Gujarat High Court
M/S Kasturi Commodity Pvt. Ltd vs Chief Manager, Union Bank Of India on 5 October, 2021
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
C/SCA/17942/2019 ORDER DATED: 05/10/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 17942 of 2019
With
CIVIL APPLICATION (FOR VACATING STAY) NO. 1 of 2021
In R/SPECIAL CIVIL APPLICATION NO. 17942 of 2019
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M/S KASTURI COMMODITY PVT. LTD.
Versus
CHIEF MANAGER, UNION BANK OF INDIA
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Appearance:
MR C B UPADHYAYA(3508) for the Petitioner(s) No. 1,2,3
MR CZ SANKHLA(3243) for the Respondent(s) No. 1
NOTICE SERVED BY DS(5) for the Respondent(s) No. 2
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 05/10/2021
ORAL ORDER
Heard learned advocate Mr.Kirtan H. Mistry for learned advocate Mr.C.B.Upadhyaya for the petitioners/applicants and learned advocate Mr.C.Z.Sankhla for the respondent No.1.
Order in Special Civil Application :
1. It was submitted by learned advocate Mr.Mistry that learned advocate Mr.C.B.Upadhyaya is in charge of the matter and he is not available to argue the matter and learned advocate Mr.Mistry refused to assist the Court and submitted that it is only learned advocate Mr.Upadhyaya who can assist the Court in the matter and therefore, this Court is left with no alternative but to proceed the matter on merits.Page 1 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022
C/SCA/17942/2019 ORDER DATED: 05/10/2021
2. The facts of the case are peculiar which would be advent from the order passed by this Court on 15.10.2019 which reads as under :
"1. In this petition under Article 226 of the Constitution of India, the main prayer of the petitioner reads as under:
"(B) To direct the respondent No.1 herein to grant permission to the petitioners to sell off the mortgaged properties through 100% cheque money, subject to the condition that the total amount received out of the sale proceeds of such properties shall be directed deposited in the bank and may further be pleased to quash and set aside the securitization proceedings initiated by the respondents including Section 13(2), 3(4) and 14 proceedings."
2. The facts are as under.
3. Pursuant to availing of a credit facility with the Union Bank of India and pursuant to a proceedings under the SARFAESI Act, 2002, the total outstanding that the petitioner was required to pay an amount of Rs.56,40,16,564.97. This amount is apparent from the notice of the bank dated 09.04.2018 to take possession of the assets of the petitioner.
4. It appears that on 26.07.2019, the bank held a meeting with the petitioners wherein it was mutually agreed between the petitioners and the officials of the bank that the petitioners pay Rs.38.40 crores within two years. The minutes of the meeting which is annexed at page 42 of the petition, indicate that pursuant to the drawing of such minutes by the officials of the bank, the petitioners were called for a discussion for payment schedule and upfront money. On 20.08.2019, a request was made by the petitioner that since amount of Rs.2.30 crores was lying in the bank as fixed deposit, the upfront payment of 10% should be deducted/adjusted from the fixed deposits and SUD/KBC policies.
5. The Bank by a letter of 29.08.2019 refused to consider the request of an OTS on the ground that an upfront 10% minimum amount has not been deposited by the borrower.
6. The petitioner immediately addressed a letter on 07.09.2019 Page 2 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022 C/SCA/17942/2019 ORDER DATED: 05/10/2021 offering properties for sale and also impressing upon the respondent-bank that they already had an amount of Rs.2.3 crores which could have been appropriated towards the 10% of the OTS amount.
7. A letter dated 04.10.2019 together with the letter of prospective buyer Savina Developer and the certificate of the Union Bank at page 53 would indicate that in addition to the prospective buyer's deposit/cheque, an amount of Rs.3,80,11,000/- is lying with the Union Bank of India the respondent.
8. Prima-facie, therefore what appears to be evident is that the communication of bank dated 29.08.2019 rejecting the proposal of the OTS on account of the petitioner not depositing the 10% of the amount, needs reconsideration in view of Rs.2.3 crores already lying as Fixed Deposit which the petitioner has requested to be appropriated towards 10% amount plus the amount of Rs.3.80 crores (approximately) deposited by the prospective buyer.
9. Today, Mr.Kavina learned Senior Counsel states that the proceedings under Section 14 of the SARFAESI Act, 2002, are already in progress and the hearing is scheduled for today.
10. Issue NOTICE to the respondents, returnable on 11.11.2019. In the meantime, the proceedings before the respondent no.2 are not stayed. However, no final order be passed thereon till the returnable date. The petitioner shall participate in the proceedings before the respondent no.2. Direct service today is permitted. "
3.1. Learned advocate Mr.Sankhla for the respondent-Bank submitted that after passing of the aforesaid interim-order on 15.10.2019, the petitioners have not cared to proceed with the matter. It was further pointed out that as a last chance, as further remedy was not available with the respondent-Bank, the respondent-Bank was constrained to file a Civil Application for vacating the interim-relief.Page 3 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022
C/SCA/17942/2019 ORDER DATED: 05/10/2021 3.2. It was submitted by learned advocate Mr.Sankhla that the petitioners are the borrowers and the guarantors who have mortgaged their immovable property as security in the account where the recoverable amount as on 30th June, 2021 is to the tune of Rs.66,39,08,664/- (Rupees Sixty-Six Crore Thirty Nine Lakhs Eight Thousand Six Hundred Sixty Four Only) 3.3. It was also pointed out by learned advocate Mr.Sankhla that the account of the petitioners with the respondent was classified as Non-
performing Asset as per the RBI guidelines and notices under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'the SARFAESI Act') was served upon the petitioners and thereafter the application under Section 14 of the SARFAESI Act was filed.
3.4. Learned advocate Mr.Sankhla pointed out from the affidavit-in-reply filed on behalf of the respondent-Bank that the petitioners have suppressed material facts about pendency of the Securitisation Application NO.313 of 2019 before the Debt Recovery Tribunal-II, Mumbai wherein the Tribunal after hearing the learned advocate for the petitioners by order dated 12.09.2019 permitted the respondent-Bank to proceed with taking physical possession of the secured assets on condition that if the petitioners do not Page 4 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022 C/SCA/17942/2019 ORDER DATED: 05/10/2021 deposit Rs.3.80 Crores being 10% of the outstanding dues as per the one time settlement scheme.
3.5. Learned advocate Mr.Sankhla also pointed out that by letter dated 12.09.2019, the petitioner No.1 was informed that as per the communication received from the higher office that the forensic auditors have reported that there is diversion of fund in the accounts of the petitioners due to suspected frauds in the account, the one time settlement scheme dated 26th July, 2018 was cancelled.
3.6. Learned advocate Mr.Sankhla relied upon the following decisions to submit that there is an alternative efficacious remedy available to the petitioners under Section 17 of the SARFAESI Act and therefore the petition filed by the petitioners is required to be dismissed and interim-relief is required to be vacated :
(1) Authorised Officer, State Bank of Travancore and Ors. V/s. Mathew K.C.1 "HEAD NOTE: -
"BANKING - STAY ORDER - CHALLENGED THEREOF - SECTION 13(4) OF SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 (SARFAESI ACT) - PRESENT APPEAL FILED AGAINST ORDER WHEREBY HIGH COURT STAYED FURTHER PROCEEDINGS UNDER SECTION 13(4) OF SARFAESI ACT ON DEPOSITING REQUIRED AMOUNT - WHETHER HIGH COURT JUSTIFIED IN STAYING FURTHER PROCEEDINGS."
1 AIR 2018 (SC) 676 Page 5 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022 C/SCA/17942/2019 ORDER DATED: 05/10/2021 FACTS "THE LOAN ACCOUNT OF THE RESPONDENT WAS DECLARED A NON- PERFORMING ASSET (NPA). DESPITE REPEATED NOTICES, THE RESPONDENT BR LED AND NEGLECTED TO PAY THE DUES. STATUTORY NOTICE WAS ISSUED TO THE RESPONDENT. THE OBJECTIONS WERE CONSIDERED, AND REJECTION WAS COMMUNICATED BY TEH APPELLANT, POSSESSION NOTICE WAS THEN ISSUED UNDER SECTION 13(4) OF THE SARFAESI ACT. A WRIT PETITION WAS FILED WHEREIN THE HIGH COURT STAYED FURTHER PROCEEDINGS UNDER SECTION 13(4) OF SARFAESI ACT UPON DEPOSITIONG THE REQUIRED AMOUNT. HENCE, PRESENT APPEAL WAS MADE.
HELD (I) "IT IS THE SOLEMN DUTY OF THE COURT TO APPLY THE CORRECT LAW WITHOUT WAITING FOR AN OBJECTION TO BE RAISED BY A PARTY, ESPECIALLY WHEN THE LAW STANDS WELL SETTLED. ANY DEPARTURE, IF PERMISSIBLE, HAD TO BE FOR REASONS DISCUSSED, OF THE CASE FALLING UNDER A DEFINED EXCEPTION, DULY DISCUSSED AFTER NOTICING THE RELEVANT LAW. IN FINANCIAL MATTERS GRANT OF EX- PARTE INTERIM ORDERS COULD HAVE A DELETERIOUS EFFECT AND THE AGGRIEVED HAD THE REMEDY EFFECT AND THE AGGRIEVED HAD THE REMEDY TO MOVE FOR VACATING THE INTERIM ORDER. LOANS BY FINANCIAL INSTITUTIONS ARE GRANTED FROM PUBLIC MONEY GENERATED AT THE TAX PAYERS EXEPESE. SUCH LOAN DID NOT BECOME THE PROPERTY OF THE PERSON TAKING THE LOAN, BUT RETRAINS ITS CHARACTED OF PUBLIC MONEY GIVEN IN A DIDUCIARY CAPACITY A ENTRUSTEMENT BY THE PUBLIC. TIMELY REPAYMENT ALSO ENSURES LIQUIDITY TO FACILITATE LOAN TO ANOTHER IN NEED, BY CIRCULATION OF THE MONEY AND COULD NOT BE PERMITTED TO BE BLOCKED BY FRIVOLOUS LITIGATION BY THOSE WHO CAN AFFORD THE LUXURY OF THE SAME."
(2) United Bank of India v/s. Satyawati Tondon & Ors.2 "HEAD NOTE No. (IV) "CONSTITUTION OF INDIA, 1950, ARTICLES 226 AND 227 - RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT; 1993, SECTION 19 - SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTERST ACT,2002, SECTIONS 13(2), 13(4) AND 17 - WRIT PETITION --MAINTAINABILITY OF - ALTERNATIVE REMEDY - AVAILABILITY OF - DEBTS DUE TO BANK - ACCOUNT OF BORROWER CLASSIFIED AS NON PERFORMING ASSET - DISPITE NOTICE AMOUNT DUE NOT PAID --BANK ISSUED NOTICE TO GUARANTOR UNDER SECTION 13(4) TO PROCEED WITH THE MORTGAGE PROPERTY -- NON AVAILABILITY OF ALTERNATIVE REMEDY AND GUARANTOR APPROCHED HIGH COURT THROUGH WRIT PETITION - HIGH 2 2010 (8) SCC 110 Page 6 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022 C/SCA/17942/2019 ORDER DATED: 05/10/2021 COURT RESTRAINED BANK FROM PROCEEDING AGAINST THE GUARANTOR ~ WHEN ALTERNATIVE REMEDY WAS AVAILABLE, HIGH COURT OUGHT NOT TO HAVE ENTERTAINED WRIT PETITION - GUIDELINES ISSUED TO THE HIGH COURTS."
PARAGRAPH NO. 27'IT IS A MATTER OF SERIOUS CONCERN THAT DESPITE REPEATED PRONOUNCEMENT OF THIS COURT, THE HIGH COURTS CONTINUED TO IGNORE THE AVAILABILITY OF STATURY REMEDIES UNDER THE RDDBFI ACT AND SARFAESI ACT AND EXERCISE JURISDICTION UNDER ART. 226 FOR PASSING ORDERS WHICH HAVE SERIOUS ADVERSE IMPECT ON THE RIGHT OF BANKS AND OTHER FINANCIAL INSTITUTIONS TO RECOVERY THEIR DUES. WE HOPE AND TRUST THAT IN FUTURE THE HIGH COURTS WILL EXERCISE THEIR DISCRETION IN SUCH MATTERS WITH GREATER CAUTION, CARE AND CIRCUMSPECTION."
3.7. Relying upon the settled legal position, learned advocate Mr.Sankhla submitted that the interim-relief which is in favour of the
petitoners as per the order dated 15.10.2019 is required to be vacated forthwith.
4. I have heard the learned advocate for the respondent-Bank as learned advocate for the petitioners refused to assist the Court in the matter. I have also perused the material on record thoroughly and have considered the memo of the petition including the grounds stated therein and I could not find any averment made by the petitioners with regard to the pendency of the of the Securitisation Application filed by the petitioners before the Debt Recovery Tribunal under Section 17 of the SARFAESI Act. Thus, the petitioners have suppressed material facts before this Court and have not disclosed the order passed by the Debt Recovery Tribunal-II, Mumbai in Securitisation Application No.313 of 2019 on Page 7 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022 C/SCA/17942/2019 ORDER DATED: 05/10/2021 12.09.2019 and preferred this petition by affirming an affidavit on 11.10.2019. In such circumstances, as the petitioners have made material suppression, interim-relief granted by this Court is required to be vacated forthwith.
5. On perusal of the averments made by the petitioners, in the memo of the petition the petitioners have only relied upon the one time settlement scheme of the respondent-Bank and highlighted that after sanction of the one time settlement scheme by the respondent-Bank on 26th July, 2019, the respondent-Bank could not have withdrawn or cancelled the sanction given by it.
6. The petitioners have made following averments with regard to the factual aspects in the petition as well as the grounds which are raised in the petition are also reproduced to highlight the conduct of the petitioners for suppression before this Court :
"3.1. The petitioners herein are engaged in the business of iron re-rolling and ship breaking at Bhavnagar. For the purpose of running the aforesaid business the petitioner had applied for various financial facilities for the respondent no. 1 bank in 2007 in two different accounts namely Kasturi Commodities Pvt. Ltd. As well as Kamarli Steels Pvt. Ltd. In the year 2007. The said financial facility was in the form of cash credit facility, letter of credits and bill discounting facility including others. In accordance with the request made by the petitioner, loan facility in terms of cash credit and letter of credit (import) came to be sanctioned to the tune of 85 crores in Kasturi Commodities Pvt. Ltd. And 20 crores in Kamarli Steels Pvt. Ltd.
3.2. It is submitted that in light of the aforesaid the petitioners herein were utilizing the aforesaid facility from Page 8 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022 C/SCA/17942/2019 ORDER DATED: 05/10/2021 time to time until both the aforesaid accounts came to classified as NPA accounts in the year 2017. It is to be noted that for the period of more than 10 years the petitioner herein have made regular payments for the financial facility utilized by them. However, as a result of demonetization in the year 2016 as well as due to implementation of GST, the overall market scenario for iron business slowed down and the petitioner started facing financial difficulties. As a result of same on 31/12/2017 the account came to be classified as NPA. It is pertinent to note that the petitioner herein had made various attempts to regularize the account and after 31/12/2017, an amount of Rs 5.35 Crores has been paid in the bank. However, as a result of market trend, the petitioner could not regularize the aforesaid account.
3.3. In light of the facts that the aforesaid account came to be classified as NPA, on 17/01/2018 the respondent no.1 bank was pleased to issue a demand notice to the tune of Rs. 56,40,16,564.97 to gather with contractual rate of interest from 01/10/2017 within a period of 60 days. It is also to be noted that the aforesaid notice under the provisions of the Section 13(2) of the SARFASI, the twelve immovable properties which were mortgaged with the bank were all mentioned. It is submitted that considering the fact that the petitioner were not in position to discharge the liability as indicated in the demand notice, the respondent bank was pleased to issue possession notice under Section 13(2) of the Act on 09/04/2018. It is further submitted that subsequently some payment came to be made by the petitioner and therefore the possession of the premises was not taken over at the relevant point of time. However again on 01/11/2018 possession notice came to be issued by the bank in line with notice dated 09/04/2018. It is further submitted that the petitioner tried to arrange and make payments but however could not clear the whole outstanding amount and has made various attempts to settle the account by requesting the bank for restructuring of the loan or making OTS proposals. It is submitted that various OTS proposals were submitted by the petitioner on 15/10/2018, 17/11/2018 and 01/12/2018, for an amount of Rs. 20crores, 26.25 crores and 30 crores respectively. The same came to be rejected by the respondent bank on 03/11/2018 and 30/11/2018 respectively however the last proposal dated 01/12/2018 was not rejected and remain pending. Copies of the OTS proposals dated 15/10/2018, 17/11/2018 and 01/12/2018 as well as the rejection by the bank dated 03/11/2018 and 30/11/2018 are collectively annexed herewith and marked as ANNEXURE-B COLLY to the present petition.
3.4. It is further submitted that however, the bank had taken possession of one of the immovable properties located at Mumbai valued at approximately 12 crores in the year 2018. Apart there from the bank has initiated actions under the provision of section 14 of the SARFASI by way of application dated 02/05/2019. It is submitted that the District Magistrate was pleased to issue notice upon the petitioner on 01/08/2019 and the same was kept on 13/08/2019. It is submitted that the Page 9 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022 C/SCA/17942/2019 ORDER DATED: 05/10/2021 District Magistrate however, was transferred and the new district magistrate has already taken charge and now the aforesaid matter has been now kept for hearing on 15/10/2019.
3.5. It is further submitted that considering the fact that the petitioner has were continuously trying to convince the bank for OTS, the respondent bank was pleased to consider the request of the petitioner and was pleased to accept the OTS of the petitioner on 26/07/2019 and the said OTS was finally accepted for an amount of 38 crores. The copy of the said acceptance of OTS dated 26/07/2019 is annexed herewith and marked as ANNEXURE-C to the present petition.
3.6. It is submitted that if the proposals submitted by the petitioners are perused, from the very beginning it was the stand of the petitioner that the petitioner may be permitted t sell off the property which are mortgaged with the bank and with the clear understanding that all the sale proceeds of the said transactions shall be done through 100% cheque money and the same shall be deposited in the bank.
3.7. It is pertinent to note that in pursuance of repeated endeavors on the part of the petitioner the respondent no. 1 was pleased to accept the OTS proposals and in pursuance of the said OTS dated 26/07/2019, the petitioner submitted a letter to the effect that for settlement of the account against an amount of 38 crores, initial 10% payment shall be adjusted against an FDR of Rs 2 crores which is lying with the bank and the petitioner shall deposit the remaining amount from sale proceeds of one of his properties. The copy of the said letter dated 20/08/2019 is annexed herewith and marked as ANNEXURE-D to the present petition.
3.8. It is further submitted that apart therefrom the petitioner also submitted two different proposal on 16/08/2019 and 03/09/2019 in furtherance to the OTS agreed upon dated 26/07/2019. However, the respondent no.1 bank by way of letter dated 29/08/2019 indicated that minimum 10% upfront amount has not been paid by the petitioner and therefore that proposal dated 16/08/2019 could not be accepted. The copies of proposals dated 16/08/2019 and 03/09/2019 as well as communication of the bank dated 29/08/2019 are collectively annexed herewith and marked as ANNEXURE-E COLLY to the present petition.
3.9. It is submitted that on 07/09/2019 the petitioner requested the respondent no.1 bank to provide terms and conditions of OTS in accordance with OTS proposal accepted dated 26/07/2019. It is to be noted that as of now the bank has not provided any terms and conditions and therefore the petitioner had submitted their proposals. Copy of the said letter dated 07/09/2019 is annexed herewith and marked as ANNEXURE-F to the present petition. It is further submitted that in pursuance of the letter dated 29/08/2019, which was received on 11/09/2019, from the bank, the petitioner requested the bank to permit the petitioner to sell off Page 10 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022 C/SCA/17942/2019 ORDER DATED: 05/10/2021 property bearing plot no. 2197 A-1 and 2197 A-2 as well as 2197 B situated at Bhavnagar as the petitioner could find out a customer who was ready and willing to buy the aforesaid property for an amount of Rs. 9.27 crores. It was also indicated to the bank that as a bonafide gesture, the probable buyer of the aforesaid property has deposited an amount of Rs.
3. Crores with the same bank at Bhavnagar branch bearing account no. 313701010037751. It is further submitted that it was also mentioned that as per the OTS the total period agreed upon by the bank was of 2 years and therefore the remaining amount of Rs. 5.47 crores, from the said deal shall be deposited within a period of 150 days. It was also mentioned that the amount which is lying in the account of the probable buyer to the tune of Rs. 3.8 crores which comes to 10% of the OTS amount shall be immediately transfer from the account of the probable buyer to the loan account of the petitioner. It is also submitted that the petitioner also is ready and willing to transfer FDR amount of Rs. 2 crores lying with the bank along with the amount of Rs. 3.8 crores with immediate effect. However, in spite of the aforesaid, the aforesaid request the respondent bank is not granting permission to sale of the property so as to enable the petitioner to deposit the aforesaid amount from the account of the probable buyer to the loan account. It is also submitted that the probable buyer has also provided a written proposal on 04/10/2019 along with a certificate from the Union Bank i.e. respondent no.1 herein that an amount of Rs. 3.80 crores are deposited and lying in the account of the probable buyer. Copies of the letter dated 04/10/2019 written by the petitioner, as well as the written confirmation given by the probable buyer dated 04/10/2019 and the certificate disused by the bank certifying that an amount of Rs. 3.80 crores is lying with the Union Bank of India dated 04/10/2019 are collectively annexed herewith and marked as ANNEXURE-G (COLLY) to the present petition.
3.10. It is therefore submitted that inte of the fact that the OTS of the present petitioner has been accepted by the bank and the same has been permitted to make a payment over a period of 2 years to the tune of 38 crores as OTS, and considering thfact that as on date the petitioner is ready and willing to make a payment to the tune of Rs.3.8 crores as upfront payment against permission of Sale of property as well as Rs.2 crores lying as FOR with Union Bank within a weeks time from the permission granted by the bank and the petitioner is also ready and willing to deposit the amount of Rs. 5.47 crores within a period of 150 days and in addition thereto the petitioner has also ready and willing to file an undertaking to the petitioner shall deposit the entire amount with the bank, the bank is not willing to grant permission for sale of one of the mortgaged properties situated at Bhavnagar. It is also to be noted that the respondent no.1 bank has already taken possession of one residential premises situated at Mumbai which is valued approximately at Rs.12 crores. Therefore considering the present aspect the petitioner is constrained to approach this Hon'ble court for appropriate directions.Page 11 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022
C/SCA/17942/2019 ORDER DATED: 05/10/2021 3.11. It is further submitted that the petitioner though ready and willing to deposit the aforesaid amount I.e. to the tune of Rs. 11.47 crores and also undertakes to make the payment of the remaining amount of Rs. 26.73 crores over a period of 2 years from the date of grant of permission to sale of the property by the bank, the petitioner is still facing securitization proceedings under the provisions of section 14 before the district magistrate.
4. Therefore considering the aforesaid facts and circumstances the petitioner is constrained to approach this Hon'ble court seeking appropriate directions and protections from this Hon'ble court.
GROUND A. It is submitted that the properties which are mortgaged with the bank by the petitioners are the properties owned by the directors of the petitioner no. 1 company. It is pertinent to note that in spite of the mortgage, with the Bank the ownership of the properties cannot be disputed and the sale transaction of the properties shall be the prerogative of the owners of the property. It is submitted that under the provisions of the Transfer of Properties Act, the sale transaction of any property which is mortgaged shall be considered a valid sale, Therefore, the action of the Bank of not granting permission to the petitioner to sell off certain properties that too only with a sole motive of depositing the said amount with the Bank is unfair on the part of the Bank.
B. It is further submitted that though the OTS came to be accepted by the Bank for an amount of Rs.38 crores to be paid over a period of two years and from the very inception one of the conditions submitted by the petitioners in the OTS proposals was that the petitioners may be permitted to sell off properties which are mortgaged through 100% cheque money and the same shall be deposited with the Bank, under this situation restraining the petitioners from transferring the property would only hinder the bonafide intention of the petitioner to fulfill the OTS obligations and fulfillment of its financial liabilities towards the Bank.
C. It is further submitted that out of the 12 properties mortgaged with the Bank, one property i.e. the residential premise of the petitioner situated at Mumbai which is valued at Rs.12 crores, has already been taken possession of by the Bank and the same is lying with the Bank as on date, Apart therefrom, the petitioner is ready and willing to make a payment of Rs.11.27 crores upfront over a period of 150 days. Therefore, if the Bank grants permission, it would be conducive for the petitioner to enter into honest sale transaction with probable buyer, resulting into fulfillment of OTS terms and conditions.Page 12 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022
C/SCA/17942/2019 ORDER DATED: 05/10/2021 D. It is submitted that inspite of the fact that the OTS of the petitioner has been accepted and the petitioner is ready and willing to make the payment upfront as indicated hereinabove, the petitioner is facing securitization proceedings under the provisions of Section 14. It is pertinent to note that one of the residential premises where the petitioners reside with their old parents is also sought to be taken over by the Bank by virtue of the aforesaid proceedings. Therefore, this Hon'ble Court may kindly be pleased to take a humanitarian approach and direct the Bank to grant permission to the petitioners to sell off the properties which are otherwise owned by the petitioners so as to meet with the OTS obligations.
5. The petitioner has not filed any other petition either in this Hon'ble Court or in the Hon'ble Supreme Court of India in the subject matter of this petition otherwise than what is stated herein above.
6. The petitioner craves leave of this Hon'ble Court to amend, alter, delete, or rescind any of the aforesaid grounds /paragraphs as and when necessary in the interest of justice."
7. As against the above averments made in the petition, the respondent-Bank has categorically made following averments on oath in affidavit-in- reply :
"04. I say that the Petitioners have not come with the clean hands before this Hon'ble Court and suppressed the material facts and on this ground alone present Securitization Application is required to be rejected. It is submitted that the petitioners already availed the remedy u/s. 17 of the SARFESI Act, 2002 by filing the SA no. 313/2019 before the Ld. Debt Recovery Tribunal-II, Mumbai at Vashi and prayed for interim order and accordingly the same was heard by the Ld. Presiding officer (i/e) and vide order dated 12/09/2019 decided the Interim Application and granted the time to the Petitioners to deposit Rs.3.80 Crores before 12:00 noon of 18/09/2019, failing which Bank will be at liberty to proceed with taking over possession, however, the Petitioners failed to deposit the said amount as directed. The copy of the order dated 12/09/2019 is annexed hereto and marked as ANNEXURE "A"
for , kind perusal of this Hon'ble Court. Since the Petitioners have failed to deposit the amount as directed by the Ld. DRT-II, Mumbai the Respondent Bank has taken over physical possession of the property situated at Wadala, Mumbai.
Page 13 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022C/SCA/17942/2019 ORDER DATED: 05/10/2021
05. I say that the matter under present Special Civil Application has been made out on such grounds which pertain to the action initiated under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [hereinafter referred to as "Securitization Act"], where the Chief Manager in his capacity as Authorized Officer as defined under Rule 2
(a) of the Security Interest (Enforcement) Rules 2002 had initiated recovery proceedings by way of issuance of Notice in writing under Sec. 13(2] of the Securitization Act on classification of the account under reference as '"Non- performing Asset" in accordance with the guidelines as notified by the Reserve Bank of India in respect thereof.
06.The Respondent Bank has not considered the OTS proposal submitted by the Petitioners as claimed in this SCA. The repayment in the account was not received as per the terms of sanction and, therefore, as brought out in the recovery proceedings, the account was classified as "Non-performing Asset" where-after 13[2] notice was issued to petitioners and others, inter alia, demanding the repayment of the entire recoverable amount within the available statutory period of 60 days from the date of the said notice.
07.Since the repayment of the outstanding amount as per 13[2} notice was not made, the Respondent Bank proceeded further to take possession of the secured asset [mortgaged property]. However, during the course of visit by the Authorized Officer to take possession of the property, same was not handed over. Accordingly, the Respondent Bank proceeded u/s. 14 of SARFESI Act.
08.I narrate certain events for kind consideration of this Hon'ble Court, however, I reserve my right to submit additional/ further Affidavit if required and/or so directed by this Hon'ble Court.
a. The Petitioners have submitted that the OTS proposal for Rs.38.00 Crores on 26/07/2019.
b. As per the settlement the Petitioner have to deposit 10% of the settlement amount upfront, however, the Petitioners have failed therefore, the Respondent Bank vide letter 29/08/2019 informed the petitioners they had not paid the upfront payment. Therefore, their requested can not be considered. The said letter is at page no. 47 of the present SCA.
c. The petitioners have not deposited the upfront payment as stated above and during intervening period the Bank appointed the auditor as per the Guidelines of RBI for forensic audit and the said auditors found diversion of the funds in the accounts and suspected fraud, therefore, the Respondent Bank vide letter dated 12/09/2019 informed the said facts to the Petitioners. The copy of the said letter dated 12/09/2019 is Page 14 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022 C/SCA/17942/2019 ORDER DATED: 05/10/2021 annexed hereto and marked as ANNEXURE "B".
d. The petitioners filed the SA no. 313 of 2019 before the Ld. Debt Recovery Tribunal-II, Mumbai at Vashi and prayed for interim order and accordingly the same was heard by the Ld. Presiding officer (I/c) and vide order dated 12/09/2019 decided the Interim Application and granted the time to the Petitioners to deposit Rs.3.80 Crores before 12:00 noon of 18/09/2019, failing which Bank will be liberty to proceed with the taking possession, however, the Petitioners failed to deposit the said amount as directed. The copy of which is attached, herewith, as ANNEXURE "A" for kind perusal of this Hon'ble Court. Since the Petitioners have failed to deposit the amount as directed by the Ld. DRT-II, Mumbai the Respondent Bank have taken the physical possession of the property situated at Wadala, Mumbai.
e. The Petitioners again vide letter dated 04/10/2019 (page 50 of the SCA) requested to settle the account and in this letter for the first time the petitioners have informed that the prospective buyer has opened the Bank account with Bhavnagar Branch of the Respondent. The said letter, however, has been replied by the Respondent Bank vide letter dated 10/10/2019 informing the petitioners the reasons for non acceptance of their proposal. The copy of the said letter dated 10/10/2019 is annexed hereto and marked as ANNEXURE "C".
f. The Petitioners vide letter dated 14/11/2019 requested to settle the account however, the said letter has been replied by the Respondent Bank vide letter dated 28/11/2019.
g. The Petitioners again vide letter dated 28/11/2019 requested to settle the account however, the said letter has been replied by the Respondent Bank vide letter dated 04.12.2019.
h. The petitioner have time and again been given time and provided the opportunities to settle the account as per the agreed terms, however, the petitioners failed to comply with the said terms and conditions pertaining to the payment, therefore the Respondent Bank has rejected the proposal submitted by the Petitioners.
i. It is submitted that the Bank has not denied the receipt of the proposal dated 14/11/2019 as contended by the Petitioners, on the contrary the Respondent Bank made submission that even that proposal dated 14/11 /2019 also was not acceptable to the Bank, however, on the request of the petitioners matter is adjourned to 10/12/2019 for further hearing and Bank orally informed about reply to the said letter dated 14/11/2019, which was replied by the Bank on 28/11/2019."
8. In view of the above averments made on oath Page 15 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022 C/SCA/17942/2019 ORDER DATED: 05/10/2021 by the respondent-Bank, it is clear that there is clear suppression made by the petitioners about pendency of the Securitisation Application No.313 of 2019.
9. In view of the above facts which cannot be disputed by the petitioners, the petition is dismissed with a cost of Rs.1,00,000/- to be deposited with the legal service authority within four weeks from today. Interim-relief stands vacated. Notice is discharged.
Order in Civil Application :
In view of the order passed in the Special Civil Application, the Civil Application stands disposed of.
(BHARGAV D. KARIA, J) PALAK Page 16 of 16 Downloaded on : Sun Jan 16 21:24:21 IST 2022