SARFAESI Act Section 18(1) mandates 50% pre-deposit of debt as claimed by secured creditor if not quantified by DRT, reducible to 25%.

Dated this the 31^st day of March 2026 J U D G M E N T This Original Petition (DRT) is filed seeking to set aside Ext.P4 order passed by the Debts Recovery Appellate Tribunal, Chennai (hereinafter referred to as ‘the DRAT’). Ext.P4 is an order passed in I.A. No. 1435 of 2025 in AIR No. 1929 of 2025 , seeking waiver of the statutory pre-deposit required under Section 18(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the SARFAESI Act’).

2. The petitioner is the appellant in AIR No. 1929 of 2025 pending before the DRAT. The said appeal has been preferred against the final order dated 19.08.2025 passed by the Debts Recovery Tribunal - II, Ernakulam (hereinafter referred to as ‘the DRT’) in S.A.No.573 of 2022. Along with the appeal, the petitioner also filed an application as I.A. No. 1435 of 2025 seeking waiver/reduction of the statutory pre-deposit. By order dated 11.03.2026, the DRAT directed the petitioner to deposit 25 percent of Rs. 6,78,01,317/- (Rupees Six Crore Seventy-Eight Lakh One Thousand Three Hundred and Seventeen Only), in two equal installments. It is aggrieved by Ext.P4 order, this Original Petition (DRT) has been filed by the petitioner.

3. Heard the learned counsel for the petitioner and the learned Standing Counsel for the respondents.

4. The learned counsel for the petitioner submits that Ext. P4 order passed by the DRAT is illegal and is not sustainable in the eyes of law. He argued that, since in the Securitisation Application preferred by the petitioner, no quantification of the debt due has been made by the DRT and, since there is no amount due from the petitioner, the DRAT could not have directed the petitioner to make the pre-deposit. He relied on Exts. P5 and P6 and submitted that the entire amount due to the bank has been cleared and, therefore, as on date, there is no amount due to the bank.

5. Per contra, the learned Standing Counsel for the respondents submitted that, as per the 2nd and 3rd provisos to Section 18(1) of the SARFAESI Act, if the amount due has not been determined by the DRT, the petitioner is bound to pay the amount of debt due as claimed by the secured creditor. He, by relying on Ext.P8 Securitisation Application filed by the petitioner and Ext.P10 notice issued under Section 13(2) of the SARFAESI Act, contended that the total amount due to the bank as on 2021 itself, was Rs. 4,03,14,412/- (Rupees Four Crore Three Lakh Fourteen Thousand Four Hundred and Twelve Only) and, therefore, the petitioner cannot claim any exemption from deposit. He also relied on the decision of the Apex Court in Sidha Neelkanth Paper Industries Private Limited (M/s) v. Prudent ARC Limited [2023 KHC 6009] to contend that the “debt due” under of the SARFAESI Act would include the liability plus interest, and that the borrower has to deposit 50 percent of the amount of “debt due” as claimed by the bank, along with interest as claimed in the notice under (2), in order to maintain an appeal. He further submitted that, as on today, an amount of Rs.7,05,77,170/- (Rupees Seven Crore Five Lakh Seventy-Seven Thousand One Hundred and Seventy Only) is due from the petitioner to the bank and the petitioner has filed the exemption petition even without depositing 25% of the debt due.

6. On an anxious consideration of the rival submissions and the materials on record, I find considerable force in the submissions made by the learned counsel for the respondents. The second and third provisos to Section 18(1) reads as follows:

xxxxxxx “Provided further that no appeal shall be entertained unless the borrower has deposit