Authorised Officer, Shriram City Union Finance Ltd. v. Kamla Industries & Ors.

Facts:

Shriram City Union Finance Ltd., a financial institution (F.I.), had lent money to Respondents Nos. 1 and 2, who were the sole proprietorships of Respondents Nos. 3 and 4, respectively. Respondents Nos. 3 and 4 stood as guarantors for the debt incurred. Respondent No. 4 had also mortgaged her property as collateral security. The borrowers defaulted on payment, and the Appellant initiated measures available under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) against the Respondents. The Respondents challenged these measures under Section 17(1) of the SARFAESI Act by filing Securitisation Application (S.A.) No. 101 of 2021 before the Debts Recovery Tribunal-I, Ahmedabad (D.R.T.). On 13.08.2021, during a virtual hearing by the D.R.T., a settlement was arrived at between the parties. The applicants in the S.A. offered to pay the total outstanding sum of ₹52 lakhs, as proposed by the secured creditor, in installments. The applicants agreed that in case of default in payment, they would hand over possession of the secured asset to the creditor without any demur, and if they failed to do so, the secured creditor would be at liberty to take the assistance of the police machinery to take over possession of the property. The Ld. Counsel for the applicants was directed to file an undertaking concerning the schedule of payment by 16.08.2021. The Ld. Counsel for the Appellant F.I. undertook to defer taking over physical possession of the secured asset until a default in payment was committed by the applicants. The D.R.T. made it clear that the statements made by the counsels for the parties would operate as the order of the Tribunal. An undertaking was filed by the applicants to the D.R.T. through email, as agreed. The F.I. resiled from the undertaking to settle, and vide order dated 05.04.2023, the S.A. was disposed of, imposing a compensation of ₹1 lakh on the F.I. to be paid to the applicants and a further sum of ₹1 lakh to be paid as costs to the National Defence Fund. The Appellant is aggrieved and has filed an appeal.

Argument by the Appellant:

The Ld. Counsel for the Appellant, Ms. Uma Fadia, argued vehemently that the Appellant had never accepted the terms of settlement. It was a unilateral act of submitting an undertaking to pay ₹52 lakhs toward the settlement of the entire debt made by the applicants in the S.A., which the Appellant had never consented to. The amounts paid by the Respondents were received by the Appellant as they were due and payable, but the Appellant could not have refused them. The Appellant had made an endorsement on the undertaking that the proposal was not acceptable and had also sent an email on 13.08.2021 to the Respondents conveying that the amount of installments offered was not acceptable as they were too low, and the institution intended to proceed to take physical possession of the secured asset by following due process of law.

Argument by the Respondents:

The arguments made by the Respondents were not explicitly mentioned in the document.

Sections and Laws Referred:

Cases Cited: