Case Note & Summary
The petitioners, M/s Vinay Container Services Pvt. Ltd. and its guarantors, challenged an order of the Debts Recovery Appellate Tribunal (DRAT) which required them to deposit 25% of the bank's claim as a condition for hearing their appeal against an interlocutory order of the Debts Recovery Tribunal (DRT). The DRT had granted interim protection from physical possession of secured assets but made it conditional on a deposit of Rs. 1.78 crores. The petitioners argued that the predeposit requirement under Section 18(1) of the SARFAESI Act should not apply to interlocutory orders. The High Court held that Section 18(1) applies to all orders under Section 17, including interlocutory orders, and the DRAT had discretion to reduce the deposit to 25%. The court found no infirmity in the DRAT's order and dismissed the writ petition, directing the petitioners to comply with the deposit condition.
Headnote
A) Securitisation Law - Predeposit Requirement - Interlocutory Orders - Section 18(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The issue was whether the condition of predeposit under Section 18(1) applies to appeals against interlocutory orders passed under Section 17. The court held that the language of Section 18(1) does not distinguish between final and interlocutory orders; any order under Section 17 is appealable and subject to the predeposit condition. The Appellate Tribunal's direction to deposit 25% of the debt was upheld as within its discretion. (Paras 1-6)
B) Securitisation Law - Interim Relief - Conditional Order - Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The Debts Recovery Tribunal granted interim protection to the petitioners against physical possession but conditioned it on deposit of Rs. 1.78 crores. The court found no error in the Tribunal's approach as it balanced the interests of both parties. (Paras 2-3)
C) Constitutional Law - Writ Jurisdiction - Interference with Interlocutory Orders - Article 226 of the Constitution of India - The court declined to interfere with the Appellate Tribunal's order, noting that the petitioners had an alternative remedy and the condition of predeposit was not arbitrary. The writ petition was dismissed. (Para 6)
Issue of Consideration
Whether the requirement of predeposit under Section 18(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is attracted where the order challenged in an appeal before the Debts Recovery Appellate Tribunal is an interlocutory order and not a final order under Section 17.
Final Decision
The High Court dismissed the writ petition, holding that the DRAT's order requiring predeposit under Section 18(1) was valid and applicable to interlocutory orders. The court directed the petitioners to comply with the deposit condition as per the DRAT order.
Law Points
- Predeposit requirement under Section 18(1) of SARFAESI Act applies to appeals against interlocutory orders
- not only final orders under Section 17
- Section 18(1) second proviso mandates deposit of 50% of debt due as condition for entertaining appeal
- Appellate Tribunal may reduce deposit to 25% in appropriate cases
Case Details
2010 LawText (BOM) (11) 29
WRIT PETITION NO. 8915 OF 2010
Dr. D.Y. Chandrachud, Anoop V. Mohta
Mr. Rafeeq Peermohideen with Ms. Vijaya Mistry for the petitioners, Mr. Dhirendra K. Sina with Mr.Rahul Totala i/by M/s.Vidhi Partners for respondent
M/s.Vinay Container Services Pvt.Ltd., Vilas J. Khaire, Mrs.Aruna Vilas Khaire
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Nature of Litigation
Writ petition under Article 226 challenging an order of the Debts Recovery Appellate Tribunal requiring predeposit under Section 18(1) of SARFAESI Act for appeal against an interlocutory order of the Debts Recovery Tribunal.
Remedy Sought
Petitioners sought to quash the DRAT order directing deposit of 25% of the bank's claim as condition for hearing their appeal.
Filing Reason
Petitioners were aggrieved by the DRAT order requiring predeposit for appeal against an interlocutory order of DRT which had granted interim protection conditional on deposit.
Previous Decisions
DRT on 1 October 2010 directed the bank not to take physical possession subject to deposit of Rs. 1.78 crores by petitioners. DRAT on 29 October 2010 directed petitioners to deposit 25% of the bank's claim (Rs. 4,29,50,000) as condition for appeal.
Issues
Whether the requirement of predeposit under Section 18(1) of the SARFAESI Act applies to appeals against interlocutory orders passed under Section 17.
Whether the DRAT's direction to deposit 25% of the debt was valid.
Submissions/Arguments
Petitioners argued that Section 18(1) applies only to final orders under Section 17, not interlocutory orders, and that the predeposit condition should not be imposed.
Respondent bank supported the DRAT order, contending that Section 18(1) applies to all orders under Section 17.
Ratio Decidendi
The language of Section 18(1) of the SARFAESI Act does not distinguish between final and interlocutory orders; any order made under Section 17 is appealable and subject to the predeposit condition. The Appellate Tribunal has discretion to reduce the deposit amount, and in this case, reducing it to 25% was not arbitrary.
Judgment Excerpts
The main issue which has been canvassed before the Court is whether the requirement of predeposit under Section 18(1) of the Act would be attracted where the order that is challenged in an Appeal before the Appellate Tribunal is not a final order under Section 17, but an interlocutory order.
The Tribunal has held that the provisions of Section 18 have to be complied with even in the case of an interlocutory order.
Procedural History
The petitioners availed credit facilities in 2008; accounts became NPA on 31 Dec 2009; bank issued Section 13(2) notice on 12 Mar 2010 and took symbolic possession on 18 Aug 2010 under Section 13(4). Petitioners filed appeal under Section 17 before DRT on 17 Sep 2010. DRT passed interim order on 1 Oct 2010 directing bank not to take physical possession subject to deposit of Rs. 1.78 crores. Petitioners appealed to DRAT, which on 29 Oct 2010 directed deposit of 25% of bank's claim as condition for appeal. Petitioners filed writ petition under Article 226 challenging DRAT order.
Acts & Sections
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: 13(2), 13(4), 17, 18(1)
- Constitution of India: Article 226
