An appeal under Sec. 18 of SARFAESI Act cannot be entertained by the DRAT without pre-deposit of 50% of amount due: SC
[ by Kavita Krishnan ]A Bench of Justices Deepak Gupta and Aniruddha Bose held that the High Court cannot give directions which are contrary to law.The question posed for determination before the Supreme Court was whether the High Court was right in directing that the mandated pre-deposit was not required for entertaining an appeal before the Debt Recovery Appellate Tribunal (DRAT) as...
A Bench of Justices Deepak Gupta and Aniruddha Bose held that the High Court cannot give directions which are contrary to law.
The question posed for determination before the Supreme Court was whether the High Court was right in directing that the mandated pre-deposit was not required for entertaining an appeal before the Debt Recovery Appellate Tribunal (DRAT) as mandated by Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’).
The petitioner challenged an order of the DRAT with the Bombay High Court. The High Court without getting into the merits of the matter, relegated the Petitioner stating that the Petitioner has an efficacious alternate remedy of appeal before the DRAT and that no pre-deposit was required.
The said order of the Bombay High Court was challenged before the Supreme Court of India.
The Apex Court held that the observations of the Bombay High Court were totally incorrect.
According to section 18 of the SARFAESI Act, all appeals to the DRAT shall be entertained by the Tribunal only after the deposit of 50% of the amount of debt due.
The Apex Court further held that the DRAT has powers to reduce the amount to not less than 25% but could not have totally waived the deposit. Moreover the DRAT can do so only after recording reasons in writing.
The Court relied on Narayan Chandra Ghosh vs. UCO Bank & Ors in which it was held that “there is an absolute bar to the entertainment of an appeal under Section 18 of the Act unless the condition precedent, as stipulated, is fulfilled. Unless the borrower makes, with the Appellate Tribunal, a pre-deposit of fifty per cent of the debt due from him or determined, an appeal under the said provision cannot be entertained by the Appellate Tribunal. The language of the said proviso is clear and admits of no ambiguity.”
The Court observed that a guarantor or a mortgagor who has mortgaged its property to secure the repayment of the loan, stands on the same footing as a borrower and if he wants to file an appeal, he must comply with the terms of Section 18 of the SARFAESI Act. The Court went on to add that the High Court has no powers akin to powers vested in Supreme Court under Article 142 of the Constitution and that the High Court cannot give directions which are contrary to law.
The Supreme Court set aside the order of the Bombay High Court.