In a recent judgment the Supreme Court has held that not every appeal arising from the Debts Recovery Tribunal (DRT) attracts the statutory requirement of pre-deposit under Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
The decision came in Civil Appeal No. 5290 of 2025, arising from a Special Leave Petition filed by M/s Sunshine Builders and Developers challenging the Bombay High Court's order dated 19 March 2024. The High Court had upheld an order of the Debts Recovery Appellate Tribunal (DRAT), which had directed the appellant to deposit Rs. 125 crore as a pre-condition for entertaining an appeal under Section 18 of the SARFAESI Act.
The DRAT’s direction stemmed from an appeal against the DRT’s refusal to implead the appellant, auction purchasers, in a pending securitisation application. The appellant sought to challenge the procedural rejection before the DRAT, but was confronted with the statutory barrier of pre-deposit.
A bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan set aside the High Court’s order, remanding the matter for fresh consideration. The Court observed that the High Court erred in mechanically applying the pre-deposit requirement without examining the nature of the order under challenge.
The Supreme Court noted that the High Court “got enamoured by the finding recorded by the DRAT that the appellant – herein had consented to the creation of the mortgage.” It further remarked that the High Court, upon referring to the definition of ‘borrower’ under Section 2(1)(f) of the SARFAESI Act, failed to properly engage with the central question.
The Court emphasized the need for a subtle interpretation of Section 18, stating:
“The plain reading of Section 18 of the SARFAESI Act, referred to above, would indicate that if any person which should also include a borrower is aggrieved by any order made by the DRT under Section 17 of the SARFAESI, he may prefer an appeal subject to the pre-deposit. We are of the view, of course prima facie that the expression ‘any order’ should be given some meaningful interpretation.”
Elaborating further, the bench observed:
“One can understand that if any final order is passed by the DRT, determining the liability of the borrower or any other liability of any person, and an appeal is preferred under Section 18 of the SARFAESI Act to the appellate tribunal, the provision of pre-deposit would come into play. However, what would be the position if an order like the one passed in the present litigation, i.e., declining to implead the auction purchaser in the pending proceedings before DRT is concerned?”
On this footing, the Court held that such procedural orders may not automatically trigger the statutory pre-deposit requirement and deserve distinct judicial treatment. It held:
“We are of the view that we should remand the matter to the High Court for the purpose of reconsidering the aforesaid aspects of the matter.”
Accordingly, the High Court’s order was set aside and Writ Petition No. 3929 of 2024 was remanded for de novo adjudication. The Court clarified that in the event of an adverse order, the appellant would be at liberty to return to the Supreme Court.
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