Pre-deposit under SARFAESI Section 18 must account for auction sale proceeds when secured debt is already realised.

Under Section 18 of the SARFAESI Act, the second proviso was read as requiring pre-deposit only to the extent of debt due from the borrower as claimed by the secured creditor or determined by the DRT. Where the secured creditor had already sold the mortgaged asset, executed the sale deed and delivered possession, and the sale proceeds exceeded the claimed dues, those proceeds had to be taken into account for the pre-deposit requirement. The Court also held that a mere possibility that the auction sale may later be set aside does not alter the interpretation of Section 18, and the pre-deposit cannot be treated as separately secured by the bank simply because the borrower challenges the sale.

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Issues: Whether the amount realised by the secured creditor by sale of the mortgaged property could be adjusted towards the pre-deposit required for entertainment of the appeal under Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, when the borrower was challenging the auction sale itself.

Analysis: The statutory scheme of the second proviso to Section 18 was read as requiring deposit only where there is an amount of debt due from the borrower as claimed by the secured creditor or determined by the Debts Recovery Tribunal. On the facts, the Bank had already sold the secured asset, executed the sale deed and delivered possession to the auction purchaser, and the amount realised exceeded the claimed dues. The Court held that an apprehension that the sale might later be set aside could not control the interpretation of Section 18. It further held that the pre-deposit lies with the Appellate Tribunal and cannot be treated as secured by the bank merely because the borrower challenges the sale.

Conclusion: The auction sale proceeds were required to be taken into account, and insistence on a further pre-deposit was unjustified. The order of the Appellate Tribunal rejecting waiver was set aside and the appeal was directed to be heard on merits without such insistence.

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