DRAT’s Order to Maintain Status Quo on Mortgaged Property Ends if Borrower Defaults on Deposit Repayment: SC

Case Details: Anil v. Tata Capital Financial Services Ltd. - [2023] 150 taxmann.com 286 (SC)

Judiciary and Counsel Details

• • D.Y. Chandrachud, CJ. Pamidighantam Sri Narasimha & J.B. Pardiwala, JJ.
  • Garvesh Kabra, AOR & Mrs Pooja Kapra, Adv. for the Petitioner.
  • Rajat Katyal & Rahul Sambher, Advs. for the Respondent.

Facts of the Case

In the instant case, the petitioners borrowed an amount from the respondent (i.e. creditor). Upon default in the repayment of the loan amount by the petitioners/borrowers, the District Magistrate passed an order u/s 14 of the SARFAESI Act, 2002 directing the creditors to take possession of the mortgaged property.

The petitioners then filed an application u/s 17 of the SARFAESI Act, 2002 for interim relief and submitted an affidavit before the Debt Recovery Tribunal (DRT), stating that an amount of Rs. 1 crore would be paid in instalments.

The DRT directed the status quo to be maintained with further directions that in case of any default of payments to be made, the order of status quo would stand automatically vacated. The borrowers requested an extension of time to make the payment. However, the DRT dismissed the same.

Being aggrieved by the said order, the petitioners approached the Debt Recovery Appellate Tribunal (DRAT) challenging the said order.

The DRAT directed the petitioners to deposit a total amount of Rs. 1 crore as a pre-deposit. Being aggrieved by the direction to deposit an amount by way of pre-deposit, the petitioners challenged the orders in the writ petition. However, the High Court refused to interfere with the order of DRAT.

Consequently, an appeal was made to the Supreme Court against the order passed by the High Court. It was noted that, apart from an amount of Rs. 20 lakhs that had already been deposited with the DRAT, the petitioners were ready to deposit a demand draft of Rs. 20 lakhs in terms of the order of the DRAT.

Supreme Court Held

The Supreme Court observed that permission was granted to the petitioners to pay an amount of Rs. 20 lakhs to the respondent within three days. Further, the remaining balance of Rs. 60 lakh was to be paid in equal instalments each of Rs. 20 lakhs on or before 31.05.2023.

The Supreme Court held that the interim order would continue to remain in operation subject to the condition that if there was any default on the part of the petitioners in complying with the time schedule, the said interim order would come to an end without further reference to the Supreme Court.

Further, the Supreme Court held that if the petitioners comply with the given time schedule, then it would be for the DRAT to take an appropriate view on whether the petitioners should be granted any further interim direction or not. According, the petition was disposed of.