Union Bank of India Vs. Rajat Infrastructure Pvt. Ltd. and Ors. - (Supreme Court) (02 Mar 2020)

DRAT cannot entertain appeal under Section 18 of SARFAESI Act without insisting on pre- deposit

MANU/SC/0249/2020

Banking

The basic facts are that the Respondent No. 1 stood guarantee and mortgaged its property for repayment of loan availed by Respondent Nos. 4 and 5. The property was put to auction and Respondent Nos. 2 and 3 who are the alleged leaseholders in possession of the property are the highest bidders for a sum of Rs. 65.52 crores. The main objection of the Respondent No. 1 to the sale is that, it is for a low amount and there is collusion between the officers of the Bank and the auction purchaser. The Petitioner challenged the order of the DRAT before the High Court.

By the said impugned order the High Court had relegated the Appellant before it i.e. Respondent No. 1 herein to avail the statutory remedy of appeal before the Debt Recovery Appellate Tribunal. we are not going into the merits of the case in view of the fact that we agree with the High Court that the matter must be decided by the DRAT. The only issue is whether the High Court was right in holding that no pre-deposit was required.

This Court in the case of Narayan Chandra Ghosh v. UCO Bank and Ors., held that keeping in view the language of the Section even if the amount or debt due had not been determined by the DRT, the appeal could not be entertained by the DRAT without insisting on pre-deposit.

Thus, 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.

In view of the law laid down by this Court, present Court is clearly of the view that the observation made by the High Court was totally incorrect. 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 Securitisation And Reconstruction Of Financial Assets And Reinforcement Of Security Interest Act, 2002 (SARFAESI Act).

Furthermore, the High Court has no powers akin to powers vested in this Court under Article 142 of the Constitution. The High Court cannot give directions which are contrary to law. Present Court set aside both the orders of the High Court in so far as they hold that pre-deposit is not required and allow the appeals. Present Court have not gone into the merits of the contentions raised by the parties which shall be decided by the DRAT when it entertains the appeal and is called upon to do so. The time given to the auction purchasers is extended.

Relevant : Narayan Chandra Ghosh v. UCO Bank and Ors. MANU/SC/0416/2011

Tags : PRE-DEPOSIT REQUIREMENT ENTERTAINMENT APPEAL