Kerala High Court Modifies Pre-Deposit Requirement in SARFAESI Appeal

Tribunal's Discretion to Fix Pre-Deposit Amount Reaffirmed; Petitioners Directed to Pay Rs.3.39 Crores

In a significant ruling, the Kerala High Court has intervened in the pre-deposit requirement mandated by the Debt Recovery Appellate Tribunal, Chennai, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The Tribunal initially directed the petitioners, Glenny C.J. and others, to deposit 40% of the debt due, amounting to Rs. 4.04 crores, as a condition to entertain their appeal. However, the Kerala High Court has modified this requirement, reducing the pre-deposit to Rs.3.39 crores, aligning it with the actual subject matter of the appeal.

Justice C. Jayachandran presided over the case, where the petitioners challenged the Tribunal's order that demanded a pre-deposit without providing adequate reasons for fixing the percentage at 40%. The appeal in question related to an auction sale of the petitioners' property, valued at Rs.3.39 crores. The court emphasized that any pre-deposit should not exceed the subject matter of the appeal, as mandated by the third proviso to Section 18 of the SARFAESI Act, which allows the Tribunal discretion to reduce the deposit amount from 50% to not less than 25%, with reasons recorded in writing.

The High Court found merit in the petitioners' argument, noting the absence of recorded reasons in the Tribunal's decision to fix the deposit at 40%. The judgment underscored the necessity for discretion to be exercised with adequate justification, reflecting on the fundamental principles of judicial procedure as recognized by precedent cases, including Dhulabhai v. State of Madhya Pradesh and Mask and Co.'s case.

Addressing the auction purchaser's objection regarding the jurisdiction and the misquoting of the constitutional article, the court clarified that relief cannot be denied solely on these grounds. The writ petition was treated as filed under Article 226, despite being quoted under Article 227, thereby reinforcing the flexibility within judicial procedures to grant relief.

Ultimately, the Kerala High Court decreed that the pre-deposit should be Rs.3.39 crores, constituting 33.53% of the debt due, thus ensuring it does not surpass the appeal's subject matter. This modification aims to alleviate the petitioners from onerous financial demands while maintaining procedural integrity in appellate matters. The stipulated amount is to be paid in two installments over a month, providing the petitioners a structured timeframe to comply with the court's order.

This ruling reiterates the importance of transparency and reasoned decision-making in judicial and quasi-judicial processes, safeguarding appellants from disproportionate financial burdens while navigating statutory requirements.

Bottom Line:

SARFAESI Act - Pre-deposit requirement under Section 18 - Discretion of Appellate Tribunal to reduce pre-deposit amount - Tribunal must provide adequate reasons for fixing percentage of debt due for pre-deposit - Pre-deposit cannot exceed the subject matter of the appeal.

Statutory provision(s): SARFAESI Act, 2002 Section 18, Constitution of India, Articles 226 and 227

Glenny C.J. v. Authorised Officer, Canara Bank, (Kerala) : Law Finder Doc Id # 2807176