Supreme Court Declines Notice in Petition Against SARFAESI Act's 50% Pre-Deposit Condition

sakshi mittal 0

 


On June 26, the Supreme Court of India declined to issue a notice in a petition filed by a company director challenging the validity of the condition requiring a 50% pre-deposit for an appeal to the Debt Recovery Appellate Tribunal (DRAT) under Section 18 of the SARFAESI Act.


Petitioner's Contention

The petitioner argued that the provisos to Section 18 of the SARFAESI Act, which mandate depositing either 50% of the sum due to the bank or 25% at the court's discretion for the DRAT to hear an appeal against a Debts Recovery Tribunal (DRT) order under Section 17, were arbitrary and violated the principles of natural justice.


Key Arguments:

  • Redundancy of Appeal Provision: The petitioner contended that these provisos make the provision for appeal redundant and negatory. Given that a significant portion of lending by banks is in the form of long-term loans (10-15 years), the default sum triggering SARFAESI action is often only 5% or less of the borrowed amount. However, borrowers are forced to pay 50-25% of this sum to be heard in an appeal.

  • Arbitrary Requirement: It was argued that requiring a borrower who might default on just 5% of the total loan amount to deposit 50% of the entire loan amount to maintain an appeal, regardless of the nature of the DRT order, is unjust. This effectively renders the appeal provision nugatory, especially since DRATs often insist on a pre-deposit of at least 25%, even for interim orders.


Supreme Court's Decision

The vacation bench of Justices AS Oka and Rajesh Bindal refused to entertain the petition. The Court noted two primary reasons for this decision:

  1. Alternative Remedy Available: The petitioner has a remedy before the Bombay High Court under Article 226 of the Constitution of India.
  2. Pending Petition on Similar Issues: The company of which the present petitioner is a director had already filed a petition before the Supreme Court on similar issues. This previous petition had been listed before a particular bench.


Court's Observation

The Court made the following observation while disposing of the matter:

"There are two reasons why we are not entertaining the petition, firstly the Petitioner has 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 was the Petitioner in writ petition no. 3038 of 22. The final order passed in the said writ petition has been challenged by the Company before this Court in which the counsel for the Petitioner himself appeared, and an order was passed that the petition shall be listed before a particular bench. As the petitioner has remedy before the High Court, we decline to entertain this petition under Article 32 of the Constitution of India, and subject to what is observed above, the petition is disposed of."


Legal Representation

The petitioner was represented by Advocate Mr. Mathews J. Nedumpara, and the petition was filed with the assistance of AOR Abdul Qadir Abbasi.


Case Details

  • Case Title: CHETAN PRABHASHANKAR JOSHI VS. BOARD OF DIRECTORS OF PEGASUS ASSETS RECONSTRUCTION PRIVATE LIMITED

Tags

Post a Comment

Post a Comment

Previous Post Next Post