The Supreme Court in Union Bank Of India vs Rajat Infrastructure Pvt. Ltd. allowed Bank’s appeal on 02.03.2020. The Court set aside Bombay High Court orders dated 25.11.2019 and 16.12.2019. High Court had said no pre-deposit is required for DRAT appeal against SARFAESI sale. Supreme Court held that is totally incorrect. Section 18 of SARFAESI Act, 2002 mandates 50% deposit of debt due, or 25% minimum if DRAT reduces. This applies to borrower, guarantor, and mortgagor. High Court has no power to waive statutory pre-deposit. The judgment reinforces strict compliance in SARFAESI appeals. It prevents parties from bypassing deposit requirement by going to High Court. Important banking recovery law for Banks and secured creditors.
Facts: Property Auctioned For 65.52 Cr; Guarantor Challenged Sale Price
Respondent No.1 stood as guarantor and mortgaged property for loan availed by Respondent No.4 and 5. Property was auctioned and Respondent No.2 and 3, alleged leaseholders, were highest bidders for Rs 65.52 crores. Guarantor challenged sale before DRAT alleging low price and collusion between Bank officers and bidders. DRAT order dated 11.11.2019 was challenged in Bombay High Court. High Court relegated parties to DRAT and said no pre-deposit required because no decree was passed. Review was also dismissed. Bank and auction purchasers appealed to Supreme Court.
Legal Issue: Is Pre-Deposit Under Section 18 SARFAESI Mandatory For DRAT Appeal?
Section 18(1) SARFAESI Act provides right of appeal to DRAT against DRT order under Section 17. Second proviso says "no appeal shall be entertained unless borrower has deposited 50% of amount of debt due". Third proviso allows DRAT to reduce to 25% for reasons recorded. High Court held pre-deposit not required when challenging reserve price. Supreme Court disagreed. Relying on Narayan Chandra Ghosh vs UCO Bank, Court said there is absolute bar. DRAT can reduce to 25% but cannot waive entirely. Guarantor/mortgagor stands on same footing as borrower.
Ratio Decidendi: High Court Cannot Waive Statutory Pre-Deposit
Supreme Court held High Court erred in interpreting Section 18. Statutory condition precedent must be fulfilled. Language is clear and admits no ambiguity. High Court does not have powers like Article 142 to give directions contrary to law. Argument that guarantor is not borrower was rejected. Court said guarantor who mortgaged property is same as borrower for Section 18. Therefore appeal to DRAT must be with deposit. Appeals allowed. Time extended to auction purchasers to deposit balance till 20.03.2020. Respondent No.1 given 30 days to file appeal with deposit.
Conclusion:
50% Pre-Deposit Mandatory For SARFAESI DRAT Appeals
Union Bank Of India vs Rajat Infrastructure is key sarfaesi act section 18 pre deposit supreme court 2020 precedent. Supreme Court 02.03.2020 held pre-deposit cannot be waived by High Court. As the law stands, borrower, guarantor or mortgagor must deposit 50% or minimum 25% to file DRAT appeal. This upholds SARFAESI Act’s objective of speedy recovery. Banks can rely on this to ensure deposit compliance. Merits to be decided by DRAT.
