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TITLE : Bafna udyog v Micro and Small enterprises, Facilitation council

CORAM : Hon’ble Justice Neela Gokhale

DATE : 16^th January 2024

CITATION : Arbitration Petition No.201 of 2023

FACTS

The petitioner seeks appointment of a retired judge to conduct the arbitration proceedings. The petitioner also requests the court to direct the respondent to produce all records required for the proceedings. The petitioner is registered under MSMED Act, 2006. The respondent owes Rs. 92,41,072 to the petitioner with future interest as per the act.

The dispute among the parties remained unsolved. The petitioner contends that the respondent acknowledged the debt he owes. The petitioner filed a conciliation proceeding which upon getting failed has approached for arbitration under Section 11(6) of the arbitration act. The respondents did not show up during the proceedings even after issuing notice.

LAWS INVOLVED

Section 11(6) states that an arbitrator would be appointed by the arbitral forum if none of the parties take initiative to appoint an arbitrator or fails to seek for an arbitrator.

ISSUES

Whether the petitioner was right in asking for an arbitration proceeding?

JUDGEMENT

The court observed that the arbitration proceeding would be invalid as per the MSMED Act. There is an alternative remedy available in law to first observe failure of conciliation proceeding and then approach for arbitration. In the present matter, the conciliation proceeding was terminated which is against Section 18(3) of the MSMED Act which states that only after failure of conciliation proceeding, an arbitration recourse can be proceeded with.

The petiton was dismissed on the grounds of maintainability.

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Written by- Sanjana Ravichandran

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Title: SZF EXPORTS PVT. LTD. & ANR. versus PUNJAB NATIONAL BANK & ANR.

Date of Decision: 17.07.2023

+ W.P.(C) 9408/2023

CORAM: HON’BLE MR. JUSTICE VIBHU BAKHRU

HON’BLE MR. JUSTICE AMIT MAHAJAN

Introduction

Delhi High Court dismissed the petition filed seeking impugning of an order by Debt Recovery Appellate Tribunal (DART) for not complying to the conditions of making the necessary pre-deposit.

Facts of the case

The petitioners have brought this case to contest an order made on July 14, 2023, in Miscellaneous Appeal No. 113/2023, SZF Exports Pvt. Ltd. & Anr. v. Punjab National Bank, by the Debts Recovery Appellate Tribunal, Delhi (hereinafter “the DRAT”).

The petitioners filed the aforementioned appeal in response to an order dated 22.06.2023, issued by the Debts Recovery Tribunal (hereafter “the DRT”). In that order, the DRT expressed the preliminary opinion that the respondent bank’s actions in accordance with the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter “the SARFAESI Act”) were not irregular.

The DRT had further denied the petitioners’ request to prevent the responding bank and court receiver from seizing the subject property. There is no disputing that the petitioners used the credit facilities and failed to repay them, as the Ld. DRT had acknowledged. In essence, the petitioners feel wronged by the property’s auction. The petitioners claim that Rule 9(1) of the SARFAESI Security Interest (Enforcement) Rules, 2002 (hereafter referred to as “the Rules”) was broken by the auction. According to the petitioners, the aforementioned Rule mandates that the auction buyer pay 25% of the total auction price (including any earnest money put) within 24 hours after the sale.

Analysis of the court

Rule 9(3) of the Rules’ straightforward wording makes it obvious that the deadline for paying 25% of the selling price must be calculated starting with the sale of an immovable property. The first phrase of Rule 9(3) of the Rules, “on every sale of movable property,” makes this clear. In this instance, the auction took place online on the MSTC platform on June 8, 2023.

Respondent No. 2 (hereinafter referred to as “the auction purchaser”) had entered the bidding process and had made the highest bid of 6,60,38,000/-. We do not see any merit in the petitioners’ claim that the property auction procedure was faulty. After having said the foregoing, it is important to note that the impugned decision, which the DRAT made denying to hear the petitioners’ appeal, is not based on the merits but rather on the claim that the petitioners had broken the requirement to pay the required pre-deposit. We don’t see any reason to change the contested order. Concededly, the petitioners’ chosen appeal could not be considered by the DRAT unless they made the required predeposit. It is common knowledge that the appellant has no legal entitlement to be given further time to make the deposit.

The necessary pre-deposit was reportedly not made. Consequently, we believe that the petitioners’ appeal was properly denied. This Court has also been told that PNB has acquired ownership of the disputed property.

The petition cannot be awarded any remedy. The identical is rejected.

Written By – Shreyanshu Gupta

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