w w w . L a w y e r S e r v i c e s . i n

Pankaj Shah V/S Cosmos Co-operative Bank Ltd.

Company & Directors' Information:- E-COSMOS (INDIA) PRIVATE LIMITED [Active] CIN = U30007KA2004PTC034007

Company & Directors' Information:- THE COSMOS BANK LIMITED [Active] CIN = U99999MH1933PTC002029

    Securitisation Application No. 15 of 2005

    Decided On, 31 May 2005

    At, Debts Recovery Tribunal Mumbai


    For Petitioner: Girish Kedia, Advocate And For Respondents: Rishabh Shah, Advocate. for the Respondent No. 1 and Rajesh Nagori, Advocate., i/b., Lalit Jain, Advocate.

Judgment Text

1. This application (Appeal) (for short 'S.A.') under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 for (short 'SRFAESI Act') pertains to the movable properties like Raw Material, Furnance Oil, Dies, etc. as set out in Exh. 'A' to the S.A.

2. The respondent No. 2 is respondent No. 1's constituent. The respondent No. 1 had given notice dated 11.8.2003 under Section 13(2) of SRFAESI Act calling upon the respondent No. 2 to pay the outstanding failing which possession of the secured assets namely immovable properties and hypothecated stocks, raw material, etc. was to be taken. Since the amount was not paid by respondent No. 2, the respondent No. 1 took possession on 15.12.2004 by possession notice under Rule 8(1) of even date only of the immovable property. Though the possession notice refers only to immovable property, the movable, raw material, etc. inside the immovable property have also gone in the possession of the respondent No. 1.

3. The applicant's case is that movables as referred to Exh. 'A' to the S.A. belong to it. The applicant claims to be carrying business of manufacturing Carbon and Alloy Steel, forging for the export purpose. In order to carry out the manufacturing activities, the applicant used to purchase raw material i.e. carbon steel and alloy from the market and deliver at the respondent No. 2's factory at Murbad on job work basis. Accordingly, the movables herein delivered to respondent No. 2 between 16.8.2004 and 24.11.2004 are covered under Form No. 57(F) [(now Convet Rule 4(5A)]. This was also within the Bank's knowledge, the respondent No. 2 having accordingly informed respondent No. 1. As such, the respondent No. 1 should not have taken possession of the movables in question. But, the respondent No. 1 Bank refused to re-deliver the goods on the request by the applicant bringing to the Bank's notice all the aforesaid and relevant facts. Therefore, this S.A.

4. The respondent No. 1 by reply in the nature of affidavit of Mr. D.A. Dehadaray (Exh. 11) has opposed the applicant's claim initially on the ground of limitation. It is then stated that 9 items referred to in Exh. 'A' to the S.A. do not form subject matter of possession taken by the respondent No. 1 as would be clear from the inventory prepared by the Bank under Rule 4(2) of the Security Interest (Enforcement) Rules, 2002. It is stated that copy of possession notice was pasted on the main door of the premises and given to Mr. A.P. Sawant and Mr. B.M. Shah, Directors of the Company who did not point out that the stocks or raw material belonged to the 3rd party/applicant. The respondent has pleaded ignorance about the raw material, furnace oil, etc. having been given by the applicant to respondent No. 1 for job work. The application is sought to be dismissed on said grounds.

5. Vide Exh. 12, affidavit of Mr. Bhupendra Shah, the respondent No. 2 has supported the applicant's case.

6. After first round of the hearing, M/s. Girish Pawar and Associates were appointed as Commissioner for finding out whether the raw material, etc. as described in Exh. 'A' read with copies of invoices showing that the same were given to respondent No. 2 for job work (Exhs. A1 to A10 of the S.A.) was appointed. His report (Exh. 25) broadly supports the applicant's case.

7. Thereafter, the representative of the applicant and both the respondents opened the premises of respondent No. 2 and took out following record:

(1) Material Inward Register maintained by respondent No. 2 company from 29.12.2002 to 14.12.2004;

(2) File containing the Excise Form No. 5(5)(a) under Canvet Rules along with Delivery Challans;

(3) File containing the invoices/receipts of the various materials by the respondent No. 2 from the various suppliers/job workers.

This was done for cross-checking the applicant's claim that the raw material, furnace oil, etc. was handed over to respondent No. 2 for job work and that respondent No. 2 had taken according relevant entries. The aforesaid record broadly supports the applicant's claim.

8. I have heard arguments of learned Counsel representing the rival parties. I have gone through the material on the record.

9. The question of tenability of the application raised on the ground that the applicant is not the Borrower does not detain me much because Section 17 of SARFAESI Act uses expression 'person (including Borrower)'. On the point of limitation there is no doubt delay of about 15 days in filing the application (Appeal). But, the request of the applicant for condonation of the delay on the ground that after taking possession he had requested the Bank for returning the raw material, furnace oil, etc. (Bank) rejected the request on or about 30.12.2004 is liable to be allowed considering that 'sufficient cause' in Section 5 of Limitation Act has to be liberally construed.

10. At the very outset, I may observe that subject to the applicants proving ownership, the application can be allowed only on the ground that the Bank has taken possession only of immovable property, factory shade, fixed Plant and Machinery and not of movables, raw materials, etc. It is pertinent that the respondent No. 2 from whom the possession is taken does not claim to be owner of the movables, etc. sought by the applicant and has in fact supported the applicant's claim.

11. On the merit, I find that there is ample evidence on the record supporting the applicant's case. In the beginning, it may be stated that on the Bank's showing the two items (Sr.Nos. 10 and 11 of Exh. 'A' to the S.A.) namely Furnace Oil (SFT) and Manual Bandsaw Machine "Hari" have not been taken in possession. The Xerox copies of the invoices marked as Exh. A-10 apparently prove the applicant's ownership over the same. The respondent No. 2 has supported the applicant's case. Thus, the applicant is entitled to possession of the same and respondent No. 1 cannot withhold the same. With reference to Dies and Inserts as set out on pages 78-A and 78-B of the S.A., as per the inventory, the respondent No. 1 has taken possession of only 17 Dies. The Dies are embossed as 'DFC' which is short form of trade name of the applicant. The rest of the items are not challenged to be belonging to the applicant. Therefore, the applicant is entitled to the items covered by said entry in Exh. 'A'.

12. As regards items at Sr. Nos. 1 to 9 like Steel Billets, SAE, Steel round bars, etc. there are bills/invoices at page Nos. 31, 35, 44 to 47, 52 to 57, 61, 66, 71 and 74 in favour of the applicant. There are corresponding delivery challans under Canvet Rule 4(5)(a) at page Nos. 33, 38, 42, 50, 60, 63, 68, 72 and 75 respectively. There are corresponding entries showing that the items have been delivered by the applicant to respondent No. 2 bearing numbers 3564/86, 3716/93, 3752/98, 3870/100, 3871/100, 3872/100, 3882/101,3883/103 and 35/78/88 in the Inward Register. In fact, by letter dated 20.12.2001 (Exh. E to the S.A.) the respondent No. 2 had clearly informed the Bank that it is doing job work of the respondent No. 2. There is no reason to disbelieve this imposing evidence making me believe that the raw material, etc. was handed over by the applicant for job work to the respondent No. 1. That means the ownership of the material remained with the applicant which anyway is not the applicant's secured asset as per the possession notice as indicated earlier. The learned Counsel for the respondent No. 1 has pointed out that the description of some material does no

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t exactly tally inasmuch as at some places the material is described as carbon steel which is sought to be co-related with billets. But, considering the quantity of the item and the dates and the invoice numbers, etc., the identity of the materials is clearly established. I do not think that mere mis-description at some place disproves the applicant's ownership. The only conclusion which can be drawn in the light of aforesaid evidence is that the applicant is owner of raw material, etc. claimed by it. The application therefore is liable to be allowed. Hence, following order: ORDER (A) The securitisation application is allowed with no order as to costs. (B) The respondent No. 1 is directed to deliver within 15 days, to the applicant, the raw material, furnace oil, etc. as mentioned in Exh. A to the S.A.