Provision for mandatory pre-deposit under section 18 of the SARFAESI Act as also under section 21 of the RDB Act is made specifically for appeals preferred by the borrowers, guarantors or mortgagors and not by secured creditors or banks and financial institutions – State Bank of India Vs. M/s. P. K. Thakker Construction Pvt. Ltd. – DRAT Mumbai
The words, ‘appeal is preferred by any person’, as pointed out cannot be read in isolation. A reading of the entire section would indicate that only when an appeal is preferred by any person from whom the amount of financial debt is due to a bank or financial institution, he needs to pay fifty per cent of the amount of debt so due from him as determined by the Tribunal under section 19. That being the case, the secured creditors (i.e) the banks or financial institutions or any consortium of banks or financial institutions, who are taking steps to recover the outstanding loan amount from the defaulting borrower or guarantor cannot be asked to make the pre-deposit for entertaining and Appeal before the DRAT. When the banks and financial institutions have advanced loans to borrowers, there will not be any justification for asking the banks to make the predeposit for preferring an appeal before the DRAT. In such cases, the secured creditors viz., the banks and financial institutions are exempted from making the pre-deposit for preferring an appeal before the DRAT.
