No Pre-deposit Needed for Appeal before DRAT if Bank Recovers Full Debt & Surplus via Property Auction

Case Details: Vishal Jaiswal v. Naresh Soni - [2023] 150 taxmann.com 241 (HC-Madhya Pradesh)

Judiciary and Counsel Details

• • Vivek Rusia & Amar Nath Kesharwani, JJ.
  • Akash Rathi, learned Counsel for the Petitioner.
  • Vivek Phadke & Kshitij Vyas, learned Counsels for the Respondent.

Facts of the Case

In the instant case, a loan was obtained by the borrower from a bank. In order to secure the said loan, the borrower mortgaged its immovable property. As the loan remained unpaid, the bank initiated action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and took possession of the subject property.

Subsequently, the subject property was sold in auction to the petitioner and the sale certificate was registered in favour of the petitioner. The Debt Recovery Tribunal (DRT) dismissed the securitization application as no irregularity was found in the measures taken by the bank for recovering the entire debt.

Being aggrieved by the said order, the borrower approached the Debt Recovery Appellate Tribunal (DRAT) along with an application seeking waiver of the amount towards the condition of pre-deposit for entertaining an appeal u/s 18 of the Act.

The said application was opposed by the petitioner and bank as well. The DRAT held that since the bank had already recovered the debt, hence, there was no amount of debt due, satisfying the requirement of pre-deposit. Therefore, the borrower was not required to tender any amount towards the pre-deposit condition to entertain the appeal u/s 18 of the Act.

Thereafter, the petitioner and the bank filed the instant writ, arguing that the appeal could not be entertained unless the borrower had deposited 50% of the amount of debt due from him with the DRAT.

High Court Held

The High Court observed that since the bank had recovered the entire amount, even more than the amount of debt by way of an auction sale, there was no debt due against the borrower on the date of filing the appeal.

The High Court held that there was no question of a deposit of 50% of the total amount as a pre-deposit and, the appeal of the borrower had rightly been entertained by the DRAT without a pre-deposit of 50% of debt due under the second proviso of section 18 of the Act.

List of Cases Reviewed

• • Order passed by DRAT in Appeal No. 344/2020, dated 9-2-2021 (para 16) affirmed.

List of Cases Referred to

• • Manohar Infrastructure and Constructions (P.) Ltd. v. Sanjeev Kumar Sharma [Civil Appeal No. 7098 of 2021, dated 7-12-2021] (para 6)
  • Narayan Chandra Ghosh v. UCO Bank [2011] 4 SCC 548 (para 6)
  • Eskays Construction (P.) Ltd. v. Soma Papers & Industries Ltd. AIR 2017 Bom. 10 (para 6)
  • Akash Ganga Airlines Ltd. v. Debt Recovery Appellate Tribunal [Writ Petition No. 3973 (MS) of 2015, dated 12-8-2015] (para 6).