High Court sets aside Debt Recovery Tribunal order, allows auction of Usha Kiran flat

 

Expressing its displeasure at the manner in which Debt Recovery Tribunal (DRT) Mumbai discharged its duties in a matter, the High Court of Bombay has allowed a plea by Phoenix ARC, an asset reconstruction company, for public auction of a flat in Usha Kiran building at Carmichael Road in south Mumbai.

On Friday, the High Court set aside orders passed in Dec by the DRT & its appellate body—Debt Recovery Appellate Tribunal (DRAT)—staying the auction.

The bench of Chief Justice Dipankar Datta & Justice V G Bisht said, “We are not happy & satisfied with the way the recovery officer, DRT-I, discharged his duties. This being so, the petitioners also cannot draw any comfort from the illegal orders passed by the registrar, DRAT, & recovery officer, DRT..."

The High Court dismissed the plea filed by the flat owner & one of the mortgagees, Charu Mehta, who sought stay on its sale till the DRAT became functional & decided on the appeal filed. The bench also directed that Rs 1 lakh cost be paid to the state legal aid fund. “We are aghast to note that the recovery officer, DRT-I, Mumbai was oblivious of the sale notice whereby the claim as determined by him is a sum of Rs 270 crore,’’ said the High Court, noting that the sale proclamation was not challenged before any forum by the petitioners.

The bench allowed the plea filed by Phoenix ARC, which was pursuing recovering proceedings as assignee of a bank that was a creditor of the borrower, Beautiful Diamonds, later called Splendour Gems (now in liquidation). The company, through counsel Rohit Gupta, said the DRAT order that stayed public auction by wrongly accepting Rs 1.25 crore as 25% of the due amount was causing it “undue loss’’. Gautam Ankhad, counsel for the flat owner, argued that there was no recovery certificate against Mehta by DRT. Disputing the quantification on grounds of natural justice, he claimed the mortgagee’s liability was only Rs 5 crore & the flat be released from “equitable mortgage’’ as Rs 20 crore in excess was already paid to Phoenix ARC.

The High Court said it should refrain from assuming the role of DRAT or go into “nitty gritty & nuances of pending dues’’. The recovery officer apparently “blindly accepted” that petitioners claim is only Rs 5 crore, said the High Court observing: “This is a classic case of approbation & reprobation.” Mehta’s advocate Abhishek Prabhu said she is likely to move Supreme Court.

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