The High Court cannot waive pre-deposit for preferring appeal before DRAT; SC.

Supreme Court of India

Justice  Deepak Gupta & Justice Aniruddha Bose

The SC {UNION BANK OF INDIA v. RAJAT INFRASTRUCTURE PVT. LTD. & ORS.} holds 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. The DRAT, at best could, after recording the reasons, have reduced the amount to 25% but could not have totally waived the deposit. The SC also held that the right of appeal conferred under Section 18(1) is subject to the conditions laid down in the second proviso therein which postulates that no appeal shall be entertained unless the borrower has deposited 50% of the amount of   debt   due   from   him   as   claimed   by the   secured   creditors   or determined   by   the   DRT, whichever   is   less.     The   third   proviso enables the DRAT, for reasons to be recorded in writing, to reduce the   amount   of   deposit   to   not   less   than   25%.  

It was held that 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 - i.e. to waive of the pre-deposit amount. It was also held 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 SC set aside both the orders dated 25.11.2019 and 16.12.2019 of the High Court in so far as they held that pre­-deposit is not required before DRAT and allowed the appeals.

In the present case, the issue was whether the High Court was right in directing that pre­-deposit was not required for entertaining an appeal before the DRAT as mandated by Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘SARFAESI Act’). The SC answered it in negative.