DRAT Chennai Refuses To Condone Over 6-Year Delay In ₹115.39 Crore Recovery Appeal

The Chennai Bench of the Debts Recovery Appellate Tribunal (DRAT) has refused to condone a delay of more than six years (2417 days) in challenging a recovery order, finding that the appellant's plea of ignorance of the proceedings was untenable after notices were returned unclaimed and she later sought one-time settlements to secure the release of the mortgaged property.

The tribunal, comprising Chairperson Justice G. Chandrasekharan, found that the appellant's claim that she had never been served with notice could not be accepted. It held:

“Therefore, the submission of the Learned Counsel for Petitioner/Appellant that the Petitioner/Appellant's address was wrongly given in OA 333/2015 and notice was not served cannot be accepted.”

The matter arose from recovery proceedings initiated by State Bank of India and Bank of Maharashtra to recover ₹115.39 crore from JKS Constructions Pvt. Ltd. and others.

In September 2017, the Debts Recovery Tribunal-II, Chennai, allowed the banks' claim against the company and five other parties.

M. Padma Sree, one of those parties, approached the appellate tribunal in May 2024. She sought to challenge the 2017 order after a delay of 2,417 days.

She contended that she had never been served with notice in the recovery proceedings. She therefore claimed that she learnt about the order only after insolvency proceedings involving JKS Constructions commenced before the National Company Law Tribunal in 2022.

Padma Sree also argued that she was neither a borrower nor a guarantor. She further contended that she had been wrongly impleaded and that a fictitious address had been used in the recovery proceedings. She also claimed that the mortgaged property was agricultural land.

Opposing the plea, the banks submitted that the address used for service of notice was identical to the one recorded in the memorandum of deposit of title deeds. They also pointed out that the same address appeared in her filings before the National Company Law Tribunal. The banks further referred to writ petitions filed by her before the Telangana High Court as part of the sequence of proceedings involving the dispute.

The banks also relied on a letter dated June 9, 2021. In it, Padma Sree acknowledged that she had offered her property as collateral security for the loan obtained by JKS Constructions in 2009. She also offered ₹10 crore as a one-time settlement to secure the release of the property. In December 2021, she increased the offer to ₹30 crore through an email.

Rejecting her contention regarding the address, the tribunal observed that the address mentioned in the recovery proceedings matched the one contained in her mortgage documents. It also matched the address she used while appearing through counsel before the National Company Law Tribunal.

The tribunal then examined the original records of the Debts Recovery Tribunal. It found that the notice sent to Padma Sree's recorded address had been returned as "unclaimed", which amounted to deemed service.

It also rejected her contention that the property was agricultural land. The tribunal observed that no material had been produced to show agricultural operations were being carried out on the land when the mortgage was created or thereafter.

The tribunal further observed that Padma Sree had admitted creating a mortgage by deposit of title deeds as collateral security for the company's loan. It also noted that she had subsequently offered ₹10 crore and later ₹30 crore under a one-time settlement while seeking release of the property. It held:

“As submitted by the Learned Counsel for Respondent Bank, the Petitioner/Appellant had admitted the creation of mortgage by deposit of title deeds for the loan availed by M/s. JKS Constructions Private Limited. She had offered to pay Rs.10 Crores and then Rs.30 Crores and sought for an One Time Settlement. Therefore, the submission of Learned Counsel for the Petitioner/Appellant that the property was not mortgaged as a security asset cannot be accepted.”

The tribunal also observed that, even on Padma Sree's own case that she became aware of the recovery proceedings in January 2022, she filed the appeal only in May 2024.

Holding that the delay of 2,417 days had not been satisfactorily explained, the tribunal observed that the appellant had not been vigilant, prompt or diligent in pursuing the appeal.

“The huge delay of 2417 days is not properly explained. Therefore, this Tribunal is not inclined to condone the delay. Therefore, this Application in IA 499/2024 is dismissed.”, it held.

Accordingly, the tribunal dismissed the application seeking condonation of delay and consequently rejected the appeal.

For Petitioner: Deepika Murali

For Bank: M. L. Ganesh