Condition Of Pre-Deposit For Appeal U/S 18(1) SARFAESI Act Only For Borrowers & Guarantors: Delhi HC [Read Judgment]

 The Delhi High Court, on Wednesday, upheld a decision passed by the Debt Recovery Appellate Tribunal (DRAT), to hold that any aggrieved person can file an appeal against the order of the Debt Recovery Tribunal (DRT) without pre-deposit.

A bench comprising Chief Justice Rajendra Menon and Justice V Kameswar Rao held that the requirement for payment of pre-deposit would apply only if the borrower or guarantor files the appeal.

“Having noted the position of law, we must hold that there is no ambiguity in the provisions of Section 18 of the SARFAESI Act. The provisions of Section 18 of the SARFAESI Act, are determinative of the fact that the legislature intended that it is only the borrower and the guarantor, who should be under obligation to make the pre-deposit. 

“The same is clear on a literal and grammatical meaning of the words “borrower” and “any person aggrieved” as found mentioned in Section 18 and 2 (f) of the Act. There is no inconsistency within the provision of Section 18(1) of the Act,” it explained.

The court was hearing a petition filed by Indiabulls Housing Finance Ltd., challenging an order passed in March this year by the DRAT, which had rejected Indiabulls’ objection for pre-deposit of half of the amount before an appeal filed by the respondents can be entertained.

The court, however, did not agree with the petitioner’s point of view, as the respondents in the case were neither the borrowers nor the guarantors.

The court noted that the second proviso to Section 18(1) of the SARFAESI Act clearly states that “no appeal shall be entertained unless the borrower has deposited with the Arbitral Tribunal 50% of the amount of debt”. It then pointed out that while the appeal under Section 18(1) can be filed by “any person” aggrieved, the pre-deposit condition is only for a “borrower”.

Averting to definition of a “borrower” under Section 2(f) of the SARFAESI Act, it therefore observed, “It must be held that the only way, the second proviso to Section 18(1) can be interpreted is that it is either the borrower or the guarantor, who is liable to make pre-deposit on an appeal filed by him/her against the order of the DRT. The DRAT has rightly rejected the contention made on behalf of the petitioner for the pre-deposit to be made by the respondent.”

The petition was, thereafter, dismissed.

Indiabulls was represented by Senior Advocate Ashwini Kumar Mata, with Advocate Aastha Lumba. The respondents, Vaibhav Jhawar and others were represented by Advocate Manisha Chaudhary along with Advocates S.L. Gupta and Raja Singh.

Read the Judgment Here