Whether amount deposited by auction purchaser will have to be adjusted for 50% pre deposit for appeal by borrowers under section 18?

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Whether amount deposited by auction purchaser will have to be adjusted for 50% pre deposit for appeal by borrowers under section 18?[1]

 

whether the “debt due” under Section 18 of the SARFAESI Act would include the liability + interest?

 


Shubham Budhiraja[2]

 

(i)                    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.

 

(ii)                   Second proviso to section 18 provides that no appeal shall be entertained unless the “borrower” has deposited with the Appellate Tribunal fifty percent of the amount of “debt due” from him, as claimed by the secured creditors or determined by the DRT, whichever is less and only and only then, an appeal under Section 18 of the SARFAESI Act is permissible against the order passed by the DRT under Section 17 of the SARFAESI Act.

 

(iii)                 Under Section 17, the scope of enquiry is limited to the steps taken under Section 13(4) against the secured assets.

 

(iv)                 Thus, whatever amount is mentioned in the notice under Section 13(2) of the SARFAESI Act, in case steps taken under Section 13(2)/13(4) against the secured assets are under challenge before the DRT will be the ‘debt due’ within the meaning of proviso to Section 18 of the SARFAESI Act.

 

(v)                   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 from sale of the secured assets deposited by the auction purchaser, the borrower has to accept the auction sale.

 

 

(vi)                 In case of challenge to the sale of the secured assets, the amount mentioned in the sale certificate will have to be considered while determining the amount of pre-deposit under Section 18 of the SARFAESI Act.

 

(vii)               However, in a case where both are under challenge, namely, steps taken under Section 13(4) against the secured assets and also the auction sale of the secured assets, in that case, the “debt due” shall mean any liability (inclusive of interest) which is claimed as due from any person, whichever is higher.

 

(viii)              The borrower can take the benefit of the amount received by the creditor in an auction sale only if he unequivocally accepts the sale.

 

(ix)                 In a case where the borrower also challenges the auction sale and does not accept the same and also challenges the steps taken under Section 13(2)/13(4) of the SARFAESI Act with respect to secured assets, the borrower has to deposit 50% of the amount claimed by the secured creditor along with interest as per section 2(g) of the Act 1993 and as per section 2(g), “debt” means any liability inclusive of interest which is claimed as due from any person.

 


[1] CIVIL APPEAL NO. 8969 OF 2022, Supreme Court of India, Judgment dated 05/01/2023

[2] Advocate, Delhi High Court [LLB, ACS, BCOM(H)], Budhirajalawchambers@gmail.com , +91-9654055315

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