M s karavali Hotels Pvt Ltd vs Housing and Urban Development on 18 November 2020

1. The Miscellaneous Appeal [MA] No.12/2020 is filed by the Borrower (Applicant) on 20.06.2016 aggrieved by the Order passed by this Tribunal in O.A. No.14/2010.

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2. The Miscellaneous Application is filed by the Defendants and the Respondent is the financial Institution who had filed the O.A.14/2010. The present Application is filed is to set aside the Order dated 09.08.2012 in O.A.14/2010 and to restore the sale consideration and to give an opportunity to file the additional written statement and to lead evidence.

3. It is the case of the applicant that they had approached the respondent Institution, Housing & Urban Development Corporation Limited (for short "HUDCO") for a Term loan of Rs.1165.00 lakhs. Initially, the loan was availed by Applicant from Bharat Co-Operative Bank, Mumbai for construction of a Hotel Complex at the Temple Town, Udipi and the Respondent HUDCO considering the repayment track report of the Applicant had agreed to take over the financial facility to run the hotel business.

4. It is contended that the loan was being repaid regularly initially but due to the slowdown in the economy and the adverse impact on the tourism, there occurred some delay in the repayment. Hence, the applicant had approached Respondent /Applicant HUDCO seeking for rescheduling the loan repayment for a few quarters.

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5. However, the HUDCO did not accede for the request of the applicant and took steps under the SARFAESI Act without offering any opportunity to the Applicant and has issued Section 13(2) notice on 15.10.2007. Subsequently, to the issuance of Section 13(2) notice, they have taken the physical possession of the Hotel complex under Section 13(4) of the SARFAESI Act. Though HUDCO was empowered to manage the hotel business before shutting down, there was no income generated.

6. It is submitted that the respondent HUDCO has fled the above OA seeking for recovery of money and for issuance of recovery certificate. On service of notice from the Tribunal, the applicant engaged the Ld. Advocate Sri N.S.Satish Chandra to conduct and defend their case. Though the counsel appeared on their behalf, he did not even file the written statement on behalf of the applicant, as a result of which the Respondent has obtained a decree to recovery of amount as prayed for i.e., Rs.18,45,75,969/- together with future interest at 14% p.a. compounded besides penal interest from the date of the present OA till the date of the realization of the OA amount.

7. It is asserted that the applicants had made all possible efforts to meet the advocate and there was no response. Further, the applicant was also severely affected with multiple 4M.A. NO.12/2020

ailments and was not able to move out of Mumbai. However, it came to the knowledge of the applicant that the advocate died in the month of January 2016, when the matter was pending in the OA.

8. On information of the death of the counsel, the applicant had difficulty in locating the Office and finally took the case papers on 17.01.2016 and then they engaged a lawyer Mr.Pujary Jeetendra Thomare in Mumbai and requested him to contest the matter. Though the counsel initially agreed to take the matter, later he advised the applicant to settle the matter with HUDCO amicably for one time settlement and did not give any relief to the Applicant and they could took back the papers from Mr. Pujary Jeetendra Thomarreonly on 14.06.2016. Hence, they could not approach the Tribunal in time to set aside the Decree passed against them.

9. It is known that the decree was passed on 09.08.2012 and there is a delay of 1380 days in filing a petition to stay the exparte decision in the matter; and the delay occurred due to the continuous illness of the applicant and untimely death of the advocate and the Defendant being in Mumbai caused unnecessary delay. The applicant has produced the medical documents in support of his illness.

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10. Further it is alleged that the respondent bank has suppressed the material facts to this Hon'ble tribunal and obtained the decree in their favour. The contractual rate of interest is 9.75%p.a. and if the interest rate is raised above, and the penal interest is against the public policy laid down by the Hon'ble Supreme Court of India in the matter of Punjab and Sind Bank Vs. Allied Beverages. The decree awarding compounded future interest at post decretal stage is also against the law. Hence, the decree order dated 09.08.2012 is to be set aside and to be restored as there is no injury or hardship would be caused to the applicant. On the other hand, the applicants have a very good case on merits and prays to set aside the impugned order or implementation of the execution of the final order dated 09.08.2012.

11. The Respondent have come on record and have filed the objection for the stay application and their objections to the main M.A. contending *interalia* that the OA No.14/2010 was filed by the Respondent against the applicants, M/s. Karavalli Hotels Pvt Ltd., which came to be allowed by the Tribunal vide Order dated 09.08.2012 wherein the respondent is empowered to recover a sum of Rs.18,45,75,969/- with interest at 14% p.a. compounded and penal interest.

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12. It is submitted that the M.A. filed by the applicants with an inordinate delay of 1380 days be dismissed as there is no explanation for the delay. The 1^st applicant is represented by its Managing Director, Mr. Shekar M.Kotian and the applicant company in the OA neither represented nor the advocate contested the matter by filing the statement of objections and hence the condonation application and MA is to be dismissed.

13. The applicants have admitted that they have approached the respondent bank and has availed loan of Rs.11.65 lakhs and the loan was secured by guarantors and mortgage of property and in view of the demand there is no need to entertain the condonation application and is not sustainable and needs to be dismissed.

14. The applicant has also an application for stay of the sale of the Mortgage property in the recovery proceedings by the Recovery Officer in DRC 7108 which is opposed by Housing & Urban Development Corporation contending that it is not maintainable and aggrieved by the Order of the Recovery Officer of DRT they have preferred an appeal before the DRT and hence this application is liable to be dismissed.

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15. The applicant company, M/s. Hotel Karavalliproject stands in the name of the company which is the borrower and two collateral properties are owned by the Managing Director of the Company who has mortgaged the same towards the collateral security. Further, one flat and one shop at Mumbai have been mortgaged towards collateral security towards the credit facility which is not disclosed by the applicant in their application.

16. The physical possession of the property at Udipi was taken on 12^th & 13^th April 2013 after the issuance of notice under section 13(2) in which the applicant had approached the DRT and sought stay on 22.04.2010 in I.R. No.1034/2010 wherein the Tribunal had granted a stay subject to the applicant depositing an amount of Rs.1.50 crores, Rs.50.00 lakhs on 24.05.2010 and Rs.1.00 crore on 24.06.2010 respectively.

17. Since the applicant could not comply with the Order the DRT vide its order dated 24.05.2010 vacated the stay. The applicant aggrieved by the Order of the Tribunal preferred the W.P.No.15426/2011 in the High Court of Karnataka and the High Court of Karnataka vide Order dated 04.06.2012 remitted back the matter to DRT subject to the applicant depositing a sum of 8M.A. NO.12/2020

Rs.2.00 crores with the respondent within 6 weeks from the date of the Order.

18. The applicant did not comply with the Order and the respondent took physical possession of the properties on 12^th& 13^th April 2013 and further part of the portion was taken possession on 11.10.2013 as some of the portion occupied by the tenant other than the applicant and sufficient portion was granted to the applicant to repay the loan for running the hotel business. After taking portion of balance physical possession of the property on 11.10.2013, the properties were put to sale and on eight occasions. The first sale notice was issued on 27.04.2014.

19. It is contended that the applicant was fully aware of the proceedings initiated by the respondent and they had put their appearance in the OA, however did not contest the matter and after approaching the DRT and the Hon'ble High Court now has filed the present MA with a delay with unjustifiable reasons which deserves to be dismissed.

*Heard the submissions of both the counsels.*

20. Admittedly, the applicants are the borrowers who had availed loan and evidently the present M.A. is filed with a 9M.A. NO.12/2020

delay of 1380 days. Undisputedly, the applicants are aware of the filing of the OA by the respondent for the recovery of the amount due to them. There is no denial that the summons were served on them, in fact it is asserted by the applicants that after the service of OA summons they had engaged advocate Mr.N.S.Satish Chandra to represent the matter on their behalf.

21. It is discernible from the records that the applicant was represented by Advocate N.S.Satish Chandra who had filed Vakalath for the applicants and it is categoric admission of the applicants that though the counsel appeared on their behalf, he did not even file the written statement on behalf of the applicant, as a result of which the Respondent has obtained a decree to recovery of amount as prayed for i.e., Rs.18,45,75,969/- together with future interest at 14% p.a. compounded besides penal interest from the date of the present OA till the date of the realization of the OA amount.

22. It is submitted by the applicant that Advocate N.S.Satish Chandradied in the month of January 2016, when the matter was pending adjudication and on information of the death of the counsel, the applicant had difficulty in locating the Office and finally took the case papers on 17.01.2016. Then they engaged a lawyer Mr.Pujary Jeetendra Thomare in Mumbai and 10M.A. NO.12/2020

requested him to contest the matter. Though the counsel initially agreed to take the matter, later he advised the applicant to settle the matter with HUDCO amicably for one time settlement and did not give any relief to the Applicant, hence they could take back the papers from Mr. Pujary Jeetendra Thomarre only on 14.06.2016.

23. It is pertinent to note that the applicant being a Company who are in the business of hotel industry was very casual in getting the case update from their counsel. It is un conceivable that a business man who conducts business in a hotel industry did not have an update of his case and has chosen to reason out the delay attributing the death of the counsel and getting the case papers from the deceased counsel office and later engaging an another advocate from Mumbai to contest the matter in Bangalore goes to the show the hollowness of the averments made by the applicant.

24. Further the applicant has produced the medical certificate issued by Dr.Satish Shripad Ugrankar produced at Page No.19,20,21,-29. The certificate issued by Dr.Satish Shripad Ugrankar indicates that the applicant Mr. Shekar Kotian has been under the medical care since April 2010 and is under his care till August 2015. It is pertinent to note that medical 11M.A. NO.12/2020

certificates produced by the applicant is for the period 201 to 2015 where in it only indicates that the applicant was under medical care, but it does not mention the nature of the ailments which prevented the applicant to do his normal life. Furthermore the borrower is the company and its Directors and the guarantors who were also party to the proceedings in the OA has chosen to be quite and id silent spectators to the proceedings and there is no explanation forthcoming as why other defendants in the OA had not made any attempt to engage a counsel to contest the matter.

25. Though the applicants admit that there is a delay of 1380 days delay in the limitation column prescribed under the OA there is no separate application filed to condone the entire delay of 1380 days. On the contrary, the respondent bank has produced the documents contending that since the applicants defaulted in the repayment, they had filed the OA which came to be allowed vide the Final Order dated 09.08.2012 which is produced by the Applicant at Page No.12 of the M.A.

26. The respondent has brought to the notice of the Tribunal that they had initiated proceedings under the SARFAESI Act and had issued Section 13(2) notice, which was challenged by the applicant before the DRT-1 and had obtained an interim 12M.A.NO.12/2020

stay on 22.01.2010 in I.R.No.1034/2010 wherein the applicants were asked to deposit Rs.1.50 crores, Rs.50.00 lakhs on 24.05.2010 and Rs.1.00 crore on 24.06.2010 respectively. Since the applicant could not comply with the interim orders passed by the Tribunal, the I.O. was vacated on 24.05.2010.

27. It is revealed from the records that aggrieved by the said order, the applicant had challenged the same in High Court of Karnataka in W.P. No.15426/2011 and the High Court of Karnataka vide its Order dated 04.06.2012 remitted the matter back to DRT subject to the applicant depositing Rs.2.00 crores. Yet again the applicant did not comply with the order. Hence the bank has proceeded and took possession of the property which is admitted by the applicant in the MA. Since the liability was not liquidated by the applicants, the bank has proceeded and had put the property to auction after the final order was allowed in favour of the Respondent on 09.08.2012.

28. The bank has proceeded and issued Section 13(4) notice which was yet again challenged by the applicants in W.P. No.50325-26/2012 which also came to be disposed of on 09.09.2015. Further records reveal that the settlement as contended by the applicant did not materialize in view of the one-time settlement policy prescribed by the RBI and it is also 13M.A. NO.12/2020

evident from the records that the respondent had put the property to auction on various dates and that the applicant had challenged the sale notice, though could not succeed in obtaining any order from any court of law. Further it is seen that the applicant has filed an application to redeem the property at a belated stage.

29. Thus it is evident from the records that the applicant was fully aware of the proceedings initiated by the respondent under the OA and under the SARFAESI Act. Aggrieved by the recovery proceedings the applicants had invoked the jurisdiction of the Hon'ble High Court as well as this Tribunal. Inspite of sufficient indulgence shown by the high court as well as by the Tribunal , the applicant failed miserably to comply with the conditional interim order obtained by them.

30. On the contrary, the applicant cast a baseless averment on their counsel not conducting the case and the counsel at Mumbai advised them to get into OTS. Hence, the contentions raised by the applicant does not survive any scrutiny and the applicant having failed to make out a proper and justifiable cause in preferring the MA with a delay of 1380 days and in the absence of any application in a condonation, the Tribunal is not inclined to condone the entire delay of 1380 days 14M.A. NO.12/2020

(3 years 7 months)as prayed for. The records reveal that the applicant has invoked the writ jurisdiction and as and when the measures were initiated by the bank. However, the applicant has failed to comply with the Orders of the Hon'ble High Court of Karnataka as well as the Tribunal which is evident from the records.

31. It is the settled legal position that an ex-parte order against defendant has to be set aside if the party satisfies the court that summons had not been duly served or they was prevented by sufficient cause from appearing when the suit was called on for hearing; however, the court shall not set aside the said order on mere irregularity in the service of summons or in a case where the defendant had notice of the date and sufficient time to appear in the court.

32. In the present case, the applicants were fully aware about the proceeding of the OA and in fact appeared through their counsel. But despite of sufficient opportunity they have not filed any written statement either within the period of 30 days or thereafter. After the respondent adduced evidence, a final order came to be passed based on documents produced by the bank.

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33. Sub-section (24) of S.19 of the Recovery of Debts and Bankruptcy Act 1993 prescribes the time-limit of 180 day within which an application made under S.19 is required to be disposed of. The proviso to this sub-section envisages extension of time, but the outer limit for adjudication of an application is six months. It is thus evident that the remedies available to an aggrieved person under the Act are both expeditious and effective.

34. In so far as the delay of 1380 days in preferring the MA and to set aside exparte order is concerned, the applicant has to show why he has not filed the application on the last day of limitation prescribed. That may inevitably mean that the applicant will have to show sufficient cause not only for not filing the application on the last day but to explain the delay made thereafter day by day. In other words, in showing sufficient cause for condoning the delay, the party may be called upon to explain for the number of days delay covered by the period between the last day prescribed for filing the application and the day on which the application is filed. In the instant case the applicant has not come out with any cogent reason which prevented them to approach the Tribunal within limitation.

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35. It is pertinent note that the applicants herein being aggrieved by the final order passed by the Tribunal under S.19 of the RDDBFi act ought to have challenged the final order before the Appellate Tribunal or to have filed petition to set aside the final order within the period of limitation as prescribed under the Act before this Tribunal. The delay in filing an application to set aside the exparte order and the reason for non-filing of written statement are very vague which lacks bonafides and does not support their case and no iota of proof has been put forth by them to substantiate their contentions.

36. For the foregoing reasons, the Tribunal finds no ground or any prima facie case to condone the delay of 1380 days. Accordingly, MA 12/2020 stands dismissed. Consequently, pending IA/s if any also dismissed. No order as to costs.

*(Dictated to the Stenographer (SR), after its transcription and necessary corrections, signed and pronounced by me in the Open Court on this 18^th November, 2020.*

Sd/- **PRESIDING OFFICER** **DRT-2, BENGALURU**