No Absolute Right Of Appeal Under SARFAESI Without Pre-Deposit: Delhi High Court

The Delhi High Court has recently upheld the dismissal of a DRAT appeal for failure to comply with the mandatory pre-deposit under Section 18 of the SARFAESI Act.

A Division Bench of Justices Vivek Chaudhary and Renu Bhatnagar held that the statutory right of appeal is conditional. The court observed that “the said right is not absolute.”

The case arose after the Debts Recovery Tribunal dismissed a securitisation application filed by Renu Goyal challenging measures taken by Edelweiss Asset Reconstruction Company Ltd. She filed an appeal before the Debt Recovery Appellate Tribunal but did not comply with the statutory pre-deposit requirement.

The DRAT dismissed the appeal. It also rejected her applications seeking waiver and restoration.

Before the High Court, the petitioner submitted that she is a homemaker without independent income. She also submitted that substantial recovery had already been effected through auction of the secured property.

The High Court examined Section 18 of the Act. 

The Court noted that under the provision,“no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent. of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less.”

The Bench held that “the legislative language in the provision, particularly 'no appeal shall be entertained' makes the requirement of pre-deposit a condition precedent for maintainability of an appeal before the DRAT.”

It further clarified that "While the DRAT may reduce the deposit requirement from fifty percent to twenty five percent for reasons to be recorded in writing, the provision does not talk about complete waiver of the pre-deposit requirement"

Finding no error in the DRAT's approach, the Court held that “the DRAT has merely enforced the statutory mandate contained in Section 18 of the SARFAESI Act.” The writ petition was dismissed.

For Petitioner: Advocates Mohit Gupta, Seema Ali, Pallavi, and Adit Sharma