Pre-deposit not mandatory while challenging procedural orders under section 18 of the SARFESI Act, 2002.

"'Any Order' envisaged under section 18 of the SARFESI Act, should be given a meaningful interpretation."

There had been a growing practice about the strict compliance with respect to the pre-deposit of minimum 25% in an appeal filed under Section 18(1) of the Securitizations and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the “SARFAESI” Act) aggrieved under any measures under section 17 of the SARFESI, Act.

Section 18 of the Act reads as thus:

18. Appeal to Appellate Tribunal.—(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal1 [under section 17, may prefer an appeal along with such fee, as may be prescribed] to the Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal. Provided that different fees may be prescribed for filing an appeal by the borrower or by the person other than the borrower: Provided further that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent. of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less: Provided also that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent. of debt referred to in the second proviso.

This strict measure envisaged under the act had made pre-deposit made mandatory for the appeal to be admitted against 'any order' even if the challenge subject was against any kind of Interlocutory applications.

the Supreme Court recently in M/S SUNSHINE BUILDERS AND DEVELOPERS vs  HDFC BANK LIMITED THROUGH THE BRANCH MANAGER & ORS. CIVIL APPEAL NO.5290/2025  has given a new meaning to the mandatory pre-deposit for any orders under section 18 of the SARFESI Act. It observed that the expression 'any order' under section 18 of the SARFESI Act should be given a liberal meaning. It should not be applied to procedural orders like, IAs. The pre-deposit should only be made mandatory for appeal against final order passed by the DRT. It opined that:  the expression “any order” should be given some meaningful interpretation. Should any and every order that may be passed by DRT, if sought to be challenged, be made subject to pre-deposit. 

Thus, the observation of the Supreme Court in the aforesaid judgement has made efficient and cost effective for aggrieved parties to approach the Appellate forum for small procedural challenges without hesitation and financial obligation. This liberal interpretation of the SC should be seen as a constructive step in SARFESI practice for better administration of justice.