Debt Recovery | Extension Of Interim Relief At The Time Of Remand Subject To Prima Facie Finding In Petitioner's Favor: Delhi High Court

The Bench, comprising Justices Vibhu Bakhru and Amit Mahajan, dismissed the present writ petition and dispelled petitioner-Deco’s contention that the interim order in its favor ought to have been extended. It observed:

“If the same is accepted, then in every case where the Court decides to remand the matter to the Court of first instance or any Adjudicating Authority for consideration - till such time the matter is considered - the same would require continuation of the interim orders, even if, prima facie, a case for such orders has not been established.”

The genesis of the dispute lay in a loan obtained by Deco from respondent No.3 (Karnataka Bank), which was secured by creating equitable mortgages over two of its properties.

As Deco defaulted in repayment, Karnataka Bank issued possession notices in respect of the mortgaged properties. Subsequently, the financial interest w.r.t. Deco was assigned by the Bank to respondent No.1 (JM Financial).

When Deco’s Securitization Applications were dismissed by the DRT, it preferred an appeal to DRAT.

Allowing Deco’s appeal, DRAT remanded the matter back to DRT for fresh consideration and observed that it had failed to decide if the transaction between JM Financial and Karnataka Bank was an outright sale of Deco’s properties or assignment of debt u/s 5 of SARFAESI Act.

Deco’s case was that the transaction was an outright sale of mortgaged properties, which required compliance with RBI guidelines as well as Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002, but the same had not been complied with.

It further contended that the interim protection granted by DRAT w.r.t. the mortgaged properties ought to have continued at the time of remanding.

Prima facie, the court was of the opinion that the transaction between Karnataka Bank and JM Financial was not a sale of Deco’s properties.

Noting that Deco can file an application seeking interim relief before DRT, and being of the view that interim relief from DRAT was not warranted at the time of remand without a prima facie finding in Deco’s favor, the court dismissed the petition.

Advocates Sangram Patnaik, Rajiv Gupta, Manish Kumar Mathur & Pushkar Anand appeared for petitioner-Deco Industries

Advocates Chitranshul A. Sinha & Jaskaran S. Bhatia appeared for respondent No.1

Case Title: Mis Deco Industries India v. JM Financial Assets Reconstruction Company Ltd through its AO Kumar Gaurav & Ors.

Citation: 2023 LiveLaw (Del) 1171