SARFAESI Act - "Pre-deposit" for appeal - Deposit reduced on review : Rectified amount must be served on appellant

Supreme Court Sets Aside DRAT and High Court Orders in SARFAESI Case Apex Court Rules Rectified Debt Amount Not Served on Appellants, Orders Reassessment

In a significant ruling, the Supreme Court of India has set aside the orders passed by the Debts Recovery Appellate Tribunal (DRAT) and the High Court of Kerala regarding a contentious issue under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. The case, involving S.R. Educational and Charitable Trust and Asset Reconstruction Company (India) Ltd. (ARCIL), revolved around the rectification of the debt amount due from the appellants.

The Supreme Court bench, comprising Justices Dipankar Datta and Augustine George Masih, delivered the judgment on November 21, 2025. The appeal stemmed from a High Court decision which had upheld the DRAT's order requiring the appellants to deposit 30% of the rectified debt amount of Rs.193.10 crore, a significant increase from the originally stated Rs.22.80 crore.

The appellants, S.R. Educational and Charitable Trust, had challenged the possession order of a secured asset under Section 14 of the SARFAESI Act. Their interim application for a stay was initially dismissed by the Debts Recovery Tribunal (DRT), prompting an appeal to the DRAT. The DRAT initially directed a 40% deposit of the Rs.22.80 crore debt. However, upon ARCIL's review petition, this was rectified to 30% of Rs.193.10 crore.

The Supreme Court found that the rectified amount was not duly served on the appellants, rendering the DRAT's review order and the subsequent High Court judgment indefensible. The apex court emphasized that any claim for rectified debt amounts should be served on the concerned parties to ensure fair proceedings.

Consequently, the Supreme Court annulled the orders dated August 1, 2025, by the DRAT, and the High Court's judgment, directing a reassessment of the appeal by the DRAT. The appellants were given a one-time opportunity to deposit the "pre-deposit" amount as per the original order dated July 11, 2025, within seven days to keep the appeal active.

The Supreme Court clarified that this judgment does not prejudice ARCIL's right to claim the rectified debt amount in future proceedings. All arguments remain open for consideration by the lower tribunals.

Bottom Line:

SARFAESI Act - "Pre-deposit" requirement for appeal before DRAT - Rectified amount of debt due must be served on the appellant before modifying earlier orders - DRAT order and High Court judgment affirmed such modification set aside.

Statutory provision(s): SARFAESI Act, 2002 Sections 13(2), 13(4), 14, 17

S.R. Educational And Charitable Trust v. Asset Reconstruction Company (India) Ltd, (SC) : Law Finder Doc Id # 2812310