Dismissed

Ms J v. R Hotels and Hospitality Pvt. Ltd. v Ms Reliance Asset Reconstruction Company Ltd.

DRT19 Jan 2023SA/67/2022

Case brief

AI extract

What is this about?

In this securitization application, applicants challenged a revocation notice and auction proceedings initiated by the respondent under the SARFAESI Act. The Tribunal held that rejection of the reschedulement proposal was valid due to non-compliance with earlier terms and that it lacks jurisdiction to force the creditor to accept a settlement. Allegations regarding non-service of notices were reje

What did the court decide?

The Securitization Application is dismissed; interlocutory applications pending stand disposed.

Ms J v R Hotels and Hospitality Pvt. Ltd. versus Ms Reliance… — Company and Corporate | DRT (2023)

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IN THE DEBTS RECOVERY TRIBUNAL-IIAT HYDERABAD

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DATED THIS THE 19TH DAY OF JANUARY,2023

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PRESENT: SH. RAMESHWAR KOTHE,^{B.com,L.LB.(Hons'), M'A.} PRESIDING OFFICER

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Securitization Application No.67 OF 2022

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Between:

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M/s l,V.R. Hotels & Hospitality Pvt.^Ltd Rep by its Director Jitta Balakrishna Reddy Office at 3-72-92, Plot No.143 & 144 Rock Town, Mansoorabad, Hyderabad-500 068

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M/s l. Grill A partnership firm Rep by its Partner, litta Balakrishna Reddy S/o J, Bal Reddy, Aged 49^years Occ: Business, Plot No.50

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Yadavanagar Colony, Alkapuri Hyderabad, Telangana-500035

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M/s Rani Rudrama Boutique Partnership Firm rep by its Partner litta Balakrishna Reddy, S/o J. Bal Reddy Alkapuri, Hyderabad, Telangana-500 035

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M/s Hotel Green Lands Rep by its Proprietor J. Sunitha Reddy W/o J. Balakrishna Reddy, Aged 42^years Alkapuri, Hyderabad, Telangana-500 035

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q M/s Green Lands Dhaba Rep by its Proprietor J. Balakrishna Reddy S/o l. Bal Reddy, Aged 49^years Occ: Business, Alkapuri, Hyderabad Telangana-500 035

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Jitta Balakrishna Reddy, S/o l. Bal Reddy Aged 49 years, Occ:Business 3-12-92, Plot No.143 & 144 Rock Town, Mansoorabad, Hyderabad-500 068

Page 2 of 8

SA,No.67/2022

Jitta Sunitha Reddy, W/o Jitta Balakrishna Reddy Aged 42 years, Occ:Business, 3-L2-92 Plot No.143 & 144 Rock Town, Mansoorabad Hyderabad-500 068

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B. litta Jyothi Reddy, D/o Jitta Bal Reddy Aged 46 years, Occ:Business 3-L2-92, Plot No.143 & 144 Rock Town, Mansoorabad, Hyderabad-500 068

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Gogula Rani Rudrama Devi, D/o Pratap Reddy Aged 40 years, Occ:Business Flat No.209, Mahara Block, Garden Towers Masab Tank, Hyderabad-SO0 038

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..,....Applicants.

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And

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M/s Reliance Asset Reconstruction Company Ltd Rep by its Authorized Signatory Having Office at 11th Floor, North Side R-Tech Park, Western Express Highway Goregaon East, Mumbai-400 063.

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M/s Reliance Asset Reconstruction Company Ltd Rep by its Authorized Officer

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Having its Branch Office at 2nd Tower

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RNG Tower, Anna Salai, Nandanam Chennai-600 035.

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Counsel for the Applicants :Mr. Peri Venkata Ramana Counsel for Respondent :Mr. M. Srinivas

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-TORDER:-

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The Applicants filed the present Securitisation Application u/s.17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter ',the Act,, for short)to declare revocation notice/proceed ings dated 26.03.2021 revoking sanction of reschedulement of dues letter

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Page 3 of 8

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SANo.67l2O22

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dated 02.10.2020 and to set aside proceedings initiated under Sec.13(4) of the Act fixing e-auction on 19.01.2022 pursuant to notice dated 09.L2.2021 issued by the respondents 1 and 2 (hereinafter "respondent").

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The case of the applicants is that the 1st applicant is a private limited company represented by its Managing Director who is the 6th applicant. He is also partner of 2nd,3'd and 5th applicant firm. The 7th applicant is the proprietor of 4th applicant. The 9th applicant is partner of 3'd applicant and guarantor of the loan. The Bth applicant is also guarantor and co-owner of the secured asset. The applicants are involved in various businesses. They availed six types of loan facilities originally from M/s Lakshmi Vilas Bank Limited, Malkajgiri Branch and subsequently assigned to the 1't respondent along with security interest i.e., SA schedule property under assignment deed dated 23.01.2018. Due to ups and downs in their businesses, there was delay in repayment. At the request of the applicants, the 1't respondent agreed for OTS at Rs.11,50,00,000/- payable in scheduled instalments out of which, they could pay Rs.6,95,00,000/- but due to onset of COVID-19 and lockdown, there was entirely^no business and hence no further^payment could be made.^The applicants gave a representation to^reschedule of^settlement keeping in view the situation and the^{1't respondent accepted the} same and withdrew the SARFAESI notice dated^18.08.2020. According to reschedulement, there is time^{tillthe 1st} 25.03.2022 for clearing the entire^{settled amount. However, the} 1't respondent issued revocation of^{OTS under letter dated} 26.03.202L. even after revocation^{letter, the applicants paid} Rs.1,10,00,000/-and^gave a^{representationdated 02.t2.2021lo} N*

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Page 4 of 8

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sANo.67l2O22

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wait for balance^payment till March, 2022. The 1't^respondent rejected the request and advised the applicants to^{submit a fresh} OTS^proposal. However, the 1tt respondent^{issued 30 days notice} of sale dated 03.12.2021 followed by^{public notice} of^e-auction fixing auction on 19,01.2022. The e-auction notice said to^have been issued on 09.12.2021 was not served on^{the applicants and} they came to know only on 07.07.2022 and immediately^{filed WP} No.1981 of 2022. The^property was undervalued and the^reserve price fixed at Rs.19,00,00,000/- which is worth about Rs.100 crores and such fixation of reserve^price is against^{Rule B(5) of} the Security Interest^{(Enforcement)} Rules, 2002^(hereinafter referred to as "the Rules") and sale of secured asset^by undervaluing is against the^judgement of^Hon'ble Supreme^Court in l. Rajiv Subramaniyan and Anr vs, M/s Pandiyas and Ors caseThe demand notice dated 04.01.2020 u/s 13(2) is^void as^it was not issued as^prescribed in Sec.13(3), details of^principal and interest components, repayment etc., were not mentioned as per principles laid down by the Hon'ble Supreme Court in Mardia Chemicals case. The alleged possession notice dated 21.09.2021 was neither served on applicants nor affixed on the secured as per Rule 8(1) of the Rules. No separate notices have been issued under Rules 8(6) and 9(1) of the Rules as observed by the Hon'ble Supreme Court in Canara Bank vs. M.Amarender Reddy case. Hence this SA.

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J.') The respondent filed reply statement submitting that the six types oF loans availed by the applicants between 2013 to 2015 have been assigned to them from M/s Lakshmi Vilas Bank Limited vide assignment deed dated 23.01.2018. At the time of sanction of loan, the applicants executed all loan documents and N*'

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Page 5 of 8

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SANo.67l2O22

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mortgaged the SA schedule property as a security. As on 16.70.2022 the outstanding dues were Rs.17,62,31,315.34 ps. The applicants failed to honour the OTS terms, the respondent issued revocation letter dated 26.03.2021 and there exists no OTS as on today. Whatever payments made have been appropriated to the loan accounts. The allegation of undervaluation of the property is incorrect. The applicants obtained stay order from the Hon'ble High Court by submitting the demand notice amount of only one account i.€., Rs.3,61,74,9271- instead of the entire outstanding amount of Rs.17,62,31,315.34 ps in all six loan accounts. The auction was not conducted on 19.01.2Q2 in view of stay granted by the Hon'ble High Court. The applicants were served all notices and the respondent issued reply to the objections raised by the applicants. Hence the SA is liable to be dismissed.

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Heard learned counsel appearing for the applicants and the learned counsel for the respondent. Perused the material documents placed on record.

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During the course of arguments, learned counsel for the applicants while reiterating the averments made in the application further submits that the applicants complied the order passed by the Hon'ble High Court in WP No.198l of 2022 and paid Rs.2,70,00,000/- and also filed the SA within time granted by the Hon'ble High Court. The learned counsel stresses on the point of revocation of OTS and submits that the same is against the Principles of Natural Justice as the applicants paid substantial amounts towards OTS. They ought to have approved the fresh/reschedulement of OTS proposal. The respondent is proceeding to auction the property without providing opportunity

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Page 6 of 8

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sANo.67l2O22

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toapplicantstosettletheaccountsandWithoutServingstatutory notices and therefore,^{all the measurestaken right from issuance} ofdemandnoticearetobesetaside.Withthesubmissions, learned counsel^{prays to allow the SA'}

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On the contrary,^{the learned counsel for the respondentbank} made submissions^{on similar lines of replystatement and further} adds that as the^{applicantsfailed to adhereto the OTS terms'the} reschedulement of^{OTS proposal was not accepted' As the very} auction was not^{conductedon 19.01.2022in view of directions} passed by the Hon'ble High Court^{in WP No.1981 of 2022, the SA} has become infructuous.^{All the amounts paid by the applicants} have been appropriated^{to the loan accounts.The respondent has} scrupulously followed^{the procedurelaid down in the provisions of} the SARFAESI Act and^{the Rules framed thereunderin issuing,} serving, affixing and^{publishingthe notices and there is no} deviation of^{procedureprescribedin the Act and the Rules of} 2002 while^{proceedingagainst the secured asset for realization of} secured debt. With^{these submissions,learned counselsought for} dismissal of the SA.

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Now, the^points that arise for consideration are;-

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(i) Whether the applicant made out any^{valid groundfor} setting aside the^proceedings initiated by the^respondent bank under the SARFAESI Act and^{Rules framed} thereunder in proceeding against the SA^schedule property?

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dw*

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(ii) To what relief?

Page 7 of 8

sANo.67/2022

Point No.(i):-

B. The applicants are not disputing availment of various credit Facilities originally from M/s Lakshmi Vilas Bank Limited by creating mortgage over SA schedule property as a security which came to be assigned to the respondent along with security under Assignment Deed dated 23.01.2018.

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According to respondent, the auction scheduled on L9.0L.2022 was not conducted as the applicants complied the conditions as directed by the Hon'ble High Court in Wp No.19Bt of 2022. In view of this, the prayer with regard to auction sale pursuant to sale notice dated 09.12.2021 does not survive.

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The principal contention of the applicants is that the respondent ought to have accepted the reschedulement of OTS proposal keeping in view the substantial amounts paid towards previous OTS schemes approved by it. Admittedly, no OTS proposal is pending as on today as the respondent rejected the reschedulement proposal as submitted by the applicants. The revocation and rejection oF reschedulement of OTS proposal was due to non-compliance of approved OTS terms and therefore, the respondent's decision to reject reschedulement cannot be faulted. However, this Tribunal has no jurisdiction to force or direct the secured creditor to accept one time settlement proposals. The banks are guided by the policies of the Reserve Bank of India. Hence, the relief sought for in this regard cannot be considered.

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The next plea of the applicants is non-service of necessary notices. The respondent placed on record copy of documents along with its reply statement. The demand notice dated ffi*>

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Page 8 of S

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sANo,, rzo22

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31.05.2021^{and possession notice dated 21'09'2021weresent} by registered^{post to the applicants and publishedin two} newspapers,^{one in Telugu and one in English' Referringto the} demand^{notice and possession notice, Mr' litta Balakrishna} Reddy, Director^{of lst applicant company submitted a letter dated} 02.12.2027 on^{behalf of all applicants requestingthe respondent} to^give time^{till March, 2022 lo pay the balancescheduled} instalments of^{oTS and to drop SARFAESI proceedings.copy of} this letter finds^{place at page 116 and page 54 of the material} documents filed^{along with reply statement of respondent and} application of^{the applicants respectively'The respondent bank} asserts that it^{causedaffixture and publication of all necessary} notices and duly^{followed the procedureof law' Therefore'the} contention with^{regard to non-serviceof notices does not deserve} accePtance.

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In view of the^{above discussion, I find that the applicantsfalled} to make out any^{valid grounds to set aside the measures taken} by the respondent^{against the securedasset' Accordingly,the SA} is liable to be dismissed.

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Point No.(ii):

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In the result, the Securitization^{Application is dismissed'}

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t4. Consequently, the^{InterlocutoryApplications pendinq if any, shall} stand disposed.^{No orderas to costs. Communicate a copy of this} order to the^{parties concerned'}

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(Dictated to the PS, tronscribed by^{him'corrected, signed} ond pronounced by^{me in} the open court^{on this the 79th day of Jonuory,202j).}

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Kn$ (RAMESHWAR KOTHE) PRESIDING OFFICER

Ms J v. R Hotels and Hospitality Pvt. Ltd. v Ms Reliance Asset Reconstruction Company Ltd.

Case brief

What is this about?

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Ms J v. R Hotels and Hospitality Pvt. Ltd. v Ms Reliance Asset Reconstruction Company Ltd.

Case brief

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What the court decided

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