AI Structured Summary
Not yet generated for this judgment
Judgment
ORDER
This Application is filed to refund of pre deposit, deposited by the Petitioner/Appellant at the time of entertaining the Appeal with accrued interest.
Learned Counsel for Petitioner/Appellant submitted that a sum of Rs.64,08,762/- was deposited as pre deposit at the time of entertaining the Appeals in MA(SA) 42/2025 and MA(SA) 43/2025. These Appeals were dismissed on 10.10.2025. On dismissal of the Appeals, the pre deposit amount of Rs.64,08,762/- along with accrued interest is sought to be refunded .
Learned Counsel for Respondent Bank opposes this Application on the ground that the Respondent Bank had obtained an order in IA 1568/2026 in OA 391/2021, attaching the pre-deposit amount lying in MA (SA) 42/2025 and MA (SA) 43/2025, towards realizing the debt due to the Respondent claimed in OA 391/2021. A copy of the said attachment order is also produced.
Considered the rival submissions and perused records.
There is no doubt that the pre-deposit amount is deposited as a statutory requirement for entertaining the Appeals filed under Section 18 of the SARFAESI Act, 2002. The Hon’ble Supreme Court, in Axis Bank vs. SBS Organics Pvt. Ltd & Anr, reported in AIR 2016 Supreme Court 2024, held that the pre-deposit amount is not a secured debt nor security interest is created over this amount. Therefore, the person who deposits the pre-deposit, as a pre condition for entertaining the Appeal, is entitled to refund of the said amount. However, such entitlement is not absolute and is subject to certain conditions. Supposing, where the Appellate Tribunal, on the request of the secured creditor but with the consent of the depositors, had already appropriated the pre-deposit towards the liability of the borrower, or with the consent, had adjusted the amount towards the dues, or if there be any attachment on the pre-deposit in any proceedings under Section 13(10) of the Act read with Rule 11 of the Security Interest (Enforcement) Rules, 2002, or if there be any attachment in any other proceedings known to law, the Petitioner cannot seek refund of such pre deposit.
Section 13(10) of the SARFAESI Act, 2002 is extracted hereunder for better understanding:-
“13. Enforcement of security interest.
(1)…..
…….
……
(10)Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower.”
Rule 11 of Security Interest (Enforcement) Rules, 2002 deals with the procedure for recovery of shortfall of secured debt, and the same is extracted hereunder:-
11. Procedure for recovery of shortfall of secured debt.
(1)An application for recovery of balance amount by any secured creditor pursuant to sub-section (10) of section 13 of the Act shall be presented to the Debts Recovery Tribunal in the form annexed as Appendix VI to these rules by the authorized officer or his agent or by a duly authorized legal practitioner, to the Registrar of the Bench within whose jurisdiction his case falls or shall be sent by registered post addressed to the Registrar of Debts Recovery Tribunal.
(2)The provisions of the Debts Recovery Tribunal (Procedure) Rules, 1993 made under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993), shall mutatis mutandis apply to any application filed by under sub-rule (1).
(3)An application under sub-rule (1) shall be accompanied with fee as provided in rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993.
A combined reading of Section 13(10) of SARFAESI Act, 2002 and Rule 11 of the Security Interest (Enforcement) Rules 2002, makes it clear that where the dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an Application as detailed in Rule 11 of the Security Interest (Enforcement) Rules 2002, before the DRT having jurisdiction or before a competent court, for recovery of the balance amount from the borrower.
In this case, the Respondent Bank had filed IA 1568/2026 before DRT-I, Ernakulam, where the OA 391/2021 is pending for recovery of loan dues from the Petitioner and had obtained the order of attachment under Section 13(10) of the SARFAESI Act, 2002.
Therefore, this Tribunal is of the view that, in light of the attachment order passed by DRT-I, Ernakulam in 1568/2026 in OA 391/2021, the pre deposit amount cannot, at this stage, ordered to be refunded to the Petitioner.
The issue of refund of pre-deposit shall depend upon the outcome of the order passed in OA 391/2021.
Accordingly, this Application is disposed of. No order as to costs.