High Court has no power to waive pre deposit for entertaining appeal before DRAT as mandated by Section 18 of the SARFAESI Act – Supreme Court
ABCAUS Case Law Citation:
ABCAUS 3282 (2020) (03) SC
Important case law relied upon by the parties:
Narayan Chandra Ghosh vs. UCO Bank& Ors. (2011) 4 SCC 548
In the instant case, Petition was admitted by the Hon’ble Supreme Court on the short question as to 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 (SARFAESI Act).
The respondent company stood guarantee and mortgaged its property for repayment of loan availed by other respondents. The said property was put to auction and other respondents who were the alleged leaseholders in possession of the property were the highest bidders.
The main objection of the respondent company to the sale was that it was auctioned at a very low price and there was collusion between the officers of the Bank and the auction purchaser.
The petitioner challenged the order of the DRAT before the High Court and the High Court relegated the Petitioner to the appellate remedy on account of aforenoted facts and holding that the Petitioner had an efficacious alternate remedy of appeal before the DRAT where no pre deposit is required.
The successful bidders filed review petitions before the High Court praying that the Court could not have issued directions that no pre deposit was required. However, the High Court dismissed the review petition.
High Court has no power to waive pre deposit for entertaining appeal before DRAT
The Hon’ble Supreme Court observed that I a case it had held that keeping in view the language of the Section 18 of the SARFAESI Act, 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 predeposit.
The Court had held that The DRAT, at best could, after recording the reasons, had reduced the percentage amount but could not have totally waived the deposit.
The Court had 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%.
In view of the above law laid down the Hon’ble Supreme Court held that the observation made by the High Court was totally incorrect.
The Hon’ble Supreme Court rejected the contention that the High Court had exercised its discretionary powers under Article 226 of the Constitution. It was observed that the order of the High Court did not show any exercise of such discretionary powers but according to the High Court on an interpretation of the Section, pre deposit was not required.
The Hon’ble Supreme Court was also not impressed with the argument that the respondent was not a borrower. The Court stated 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 Section18 of the SARFAESI Act.
The Hon’ble Supreme Court further clarified that the High Court has no powers akin to powers vested in Apex Court under Article 142 of the Constitution. The High Court cannot give directions which are contrary to law.
Accordingly the order(s) of the High Court was set aside on the question of pre-deposit.
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