Pre-Deposit Condition Under SARFAESI Can't Apply to Procedural Appeals: Supreme Court Sets Aside Bombay High Court Order, Clarifies Scope of Section 18

“Every Appeal Doesn’t Trigger Pre-Deposit — If It’s Not About Debt Liability, You Can’t Demand ₹125 Crore Upfront” —  In a judgment clarifying the scope of Section 18 of the SARFAESI Act, the Supreme Court of India held that pre-deposit conditions under Section 18(1) of the SARFAESI Act do not apply to procedural appeals such as those involving impleadment or condonation of delay. The Court set aside the Bombay High Court’s judgment which had upheld the DRAT’s direction to deposit ₹125 crore as a pre-condition to hear an appeal, and remanded the matter for fresh consideration.

The Bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan emphasized: “The High Court got enamoured by the DRAT’s finding that the appellant consented to the mortgage. But it failed to examine whether Section 18’s pre-deposit requirement even applies to an order concerning impleadment and procedural issues.”

Dispute Over Auction, Mortgage, and a ₹125 Crore Pre-Deposit
The matter originated from a challenge to a DRAT order dated February 29, 2024, which directed Sunshine Builders, not a borrower or guarantor, to deposit ₹125 crore as a pre-condition to maintain their appeal under Section 18(1) of the SARFAESI Act.

The appeal itself arose from the rejection of two interim applications before the DRT — one seeking impleadment of auction purchasers and the other for condonation of delay in filing.
While the DRAT treated the appellant as a “borrower” under Section 2(1)(f) of the SARFAESI Act (on grounds they consented to a mortgage), the High Court upheld this interpretation and the massive pre-deposit.

 “Pre-Deposit Applies to Final Liability, Not Procedural Orders”
The Supreme Court took a pragmatic view, holding that every appeal under Section 18 doesn’t attract a pre-deposit condition: “One can understand if a final order determining liability is passed and appeal is filed — in that case, pre-deposit is triggered. But should the same apply to an order rejecting an impleadment plea?”

Reading down Section 18, the Court emphasized the importance of contextual interpretation: “The expression ‘any order’ cannot be interpreted to include purely procedural or interlocutory orders that do not deal with the quantum or merit of the debt claim.”

On DRAT and High Court’s Approach: “Both Missed the Core Issue”
The Supreme Court criticized both forums for ignoring the substantive nature of the appeal, focusing instead on the definition of ‘borrower’ to mechanically apply the pre-deposit condition.

“Merely because the DRAT noted prima facie that consent was given for mortgage, that by itself cannot trigger Section 18 pre-deposit. The appeal did not arise from adjudication of debt liability.”

Matter Remanded to High Court for Fresh Consideration
The Supreme Court set aside the High Court’s order and directed: “The High Court shall rehear Writ Petition No. 3929/2024 and decide afresh in accordance with law, specifically addressing the question — does Section 18 pre-deposit apply to appeals from procedural orders?”

The Court granted liberty to the appellant to return to the Supreme Court if an adverse order is passed again.

“Law must distinguish between substance and form — not every appeal mandates a financial hurdle when the real issue is procedural.”

Date of Decision: April 17, 2025