Sriharan Sripathmanathan, represented by his Power of Attorney Mr. E. Sivanandam v. Edelweiss Asset Reconstruction Company Limited

DRT21 May 2024SA/9/2024

Case brief

AI extract

What is this about?

The DRT-I Chennai rejected the special application for maintainability under Section 17(1) of the SARFAESI Act. The court held the matter sub-judice before the NCLAT regarding the sale notice and resolution plan rights, finding no independent challenge to SARFAESI measures to justify jurisdiction.

What did the court decide?

The notice to other defendants is dismissed as the SA is rejected as not maintainable.

Sriharan Sripathmanathan, represented by his Power of Attorney… — Specific Performance | DRT (2024)

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IN THE DEBTS RECOVERY TRIBUNAL –I AT CHENNAI

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Dated this 20^th Day of May, 2024

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PRESENT: SHRI A.S.JAYACHANDRA

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Presiding Officer

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S.A. No.9 of 2024

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Mr.Sriharan Sripathmanathan,

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Repd. By his Power of Attorney Mr.E.Sivanandam,

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No.33, Karpagavinayagar Koil Street,

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Kandanchavadi,

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Chennai – 600096.

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M/s.Asiana Hotel Management Company PTE Limited, Having its Regd. Office at:

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No.17, Phillip Street,

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#0501, Grand Building,

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Singapore – 048695.

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. . . Applicants

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Versus

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Edelweiss Asset Reconstruction Company Limited, Having its Regd. Office at: Edelweiss House, Off CST Road,

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Kalina, Mumbai – 400098.

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M/s.Malabar Hotels Private Limited,

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Having its Regd. Office at: #1/238, Old Mahabalipuram Road,

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Semmencherry,

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Chennai – 600019.

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Mr.Sarang Sudhakar Kale, Director – M/s. Malabar Hotels Private Limited, Flat No.2, Gangadhar Chambers, 314, Narayan Peth, Pune – 411030.

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M/s.Kaleidoscope Projects Private Limited, Having its Regd. Office at: Flat No.2, Gangadhar Chambers, 314, Narayan Peth, Pune – 411030.

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Edelweiss Finvest Limited,

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Having its Regd. Office at:

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Tower 3, Wing B, Kohinoor City Mall, Kohinoor City, Kiral Road, Kurala (West), Mumbai – 400070.

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. . . Defendants

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Counsel for Applicant :- Sri. Arivandan for M/s.J.Parimalam, Sai Sathyajith Counsel for Defendant No.1 :- Ld. Sr. Counsel Sh.Ravi a/w Ms.Subitsha. Counsel for Defendant No.2 to 5 :- Notices dispensed.

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: - PROCEEDINGS / FINAL ORDER Dt:-20.05.2024 - :

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File taken up today upon mentioning by the Counsel for applicant Sh.Aravindan, Adv

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IA- 92/2024 for emergent hearing.

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Heard and allowed.

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IA-93/2024 for stay and IA-91/2024 for injunction.

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The IA for injunction with a prayer to restrain the defendant from proceedings further arising out of the E-Auction sale notice is nothing but the duplication of the prayers sought in IA-93/2024. Hence the IA-91/2024 stands dismissed as superfluous on record.

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Heard on the IA-93/2024 .

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Considering the peculiar facts of the case notices to the other defendants are dispensed, except Defendant No.1 – who is represented through the Ld. Counsel.

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There was a caveat as submitted by the ld Senior Counsel Sh.Ravi, through VC. The briefing Counsel Ms.Subhitsha is appraised that the caveat is returned for curing the defects which is not complied.

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However with the consent of the Ld Counsel appearing for the applicants, the caveator is also heard.

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Heard on the maintainability, in view of the peculiar facts of the case which are being discussed herein.

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The applicants 1 and 2 are not the borrowers nor the guarantors but the third parties to the SARFAESI action, initiated by Defendant No.2.

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It is their case that the second defendant herein represented by the third defendant had borrowed certain loans from defendant no - 5. The said defendant no-5 had assigned the debt in favour of defendant no-1.

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The defendants 3 and 4 are the current shareholders of the defendant no-2. The Ld Sr Counsel submits that they are guarantors also.

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The Ld Counsel for the applicant Sh.Aravindan submits that his clients are the aggrieved persons by the intended sale, published by the defendant no-1 concerning three immovable properties which belongs to the defendant no-2 – borrower.

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The interest/legal right canvassed by the applicants is that the applicants are entitled for redemption of their preferential shares to be converted into the equity shares to the extent of about twenty-twenty five crores. Such a right had accrued in favour of the applicants consequent to the reconstruction plan approved by the Ld NCLT in MA-264/2018 dt 17.9.2018. Under the said plan, the applicants had to wait for gestation period of six years. However the said order of resolution plan was implemented but certain contraventions were complained by these applicants. They

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have filed IA-1174/2021 in MA-264/2018 before the Ld. NCLT, Chennai and also filed one more IA in the said forum to stop the SARFAESI proceedings.

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The ld NCLT by its order dt 29.3.2022 had ordered for Forensic Audit in IA1290 and IA-1174/2021. The said order is challenged by the first defendant and third defendant herein before the Hon'ble NCLAT, Chennai in Company Appeal no-125 and 185/2022. It is pleaded that the said appeals were withdrawn by the defendants 1 and 3 and therefore Forensic Audit report was accepted and to be considered for objections if any before the Ld. NCLT, Chennai.

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It is further pleaded that after considering the report of the Forensic Audit, the ld NCLT had dismissed IA-1174/2021 and IA-1290/2021 filed by these applicants for setting aside the further proceedings arising out of the resolution plan including the challenge made to the possession notice before the NCLT ( not before the DRT).

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The ld Counsel Sh.Aravindan further submits that these orders dt 11.8.2023 is challenged before the Hon'ble NCLAT in CA no-354/2023. In the said appeal itself, these applicants had further sought for a stay of intended sale and the sale notice issued by the defendant no-1 dt 6.5.2024 under Rule 8(6) and Rule 9(1) of the security interest rules. The matter is sub-judice before the Honble NCLAT.

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It is further pointed out that the applicants have sought for a stay order of the sale notice before the Hon'ble NCLAT during the vacations. The Hon'ble NCLAT by an order dt 15.5.2024 had passed the following order:-

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―O R D E R (Hybrid Mode)

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15.05.2024: This Company Appeal (AT)(CH)(Ins) No. 354 of 2023 was taken upon a mention being made by the learned Counsel for the Appellant expressing an exigency through I.A. No. 433 of 2024 for taking this Company Appeal for consideration, of the interim relief application, out of turn during vacation, under an apprehension that in

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pursuance to the Auction Notice as published on 06.05.2024, the auction is scheduled to be held on 22.05.2024.

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In this Company Appeal, as preferred under Section 61 of I&B. Code, challenges the order dated 11.08.2023, it has been passed by the learned Adjudicating Authority in IA(IBC)/1174(CHE)/2021, as well as, in IA(IBC)/1290(CHE)/2021 in MA/264/IB/2018 in TCP/198/IB/2017. By virtue Company Appeal (AT)(CH)(Insolvency) No. 354 of 2023 & I.A. No. 433 of 2024 Page 2 of 3 of the impugned order dated 29.03.2022 which was under challenge, the Applications as preferred, stood rejected and was subjected to challenge in Company Appeal (AT)(INS) Nos. 125 and 185 of 2022 respectively. The Company Appeals were dismissed as withdrawn by the Order of the Appellate Tribunal dated 19.01.2023 and 10.01.2023. As consequence thereof, audit report was opened and parties were directed to receive the copy of the same and to file their objection to the said audit report.

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The Order Sheet of the Appellate proceeding of the instant Company Appeal (AT)(CH)(Ins) No. 354 of 2023, reflects that it had been argued on a number of occasions and no Interim Order was passed by the Court and another important fact is that neither the earlier e-auction dated 22.09.2023, was ever put to challenge by the Appellant, nor any Interim Order was sought against the same and the records further reveal that auction was shown to be conducted on 26.10.2023.

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Be that as it may, since in this Company Appeal, the date has already been fixed by the Registry on 19.07.2024, let this application be placed for its consideration on the date already fixed. The factum of pendency of this Application and its consideration on the date already fixed, it will be open for the Appellant to bring to the knowledge of concerned authority.

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Company Appeal (AT)(CH)(Insolvency) No. 354 of 2023 & I.A. No. 433 of 2024 Page 3 of 3 Put upon 19th July, 2024.

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[Justice Sharad Kumar Sharma]

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Member (Judicial)

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[Mr. Jatindranath Swain] Member (Technical)‖

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The Ld Counsel for the applicant submits that thus the matter is sub-judice before the Hon'ble NCLAT which felt that ―it will be open for the appellant to bring to the knowledge of the concerned authority‖ regarding the factum of pendency of the applications.

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The ld Counsel points out that the matter pending before the Hon'ble NCLAT was duly brought to the knowledge of the defendant no-1 authority by email dt

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17.5.2024 and since there is no communication or response, he approaches this Tribunal.

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The Ld Sr. Counsel Sh.Ravi appearing for the defendant no-1 submits that this application is not maintainable under Section 17(1) of the SARFAESI Act since the applicants have not challenged the ―measures‖ and only if the measures are challenged by any person, this Tribunal assumes the Jurisdiction. Therefore it was argued that the SA is not maintainable.

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13) Section 17(1) reads as under:-

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(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, 1[may make an application along with such fee, as may be prescribed] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken:—

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The Law as found in Section 17(1) provides for any person who is aggrieved by any of the ―measures‖ taken under the act by the authorised officer could approach the Tribunal.

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In order to understand what is that challenged in the present ―lis‖ is gathered from the grounds. The omnibus allegations that the E-Auction sale notice is totally illegal, malafide and voidable except that the matter is ‗sub-judice‘ cannot be equated with questioning the measures under the act. The other grounds are also perused. The same revolves around the earlier proceedings before the Ld NCLT and Hon'ble NCLAT concerning the adoption of the resolution plan and certain fraudulent activities alleged against the third defendant, the genesis of the Forensic audit and the rights arising in favour of these applicants under the resolution plan which were all dealt by the competent forum of Law under IBC.

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After perusal of the grounds urged, this Tribunal does not see any challenge made to the measures initiated by the authorised officer under the SARFAESI Act and

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the security interest enforcement rules. Therefore the notices to the other defendants would be only a futile exercise by admitting this application on the grounds made out to lay a challenge to the sale notice issued by the defendant no-1 dt 6.5.2024. However it is made clear that the authorised officer shall take note of the pending proceedings before the competent higher forum of Law i.e, The Hon'ble NCLAT, Chennai. This tribunal is of the considered view that after hearing the ld Counsel on either side that since the matter is coming up before Hon'ble NCLAT on 19.7.2024 and no grounds having been made out to interfere under section 17 of the act, the SA is not maintainable. Consequently the following:

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The SA-9/2024 stands rejected as not maintainable, since the matter is sub-judice before the Hon'ble NCLAT, Chennai in CA No-354/2023. Thus the IAs are closed.

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

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(Dictated to the Assistant on the system corrected, signed and pronounced by me on this 20^th day of May, 2024)

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Sriharan Sripathmanathan, represented by his Power of Attorney Mr. E. Sivanandam v. Edelweiss Asset Reconstruction Company Limited

Case brief

What is this about?

What did the court decide?

Sriharan Sripathmanathan, represented by his Power of Attorney Mr. E. Sivanandam v. Edelweiss Asset Reconstruction Company Limited

Case brief

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What did the court decide?

What the court decided

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