Case Note & Summary
The petitioner, Kailasam P, was a guarantor for a loan of Rs.12,84,46,406.76 as quantified on 04.04.2017. The Karnataka Bank Ltd. initiated recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The Debt Recovery Tribunal (DRT) passed an order against the petitioner. The petitioner appealed to the Debt Recovery Appellate Tribunal (DRAT), Chennai, but failed to comply with the mandatory pre-deposit condition under Section 18(1) of the SARFAESI Act, which requires deposit of 50% of the debt due. The DRAT dismissed the appeal for non-compliance. The petitioner then filed a writ petition under Articles 226 and 227 of the Constitution before the High Court of Karnataka, seeking to set aside the DRAT order and to direct the DRAT to consider the appeal on merits. The High Court, after hearing the parties, held that the pre-deposit condition under Section 18(1) is mandatory and the DRAT has no power to waive it. The court noted that the petitioner had not made any deposit and the DRAT had no discretion to waive the condition. Consequently, the writ petition was dismissed, upholding the DRAT order. The court also observed that the petitioner, being a guarantor, is liable under the SARFAESI Act and cannot escape the pre-deposit requirement.
Headnote
A) SARFAESI Act - Pre-deposit Condition - Section 18(1) - Mandatory Deposit - The appeal before DRAT under Section 18 of SARFAESI Act is subject to mandatory pre-deposit of 50% of the debt due or the amount of difference, as determined by the DRT. The DRAT has no power to waive this condition. The petitioner, a guarantor, failed to comply with the pre-deposit order, leading to dismissal of the appeal. The High Court upheld the DRAT order, holding that the pre-deposit requirement is a condition precedent for entertaining the appeal. (Paras 1-5)
B) Constitutional Law - Writ Jurisdiction - Articles 226 and 227 - Interference with DRAT Orders - The High Court, in exercise of its writ jurisdiction, cannot interfere with an order of DRAT refusing to waive the pre-deposit condition under Section 18(1) of SARFAESI Act, as the condition is mandatory and the DRAT has no discretion to waive it. The writ petition was dismissed. (Paras 4-5)
Issue of Consideration
Whether the Debt Recovery Appellate Tribunal (DRAT) was justified in dismissing the appeal for non-compliance with the pre-deposit condition under Section 18(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), and whether the High Court can interfere under Articles 226 and 227 of the Constitution.
Final Decision
The writ petition is dismissed. The order of the Debt Recovery Appellate Tribunal, Chennai dated 01.04.2024 in IA No. 308 of 2023 in AIR 676 of 2023 is upheld.
Law Points
- Pre-deposit condition under Section 18(1) of SARFAESI Act is mandatory
- waiver of pre-deposit not permissible
- writ court cannot interfere with DRAT order refusing to waive pre-deposit
- guarantor is liable under SARFAESI Act
Case Details
2025 LawText (KAR) (02) 30
Writ Petition No. 11273 of 2024 (GM-DRT)
Krishna S Dixit, G Basavaraja
Manu Prabhakar Kulkarni, K N Mahabaleshwara, K V Shyama Prasad, Rajagopala Naidu
The Karnataka Bank Ltd, Mr. Chandrakumar Chaula, Smt. Sneha Nagpal, Mr. Rajesh R, Mrs. Geethanjali M N, Mr. G Jagadeswara Naidu
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Nature of Litigation
Writ petition under Articles 226 and 227 of the Constitution challenging the order of the Debt Recovery Appellate Tribunal (DRAT) dismissing the appeal for non-compliance with pre-deposit condition under Section 18 of SARFAESI Act.
Remedy Sought
Petitioner sought to set aside the DRAT order dated 01.04.2024 in IA No. 308 of 2023 in AIR 676 of 2023 and to allow the IA, directing DRAT to consider the appeal on merits.
Filing Reason
Petitioner, a guarantor, failed to deposit 50% of the debt due as required under Section 18(1) of SARFAESI Act, leading to dismissal of his appeal by DRAT.
Previous Decisions
DRAT dismissed the appeal for non-compliance with pre-deposit condition. The DRT had earlier passed an order against the petitioner.
Issues
Whether the DRAT was justified in dismissing the appeal for non-compliance with the pre-deposit condition under Section 18(1) of SARFAESI Act?
Whether the High Court can interfere under Articles 226 and 227 with the DRAT order refusing to waive the pre-deposit?
Submissions/Arguments
Petitioner argued that the DRAT should have considered the appeal on merits despite non-compliance with pre-deposit.
Respondent bank argued that the pre-deposit condition is mandatory and the DRAT has no power to waive it.
Ratio Decidendi
The pre-deposit condition under Section 18(1) of the SARFAESI Act is mandatory and a condition precedent for entertaining an appeal before the DRAT. The DRAT has no power to waive this condition. The High Court, in exercise of its writ jurisdiction under Articles 226 and 227, cannot interfere with an order of DRAT refusing to waive the pre-deposit, as the condition is mandatory and the DRAT has no discretion to waive it.
Judgment Excerpts
Petitioner being the guarantor for a gigantic loan of Rs.12,84,46,406.76 as quantified on 04.04.2017 is knocking at the doors of writ court for assailing the Debt Recovery Appellate Tribunal's order dated 01.04.2024.
The appeal before the DRAT under Section 18 of the SARFAESI Act is subject to mandatory pre-deposit of 50% of the debt due or the amount of difference, as determined by the DRT.
The DRAT has no power to waive this condition. The petitioner failed to comply with the pre-deposit order, leading to dismissal of the appeal.
The High Court upheld the DRAT order, holding that the pre-deposit requirement is a condition precedent for entertaining the appeal.
Procedural History
The Debt Recovery Tribunal (DRT) passed an order against the petitioner. The petitioner appealed to the Debt Recovery Appellate Tribunal (DRAT), Chennai, but failed to comply with the pre-deposit condition under Section 18(1) of SARFAESI Act. The DRAT dismissed the appeal on 01.04.2024. The petitioner then filed a writ petition under Articles 226 and 227 of the Constitution before the High Court of Karnataka, which was dismissed on 20.02.2025.
Acts & Sections
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: Section 18, Section 18(1)
- Constitution of India: Article 226, Article 227
