Pre-deposit under SARFAESI cannot nullify a third party's appeal; delay in pleadings may be condoned where time was granted

Section 18 of the SARFAESI Act should not be applied so rigidly that a third party's appeal is rendered ineffective by insisting on pre-deposit of the principal borrower's debt where the appellant asserts he is neither borrower nor mortgagor; the waiver refusal was therefore unsustainable. The text also notes that delay in filing the rejoinder and affidavit of evidence before the DRT may be condoned where time had already been granted and refusal would only prolong proceedings, so the documents were directed to be taken on record.

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Issues: (i) Whether waiver of pre-deposit under Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 could be declined to a person asserting that he was neither the principal borrower nor the mortgagor. (ii) Whether the delay in filing the rejoinder and affidavit of evidence before the Debt Recovery Tribunal ought to be condoned and the documents taken on record.

Issue (i): Whether waiver of pre-deposit under Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 could be declined to a person asserting that he was neither the principal borrower nor the mortgagor.

Analysis: The appeal was considered in light of the legal position that the second proviso to Section 18(1) cannot be read so rigidly as to render a third party's appeal nugatory by insisting on deposit of the debt due from the principal borrower. The petitioner's claim was that he was neither the borrower nor the mortgagor, and that question was still to be examined in the pending securitisation proceedings on the basis of the final forensic report. The Tribunal's refusal to entertain the waiver application was therefore inconsistent with the governing principle.

Conclusion: The refusal to entertain the prayer for waiver of pre-deposit was unsustainable and was set aside in favour of the petitioner.

Issue (ii): Whether the delay in filing the rejoinder and affidavit of evidence before the Debt Recovery Tribunal ought to be condoned and the documents taken on record.

Analysis: The record showed that time had in fact been granted for filing rejoinder and evidence, and the subsequent refusal to receive those filings would only prolong the proceedings. In these circumstances, the delay was treated as deserving of condonation so that the matter could proceed without further obstruction.

Conclusion: The delay was condoned and the rejoinder and affidavit of evidence were directed to be taken on record, in favour of the petitioner.

Final Conclusion: The impugned orders were interfered with, the petitioner obtained the substantive reliefs sought on the two decided issues, and the appeal before the Appellate Tribunal was rendered unnecessary.

Ratio Decidendi: A pre-deposit requirement under Section 18 of the SARFAESI Act cannot be applied so as to extinguish a third party's appeal where that party is neither the principal borrower nor the mortgagor, and delay in filing pleadings may be condoned where the record shows that time had already been granted and no prejudice justifies refusal.

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