On June 26, the Supreme Court declined to issue notice on a petition challenging the requirement of a 50% pre-deposit to appeal before the Debt Recovery Appellate Tribunal (DRAT) under Section 18 of the SARFAESI Act. The petition, filed by a company director, contested the validity of this pre-deposit condition, arguing that it is arbitrary and violates the principles of natural justice.
The petitioner argued that the provisos to Section 18 of the SARFAESI Act, which require depositing either 50% of the sum due to the bank or 25% at the court’s discretion to appeal against a Debts Recovery Tribunal (DRT) order, effectively render the provision for appeal meaningless. The petitioner noted that since a significant portion of bank lending is in the form of long-term loans, the default sum triggering SARFAESI action is often less than 5% of the borrowed amount. Nonetheless, borrowers are forced to pay 50-25% of the total sum to have their appeal heard.
“The Banker is permitted to invoke SARFAESI when an account is in default for a period of 90 days. This means that the default amount is often less than 5% of the total due. A borrower, unable to pay this 5%, is then required to pay 50% of the entire loan amount to maintain their appeal, no matter how unjust the DRT order may be. Worse, the DRATs insist on a pre-deposit of at least 25%, even for appeals arising from interim orders. This effectively nullifies the provision for appeal,” the petition argued.
The vacation bench of Justices AS Oka and Rajesh Bindal refused to entertain the petition, noting that the company, of which the petitioner is a director, has already filed a similar petition before the Supreme Court. Additionally, the bench pointed out that the petitioner has the option to seek remedy before the Bombay High Court under Article 226 of the Constitution of India.
“There are two reasons why we are not entertaining this petition: firstly, the petitioner has a remedy before the Bombay High Court under Article 226 of the Constitution of India; and secondly, the petitioner is a director of CJEX Biochem Pvt. Ltd., which has already challenged a similar issue before this Court,” the bench observed.
The Court disposed of the matter, advising the petitioner to pursue available remedies in the High Court.
The petition was filed with the assistance of Advocate on Record Abdul Qadir Abbasi.
Case Details: Chetan Prabhashankar Joshi vs. Board of Directors of Pegasus Assets Reconstruction Private Limited
W.P.(C) No. 000391 / 2024
