Dismissed

Hitesh S Patel v. Punjab National Bank

DRT19 Nov 2024SA/18/2024

Case brief

AI extract

What is this about?

The Tribunal dismissed applications challenging sale notices issued by PNB for recovery of dues from three borrower firms. The court held the applicant, an incoming partner, lacked locus standi as the properties were firm assets acquired before his induction, and his IBC moratorium status did not bar the sale.

What did the court decide?

SA-18/2024 and SA-19/2024 dismissed; parties to bear their own costs.

Hitesh S Patel versus Punjab National Bank — Insolvency and Bankruptcy | DRT (2024)

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IN THE DEBTS RECOVERY TRIBUNAL – I AT CHENNAI

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Dated this 19^th Day of November. 2024

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PRESENT: SHRI A.S.JAYACHANDRA

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Presiding Officer

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S.A. No.18 & 19 of 2024

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Mr.Hitesh S.Patel,

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S/o Shivgan K. Patel, PVH, Lumbini Square, 12^th Floor, III Block, Flat No.3123, No.127, Brick Kilin Road, Purasawalkkam, Chennai – 600007. . . . Common Applicant

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Versus

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Punjab National Bank, No.46-49, 4^th Floor, PNB Tower, Royapettah High Road, Chennai – 600014. . . . Common Defendants Counsel for Applicant :- M/s.R.Roshan, Counsel for Respondent :- M/s.M.L.Ganesh

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: - PROCEEDINGS DT.19.11.2024 - :

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File taken up today upon mentioning by the counsel for the Applicant Sh.Roshan, Adv.

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Defendant by Sh.M.L.Ganesh,Adv a/w Ms.Satya,Adv

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Since the SA-18/2024 & SA-19/2024 are identical based on the same facts and the law pleaded being the same, both are taken up together to be disposed by a common order.

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Though there is no caveat filed by the bank, the ld panel counsel Sh.M.L.Ganesh present in the Court is asked to represent the defendant bank.

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: - COMMON ORDER - :

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The Applicant herein challenges the sale notice issued by the defendant bank dt 30.10.2024 fixing the sale to be held on 20.11.2024 between 11 am to 4 pm. The sale notice is issued on behalf of the four banks for recovery of Rs.281,79,69,709.01/along with the interest.

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The main contention of the Applicant is that he is a partner in one of the borrower firms namely M/s Prabath Saw Mill and that the SBI had already approached the Hon’ble NCLT under section 95 of the IBC code against him and the moratorium is inforce. Therefore it is urged that the defendant bank cannot proceed with the property. It is also urged that the firm has no separate entity and is inseparable with the partners .Therefore the moratorium comes into picture. The grounds urged is that section 96 of IBC comes into play and that the Applicant becomes a co-owner of the firm. The demand notice issued is not in accordance with rule 5 and further the possession notice was not served, not affixed and did not comply with rule 8(1) and 8(2) of the SIE rules. There is no clear 15 days notice and further section 13(8) of the act is not followed. Therefore it is pleaded that pre sale notice having not issued, the sale notice is against the rules framed.

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On the other hand the ld counsel for the bank had urged the following points to controvert the arguments advanced by the ld counsel for the Applicant.;

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a. Earlier sale notices issued dt 22.08.2018, 6.2.2019, 29.2.2020, 30.3.2020, 22.7.2020, 14.9.2020.

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b. With these earlier sale notices, the question of 30 days notice does not arise.

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c. As regards the breakup of outstanding amounts . The same are found in the sale notice itself.

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d. OA- 324/2017 disposed on 20.11.2018 crystallized the debt which is not revealed in the SA. The same is suppressed.

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e. Property owned by three different firms which are put to sale in SA-18/2024 cannot be challenged by the Applicant and he does not have the locus being not the exclusive owner.

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f. The property in question in the sale notice is nothing to do with the Applicant since these properties belong to the firm in which the Applicant had joined after 20.12.2007 and this Applicant cannot lay a claim since he was inducted only on 20.12.2007 (M/s Prabath Saw Mill).

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g. As regards M/s Maruti Saw Mill, this Applicant is a stranger and not a partner.

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h. As regards M/s Bhavani Saw Mills – same is the situation.

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i. Moratorium does not come into operation since the proceedings initiated by the SBI against this Applicant is in his individual capacity and not as the partner of any of the certified debtor firms.

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He submits that this Applicant has no locus to question the sale notices since the sale notices are issued for recovery of a crystallized debt against the certified debtors who are the firms. He also points out that except being inducted as incoming partner in the firm namely M/s Prabath Saw Mills, this Applicant is no where connected with the other two certified debtors namely M/s Maruti Saw Mills and M/s Bhavani Saw Mills. It is also argued that the properties in question which are put to auction are all belong to the partnership firms and the same were purchased by the firms prior to the induction of this Applicant into one of the firms. The ld counsel points out to the sale notice that the mortgagors are three different firms. He submits that since the Applicant is not the partner in other two firms, he cannot maintain the present SA.

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It is also argued that the question of applicability of the moratorium does not come in the way of the present intended sale since the Applicant is no where connected to the properties in question.

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The ld counsel for applicant had relied on the following rulings.

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I. The Commissioner of Income tax Vs AW Figgies and company 1954

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SCR 171 to submit that the partners of the firm are distinct from the firm while the firm as such is a separate and the distinct unit for the purposes of assessment of the income tax act though it is held that “ it is true that under the law of partnership a firm has no legal existence apart from its partners.”

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II. The Commissioner of Income Tax vs R.M.Chitambaram Pillai 1977 AIR

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SC 489 wherein it was held that “ the necessary inference from the premise that a partnership is only a collective of separate persons and not a legal person in itself--- no person being is own servant in law since a contract of service postulate two different persons.

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III. Chokalingam Vs Authorised Officer WP No-127/2009 DD 30.7.2009 wherein the Division bench of Hon’ble High Court had held that Section 13(8) gives a right to the borrower to tender the outstanding amount with costs, charges and expenses any time before the sale. Under such circumstances the borrower/debtor must be in a position to know the actual outstanding amount“. This ruling is relied to urge that the sale notice does not specify the amount due, and statutory time allowed to repay.

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The ld counsel for the bank relied on Ramesh Kumar Chugh Vs. Assets Care

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& Construction Enterprises Limited NCLAT , Principal Bench, New Delhi. Company

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Appeal (AT) (Insolvency) No.1726 of 2024 DD 15.10.2024 to submit that the assets held in the name of the partnership firm is not the personal property of the Applicant and cannot be subjected to the interim moratorium merely because section 95 application has been filed against a partner of the firm in respect of a personal guarantee given for a party other than the partnership firm.

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He also submits that the rulings relied by the ld counsel for the Applicant are all concerning with regard to the assessments under income tax act which separates the firm and the partners and the firm is assessed besides the partners.

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It is also contended by the bank that the initiation of section 95 IBC proceedings is by SBI in the personal capacity of the present Applicant . The same cannot be held as operating against the present certified debtors since the

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proceedings arose in respect of M/s Prabath International Ltd which is totally a different entity- an Overseas borrower to which this Applicant is connected. Therefore he submits that section 95 does not come into operation in view of the

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ruling of Ramesh Kumar Chugh (Supra) .

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It is also urged that the bank had issued several sale notices earlier and the applicability of section 13(8) does not arise at all. Since the Applicant is aware of the intending actions of the banks under sarfaesi act. Furthermore it is also urged that the ruling in M.Chokalingam (supra) is rendered prior to the amendment to section 13(8). It is vehemently submitted that a staggering amount of Rs.281,79,69,709.01 is involved in the SA-18/2024 and a sum of Rs.148,28,32,826 is involved in SA-19/2024.

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SA-19/2024 is filed challenging the sale notice issued by the bank with regard to the separate properties of course belonging to all the three firms. The borrower includes M/s Prabath resources Ltd and M/s Prabath International Ltd. and also the three firms mentioned in the sale notice in SA-18/2024.

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After hearing the ld counsel, the locus of the present Applicant needs to be addressed to challenge both the sale notices. The point for determination is whether the SAs are maintainable at the behest of the present Applicant.

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To answer this point in the wake of the pleadings and the arguments at the Bar, this Tribunal is conscious of the fact that there has been a decree passed in OA324/2017 by DRT-2 Dt 20.11.2018. Therefore the aspect of recovery of public money cannot be ignored.

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The Applicant has no role in M/s Maruti Saw Mill and M/s Bhavani Saw mill and he is not a partner nor connected in any ways who are certified debtors and the sale notice is issued comprehensively for recovery of the debt arising out of the decretal final order.

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The certified debtors are aware of the earlier sale notices and this Applicant who claims to be the partner in M/s Prabath saw mill cannot plead ignorance to take shelter under section 13(8) of the act.

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Further the aspect of law on the applicability of the moratorium does not affect the execution of the final orders against the other two entities, as held in Ramesh Kumar Chugh (Supra) .

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The Applicant was inducted later into the firm of M/s.Prabath Saw mill and the properties intended to be sold in SA-18/2024 were purchased prior to his induction as an incoming partner. Some of the properties are purchased after his induction also. Nevertheless these are not the personal properties of the Applicant but belonged to the certified debtor partnership firms in the OA decreed.

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In view of the above, this Tribunal is of opinion that the Applicant cannot maintain the present SAs in the capacity as he pleaded in the backdrop of the facts and circumstances. Thus both the SA’s lack merits.

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18. Consequently the following;

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SA-18/2024 and SA-19/2024 stands dismissed. Parties to bear their own costs.

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Sd/- (A.S.JAYACHANDRA) PRESIDING OFFICER DRT-I, CHENNAI

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(Dictated to Assistant who typed in the system, corrected, signed and pronounced in open court on this 19^TH Day of November, 2024)

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Hitesh S Patel v. Punjab National Bank

Case brief

What is this about?

What did the court decide?

Hitesh S Patel v. Punjab National Bank

Case brief

What is this about?

What did the court decide?

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