Case Note & Summary
The petitioners, Smt. Julie Amitabh Parekh and others, who are the legal heirs of the deceased guarantor Amitabh Arun Parekh, filed a writ petition challenging an order of the Debt Recovery Appellate Tribunal (DRAT), Mumbai. The DRAT, while deciding a waiver application filed by the petitioners under Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), directed them to deposit 25% of the amount covered by the notice issued under Section 13(2) of the Act as a condition for allowing the waiver. The background facts are that Parekh Aluminex Limited was the principal borrower from Yes Bank Limited, and Late Amitabh Arun Parekh was a mortgagor and guarantor. After his death on 06/01/2013, a notice under Section 13(2) was issued to the petitioners as his legal heirs. The petitioners challenged the DRAT's order before the High Court under Article 226 of the Constitution. The main legal issue was whether the DRAT's direction to deposit 25% of the notice amount was justified. The petitioners argued that the DRAT had no power to impose such a condition and that the amount was excessive. The respondents, including Reliance Asset Reconstruction Company Limited (the assignee of the debt) and Yes Bank, contended that the DRAT's order was discretionary and within its powers. The High Court, after hearing both sides, held that the DRAT's order was within its discretion under Section 18 of the SARFAESI Act, which allows the Appellate Tribunal to waive or reduce the pre-deposit requirement on sufficient cause being shown. The court found no perversity or lack of jurisdiction in the DRAT's order and dismissed the writ petition, upholding the condition of 25% deposit. The decision reinforces the principle that the DRAT has the discretion to impose conditions while granting waiver of pre-deposit, and such orders are not ordinarily interfered with under Article 226.
Headnote
A) SARFAESI Act - Pre-deposit under Section 18 - Waiver of Pre-deposit - Legal Heirs of Guarantor - The DRAT directed the petitioners, legal heirs of the deceased guarantor, to deposit 25% of the amount covered by the notice under Section 13(2) as a condition for waiver of pre-deposit under Section 18 of the SARFAESI Act. The High Court held that the DRAT's order was within its discretion and did not warrant interference under Article 226 of the Constitution. (Paras 1-10) B) SARFAESI Act - Section 13(2) Notice - Applicability to Legal Heirs - The notice under Section 13(2) was issued to the petitioners as legal heirs of the deceased guarantor. The court noted that the liability of a guarantor is joint and several, and legal heirs are bound by the notice. (Paras 3-5) C) Constitutional Law - Article 226 - Interference with DRAT Order - The High Court held that the DRAT's order directing deposit of 25% of the notice amount was a discretionary order and did not suffer from any perversity or lack of jurisdiction, hence no interference was warranted under Article 226. (Paras 8-10)
Issue of Consideration
Whether the Debt Recovery Appellate Tribunal (DRAT) was justified in directing the petitioners, who are legal heirs of the deceased guarantor, to deposit 25% of the amount covered by the notice under Section 13(2) of the SARFAESI Act as a condition for waiver of pre-deposit under Section 18 of the Act.
Final Decision
The High Court dismissed the writ petition, upholding the DRAT order directing the petitioners to deposit 25% of the amount covered by the notice under Section 13(2) as a condition for waiver of pre-deposit.
Law Points
- Pre-deposit condition under Section 18 of SARFAESI Act
- waiver of pre-deposit by DRAT
- legal heirs of guarantor
- notice under Section 13(2)
- discretion of DRAT
- maintainability of writ petition against DRAT order
