DRAT Need Not Mandate 50% Of Debt Due As Pre-Deposit To Entertain Appeals, Must Consider Subject Matter: Kerala High Court

The Kerala High Court recently held that there is no mandate under law that the pre-deposit amount should always be 50% of the debt due, while entertaining appeals under Section 18 SARFAESI [Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest] Act, challenging the order of the Debts Recovery Tribunal.It clarified that the Debt Recovery Appellate Tribunal (DRAT), while determining the amount to be deposited, shall take into consideration the subject matter of the appeal.Justice C. Jayachandran observed:“it cannot be said that the subject matter of the appeal is completely and wholly irrelevant, when the pre-deposit amount to entertain the appeal is to be determined. In every case, it is not the mandate of law - irrespective of the attendant facts - that the pre-deposit amount to entertain the appeal shall be 50% of the debt due, invariably. The very purpose of granting a discretion by virtue of the third proviso, itself, would vouch the proposition that it all depends on the facts of the case, and varies from case to case. It is to ensure appreciation of facts – for the purpose of exercising discretion – that the statute mandates that reasons thereof shall be recorded in writing. Thought in that perspective, the subject matter of the appeal, in the opinion of this Court, is a relevant consideration while exercising the discretion in terms of the third proviso; and a direction to deposit an amount more than the subject matter of the appeal – just to maintain the appeal - will indubitably result in illegal exercise of the discretion, falling foul of the requirements of the third proviso.”The case before the Court was one filed under Article 227 of the Constitution challenging the DRAT, Chennai's order mandating payment of 40% of the debt due, i.e., Rs. 4,04,29,398/-, as a pre-deposit to entertain the borrower/petitioners' appeal. The respondents 1 and 2 are the bank and the auction purchaser respectively.The petitioners submitted that one of the properties belonging to them, which was offered as security, was sold in auction for Rs. 3.39 crores. The subject-matter of appeal before the DRAT is the auction sale of the said property. They, thus, contended that a direction to pay an amount more than the sale amount of Rs. 3.39 crores would be onerous, improper and illegal.The respondents resisted the petition saying that it ought to have been filed invoking jurisdiction under Article 226. They also argued that as per Section 18, appeals can be entertained only upon payment of 50% of the debt due or amount determined by the DRAT, which has the discretion to reduce it to 25% as per third proviso to Section 18(1), after recording reasons. They also submitted that subject matter of the appeal had no relation to the pre-deposit amount but only to the 'debt due'.Considering the arguments advanced, the Court opined that misquoting the Article of the Constitution is not a ground to deny relief to parties if there are otherwise entitled to it. With respect to the other argument raised, the Court disagreed and found that subject matter is relevant to determine the pre-deposit amount.It also found that the DRAT had not given any reasons to fix the pre-deposit amount as 40%, which ought to have been done as per the mandate of the provision. In the opinion of the Court, non-adherence to the provision vitiated the impugned order.The Court then went on to modify the order and directed the petitioners to pay 33.53% of the debt due, i.e., Rs. 3.39 crores as pre-deposit, to be made in two installments.Case No: OP(DRT) No. 256 of 2025Case Title: Glenny C.J. and Anr. v. Authorised Officer, Canara Bank and Anr.Citation: 2025 LiveLaw (Ker) 729Counsel for the petitioners: Praveen K. JoyCounsel for the respondent: M. Gopikrishnan Nambiar – SC – Canara Bank, S.S. Aravind, Tinu AbrahamClick to Read/Download Judgment

DRAT Need Not Mandate 50% Of Debt Due As Pre-Deposit To Entertain Appeals, Must Consider Subject Matter: Kerala High Court

K. Salma Jennath

Tags