CASE STUDY I: Legality of Notices in the Case of Deewan Housing Finance Ltd. now known as Piramal Capital and Housing Finance Ltd.

Vidya Bharti Sansthan (the Applicant) filed a Securitization Application (SA) against Piramal Capital and Housing Finance Ltd. (the Respondent FI) before the Debts Recovery Tribunal (DRT) in Jaipur. The Applicant sought relief in relation to the possession of a property and outstanding dues under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.

Background:

1. On 8th October 2021, the SA Applicant filed a Securitization Application.
2. The Ld. Tribunal was pleased to pass an order whereby the respondent FI was directed to restore the possession of the School Premises to the applicant and being dissatisfied with the orders passed by the Tribunal on 17th November 2021 and 30th November 2021, the Respondent FI approached the Rajasthan High Court to challenge these orders.
3. A Writ Petition No. 14769/2021 filed by the Respondent FI before the Hon?ble Rajasthan High Court, Jaipur was disposed of vide Order dt 20th October 2022, quashing the 17th November 2021 and 30th November 2021 orders and directing the DRT to decide SA within 2 months.
4. The Respondent raised the issue of maintainability based on the concealment of material facts, and the SA Applicant defended the argument by citing a judgment of the Hon'ble Apex Court in the case of M/s SJS Business Enterprises Pvt. Ltd. vs State of Bihar & Ors. dated 17th March 2004.
5. The Respondent FI argued that the Applicant had exhausted alternate remedies by approaching both the High Court and the Tribunal for the same reliefs on the same grounds.
6. The Respondent also contended that the Applicant failed to disclose the pendency of a writ petition before the High Court and other actions taken by them.
7. The absence of an account statement in the demand notice raised concerns regarding the transparency and accuracy of the outstanding dues claimed by DHFL Piramal.
8. The Applicant argued that without a detailed account statement, it would be difficult for them to ascertain the exact amount owed and evaluate the validity of the claim made by the Respondent FI.

Arguments: The SA Applicant:

1. The Applicant objected to the grounds raised by the Respondent, stating that the writ petition filed before the High Court aimed to obtain directions to restrain the Respondent from taking adverse actions and did not challenge the notices under the SARFAESI Act.
2. The Applicant emphasized that the legality of the demand notices should be decided by the Tribunal.
3. The Applicant contended that the inclusion of an account statement is not only a procedural requirement under the SARFAESI Act but also a fundamental right of the borrower.
4. The Applicant contended that the inclusion of an account statement is not only a procedural requirement under the SARFAESI Act but also a fundamental right of the borrower. It enables the borrower to verify the accuracy of the claimed dues and ensures that they have a fair opportunity to rectify any genuine discrepancies or errors.

The Respondent FI:

1. The Respondent argued that the Applicant's concealment of material facts, including the pendency of the writ petition and their approach to the District Magistrate, Sikar, demonstrated the Applicant's knowledge of the actions initiated by the Respondent.
2. The Respondent referred to a settlement proposal made by the Applicant, which was not fulfilled, leading to the possession of the mortgaged property being taken by the Respondent.
3. The Respondent highlighted the observations made by the High Court, affirming the legality of their actions.

Court's Findings and Order:

1. The court agreed with the Respondent's argument that the Applicant had concealed material facts by not disclosing the pendency of the writ petition before the High Court.
2. The court concluded that the pendency of the writ petition did not affect the proceedings of the SA since no order had been passed by the High Court until the filing of the SA.
3. The court decided to determine the legality of the demand notices raised by the Applicant in the SA.
4. The specific grounds related to the demand notices were reproduced, and the Respondent's reply to those grounds was taken into consideration.
5. The court did not provide a final decision on the legality of the notices but directed the Tribunal to decide the SA afresh on merits within a specified time frame.
6. The court clarified that the observations made by the High Court in a different case should not be treated as binding in the present matter.

Conclusion: The case of Piramal Capital and Housing Finance Ltd. highlights that the demand notice received from DHFL Piramal did not include an account statement. An account statement provides a comprehensive overview of the borrower's financial transactions, including the principal amount, interest, penalties, and any other relevant charges. The concealment of facts can impact the maintainability of a case and the court's decision. The court's order to decide the SA afresh on merits underscores the need for a thorough examination of the legality of the notices and a fair opportunity for both parties to present their arguments.

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