Facts
The Petitioner, claiming to be a tenant of a commercial property since 2001, challenged the measures taken by the Respondent-Bank under Sections 13 and 14 of the SARFAESI Act following a default by the landlord (borrower)
Source reference: p. 2-3The Petitioner’s application under Section 17 (S.A. No. 322/2023) was dismissed by the Debts Recovery Tribunal (DRT), which found the tenancy was created post-mortgage and had expired
Source reference: p. 4, 11-12The Petitioner appealed to the Debts Recovery Appellate Tribunal (DRAT) and sought a waiver of the statutory pre-deposit under Section 18.
Source reference: p. 4The DRAT, vide order dated 29.04.2026, directed a pre-deposit of 25% of the claimed debt (approx. ₹3.33 Crores) as a condition to entertain the appeal
Source reference: p. 4, 43The Petitioner approached the High Court seeking to set aside this direction, asserting that as a non-borrower tenant, it is exempt from the pre-deposit requirement
Source reference: p. 4-5Issues
1. Whether the mandatory requirement of pre-deposit under the second proviso to Section 18(1) of the SARFAESI Act includes a third party such as a tenant?
Source reference: para 10(i) / p. 142. Whether a person claiming waiver must establish a valid and subsisting tenancy at the threshold stage of filing an appeal?
Source reference: para 10(ii) / p. 143. Whether the DRAT order directing pre-deposit from a non-borrower suffers from legal infirmity?
Source reference: para 10(iii) / p. 15Law Applied
The Court applied Section 18 of the SARFAESI Act, distinguishing between the substantive right of "any person aggrieved" to appeal and the restrictive second proviso which mandates pre-deposit only for the "borrower"
Source reference: para 11.1-11.8It relied on the precedent M/s Hindustan Polymers v. The Authorised Officer (WP No. 19445 of 2018), which held that a tenant is a "non-borrower" and cannot be burdened with pre-deposit
Source reference: para 7.4, 11.16The Court also referenced Section 17(4-A) of the SARFAESI Act, which defines the jurisdiction of the Tribunal to adjudicate the validity of tenancy during the substantive hearing of the application
Source reference: para 12.19Reasoning
The Court noted that the legislature consciously used the broad term "any person aggrieved" in Section 18(1) but specifically restricted the pre-deposit obligation to the "borrower" in the second proviso
Source reference: para 11.9-11.10Since the Petitioner is neither a borrower nor a guarantor and has no contractual nexus with the debt, imposing a pre-deposit based on the borrower’s liability would be inequitable and contrary to the plain language of the statute
Source reference: para 11.13, 11.22Regarding the Respondent's argument that the tenancy was invalid or expired, the Court reasoned that such factual determinations under Section 17(4-A) are matters for the merits of the appeal and cannot be used to re-classify a non-borrower as a borrower at the threshold stage
Source reference: para 12.15-12.16, 12.27The Court found the DRAT erred by treating the pre-deposit as mandatory for all appellants regardless of status
Source reference: para 13.3-13.9Holding
It held that the mandatory pre-deposit under Section 18(1) applies strictly to borrowers and not to third parties like tenants
The High Court allowed the Writ Petition and issued a writ of certiorari quashing the DRAT’s order dated 29.04.2026; waived the pre-deposit requirement for the Petitioner and directed the DRAT to decide the appeal on its merits within eight weeks
Source reference: para 14.1, 14.1(iii)-(ix)All questions regarding the validity, subsistence, and registration of the tenancy were left open for the DRAT's adjudication during the final hearing
Source reference: para 14.1(v)Original Court PDF
ITTIAM SYSTEMS PRIVATE LIMITEDvsBHARATH CO OPERATIVE BANK (MUMBAI) LIMITED
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