Court No. 6 (265719) 22.04.2025 (AD 92) (S. Banerjee) CO 308 of 2025 M/s. Southern Cooling Tower Private Limited & Ors. Vs. Bank of Baroda & Ors. Mr. Anindya Lahiri, Sr. Advocate Mr. Shrey Mohta …for the petitioners Mr. Avishek Guha Mr. Subhajit Das …for the opposite parties This is an application under Article 227 of the Constitution of India at the instance of the borrower and is directed against an order dated January 16, 2025 passed by the Chairperson, Debts Recovery Appellate Tribunal in IA No. 494 of 2024 arising out of Diary No. 886 of 2024. By the order impugned the learned Debts Recovery Appellate Tribunal (for short, ‘DRAT’) directed the petitioners herein to make pre-deposit of 35% of Rs. 15.97 Crore within the time-limit stipulated in the said order. Challenging the measures taken under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, ‘SARFAESI Act’) the petitioners preferred an application under Section 17 of the said Act before the learned Debts Recovery Tribunal (for short ‘DRT’). Such application was rejected by the learned Tribunal by an order dated April 4, 2024 upon holding that the SARFAESI application is barred by limitation. Challenging the said order the petitioners herein preferred a civil revision being CO 1496 of 2024 and the same was dismissed as not maintainable. Thereafter the petitioners approached the DRAT against the order dated April 4, 2024 passed by the learned DRT. Before the learned DRAT the petitioners herein filed an application praying for waiver of the amount of pre-deposit, which was disposed of by the order impugned. Mr. Lahiri, learned Senior Advocate, appearing for the petitioners submits that the petitioners filed the SARFAESI application under Section 17 of the 2002 Act during the Covid period and the same was filed within the time-limit as extended by the Hon’ble Supreme Court in the Suo Motu case. He further submits that the learned DRAT did not assign any reason for waiving the pre-deposit to 35% and not to 25% as per the third proviso to Section 18 of the Act of 2002. Mr. Lahiri places reliance upon the decision of the Hon’ble Supreme Court in the Suo Motu case, 2 more particularly, the decision reported at (2020) 19 SCC 10 in support of his contention that the Hon’ble Supreme Court has extended the period of limitation to comply with the requirements under various statutes till February 28, 2022. The learned advocate appearing for the opposite parties submits that second proviso to Section 18 of the 2002 Act casts an obligation upon the appellant to deposit with the appellate tribunal 50% of the debt due from him. He submits that the learned DRAT exercised its discretion by reducing the pre-deposit to 35% by taking into consideration the grounds cited by the petitioners in the waiver application. Heard the learned advocates for the parties and perused the materials placed. The learned DRT in its order dated April 4, 2024 held that the limitation for filing an application under Section 17 of the 2002 Act expired on November 10, 2020 and the petitioners filed a SARFAESI application only on November 13, 2020. On such ground the learned DRT dismissed the SARFAESI application as time-barred. Challenging the said order the petitioners preferred an appeal under Section 18 of the 2002 Act. Before the DRAT the petitioners filed an application praying for waiver of the pre-deposit. 3 It is not in dispute that the petitioners filed the application under Section 17 of the 2002 Act through online on November 6, 2020 but the affidavit was affirmed only on November 13, 2020 and the same was filed thereafter in physical form. In the application for waiver of the pre-deposit it has been specifically stated that in view of Covid 19 pandemic the business of the petitioner no. 1 almost stopped and the petitioners were suffering from financial stringencies. It was further stated that the petitioners were in need of money as they were having no alternate source of income and they had taken loan from private lenders to meet the expenses to pay the court fees and other expenses along with the litigation charges. On such ground the petitioners prayed for waiver of the quantum of pre-deposit and/or for reduction of the same from 50% to 25%. Section 18 of the 2002 Act provides that any person aggrieved by an order made by the DRT under Section 17 of the Act, may prefer an appeal along with such fee as may be prescribed by an appellate tribunal within 30 days from the date of receipt of the order of the DRT. The second proviso to Section 18 states that no appeal shall be entertained unless the borrower has deposited with the appellate tribunal 50% of the amount of debt due from him as claimed 4 by the secured creditors or determined by the DRT, whichever is less. The third proviso to Section 18 empowers the appellate tribunal, for reasons to be recorded in writing, to reduce the amount to not less than 25% of the debt referred to in the second proviso. Upon a reading of Section 18(1) along with the proviso thereto, this Court is of the considered view that though the statute mandates the pre-deposit of 50% of the amount of debt due from the appellant but, the appellate tribunal also have been given leverage to reduce such amount which shall, however, be not be less than 25% of the debt referred to in the second proviso. The statute also mandates that in case the learned appellate Tribunal reduces the amount of pre-deposit from 50%, reasons have to be recorded in writing. The learned advocate appearing for the opposite parties places reliance upon the decision of the Hon’ble Supreme Court in the case of Sidha Neelkanth Paper Industries Pvt. Ltd. & Anr. –Vs.- Prudent ARC Limited & Ors., reported at 2023 SCC Online SC 12 in support of his contention that the statute mandates deposit of 50% as a precondition for entertaining an appeal. 5 The issue which fell for consideration before the Hon’ble Supreme Court in Sidha Neelkanth Paper Industries Pvt. Ltd. & Anr. (supra) was whether the DRAT while entertaining the appeals under Section 18 of the SARFAESI Act could have taken into consideration the amount realized through auction sale and the same can be appropriated towards the amount liable to be deposited as pre-deposit under Section 18 of the SARFAESI Act. While deciding the said issue the Hon’ble Supreme Court took note of the fact that the Hon’ble Bombay High Court in the case of Eskays Construction Pvt. Ltd. –Vs.- Soma Papers & Industries Limited, 2016 SCC Online Bom. 9827, took note of the decision of the Hon’ble Supreme Court in the case of Narayan Chandra Ghosh –Vs.- UCO Bank & Ors., reported in (2011) 4 SCC 548. In paragraph 19 of Narayan Chandra Ghosh (supra) it was held that the condition of pre-deposit being mandatory, a complete waiver of deposit by the appellant with the appellate tribunal was beyond the provisions of the Act as it is evident from the second and third proviso to such Section and at best the appellate tribunal could have, after recording the reasons, reduced the amount of pre-deposit of 50% to an amount not less than 25% of the debt referred to in the second proviso. 6 Thus, it is well settled that the appellate tribunal has the power to reduce the quantum of pre- deposit but the same should not be less than 25% of the amount of debt due and also reasons in support thereof has to be assigned in favour of such reduction. It is not in dispute that the SARFAESI application was filed during the Covid period. The Hon’ble Supreme Court was also pleased to extend the period of limitation prescribed under various statutes. However, the question as to whether the SARFAESI application filed by the petitioners before the learned DRT was within the specified time-limit as per the order passed by the Hon’ble Supreme Court, is pending adjudication before the learned DRAT and for such reason this Court is not inclined to make any comment in that regard. This Court finds that after taking into consideration the fact that the SARFAESI application was filed during the Covid period, the learned DRAT was satisfied that the petitioners were facing financial crunch and was of the view that the mandatory pre- deposit is required to be reduced. The learned DRAT reduced the pre-deposit to 35% and not to 25% but no reasons have been assigned as to why the pre- deposit was not reduced to 25%. This Court is of the 7 considered view that the learned DRAT ought to have reduced the pre-depositto 25% as the SARFAESI application was filed during the Covid period. For such reason, the impugned order stands modified only to the extent that the petitioners shall make pre-deposit of 25% of Rs. 15.97 Crore, i.e., the amount of debt due, within a period of four weeks from the date of receipt of a server copy of this order. If the amount as directed hereinbefore is deposited within the time-limit mentioned hereinbefore, the learned DRAT shall decide the appeal on its merits and in accordance with law. With the above observations and directions, CO 308 of 2025 stands disposed of. (Hiranmay Bhattacharyya, J.) 8