Court quashes DRAT's order for lack of jurisdiction over pre-deposit issue. Sale of assets upheld.

The High Court quashed the DRAT's order for lacking jurisdiction due to non-compliance with the mandatory pre-deposit under Section 18 of the SARFAESI Act. The sale of secured assets to the petitioner was upheld, and the petitioner was directed to maintain status quo for six weeks.

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Issues Involved:
1. Jurisdiction of Debts Recovery Appellate Tribunal (DRAT) to proceed without pre-deposit.
2. Validity of the sale of secured assets.
3. Compliance with Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
4. Restoration of possession of secured assets.

Detailed Analysis:

1. Jurisdiction of Debts Recovery Appellate Tribunal (DRAT) to proceed without pre-deposit:

The core issue was whether the DRAT had jurisdiction to decide the appeal on merits without the mandatory pre-deposit of at least twenty-five percent of the debt as required under Section 18 of the SARFAESI Act. The court emphasized that the second proviso to Section 18(1) mandates a fifty percent deposit of the debt or a minimum of twenty-five percent if reduced by the tribunal. The DRAT had granted a complete waiver of this deposit, which was later set aside by the High Court in Writ Petition No. 5005 of 2012. The court held that the DRAT's decision on merits without this pre-deposit was beyond its jurisdiction and thus non-est.

2. Validity of the sale of secured assets:

The sale of the secured assets by the respondent no.7 (M/s. Assets Reconstruction Company of India Ltd.) to the petitioner was initially confirmed by the Debts Recovery Tribunal (DRT) but later quashed by the DRAT. The High Court noted that the DRAT's order setting aside the sale was passed without jurisdiction due to the lack of pre-deposit, rendering the sale valid.

3. Compliance with Section 18 of the SARFAESI Act:

The court reiterated the mandatory nature of the pre-deposit under Section 18 of the SARFAESI Act. It referred to the previous decision in Writ Petition No. 5005 of 2012, which clarified that the DRAT could not waive the deposit below twenty-five percent of the debt. The DRAT's decision to proceed without ensuring this compliance was deemed a jurisdictional error, not merely an error in exercising jurisdiction.

4. Restoration of possession of secured assets:

Given the jurisdictional flaw in the DRAT's order, the High Court quashed the DRAT's decision and restored the status quo regarding the possession of the properties. The petitioner, who was in possession, was directed to maintain status quo for six weeks, ensuring no third-party interests were created or possession parted.

Conclusion:

The High Court quashed the DRAT's order dated 13th January 2014, due to the lack of jurisdiction stemming from non-compliance with the mandatory pre-deposit requirement under Section 18 of the SARFAESI Act. The sale of the secured assets to the petitioner was upheld, and the petitioner was directed to maintain status quo regarding the properties for six weeks.

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