Statutory Pre-deposit Under Section 18 of SARFAESI Act is Mandatory for Appeals Challenging Condonation of Delay.

In brief

The question

1. Whether the requirement of mandatory pre-deposit under the second proviso to Section 18(1) of the SARFAESI Act applies to an appeal challenging a DRT order that refused to condone delay.

The court held

The court held that the order in M/s. Gadekar Ginning is per incuriam.

It also directed

The High Court allowed the writ petitions and quashed the DRAT orders dated 18.11.2025 and 08.12.2025; status quo was vacated, and the DRAT was directed to decide the waiver application afresh by determining a pre-deposit amount between 25% and 50% of the debt due.

01Facts

The respondent-borrower (Pradeep Vora) defaulted on credit facilities from HDFC Bank, leading to the classification of his account as an NPA in 2020.

¶ 2

After a first round of litigation where a securitisation application was dismissed on merits in 2023, the bank took possession and auctioned the mortgaged land to Aloukik Construwell LLP (Petitioner).

¶ 5-6

The borrower filed a second securitisation application before the DRT-II with a delay condonation request, which was dismissed on 15.09.2025.

¶ 6

The borrower appealed this dismissal to the DRAT. On 18.11.2025, the DRAT ordered status quo without detailed reasoning while hearing a waiver application.

¶ 9

On 08.12.2025, the DRAT granted a total waiver of the mandatory pre-deposit, relying on the M/s. Gadekar Ginning precedent, on the grounds that the appeal only concerned a delay condonation.

¶ 10-12

02Issues

i.1. Whether the requirement of mandatory pre-deposit under the second proviso to Section 18(1) of the SARFAESI Act applies to an appeal challenging a DRT order that refused to condone delay.

¶ 31

ii.2. Whether the DRAT has the power to grant a total waiver of the pre-deposit amount.

¶ 19

iii.3. Whether the interim order of status quo passed by the DRAT without recording findings on prima facie case, balance of convenience, and irreparable loss was legally sustainable.

¶ 67

03Law Applied

Section 18(1) of the SARFAESI Act, 2002, which mandates a deposit of 50% (reducible to 25%) of the debt due for any appeal to be "entertained".

¶ 38

Supreme Court decisions in Narayan Chandra Ghosh v. UCO Bank and Union Bank of India v. Rajat Infrastructure Pvt. Ltd., which established that pre-deposit is a mandatory condition precedent and total waiver is prohibited.

¶ 39-40

Division Bench ruling in Vinay Container Services Pvt. Ltd. v. Axis Bank, which held that "any order" under Section 18(1) includes interlocutory and procedural orders.

¶ 42

M/s. Sunshine Builders and Developers v. HDFC Bank, which reaffirmed that even appeals against delay condonation refusals attract pre-deposit.

¶ 56

Provisions in the judgment · 6 · Linked ones open on LawLens

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Section 13 Section 14 Section 17 Section 18

Maharashtra Co-operative Societies Act, 1960 Section 101 Section 154

04Reasoning

The court found that the DRAT erred in granting a total waiver by relying on M/s. Gadekar Ginning, as that decision was rendered per incuriam because it ignored binding Supreme Court precedents and the earlier Division Bench ruling in Vinay Container Services.

¶ 51, 54

The court reasoned that the phrase "any order" in Section 18(1) is comprehensive and includes orders dismissing delay condonation applications; otherwise, a dilatory borrower would be in a better legal position than a diligent one.

¶ 42, 62

Regarding the status quo order, the court noted it was passed in a "casual and cavalier manner" in a waiver application, failing to evaluate the three mandatory pillars of interim relief: prima facie case, balance of convenience, and irreparable injury.

¶ 67

Furthermore, following Sidha Neelkanth Paper Industries, the court clarified that the amount recovered via auction does not exempt the borrower from the pre-deposit requirement.

¶ 64