Bombay High Court division bench consisting of Justice K.K.Tated and Justice N.J.Jamadar has dismissed the two writ petitions filed by Phoenix ARC Pvt. Ltd, Mumbai against the Sunil Solvent. Extraction Pvt. Ltd., a partnership firm – Ms Suresh Trading Co and its partners.- of Katangikala in Gondia District, holding that the Debts Recovery Tribunal, Nagpur, exercised the discretion to award interest in the orders passed on February 11, 2014, and March 27,2014 at the rate of 8 pc per annum, correctly and not arbitrarily and affirmed by the Debts Recovery Appellate Tribunal, Mumbai on October 19, 2016, in two appeals.
The DRT had directed the defendant to pay Rs 4.37 crores to the petitioner towards full and final settlement of the dues with 6 pc per annum interest in the event of default in making payment.,against the claim of the petitioner of Rs 4.50,65,000/- with 13.60 pc per annum interest. On the petitioner seeking review, the DRT enhanced the rate of interest to 8 pc. Dissatisfied still with the rate of interest, the petitioner moved the DRAT in appeal. DRAT maintained the DRT’s orders as it is. This led to the filing of the writ petitions before the HC with the claim of 30 pc interest.
The HC has also held in the totality of the facts and circumstances that the award of interest at the rate of 8 pc is just and proper. Thus, the challenge on this count failed.
According to the HC the pivotal question which cropped up before it, whether the notice of March 31, 2011, issued and subsequently published by the petitioner satisfies the statutory requirement under section 13 (4) of the SARFAESI Act and Rule 8 of the rules, 2002. The object of the said notice appears to proclaim that three petitioner stood to have surrogated in the place of Bank of India
The said notice nowhere indicates that it was addressed tothe borrower.It does not satisfy the requirement of Rule 8nor it appears to be in substantial compliance with the form prescribed in Appendix IV appended to Rules, 2002. Therefore,the HC held that the DRT was within its rights to record the finding that the said notice of March 31, 2011, cannot be considered as a notice under section13(4) of the SARFAESI Act.
The HC also noted that the DRT did not negative the claim of the petitioner only on the premise that there was a delay of 4 days in publishing the notice of March 31, 2011. In fact, the substantive reason was that the said notice did not acquit itself as a statutory notice, as contemplated in section 13(4) of the 2002 Act. The HC has pointed out that the Supreme Court has held in its decision of the case- Mathew Verghese v. M.Amritha Kumar & Others – (2014) 5 SCC 610 that unless and until a clear 30 days’ notice is given to the borrower, no sale or transfer can be resorted to by secured creditor.
In the backdrop of this position of law, the HC has held that though the secured creditor has been statutorily empowered to enforce the security interest without intervention of the court or the Tribunal, yet the statutory provisions prescribing the manner in which the security interest is to be enforced are to be scrupulously observed. The section13(4) of the Act read with the sub-Rule (1) t0 (4) and (6) of Rule 8 and sub-Rule (1) of Rule 9 make it explicitly clear that after the secured asset turns into a non-performing asset (NPA), it cannot be dealt with a high-handed manner and disposed of casually without adhering to the procedure prescribed by the Act and Rules of 2002.
Due to these reasons, the HC has to hold that in the facts and circumstances of the case, that there is total non-compliance of Rule 8(2) of the Rules of 2002. Hence, the publication of the notice ofMartch 31, 2011 does not help the cause of the petitioner.
The HC has also pointed out that itis abundantly clear that there was no specific stipulation regarding the rate of interest payable in the event of default. Clause 9 of the letter of acceptance of April 6, 2011, providing for penal interest at 30 pc per annum, was, however, not a part of the consent terms executed before the DRT, on the basis of which The DRT Passed the order on July 25, 2011.
The fact that the contract rate of interest agreed to be paid in the event of default in the terms of the settlement is not borne out from the record. The rate of interest was determined by the DRT in view of the consent given by the parties.
In this backdrop, the petitioner was precluded by the HC from challenging the grant of interest at the rate of 8 pc per annum based on the consent and concession made by the petitioner as well. The statement of fact recorded in the judgment as to what transpired at the hearing, are conclusive of the facts so stated and no one can contradict such statements by affidavit or other evidence. Hence the issue of the fixing of the rate of interest cannot be reopened now. Moreover, the grant of a future interest under section 34 of the CPC is discretionary in nature.AdvocatesCharles De Souza appeared for the petitioners. Advocate Atul Pande represented the respondents.
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