Pre-deposit under SARFAESI appeal provisions is ordinarily refundable on disposal unless validly appropriated, adjusted, or attached.
A statutory pre-deposit required to entertain an appeal under the SARFAESI Act does not create a security interest in favour of the secured creditor and is neither a secured asset nor a secured debt. On that basis, the amount is ordinarily refundable when the appeal is disposed of, whether on merits, by withdrawal, or because it has become infructuous. Refund may be denied only where the amount has been validly appropriated or adjusted with consent, or where it is subject to a lawful attachment, including proceedings under section 13(10) read with Rule 11 of the 2002 Rules or other lawful attachment proceedings.
Issues: Whether the amount deposited as a pre-condition for entertaining an appeal under the second proviso to section 18(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was refundable on disposal of the appeal.
Analysis: The appeal under section 18 is against the order of the Debts Recovery Tribunal under section 17, and the scope of enquiry under section 17 is confined to measures taken under section 13(4). The deposit required for entertaining the appeal is not a secured asset and is not a secured debt, because no security interest is created in favour of the secured creditor over that pre-deposit. Therefore, on disposal of the appeal, whether on merits, withdrawal, or because it has become infructuous, the deposit must ordinarily be returned to the appellant. The only exceptions recognised were cases where the amount had already been appropriated or adjusted with consent, or where there was an attachment in proceedings under section 13(10) read with Rule 11 of the Security Interest (Enforcement) Rules, 2002, or in any other lawful attachment proceedings.
Conclusion: The pre-deposit was refundable, and the contrary view of the High Court and the Debts Recovery Appellate Tribunal could not be sustained.
Final Conclusion: The impugned judgment and the order of the Debts Recovery Appellate Tribunal were set aside, and the matter was remitted to the Tribunal for fresh consideration in accordance with law.
Ratio Decidendi: A pre-deposit made as a statutory condition for entertaining an appeal does not become a secured asset or secured debt, and must be refunded on disposal of the appeal unless it has been validly appropriated, adjusted with consent, or lawfully attached.
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