The Supreme Court in Union Bank Of India vs Rajat Infrastructure Pvt Ltd clarified SARFAESI law on 02.03.2020. The dispute arose from auction of mortgaged property for Rs 65.52 cr. Guarantor challenged sale alleging undervaluation and collusion. High Court sent matter to DRAT but said no pre-deposit needed. Supreme Court set aside that direction. Court held Section 18 mandates deposit for all appeals against Section 17 orders. This includes guarantors and mortgagors. High Court cannot create exception. The judgment strengthens Banks’ hands in recovery. It ensures DRAT appeals are not filed without deposit.
Facts: Loan Default; Mortgage; Auction; Challenge Before High Court
Bank gave loan to Respondent 4 and 5. Respondent 1 guaranteed and mortgaged property. Loan defaulted. Bank initiated SARFAESI proceedings and auctioned property. Highest bid was Rs 65.52 cr by Respondent 2 and 3. Guarantor filed appeal before DRAT and simultaneously writ in High Court. High Court said go to DRAT and no deposit required. Bank and auction purchasers came to Supreme Court. Main grounds were undervaluation and collusion.
Legal Reasoning: Section 18 Is Mandatory, No Exception By High Court
The Court focused on Section 18 second and third proviso. In Narayan Chandra Ghosh this Court already held deposit is mandatory. DRAT has discretion to reduce to 25% but not to zero. High Court’s reasoning that "no decree passed" is irrelevant. SARFAESI is special law with strict timelines. Allowing writ to bypass deposit would defeat purpose. Supreme Court also rejected argument that guarantor is not covered. Once property is mortgaged to secure debt, guarantor is treated like borrower for appeal purpose.
Practical Impact: What Banks And Borrowers Must Note
After this judgment, Banks must insist on pre-deposit before DRAT entertains appeal. Legal teams should quote Union Bank vs Rajat Infrastructure to oppose waiver. Borrowers, guarantors and mortgagors must arrange 50% deposit or apply to DRAT for reduction to 25%. Filing writ in High Court to avoid deposit will not work. Auction purchasers get protection as Court extended time to deposit balance. This brings discipline in SARFAESI litigation.
Conclusion:
No Appeal Without Deposit Under SARFAESI
Union Bank vs Rajat Infrastructure establishes that union bank vs rajat infrastructure sarfaesi requires strict compliance. Supreme Court 02.03.2020 restored statutory mandate. As the law stands, pre-deposit is non-negotiable for DRAT. High Court cannot override it. Landmark ruling for banking and secured asset recovery.
