Simplified Explanation of the Judgment
In the case of CWJC No. 4203 of 2018, the Patna High Court addressed a significant issue under the SARFAESI Act, 2002. The petitioners were aggrieved by the appellate tribunal’s refusal to reduce the statutory pre-deposit amount required for filing an appeal under Section 18 of the Act.
The matter stemmed from a demand notice issued by Punjab National Bank (PNB) under Section 13(2) of the SARFAESI Act in 2009, stating dues of approximately ₹1.33 crore. In 2017, the bank sold the secured assets for around ₹1.33 crore, which was adjusted against the total dues. However, when the petitioners attempted to appeal against the bank’s action, they were required to deposit 50% of the revised outstanding amount of ₹2.95 crore, which included interest accrued up to the appeal date.
The petitioners argued that the appeal should be based only on the originally demanded sum of ₹1.33 crore, not the inflated figure resulting from interest accrual. They relied on a Supreme Court case (Narayan Chandra Ghosh v. UCO Bank, AIR 2011 SC 1913) to support their plea for reducing the deposit amount. They also argued that since the bank held possession of the property for several years, it should not charge interest during that period.
On the contrary, the bank maintained that “debt” under the Act includes both principal and accrued interest. It relied on the judgment in Nathi Lal Rathore v. DRAT (2017 1 Bankmann 326), where the Allahabad High Court held that the pre-deposit includes accrued interest, not just the principal demand.
The High Court, after examining both sides, concluded that there was no illegality in the tribunal’s decision. It clarified that the second proviso to Section 18(1) of the SARFAESI Act mandates a pre-deposit of 50% of the debt claimed or determined, which includes accrued interest. The Court observed that the Supreme Court’s reduction of deposit in Narayan Chandra Ghosh was likely under its special powers under Article 142 of the Constitution—powers which High Courts do not possess in writ jurisdiction.
Therefore, the writ petition was dismissed, affirming the requirement to deposit 50% of the debt including interest for the appeal to be heard.
Significance or Implication of the Judgment
This ruling reinforces the mandatory nature of the pre-deposit requirement under Section 18 of the SARFAESI Act. It sends a clear message to borrowers that appeals against recovery proceedings will not be entertained unless they comply with the financial prerequisite, including accrued interest. This decision upholds the balance between protecting lenders’ rights and discouraging frivolous litigation, especially where the dues are substantial.
For financial institutions, this judgment validates the inclusion of interest in debt calculations, ensuring a broader recovery scope. For borrowers, it is a cautionary precedent that unless the Debt Recovery Tribunal (DRT) determines otherwise, the statutory deposit cannot be waived lightly.
Legal Issue(s) Decided and the Court’s Decision
- Whether the pre-deposit under Section 18 of the SARFAESI Act can exclude accrued interest.
- Decision: No. The court held that “debt” includes both principal and accrued interest. Thus, pre-deposit must be calculated on the full amount, including interest.
- Whether High Courts can waive or reduce the statutory pre-deposit.
- Decision: No. The High Court stated that it cannot invoke Article 142 powers, which are reserved for the Supreme Court, to reduce mandatory statutory deposits.
- Whether the tribunal’s refusal to reduce the pre-deposit was legally correct.
- Decision: Yes. The appellate tribunal rightly refused the request as it followed the legal definition of “debt.”
Judgments Referred by Parties
- Narayan Chandra Ghosh v. UCO Bank & Ors., AIR 2011 SC 1913; (2011) 4 SCC 548
Judgments Relied Upon or Cited by Court
- Nathi Lal Rathore v. Debts Recovery Appellate Tribunal and Ors., 2017 1 Bankmann (DRT) 326
Case Title
Ram Babu Choudhary & Ors. v. The Chairman, Debts Recovery Appellate Tribunal & Ors.
Case Number
Civil Writ Jurisdiction Case No. 4203 of 2018
Citation(s)
2020 (1) PLJR 38
Coram and Names of Judges
Hon’ble Mr. Justice Rajeev Ranjan Prasad
Names of Advocates and who they appeared for
- Mr. Dr. Binay Kumar Singh, Advocate for the Petitioners
- Mr. Kumar Priya Ranjan, SC and Mr. Pallav, Advocates for PNB
- Mr. Satish Kumar Sinha and Mr. Nityanand, Advocates for Respondent No. 4
Link to Judgment
https://patnahighcourt.gov.in/vieworder/MTUjNDIwMyMyMDE4IzQjTg==-sTfqFCq–am1–W–am1–c=
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