Supreme Court Refuses To Entertain Petition Challenging SARFAESI Condition Of Pre-deposit To Appeal Before DRAT

The Supreme Court on Wednesday (June 26) declined to issue notice in a petition filed by a Company Director challenging the validity of the condition of 50% pre-deposit for an appeal to DRAT (Debt Recovery Appellate Tribunal) under S. 18 of the SARFAESI Act. 

The main contention of the petitioner was that the provisos to the S. 18 impose the condition of depositing either 50% of the sum due to the bank or 25% (at the discretion of the Court) for the DRAT to hear an appeal against an order of the Debts Recovery Tribunal (DRT) under S.17 of SARFAESI was arbitrary and against the principles of natural justice.  

As per the petition, the provisos make the provision for appeal redundant and negatory. Since a major chunk of lending by banks is in the form of term loans for a period of 10-15 years, the default sum for which provision of the SARFAESI Act is invoked by the lending bank is only 5% or less of the borrowed amount. As against which the borrower is forced to pay 50-25% of the sum in order to be heard in appeal. 

 "The Banker is permitted to invoke SARFAESI when an account is in default for a period of 90 days. Which would mean that what is in default is not even 5 percent of the amount due. A borrower who is made to face action under the SARFAESI Act for not being able to pay, for instance, 5 percent of the amount outstanding, is required to pay 50 percent of the entire loan amount to even maintain his appeal, howsoever atrocious the order of the DRT. Still worse, the terminology used being any order, no matter what the nature of the appeal, the DRATs insist on pre-deposit of at least 25 percent. The Section ex facie renders the provision for appeal nugatory. In practice, the proviso is made applicable even to appeals arising from interim orders." 

The vacation bench of Justices AS Oka and Rajesh Bindal refused to entertain the petition and noted that the company of which the present petitioner is a director already has filed a petition before the Top Court on similar issues. The petitioner was represented by Advocate Mr Mathews J Nedumpara. 

The Court disposed of the matter while making the following observation : 

"There are two reasons why we are not entertaining the petition, firstly the Petitioner has remedy before the Bombay High Court under Article 226 of the Constitution of India and secondly, the Petitioner is a director of CJEX Biochem Pvt. Ltd. which was the Petitioner in writ petition no. 3038 of 22. The final order passed in the said writ petition has been challenged by the Company before this Court in which the counsel for the Petitioner himself appeared and an order was passed that the petition shall be listed before a particular bench. As the petitioner has remedy before the High Court we decline to entertain this petition under Article 32 of the Constitution of India and subject to what is observed above the petition is disposed of." 

The petition was filed with the assistance of AOR Abdul Qadir Abbasi. 

Case Details : CHETAN PRABHASHANKAR JOSHI VS. BOARD OF DIRECTORS OF PEGASUS ASSETS RECONSTRUCTION PRIVATE LIMITED W.P.(C) No. 000391 / 2024