Jainco Projects' plea for waiver of pre-deposit in appeal against UCO Bank dismissed, reinforcing strict adherence to SARFAESI Act's pre-deposit requirements.
In a significant ruling, the Calcutta High Court has dismissed the petition filed by M/s. Jainco Projects (India) Limited, seeking a waiver of the mandatory pre-deposit required for filing an appeal with the Debts Recovery Appellate Tribunal (DRAT) under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The judgment, delivered by Justice Om Narayan Rai, emphasized that pre-deposit requirements apply even to interlocutory orders involving substantive relief, thereby upholding the stringent provisions of the SARFAESI Act.
The case arose from a dispute where Jainco Projects defaulted on loan repayments, leading UCO Bank to classify their account as a Non-Performing Asset and initiate recovery proceedings under the SARFAESI Act. Jainco Projects approached the Debts Recovery Tribunal (DRT) seeking various reliefs, including an order to implement a One Time Settlement (OTS) scheme, which was declined by the DRT as a substantive issue rather than a procedural one.
Subsequently, Jainco Projects appealed the DRT's decision to the DRAT, also requesting a waiver of the pre-deposit condition mandated by Section 18(1) of the SARFAESI Act. However, the DRAT denied the waiver, directing a pre-deposit of 50% of the debt due. Jainco Projects then sought intervention from the High Court, claiming the DRT's order was procedural, and hence should not attract the pre-deposit requirement.
The High Court, after reviewing precedents including the Supreme Court's observations in the case of Sunshine Builders and Developers, concluded that the DRT's order addressed substantive issues affecting the borrower's liabilities, and was not merely procedural. The court held that the mandatory pre-deposit condition is applicable to appeals against such orders, reinforcing the legislative intent to ensure financial discipline among borrowers.
The ruling reaffirms the legal position that appeals under the SARFAESI Act, even against interlocutory orders, require compliance with pre-deposit mandates, unless procedural irregularities or legal violations are evident. The decision underscores the judiciary's commitment to uphold the integrity of financial recovery mechanisms and discourage frivolous litigation by defaulters.
Bottom line:-
SARFAESI Act, 2002 - Pre-deposit requirement under Section 18(1) for filing an appeal before DRAT is mandatory, even for interlocutory orders that reject substantive relief. Procedural orders alone can be exempted from pre-deposit requirements.
Statutory provision(s):
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Section 18(1), Constitution of India, 1950 Article 227.
M/s. Jainco Projects (India) Limited v. UCO Bank, (Calcutta) : Law Finder Doc id # 2902593
