01Facts
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)
pp. 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
pp. 4, 11-12The Petitioner appealed to the Debts Recovery Appellate Tribunal (DRAT) and sought a waiver of the statutory pre-deposit under Section 18.
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
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
pp. 4-502Issues
i.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?
¶ 10(i) / p. 14ii.2. Whether a person claiming waiver must establish a valid and subsisting tenancy at the threshold stage of filing an appeal?
¶ 10(ii) / p. 14iii.3. Whether the DRAT order directing pre-deposit from a non-borrower suffers from legal infirmity?
¶ 10(iii) / p. 1503Law 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"
¶ 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
¶ 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
¶ 12.19Provisions in the judgment · 5 · Linked ones open on LawLens
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Section 13Section 14Section 17Section 18
Registration Act, 1908 Section 17
04Reasoning
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
¶ 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
¶ 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
¶ 12.15-12.16, 12.27The Court found the DRAT erred by treating the pre-deposit as mandatory for all appellants regardless of status
¶ 13.3-13.905Holding
It held that the mandatory pre-deposit under Section 18(1) applies strictly to borrowers and not to third parties like tenants
¶ 11.23The 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
¶ 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
¶ 14.1(v)Original Court PDF
ITTIAM SYSTEMS PRIVATE LIMITEDvsBHARATH CO OPERATIVE BANK (MUMBAI) LIMITED
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