The Bombay High Court upheld the DRAT's order mandating a pre-deposit based on "debt due" when the measures under Section 13(4) of the SARFAESI Act were primarily contested.

Sale value and related considerations are premature in the absence of a Sale Certificate.

Acts and Sections Discussed:

• The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)
  • Section 13(4)
  • Section 18(1)

Ratio Decidendi:

• The calculation of pre-deposit for appeals under Section 18(1) of the SARFAESI Act must consider "debt due" in cases where steps under Section 13(4) are challenged.
• The sale price of the secured asset becomes relevant only after confirmation of the sale and issuance of the Sale Certificate.

1. Background

• Para 1-2:
  The petitioners challenged the DRAT order dated 2nd December 2024, directing a pre-deposit of ₹24 crores in three installments. This was based on the outstanding dues of ₹48.87 crore as determined by the respondent bank (Canara Bank).

2. Petitioners' Argument

• Para 3:
  The petitioners, represented by Senior Advocate Mr. Vineet Naik, argued that the sale amount of ₹2.97 crore (auction bid value) should determine the pre-deposit under Section 18(1) since the petitioners challenged the sale of the secured asset.

3. Respondents' Argument

• Para 4:
  Respondents contended that since no Sale Certificate was issued and the auction was under Section 13(4) measures, the debt due amounting to ₹48.87 crore should remain the basis for pre-deposit calculation.

4. Legal Precedent Cited

• Para 5-6:
  Both parties referred to the Supreme Court judgment in Sidha Neelkanth Paper Industries Private Limited & Anr. v. Prudent ARC Limited & Ors. (2023 SCC OnLine SC 12), which delineates the scope of Section 18(1) regarding pre-deposit determination.

5. Court's Analysis

• Para 7:
  The court clarified that:
  • If steps under Section 13(4) are challenged, the "debt due" is the determining factor for pre-deposit.
  • The sale value comes into play only post-issuance of the Sale Certificate.

6. Final Decision

• Para 8:
  The writ petition was dismissed as the DRAT's calculation was aligned with the SARFAESI Act. The court refrained from commenting on the appeal's merits, focusing solely on procedural adherence.

Subjects:

SARFAESI Act Compliance in Auction Disputes.

#SARFAESIAct #DebtRecovery #PreDeposit #SecuredAsset #BankingLaw #AuctionDispute