SARFAESI appellate pre-deposit for guarantors upheld; delay-condonation rejection does not displace the section 18 remedy.

Section 18(1) of the SARFAESI Act requires pre-deposit at the appellate stage, and its second and third provisos were treated as valid and applicable to a guarantor because the Act's definition of borrower includes a guarantor and guarantor liability is co-extensive with that of the principal debtor under contract law. The challenge based on Mardia Chemicals was rejected because that ruling concerned pre-deposit at the original section 17 forum, not an appeal under section 18. The fact that the matter arose after rejection of a delay-condonation application did not displace the statutory appeal remedy, since the section 17 challenge remained subject to section 18. The constitutional challenge therefore failed.

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Issues: Whether the pre-deposit requirement under section 18(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, including its second and third provisos, is unconstitutional or otherwise inapplicable when the appellant is a guarantor and the appeal follows rejection of an application to condone delay rather than a direct appeal under section 17.

Analysis: Section 18 provides for an appeal to the Appellate Tribunal and its second proviso applies to a borrower. The definition of borrower in section 2(f) includes a guarantor, and the liability of a guarantor is co-extensive with that of the principal debtor under section 128 of the Indian Contract Act, 1872. The challenge based on Mardia Chemicals was rejected because that decision concerned pre-deposit at the initial forum under section 17, whereas section 18 operates at the appellate stage. Pre-deposit conditions in appellate proceedings are not per se arbitrary, and the Appellate Tribunal also has discretion to reduce the amount to not less than twenty-five per cent. The contention that the appeal arose only from dismissal of a section 5 application was held to be untenable, because rejection of the delay petition effectively left the section 17 challenge unaltered and the statutory remedy remained an appeal under section 18.

Conclusion: The pre-deposit requirement under section 18(1) and its provisos is valid and applicable to the petitioner, and the challenge to its constitutionality fails.

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