165

would initiate further action.

¶166

iii. The respondent bank proceeded with taking over the secured assets under Section 14(2) of SARFAESI Act, 2002 and made an application before the Chief Metropolitan Magistrate, Esplanade Court, Mumbai and pursuant to that order was issued on 12.07.2022 and Court Commissioner was appointed by the order dated 15.09.2022.

¶167

(39) The applicants have also given a brief synopsis of the case on pages (A) to (C) of the Securitisation Application as originally presented. The Tribunal finds it necessary to reproduce the case put up in (a) to (j) of the synopsis:

¶168

(a) The Applicant is a businessman running a proprietor concern residing at 14/B, Vrindavan CHS Ltd., Marol Naka, Chimat Pada, Andheri-East, Mumbai-400 059.

¶169

(b) The Applicant was in need of financial assistance for business expansion and accordingly, he obtained financial assistance amounting to Rs.40,00,000 vide sanction letter dated 12.09.2017 and Loan Agreement dated 31^st October 2017 for Loan Account No.2912759960.

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(c) The applicant, as against the aforesaid financial assistance, created security interest in favor of Kotak Mahindra Bank by mortgaging the immovable property situated at “Flat No.C-903 on the 9^th Floor having area adm.652 sq. ft. in the building known as “Nilgiri Co-operative Housing Society Limited situated at CTS 16, Tunga Village, Bamandayapada, off Marol Military Road, Andheri East, Mumbai-400 072 in favour of the applicant.

¶172

(d) The applicant continued making payments of EMIs until Covid-17 struck the world.

¶173

(e) The applicant has made payments of around 20 EMIs and on account of the Covid 19 pandemic and enforcement of the Strict lockdown measured imposed by Union Government from March 2020 the applicant could not make payment of EMIs thereafter and is willing to pay of the balance. Not to be mentioned that the impact of the coronavirus pandemic on India has been largely disruptive in terms of economic activity as well as a loss of human lives. Almost all the sectors have

¶174

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been adversely affected as domestic demand and exports sharply plummeted.

¶176

(f) The applicant states that after receipt of the demand notice under section 13(2) of SARFAESI Act, 2002 dated 17.11.2020 he tried contacting the bank officials and customer care but he tried contacting the bank officials and customer care but he was not entertained on account of strict lockdown measures in place that continued until the beginning of the year 2022.

¶177

(g) As the effects of a pandemic were waning and market conditions are improving by the second of year 2021, the applicant was desirous of rescheduling the loan and in that context, he visited the bank on multiple occasions requesting the Bank to rescheduled the credit facility granted but all in vein and without putting the genuine efforts to restructure the loan which respondent was legally and morally bound to do but the otherwise chosen.

¶178

(h) Applicant states that, Bank chose a shortcut to recovery and decided to abuse the provisions and procedures laid down in

¶179

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¶180

the SARFAESI Act 2002.

¶181

(i) The Applicant is not denying the legal liability but the way respondent has initiated the legal procedure of SARFAESI without applying the judicial mind, it appears that the bankers are doing this with ulterior motives.

¶182

(j) The Applicant’s flat is being occupied by his members of the family and possession should not be disturbed in the interest of natural justice unless substantial dispute raised by the Applicant is not decided by this Hon’ble Tribunal.

¶183

(40) The grounds raised on pages (5) to (10) filed are also relevant to decide the issue of NPA. Therefore, the grounds of the unamended Securitisation Application are also reproduced below:

¶184

i) The Respondent Bank has not acted fairly and reasonably and has abused the power vested under the provisions of the SARFAESI ACT, 2002.

¶185

ii) The Respondent Bank has acted highhandedly and has wrongly issued a notice of the taking over of possession of the premises for forcibly removing the Applicant from the

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premises by abusing the due process established by law and precedents. It is a matter of record that the Applicant is occupying the said flat with his family and possession cannot be disturbed by abusing the process laid down in the SARFAESI Act.

¶188

iii) The Applicant is not denying the legal liability but the manner and design were applied by the bank has become a wrong in the eye of the law ls far interest and tenure loan is concerned. Hence, the Applicant’s possession may not be disturbed.

¶189

iv) The Applicant submits that action on the part of the Respondent is completely high-handed and arbitrary an despite being informed by the Applicant, rather than resolving the issues, they are moving in the direction to take forcible possession of the residential premises.

¶190

v) The Applicant submits that the Respondent is acting illegally and with mala fide intention.

¶191

vi) The notice issued under section 13(2) is not in conformity with the requirements of the section as it failed to list down the rights

¶192

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available to notices namely to make representation within 60 days. However, respondent bank has clearly mentioned all the obligations of applicants and their own rights but not even on word has been provide about the rights of applicants. This clearly goes to show that respondent was rushing through the mandatory procedure without intending to give any remedy under section 13(2).

¶194

vii) The respondent bank had directly proceeded with taking over physical possession through CMM and duly appointed court commissioner instead taking symbolic possession.

¶195

viii) There is a gross violation of Section 13(A) of the SARFAESI Act, 2002 and that representation/objections of the petitioner submitted under Section 13(3A), have not been considered at all and that bank has proceeded ex-parte to issue possession notice dated 17.11.2020 under Section 13(4) of the Act.

¶196

ix) Applicant states that he is not coming from legal background failed to understand the

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importance of giving written representation and is against the notice given under section 13(2) for consideration. There is gross abuse and disregard spirit of Sections 13(2) and 13(3A).

¶199

x) Applicant states that the manager of the bank purposefully agreed orally and did not insist on written representation within 60 days so they can absolve themselves from the liability of Section-13(3A) which is evident from the fact that there is time gap between notice under section 13(2) and 13(4).

¶200

xi) Applicant brings to the notice of Hon’ble court that object of the act clearly states “reconstruction of financial assets” after that word “enforcement of interests” has been provided. Bank seems to be more interested in enforcement of security interest as short cut method rather than proving genuine attempt to restructure which will be within the overall objects and spirit of legislation. Considerationof the representation/objections made under Section 13(3-A) of the SARFAESI Act, is mandatory, in ITC Limited Vs. Blue Coast Hotels Ltd., & others, reported in 2018

¶201

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¶202

(2) CTC 569, while declaring that Section 13(3-A) of the SARFAESI Act, 2002, as mandatory, at paragraph No.23, the Hon’ble Supreme Court held as hereunder “23. Subsection (3A) of Section 13 was introduced in the Act by the Parliament in pursuance of the following observations of this Court in Mardia Chemicals Ltd. v. Union of India, 2004 (2 CTC 759 (SC): 2004 (4) SCC 311. “45…. The purpose of serving a notice upon the borrower under sub-section (2) of Section 13 of the Act is, that a reply may be submitted by the borrower explaining the reasons as to why measures may or may not be taken under subsection (4) of Section 13 in case of noncompliance with notice within 60 days.

¶203

The creditor must apply its mind to the objections raised in reply to such notice and an internal mechanism must be particularly evolved to consider such objections raised in the reply to the notice. There may be some meaningful consideration of the objections raised rather than to ritually reject them and proceed to take drastic measures under subsection (4) of Section 13 of the Act. Once such

¶204

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a duty is envisaged on the part of the creditor it would only be conducive to the principle of fairness on the part of the banks and financial institutions in dealing with their borrowers to apprise them of the reason for not accepting the objections or points raised in reply to the notice served upon them before proceeding to take measures under sub-section (4) of Section 13.

¶206

Such reasons, overruling the objections of the borrower, must also be communicated to the borrower by the secured creditor. It will only be in fulfilment of a requirement of reasonableness and fairness in the dealings of institutional financing which is so important from the point of view of the economy of the country and would serve the purpose in the growth of a healthy economy. It would certainly provide guidance to the secured debtors in general in conducting the affairs in a manner that they may not be found defaulting and being made liable for the unsavory steps contained under sub-section (4) of Section 13.

¶207

At the same time, more importantly, we must

¶208

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¶209

make it clear unequivocally that communication of the reasons for not accepting the objections taken by the secured borrower may not be taken to give occasion to resort to such proceedings which are not permissible under the provisions of the Act. But communication of reasons not to accept the objections of the borrowers, would certainly be for the purpose of his knowledge which would be a step forward towards his right to know as to why his objections have not been accepted by the secured creditor who intends to resort to harsh steps of taking over the management/business of viz. secured assets without intervention of the court. Such a person in respect of whom steps under Section 13(4) of the Act are likely to be taken cannot be denied the right to know the reason of nonacceptance and of his objections. It is true, as per the provisions under the Act, he may not be entitled to the reasons challenge communicated or the likely actions of the secured creditor at that point of time unless his right to approach the Debts Recovery Tribunal as provided under Section 17 of the

¶210

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Act matures on any measure having been taken under sub-section (4) of Section 13 of the Act”. (Emphasis supplied)

¶212

xii) Applicant states that he has already paid around 20 EMIs and he is willing to pay the remaining EMIs and respondent need to take this case in humanly manner consider the covid 19 pandemic that affected rich poor alike.

¶213

xiii) The Applicant submits that grave and irreparable loss and harm has already been caused to the Applicant and his beloved family and further harm will be caused to him if the Respondent is not prevented from taking possession of the premises.

¶214

xiv) The Applicant craves, leave, to add amend, or alter any of the above-mentioned grounds as and when the need arises.

¶215

(41) The three paragraphs, synopsis or the grounds raised in the original S.A. does not disclose any challenge to the NPA classification. It is not the applicants’ case that (i) any subsequent events were brought on record or (ii) the amendment was explanatory in nature of the original cause of

¶216

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action.

¶218

(42) The applicants applied under section 17(1) by filing S.A. No.127 of 2022 before DRT-1 Mumbai and I.A. No.1270 of 2022. After the notification dated 04.10.2022, S.A. No.127 of 2022 stood transferred from DRT-1 to this Tribunal. On 11.10.2022 the secured creditor’s counsel submitted when the matter was called out that 1^st defendant took physical possession of the mortgaged flat. It appears that on 15.10.2022 the applicants preferred an appeal against the order dated 11.10.2023 before Hon’ble DRAT being Appeal (D) No.1085 of 2022 and I.A. No.1087 of 2022 for waiver of pre-deposit and I.A. No.1086 of 2022 for restoration of possession of the mortgaged flat. On 20.10.2022, the Hon’ble DRAT rejected the applicants’ request to restore possession of the mortgaged security. In November 2022, the applicants and their daughter filed Writ Petition (L) No.35273 of 2022 and raised the issue of NPA classification. On 02.01.2023, the applicants got I.A./1/2023 registered.

¶219

(43) The applicants may have taken the stand of wrong or illegal NPA classification before the Hon’ble DRAT in Appeal or the Hon’ble Bombay High Court

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in the Writ Petition. However, the reading of the synopsis, paragraphs 5(i) to 5(iii) and the documentary evidence originally filed with the presentation of the S.A. on 06.10.2022 shows that the applicants did not challenge the NPA classification or the RBI notification or the provisions of the MSME Act. For the first time, the applicants introduced a new case by challenging NPA by IA/1/2023. The parties did not argue IA/1/2023 on merits and by consent kept all the issues between them open by allowing IA/1/2023. (44) It is not the applicants’ case that the amendment was explanatory or elaboration to the cause of action pleaded originally. The applicants added defendants 2 to 9 without any allegations or pleadings or claiming reliefs against them or the relief claimed if any is without establishing the cause of action. By altering the original S.A., the applicants introduced in paragraph 5 subparagraphs (iv) to (xix) {pages 5A to 5E). The applicants introduced grounds (xv) to (xxxii) and inserted new prayers in paragraph 6 i.e. (vii) to (xvii). The applicants introduced prayers for interim relief in paragraph 7 i.e. (v) to (vii). The applicants introduced a substantial amendment to

¶222

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the original cause of action originally pleaded. The original cause of action is completely different from the newly introduced cause of action in the amended Securitisation Application. Admittedly, by the amendment, the applicants introduced a wholly new cause of action which changed beyond the recognition of the original cause of action. The issue then arises not of the procedure but of the jurisdiction to which the applicants’ counsel chose not to argue or respond.

¶224

(45) The 1^st defendant set up the case before NPA classification, the accounts are identified as SMA, SMA-1 and SMA-2 as defined under the Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises-S.O. 1432(E) dated 29^th May 2015. The applicants’ account falls under the category SMA-2. The 1^st defendant referred to the order of the Hon’ble Supreme Court in Writ Petition (Civil) No.825 of 2020 to state that it was held that the account which was not declared NPA till 31^st August 2020 shall not be declared as NPA stood vacated later on. The applicants failed to apply to the committee for the corrective action plan or the restructuring of the account.

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(46) The existence of the fact has to be appreciated from the evidentiary viewpoint regarding its relevancy. Evidence is material to prove or disprove specific facts in an issue. A fact is said to be proved when the court after considering the matter before it, either believes it to exist or does not exist or considers its non-existence so probable that a prudent man under the circumstances of the case would suppose it does not exist.

¶227

(47) The pleadings and material placed on record reveal that the applicants failed to establish by demonstrating the lapse or irregularity in the 1^st defendant’s accounting practice of non-performing assets. The applicants raised no complaint relating to the wrongful classification of the NPA or non-adherence to the RBI guidelines. Admittedly, the applicants or their authorized agent did not lodge any complaint based on the grounds now raised.

¶228

(48) The applicants neither pleaded nor established that the assessment of their account showed any sign of viability. From the pleadings and absence of any evidence, the Tribunal would opine that the applicants’ MSME unit was unviable and

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therefore, the secured creditor’s business and policy decision would mean that it is best to facilitate the enforcement of the mortgage securities before the position becomes worst. The applicants avoided saying what the nature of business or services they render and under which category the applicants are eligible to apply for restructuring the credit facilities.

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(49) In the present case, the applicants have not proved (neither proved nor disproved) the case of NPA. Upon scrutiny and judicial evaluation, the Tribunal finds the applicants' credibility guilty of suppressing facts or they are untruthful. The applicants neither pleaded nor established that (i) they applied on or before 30^th September 2021 to the 1^st defendant to invoke the resolution process and to assess their eligibility for the resolution plan and (ii) they put in their efforts to finalise the resolution plan vide clause (8) of the RBI circular dated 5^th May 2021.

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(50) In the Tribunal’s view, RBI’s circulars dated 11^th February 2020 and 6^th August 202 are broad guidelines. It was the economic policy decision made by RBI to mitigate Covid 19 impact. Even otherwise the reading of the circular does not

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appear to be a mandatory requirement. It is discretionary for the lending institution to decide on a case-to-case basis which is essentially a commercial decision based on financial consideration.

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(51) Most importantly, the applicants have used MSME Act as a tool to browbeat the secured creditor. After amending the S.A. the applicants placed on record (page 35A) the Udyam Registration Certificate which reveals the following details: (i) registration no.UDYAM-MH-18-0203154, (ii) incorporation date 1^st July 2017, (iii) commencement date 1^st July 2017, (iv) manufacturing of imitation jewellery and other related items, (v) manufacturing location and the office is shown as 14/B, Vrindavan CHS Ltd. Chimatpada, Marol Naka, Andheri Kurla Road, Mumbai-400059 and (vi) date of UDYAM

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registration 20^th December 2022 . Admittedly, the 1^st applicant was not recognized as an MSME unit as of the date of (i) the sanction letter dated 12^th September 2017, (ii) the loan agreement dated 31^st October 2017. (iii) mortgage creation, (iv) NPA classification i.e. 30^th June 2020, (v) the date of 13(2) notice dated 17^th November 2020, (vi) taking

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symbolic possession i.e. 9^th February 2021, (vii) the section 14 application, (viii) section 14 order dated 12^th July 2022, (ix) Writ of the commission issued by the Ld. CMM on 15^th September 2022, (x) 23^rd September 2022 when the advocate commissioner issued notice to take physical possession (xi) 6^th October 2022 when the S.A. was presented before DRT-1, and (xii) 12^th October 2022 when this Tribunal passed an order in IA/1270/2022. For the first time, the 1^st applicant obtained the UDYAM Certificate on 20^th December 2022 during the S.A.’s pendency.

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(52) The UDYAM certificate shows the applicants carry on the manufacturing business of imitation jewellery from their residence. Mr Nedumpara’s arguments revolved around the MSME Act only. No arguments were advanced on the facts of the MSME unit, the 1^st applicant’s business, the location of the MSME unit, etc. The Tribunal found the information from the document (page 35A) of the amended S.A.

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(53) MSME Act vs SARFAESI Act : According to the applicants the MSME Act shall prevail over the SARFAESI Act. In this context, the applicants’ counsel read out various provisions of the MSME

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Act. According to the secured creditor, the provisions of the MSME Act would apply to the vendors or suppliers of goods and services in that sector. Though MSME Act contains certain procedures to deal with the MSME unit it does not suggest that MSME Act shall override the SARFAESI Act. In this context, Mr Nagori relied upon the judgment in Kotak Mahindra Bank Limited v/s Girnar Corrugators Pvt. Ltd. & Ors. dated 5^th January 2023 passed in Civil Appeal No.6662 of 2022 at Hon’ble Supreme Court of India. After considering the RBI circulars, the MSME Act and the ruling of the Hon’ble Supreme Court in Civil Appeal No.6662 of 2022, the Tribunal opines that the applicants have failed to plead and establish their case of wrongful classification of the account as NPA.

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(54) The applicants’ counsel did not point out or argue the facts and merely relied upon the provisions of the law. As discussed above, the 1^st applicant applied for MSME registration during the S.A.’s pendency. How then the 1^st applicant is entitled to the benefit under the Act? The Tribunal is of the considered view that the applicants have failed to establish their case of eligibility under the

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MSME.

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(55) 13(2) notice and measures under section 13(4) : The applicants admit (i) the availing of the loan of Rs.40 lakhs (ii) the default committed by them, and (iii) 13(2) notice received. The applicants have no grievance relating to the authenticity, accuracy, precision and clarity of the statutory demand notice. It is not the applicants' case that the 13(2) notice is not well-grounded or is ambiguous. Therefore, the Tribunal is of the view that the contents are sufficient in the demand notice fulfilling the object, purpose and intent. The applicants found no lacunae or inaccuracies and considered the notice purposively. The applicants considered whether the 1^st defendant’s claim should be accepted or resisted. The applicants chose to accept the demand notice. Therefore, the applicants did not object to the 13(2) notice dated 17^th November 2020. The applicants disclosed their minds not to object to the symbolic possession taken by the authorised officer on 9^th February 2021. Thus, the applicants waived or abandoned or relinquished their legal rights to the so-called unlawful NPA classification, the demand notice and the measure under section

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13(4). The law laid down by the Hon’ble Supreme Court in Transcore versus Union of India, it is held that there is no dichotomy between symbolic and physical possession. The applicants made no grievance about NPA or demand notice or symbolic possession. The applicants’ acquiesced their rights by sitting in the mortgaged flat when defendants 1 and 2 invaded their legal rights. Thus, the applicants waived or relinquished their legal rights intentionally which would mean conscious abandonment with full knowledge of the thenexisting legal right, advantage, benefit, claim or privilege. The applicants’ case challenging the symbolic possession is time-barred. The applicants took no steps within forty-five days. Even after a lapse of forty-five days, the applicants did not apply to condone the delay. Thus, the applicants’ narrative in this regard cannot be accepted and stands rejected.

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(56) As far as the section 14 order is concerned, the applicants failed to challenge the order dated 12^th July 2022 passed by the Ld. CMM granting assistance to defendants 1 and 2 to take physical control of the mortgaged flat. The applicants failed to pray for restoration of the possession taken on

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or before 11^th October 2022.The photocopy of the Writ Petition placed before the Tribunal reveals that the applicants annexed thereto the downloaded digitally signed section 14 order dated 12^th July 2022. It bears the date 25^th July 2022. It means the applicants knew and possessed a copy of the section 14 order since 25^th July 2022. The applicants annexed the copy of the section 14 order in the Writ Petition filed on 14^th November 2022. On 4^th October 2022, the applicants originally filed S.A. 127 of 2022 before DRT-1. They had in their power, possession and custody a copy of the digitally signed section 14 order dated 12^th July 2022. Thus, the challenge to the section 14 order was time-barred as on the date of presentation of the S.A. before DRT-1. The applicants did not apply to condone the delay in this regard also.

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(57) Now coming to the reliefs claimed by the applicants, prayer 6(i) has become infructuous upon implementation of the notice.

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(58) The applicants’ counsel advanced no arguments challenging the 13(2) notice. Be that as it may, the applicants have failed to establish any illegality in the demand notice. Thus, the Tribunal is not

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inclined to grant relief in terms of prayer 6(ii) and 6(xv) part to the extent of 13(2), therefore, stands rejected.

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(59) The relief in terms of prayer clause 6(iii) and 6(xv) part to the extent challenge to symbolic possession is time-barred. The authorized officer took symbolic possession of the secured assets on 9^th February 2021 and the applicants presented S.A. on 4^th October 2022 way beyond 45 days. The applicants did not apply to condone the delay. Hence, prayer clause 6(iii) cannot be granted and stands declined.

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(60) The relief in terms of prayer clause 6(iv) is concerned, the applicants have neither pleaded nor adduced evidence. In the absence of pleadings and evidence the question of granting relief in terms of prayer clause 6(iv) does not arise and therefore, stands rejected.

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(61) Mr Nedumpara did not press for the relief in terms of prayer clause 6(vii) and therefore, it does not require any consideration.

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(62) The 1^st applicant got the UDYAM certificate on 20^th December 2022 i.e. during the S.A.’s pendency. The applicants have failed to establish that the 1^st applicant was a registered MSME

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before the sanctioning of the loan and eligible to restructure. The Tribunal has discussed the issue under the caption NPA and MSME and therefore, the Tribunal refuses to grant relief in terms of prayer 6(viii).

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(63) The applicants have neither pleaded nor established their case to compensate for their losses and injuries. In the absence of pleadings and evidence, the applicants are not entitled to relief in terms of prayer clause 6(ix) and 6(xii) therefore, stand rejected.

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(64) The applicants did not succeed in demonstrating and establishing that the secured creditor has no enforceable rights. The applicants admit the credit facility, the mortgage creation and default. The applicants failed to establish their case of MSME. The Tribunal is of the considered view that the secured creditor is entitled to enforce their rights under the SARFAESI Act read with the Rules. The Tribunal, therefore, declines to grant relief in terms of prayer 6(x) and 6(xi).

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(65) The applicants have not made out any case for a perpetual mandatory injunction and therefore, the Tribunal declines to grant relief in terms of prayer 6(xiii) and (xiv).

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(66) The applicants did not press for relief in terms of prayer clause 6(xvi) at the appropriate time and therefore, lost its relevance upon the final hearing.

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(67) Given the discussion above, pending I.A.’s stand disposed of with no order as to costs.

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(68) After examining the facts and circumstances of the case and evidence produced by the parties, the Tribunal concludes that the action and measures taken by the secured creditor are as per the provisions of the SARFAESI Act and the Rules made thereunder.

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