In a significant ruling interpreting Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, the Supreme Court of India has held that the mandatory requirement of pre-deposit does not apply when an appeal is filed against a procedural order of the Debts Recovery Tribunal (DRT). The judgment was delivered on April 17, 2025, by a Bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan in M/s Sunshine Builders and Developers vs HDFC Bank Ltd. & Ors.
Case Background
The appellant, M/s Sunshine Builders and Developers, had approached the Supreme Court challenging the judgment of the Bombay High Court dated 19 March 2024 in Writ Petition No. 3929 of 2024. The High Court had dismissed the writ petition and upheld the order of the Debts Recovery Appellate Tribunal (DRAT) dated 29 February 2024, which directed the appellant to deposit ₹125 crore as a pre-condition under Section 18(1) of the SARFAESI Act for hearing the appeal.
The appeal before DRAT pertained to a procedural issue — specifically, the rejection of applications seeking impleadment of auction purchasers and condonation of delay in the pending Securitisation Application before the DRT.
High Court’s View
The Bombay High Court upheld the DRAT’s order by reasoning that the appellant fell within the definition of “borrower” under Section 2(1)(f) of the SARFAESI Act, having allegedly consented to the creation of a mortgage. It held that:
“From this definition, it is absolutely clear that a mortgagor, even though not being a guarantor or a principal borrower, would still be included in the definition of the word ‘borrower’.”
Based on this, the High Court concluded that the requirement of pre-deposit under Section 18 was applicable.
Supreme Court’s Analysis
The Supreme Court took a different view and held that the High Court had failed to consider the core issue: whether pre-deposit is necessary when the appeal concerns a procedural order, and not one that determines liability.
The Court observed:
“We are of the view, of course prima facie, that the expression ‘any order’ [under Section 18] 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?”
It further stated:
“One can understand that if any final order is passed by the DRT, determining the liability of the borrower or any other liability of any person, and an appeal is preferred… the provision of pre-deposit would come into play. However, what would be the position if an order like the one passed in the present litigation, i.e., declining to implead the auction purchaser, is concerned?”
Decision
Setting aside the Bombay High Court’s order, the Supreme Court remanded the matter back for reconsideration. It directed the High Court to re-hear Writ Petition No. 3929 of 2024 and adjudicate it afresh in accordance with law.
The Court concluded:
“The impugned order passed by the High Court is set aside. The matter is remitted to the High Court… In the event if any adverse order is passed by the High Court, it shall be open for the appellant to come back to this Court again.”
Citation
M/s Sunshine Builders and Developers vs HDFC Bank Limited & Ors., Civil Appeal No. 5290 of 2025 (Arising out of SLP (C) No. 10875 of 2025)
