A borrower contests an auction sale under SARFAESI Act must deposit 50% of the debt due to appeal, prohibiting adjustment of auction proceeds.

1. Prayer in this writ petition is for setting aside order dated 03.12.2015 (Annexure P1) passed by learned Debts Recovery Appellate Tribunal.

2. Availing of financial facility from respondent No. 1 by petitioner No. 1, subsequent financial indiscipline on its part and initiation of proceedings under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short – ‘SARFAESI Act’) are a matter of record.

SA-76-2013 filed by petitioners’ impugning sale of property in auction 1 of 5 ::: Downloaded on - 11-04-2024 00:57:39 :::

3. Heard, learned counsel for parties.

4. Argument raised on behalf of petitioners is again that in view of amount having been received by respondent – Bank after auction of property, waiver of amount of pre-deposit should be directed. It is pertinent to note that pre-deposit of 50% of decretal amount i.e. debt due is a mandatory requirement in terms of Section 18 of SARFAESI Act for entertainment of appeal. Gainful reference in this respect can be made to judgment of Hon’ble the Supreme Court in decision dated 16.02.2021 in Civil Appeal No. 538 of 2021 ( Kotak Mahindra Bank Pvt. Limited versus Ambuj A. Kasliwal and others ). It has been correctly held by learned DRAT that once petitioners have challenged auction sale, they cannot seek adjustment of amount deposited by auction purchaser towards their requirement of pre-deposit. It is a matter of record that one of the auction purchaser had sought permission to withdraw the amount which he had deposited. It is further to be noted that petitioners had also not 2 of 5 ::: Downloaded on - 11-04-2024 00:57:40 :::

5. Hon’ble the Supreme Court in M/s Sidha Neelkanth Paper Industries Private Limited & another versus Prudent ARC Limited & Others (CA No. 8969 of 2022 decided on 05.01.2023) held as under:- “13. As per Section 2(ha) of the SARFAESI Act, “debt” shall have the same meaning assigned to it in clause (g) of Section 2 of the Act 1993. As per section 2(g) of the Act 1993, “debt” means any liability inclusive of interest which is claimed as due from any person….., by a bank or a financial institution during the course of any business activity undertaken by the bank or the financial institution, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on the date of the application. That the “debt” means any liability inclusive of interest.

As per Section 18 of the SARFAESI Act, any person aggrieved, by any order made by the DRT under section 17, may prefer an appeal within thirty days to an appellate Tribunal (DRAT) from the date of receipt of the order of DRT. Second proviso to Section 18 provides that no appeal shall be entertained unless the “borrower” has deposited with the Appellate Tribunal 3 of 5 ::: Downloaded on - 11-04-2024 00:57:40 :::

14. As observed hereinabove and as per the second proviso to Section 18 of the SARFAESI Act, it is the “borrower” who has preferred an appeal before the Appellate Tribunal and the “borrower” who shall have to deposit 50% of the amount of “debt due” from him. If the words used in the second proviso to Section 18 of the SARFAESI Act are “borrower has to deposit”,

it is not appreciable how the amount deposited by the auction purchaser on purchase of secured assets can be adjusted and/or appropriated towards the amount of pre-deposit, to be deposited by the borrower. It is the “borrower” who has to deposit the 50% of the amount of “debt due” from him. At the same time, if the borrower wants to appropriate and/or adjust the amount realised f