Court Sets Aside DRAT's Orders Granting Status Quo and Complete Waiver of Pre-Deposit to Borrower
In a significant ruling, the Bombay High Court has set aside two orders passed by the Debts Recovery Appellate Tribunal (DRAT), which had granted a complete waiver of the mandatory pre-deposit requirement under Section 18(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) to a borrower, Pradeep Gordhandas Vora. The High Court found that the DRAT's decision was inconsistent with binding precedents and statutory provisions.
The Division Bench, comprising Justices Manish Pitale and Shreeram V. Shirsat, delivered the judgment on writ petitions filed by Aloukik Construwell LLP and HDFC Bank, challenging the DRAT’s orders dated November 18, 2025, and December 8, 2025. The petitions argued that the DRAT erred in granting a waiver of the pre-deposit requirement and directing parties to maintain "status quo" without adequate reasoning.
The High Court noted that the DRAT's orders were contrary to the mandatory requirement of pre-deposit as stipulated under Section 18(1) of the SARFAESI Act. The court emphasized that the borrower could not claim exemption from this requirement merely because the appeal challenged an interlocutory order or a delay condonation rejection by the Debts Recovery Tribunal (DRT).
The judgment also addressed the doctrine of "per incuriam," declaring the DRAT’s reliance on a previous ruling in M/s. Gadekar Ginning and Pressing Pvt. Ltd. v. Canara Bank as erroneous. The court highlighted that the earlier ruling was rendered in ignorance of binding precedents from the Supreme Court and Division Bench of the Bombay High Court, which upheld the mandatory nature of the pre-deposit requirement.
Furthermore, the High Court criticized the DRAT for failing to apply judicial principles while granting interim relief. The order of "status quo" was passed without considering key factors such as prima facie case, balance of convenience, and irreparable loss, rendering it unsustainable.
The Bombay High Court's decision underscores the judiciary's commitment to upholding statutory mandates and ensuring compliance with established legal precedents. The case will now return to the DRAT for reconsideration of the waiver application, with the directive to adhere strictly to statutory provisions and judicial precedents.
Bottom line:-
Mandatory pre-deposit requirement under Section 18(1) of the SARFAESI Act applies irrespective of whether the appeal challenges an interlocutory order, a final order, or an order refusing condonation of delay. The principle of per incuriam applies to judgments that ignore binding precedents or statutory provisions.
Statutory provision(s): Section 18(1) of the SARFAESI Act, Doctrine of Per Incuriam, Section 17 of the SARFAESI Act, Section 14 of the SARFAESI Act
Aloukik Construwell LLP v. Pradeep Gordhandas Vora, (Bombay)(DB) : Law Finder Doc id # 2918782
