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IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4379 OF 2016 (Arising out of SLP (C) No. 13861/2015)

AXIS BANK ...  APPELLANT (S)

VERSUS

SBS ORGANICS PRIVATE LIMITED AND ANOTHER           ... RESPONDENT  (S)

J  U  D  G  M  E  N  T

KURIAN, J.:

Leave granted.  

2. An appeal under Section 18 of The Securitisation and  

Reconstruction of Financial Assets and Enforcement of Security  

Interest Act, 2002 (hereinafter referred to as ‘SARFAESI Act’)  

before  the  Debt  Recovery  Appellate  Tribunal  (hereinafter  

referred to as ‘DRAT’) can be entertained only if the borrower  

deposits  fifty  per  cent  of  the  amount  in  terms  of  the  order  

passed by the Debt Recovery Tribunal (hereinafter referred to  

as ‘DRT’) under Section 17 of the Act or fifty per cent of the  

amount  due  from  the  borrower  as  claimed  by  the  secured  

creditor, whichever is less. The Appellate Tribunal may reduce  

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the amount to twenty five per cent. What is the fate of such  

deposit on the disposal of the appeal is the question arising for  

consideration in this case.

3. Being a pure legal issue, it may not be necessary for us  

to refer to the factual position in detail. The first respondent,  

being  a  borrower  and  aggrieved  by  the  steps  taken  by  the  

secured  creditor,  filed  Securitisation  Application  No.  152  of  

2010 before the Debt Recovery Tribunal, Ahmedabad. Though,  

initially an interim relief was granted, the same was vacated by  

order dated 20.01.2011. Therefore, the first respondent moved  

the Debt Recovery Appellate Tribunal,  Mumbai under Section  

18 of the SARFAESI Act. In terms of the proviso under Section  

18, the first respondent made a deposit of Rs.50 lakhs before  

the  Appellate  Tribunal.  During  the  pendency  of  the  appeal  

before the DRAT, Securitisation Application itself  came to be  

finally  disposed  of  before  the  Debt  Recovery  Tribunal  at  

Ahmedabad, setting aside the sale. Realising that the appeal  

did  not  survive  thereafter,  the  first  respondent  sought  

permission to withdraw the same and also for  refund of  the  

deposit  of  Rs.  50  lakhs.  Permission  was  granted,  however,  

making it subject to the disposal of the appeal. As the appeal  

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itself  was  being  withdrawn,  the  first  respondent  moved  the  

High Court of Gujarat at Ahmedabad by way of Writ Petition  

(Special  Civil  Application),  aggrieved by the observation that  

the withdrawal would be subject to the result of the appeal. The  

same  was  disposed  of  by  order  dated  05.03.2015  by  the  

learned  Single  Judge,  setting  aside  the  said  condition  and  

permitting the first respondent herein to withdraw the amount  

unconditionally.  Aggrieved,  the  appellant-Bank filed  an  intra-

Court  appeal.  That  appeal  was  dismissed  by  order  dated  

01.04.2015 by a Division Bench, and thus aggrieved, the Bank  

has come up in appeal before this Court.

4. Heard  learned  Senior  Counsel  Shri  C.  U.  Singh  

appearing for the appellant-Bank and learned Counsel Prashant  

Pandit appearing for the respondents.

5. The learned Senior Counsel appearing for the appellant-

Bank submits that the first respondent has no right to get back  

the deposit made by it as a pre-condition for entertaining the  

appeal. The said amount has to be set off against the dues of  

the first respondent, which has actually been quantified and for  

which,  Section 13 recovery steps have been permitted.  It  is  

submitted that the appellant-Bank has to secure the entire debt  

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by proceeding against the secured assets, and therefore, the  

deposit is liable to be appropriated by the Bank. Reference is  

also made to Section 13(10) of the SARFAESI Act and Rule 11 of  

The Security Interest (Enforcement) Rules, 2002, which read as  

follows:

“13(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.”

“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  authorised  officer  or  his  agent  or  by  a  duly  authorised  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.”

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6. Learned Senior Counsel further submits that the Bank  

has  a  lien  on  the  amount  under  Section  171  of  The  Indian  

Contract Act, 1872. The decision of the High Court of Gujarat in  

Babu Ganesh Singh Deepnarayan v.  Union of India and  

another1, which has been followed by the Division Bench in the  

impugned judgment, does not reflect the true legal position, it  

is further submitted.  

7. Babu Ganesh   (supra) was a case involving a challenge  

on  the  vires  of  the  second proviso  under  Section  18  of  the  

SARFAESI Act, on the mandatory pre-deposit. While upholding  

the provision, at paragraphs-5 and 6, it was observed that, in  

case  the  appeal  is  dismissed,  the  amounts  deposited  for  

entertaining the appeal would be refunded. To quote:

“5. Right of appeal is a creature of the statute.  Legislature can impose conditions under which it is  to  be  exercised.  Without  a  statutory  provision  creating such a right,  a person aggrieved is  not  entitled  to  prefer  an  appeal.  Legislature  while  granting  right  of  appeal  can  impose  conditions  which it thinks reasonable. Such conditions merely  regulate the exercise of right of appeal so that the  same is  not  abused by a recalcitrant  party,  and  there  is  no  difficulty  in  the  enforcement  of  the  order  appealed  against  in  case  the  appeal  is  ultimately  dismissed.  Imposition  of  such  a  condition  is  essential,  so  that  frivolous  appeals  would  not  be  filed.  Ultimately  if  the  appeal  is  dismissed,  the  aggrieved party  can  always  seek  

1 AIR 2009 Guj. 98

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refund of the amount deposited and therefore, he  is  not  in  any  way  aggrieved.  Further  the  Third  Proviso to Section 18 (1) of the Securitization Act  also  enables  the  Appellate  Tribunal,  for  the  reasons  to  be  recorded  in  writing,  reduce  the  amount to not less than 25% of the debt referred  to in the Second Proviso. We are not prepared to  accept the contention that conditions imposed in  the second and third proviso to Section 18(1) of  the Securitization Act are onerous in nature so as  to  make  the  right  of  appeal  illusory.  Delhi  High  Court in R.V. Saxena's case (supra) also upheld the  validity of Second Proviso to Section 18(1) of the  Securitization Act with which we fully concur.

6. We have also not come across any provision  in  the  Statute,  enabling  the  secured  creditor  to  adjust or appropriate the amount deposited by the  borrower to prefer an appeal under Section 18(1)  of the Act. On dismissal of the appeal the amount  deposited as a pre-condition for filing the appeal  will be refunded to the appellant and therefore, he  is no way prejudiced. We therefore, find no merit  in the contention raised by the petitioner that the  second  proviso  to  Section  18(1)  of  the  Act  is  discriminatory  or  violative  of  Article  14  of  the  Constitution of India. Petitions lack merit and the  same are dismissed.”

8. At this  juncture,  it  may be necessary  to  refer  to  the  

scheme of the SARFAESI Act. The Act was intended to facilitate  

easy  and  faster  recovery  of  loans  advanced  by  banks  and  

financial  institutions.  The  ordinary  recovery  mechanism  

contemplated  in  The Code of  Civil  Procedure,  1908 was  not  

considered  sufficient.  Thus,  the  Recovery  of  Debts  Due  to  

Banks and Financial Institutions Act, 1993 was introduced for a  

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special  and  speedier  mechanism for  the  recovery.  Almost  a  

decade of experience proved that the recovery process was not  

achieving the intended objects and hence, the SARFAESI Act to  

regulate  securitisation  and  reconstruction  of  financial  assets  

and  enforcement  of  security  interest  was  enacted.  The  Act  

incorporates  a  system whereby direct  action  for  recovery of  

secured debt may be initiated against the secured assets of a  

borrower  after  the  debt  is  declared  to  be  a  non performing  

asset (NPA).

9. “Borrower” is defined under Section 2(1)(f), which reads  

as follows:

“2(1)(f) "borrower" means any person who  has  been  granted  financial  assistance by any bank or financial  institution  or  who  has  given  any  guarantee or created any mortgage  or  pledge  as  security  for  the  financial assistance granted by any  bank  or  financial  institution  and  includes  a  person  who  becomes  borrower  of  a  securitisation  company  or  reconstruction  company  consequent  upon  acquisition  by  it  of  any  rights  or  interest  of  any  bank  or  financial  institution  in  relation  to  such  financial assistance;”

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10. “Secured Asset”, under Section 2(1)(zc), is defined as:

“2(1)(zc) “secured  asset”  means  the  property  on  which  the  security  interest  is  created”

11. “Section  2(1)(zd)  provides  for  definition  of  “secured  

creditor”, which reads as follows:

“2(1)(zd) "secured creditor" means any bank or  financial institution or any consortium or group of  banks or financial institutions and includes—

(i) debenture trustee appointed by any bank  or financial institution; or

(ii) securitisation  company  or  reconstruction  company,  whether  acting  as  such  or  managing  a  trust  set  up  by  such  securitisation  company  or  reconstruction  company  for  the  securitisation  or  reconstruction, as the case may be; or any  other trustee holding securities on behalf  of a bank or financial institution, in whose  favour security interest is created for due  repayment  by  any  borrower  of  any  financial assistance;”

12. Section  2(1)(ze)  defines  “secured  debt”  to  mean  “a  

debt which is secured by any security interest”.

13. “Security interest” is defined under Section 2(1)(zf):  

“(zf) "security  interest"  means  right,  title  and interest of any kind whatsoever upon  property, created in favour of any secured  creditor  and  includes  any  mortgage,  charge,  hypothecation,  assignment  other  than those specified in section 31;”  

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14. The mechanism for enforcement of security interest is  

contemplated under Section 13 of the Act. Sub- Sections (1),  

(2),(3),(3A) and (4) of Section 13 are relevant for the purposes  

of the present case and  they are extracted below:

“13. Enforcement of security interest (1) Notwithstanding anything contained in section 69 or  section 69A of the Transfer of Property Act, 1882 (4 of  1882),  any security  interest  created in  favour  of  any  secured  creditor  may  be  enforced,  without  the  intervention  of  court  or  tribunal,  by  such  creditor  in  accordance with the provisions of this Act. (2) Where any borrower,  who is under a liability to a  secured  creditor  under  a  security  agreement,  makes  any  default  in  repayment  of  secured  debt  or  any  installment thereof, and his account in respect of such  debt  is  classified  by  the  secured  creditor  as  non- performing  asset,  then,  the  secured  creditor  may  require the borrower by notice in writing to discharge in  full  his  liabilities  to  the  secured  creditor  within  sixty  days from the date of notice failing which the secured  creditor shall  be entitled to exercise all  or any of the  rights under sub-section (4). (3) The notice referred to in sub-section (2) shall give  details of the amount payable by the borrower and the  secured assets intended to be enforced by the secured  creditor in the event of non-payment of secured debts  by the borrower. (3A) If, on receipt of the notice under sub-section (2),  the borrower makes any representation or raises any  objection,  the  secured  creditor  shall  consider  such  representation or objection and if the secured creditor  comes  to  the  conclusion  that  such  representation  or  objection  is  not  acceptable  or  tenable,  he  shall  communicate  within  one  week  of  receipt  of  such  representation  or  objection  the  reasons  for  non-

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acceptance  of  the  representation  or  objection  to  the  borrower:

Provided that the reasons so communicated or the  likely  action  of  the  secured  creditor  at  the  stage  of  communication  of  reasons  shall  not  confer  any  right  upon the borrower to prefer an application to the Debts  Recovery  Tribunal  under  section  17  or  the  Court  of  District Judge under section 17A. (4) In case the borrower fails to discharge his liability in  full  within the period specified in  sub-section (2),  the  secured creditor may take recourse to one or more of  the  following  measures  to  recover  his  secured  debt,  namely:--

(a) take  possession  of  the  secured  assets  of  the  borrower including the right to transfer by way  of  lease,  assignment  or  sale  for  realising  the  secured asset;

(b) take over the management of the business of  the borrower including the right to transfer by  way of  lease,  assignment  or  sale  for  realising  the secured asset:

Provided that the right to transfer by way of lease,  assignment or sale shall  be exercised only where the  substantial part of the business of the borrower is held  as security for the debt.

Provided  further  that  where  the  management  of  whole  of  the  business  or  part  of  the  business  is  severable,  the  secured  creditor  shall  take  over  the  management of such business of the borrower which is  relatable to the security for the debt.

(c) appoint any person (hereafter referred to as the  manager),  to  manage  the  secured  assets  the  possession of which has been taken over by the  secured creditor;

(d) require  at  any  time  by  notice  in  writing,  any  person  who  has  acquired  any  of  the  secured  assets from the borrower and from whom any  money  is  due  or  may  become  due  to  the  borrower, to pay the secured creditor, so much  

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of the money as is sufficient to pay the secured  debt.”

15. A  conspectus  of  the  aforesaid  provisions  shows  that  

under the scheme of the SARFAESI Act, a secured creditor is  

entitled  to  proceed against  the  borrower  for  the  purpose  of  

recovering  his  secured  debt  by  taking  action  against  the  

secured  assets,  in  case  the  borrower  fails  to  discharge  his  

liability in full within the period specified in the notice issued  

under Section 13(2) of the Act.  It  is  the mandate of Section  

13(3)  of  the  Act  that  the  notice  issued  under  Section  13(2)  

should contain details of the amount payable by the borrower  

and also the secured assets intended to be enforced by the  

secured creditor in the event of non-payment of the dues as  

per Section 13(2) notice. Thus, the secured creditor is entitled  

to proceed only against the secured assets mentioned in the  

notice under Section 13(2). However, in terms of Section 13(11)  

of  the Act,  the secured creditor  is  also  free to  proceed first  

against the guarantors or sell the pledged assets. To quote:

“13(11) Without prejudice to the rights conferred  on the secured creditor under or by this section,  the secured creditor shall  be entitled to proceed  against the guarantors or sell the pledged assets  without first taking any of the measures specified  

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in clauses(a) to (d) of sub-section (4) in relation to  the secured assets under this Act.”

16. Section 17 of the Act provides for a right to appeal to  

the DRT in respect of the grievances on the measures taken by  

the secured creditor under Section 13 of the Act. To quote for  

easy reference, Section 17 of the Act:

“17. Right to appeal.-(1) Any person (including  borrower),  aggrieved  by  any  of  the  measures  referred to in sub-section (4) of section 13 taken  by the secured creditor  or  his  authorised officer  under  this  Chapter,  may  make  an  application  alongwith such fee, as may be prescribed to the  Debts Recovery Tribunal having jurisdiction in the  matter  within  forty-five  days  from  the  date  on  which such measure had been taken:

Provided  that  different  fees  may  be  prescribed  for  making  the  application  by  the  borrower and the person other than the borrower.

Explanation: For the removal of doubts, it is  hereby  declared  that  the  communication  of  the  reasons to the borrower by the secured creditor  for  not  having  accepted  his  representation  or  objection  or  the  likely  action  of  the  secured  creditor at the stage of communication of reasons  to  the  borrower  shall  not  entitle  the  person  (including borrower) to make an application to the  Debts Recovery Tribunal under sub-section (1).

(2)  The  Debts  Recovery  Tribunal  shall  consider whether any of the measures referred to  in  sub-section  (4)  of  section  13  taken  by  the  secured creditor for enforcement of security are in  accordance with the provisions of this Act and the  rules made thereunder.

(3)  If,  the  Debts  Recovery  Tribunal,  after  examining the facts and circumstances of the case  and evidence produced by the parties, comes to  

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the conclusion that any of the measures referred  to in sub-section (4) of section 13, taken by the  secured creditor  are not  in  accordance with  the  provisions  of  this  Act  and  the  rules  made  thereunder,  and  require  restoration  of  the  management of the business to the borrower or  restoration of possession of the secured assets to  the  borrower,  it  may  by  order,  declare  the  recourse to any one or more measures referred to  in  sub-section  (4)  of  section  13  taken  by  the  secured  creditors  as  invalid  and  restore  the  possession of the secured assets to the borrower  or restore the management of the business to the  borrower,  as  the  case  may  be,  and  pass  such  order  as  it  may  consider  appropriate  and  necessary in relation to any of the recourse taken  by the secured creditor  under sub-section (4) of  section 13.

(4) If,  the Debts Recovery Tribunal declares  the  recourse  taken by  a  secured creditor  under  sub-section (4) of section 13, is in accordance with  the  provisions  of  this  Act  and  the  rules  made  thereunder,  then,  notwithstanding  anything  contained in any other law for the time being in  force, the secured creditor shall be entitled to take  recourse to one or more of the measures specified  under sub-section (4) of section 13 to recover his  secured debt.

(5)  Any application made under sub-section  (1)  shall  be  dealt  with  by  the  Debts  Recovery  Tribunal as expeditiously as possible and disposed  of  within  sixty  days  from  the  date  of  such  application:

Provided  that  the  Debts  Recovery  Tribunal  may, from time to time, extend the said period for  reasons  to  be  recorded  in  writing,  so,  however,  that the total period of pendency of the application  with the Debts  Recovery  Tribunal,  shall  not  exceed  four  months  from  the  date  of  making  of  such  application made under sub-section (1).

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(6) If the application is not disposed of by the  Debts Recovery Tribunal within the period of four  months as specified in sub-section (5), any party  to  the  application  may  make  an  application,  in  such form as may be prescribed, to the Appellate  Tribunal for directing the Debts Recovery Tribunal  for expeditious disposal of the application pending  before  the  Debts  Recovery  Tribunal  and  the  Appellate Tribunal may, on such application, make  an order for  expeditious disposal  of  the pending  application by the Debts Recovery Tribunal.

(7)  Save as  otherwise  provided in  this  Act,  the Debts Recovery Tribunal shall, as far as may  be, dispose of the application in accordance with  the  provisions  of  the  Recovery  of  Debts  Due  to  Banks and Financial Institutions Act, 1993 and the  rules made thereunder.”

17. Though Section 17 of  the Act  is  titled as a ‘Right  to  

appeal’, the liberty granted to the aggrieved person is to make  

an application to the DRT and the parties are at a liberty to lead  

evidence  before  the  tribunal.  And  thus,  it  is  actually  a  trial  

before the DRT on the grievances of the aggrieved persons in  

the respect of the measures taken by the secured creditor for  

recovery  of  dues  of  the  borrower  in  proceeding  against  the  

secured assets.(See Mardia Chemicals v. Union of India2)

18. The actual appeal is contemplated under Section 18 of  

the SARFAESI Act. The provision reads as follows:

“18.  Appeal  to  Appellate  Tribunal.-(1)  Any person aggrieved, by any order made by the  

2 (2004) 4 SCC 311

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Debts  Recovery  Tribunal  under  section  17,  may  prefer an appeal alongwith 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.

(2)  Save as  otherwise  provided in  this  Act,  the  Appellate  Tribunal  shall,  as  far  as  may  be,  dispose  of  the  appeal  in  accordance  with  the  provisions of the Recovery of Debts Due to Banks  and Financial  Institutions Act,  1993 (51 of 1993)  and rules made thereunder.”

19. Any person aggrieved by the order of the DRT under  

Section 17 of the SARFAESI Act, is entitled to prefer an appeal  

along with the prescribed fee within the permitted period of 30  

days. For ‘preferring’ an appeal, a fee is prescribed, whereas  

for the Tribunal to ‘entertain’ the appeal, the aggrieved person  

has to make a deposit of fifty per cent of the amount of debt  

due  from  him  as  claimed  by  the  secured  creditors  or  

determined by the DRT, whichever is less. This amount can, at  

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the discretion of the Tribunal, in appropriate cases, for recorded  

reasons, be reduced to twenty- five per cent of the debt.

20. This  Court,  in  Lakshmi  Rattan  Enginerring Works  

Limited v. Assistant  Commissioner  Sales  Tax,  Kanpur  

and Another3,  had the occasion to consider the meaning of  

the expression ‘entertain’ in the context of a similar provision in  

the Uttar Pradesh Sales Tax Act,1948 where it was held that in  

such context, the expression has the meaning of “admitting to  

consideration”.  The  relevant  discussion  is  available  at  

paragraphs - 9 and 10:

“9. The  word  'entertain'  is  explained  by  a  Divisional  Bench of  the Allahabad High Court  as  denoting the point of time at which an application  to set aside the sale is  heard by the court.  The  expression 'entertain', it is stated, does not mean  the same thing as the filing of the application or  admission of the application by the court. A similar  view  was  again  taken  in  Dhoom  Chand  Jain  v.  Chamanlal  Gupta  &  Anr.  AIR  1962  All.  543,  in  which  the  learned  Chief  Justice  Desai  and  Mr.  Justice  Dwivedi  gave  the  same  meaning  to  the  expression 'entertain'. It is observed by Dwivedi J.  that  the word 'entertain'  in  its  application bears  the  meaning  'admitting  to  consideration'.  and  therefore when the court cannot refuse to take an  application which is backed by deposit or security,  it cannot refuse judicially to consider it. In a single  bench  decision  of  the  same  court  reported  in  Bawan Ram & Anr. v. Kuni Beharilal A.I.R. 1961 All.  42, one of us (Bhargava, J.)  had to consider the  

3 AIR 1968 SC 488

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same rule. There the deposit had not been made  within  the  period  of  limitation  and  the  question  had arisen whether the court could entertain the  application  or  not.  It  was  decided  that  the  application  could  not  be  entertained  because  proviso (b)  debarred the court  from entertaining  an objection unless the requirement of depositing  the  amount  or  furnishing  security  was  complied  with within the time prescribed. In that case of the  word  'entertain'  is  not  interpreted  but  it  is  held  that  the  court  cannot  proceed  to  consider  the  application in the absence of deposit made within  the time allowed by law. This case turned on the  fact that the deposit was made out of time. In yet  another case of the Allahabad High Court reported  in  Haji  Rahim  Bux  &  Sons  and  Ors.  v.  Firm  Samiullah & Sons A.I.R.  1963 All.  326, a division  bench  consisting  of  Chief  Justice  Desai  and  Mr.  Justice S. D. Singh interpreted the words of O. 21,  r.  90,  by saying that the word 'entertain'  meant  not 'receive' or 'accept' but proceed to consider on  merits' or 'adjudicate upon'.  

10. In  our  opinion  these  cases  have  taken  a  correct  view  of  the  word  'entertain'  which  according  to  dictionary  also  means  'admit  to  consideration'. It would therefore appear that the  direction to the court in the proviso to s. 9 is that  the  court  shall  not  proceed  to  admit  to  consideration an appeal which is not accompanied  by  satisfactory  proof  of  the  payment  of  the  admitted tax. This will be when the case is taken  up by the court for the first time. In the decision  on which the Assistant  Commissioner  relied,  the  learned  Chief  Justice  (Desai  C.J.)  holds  that  the  words  'accompanied  by'  showed that  something  tangible had to accompany the memorandum of  appeal. If the memorandum of appeal had to be  accompanied by satisfactory proof, it had to be in  the  shape  of  something  tangible,  because  no  intangible thing can accompany a document like  the  memorandum  of  appeal.  In  our  opinion,  

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making  'an  appeal'  the  equivalent  of  the  memorandum of appeal is not sound. Even under  O.  41  of  the  Code  of  Civil  Procedure,  the  expression "appeal" and "memorandum of appeal"  are  used  to  distinct  two  distinct  things.  In  Wharton's  Law  Lexicon,  the  word  "appeal"  is  defined as the judicial examination of the decision  by  a  higher  Court  of  the  decision  of  an  inferior  court. The appeal is the judicial examination; the  memorandum of appeal contains the grounds on  which  the  judicial  examination  is  invited.  For  purposes  of  limitation  and  for  purposes  of  the  rules  of  the  Court  it  is  required  that  a  written  memorandum of appeal shall  be filed. When the  proviso speaks of the entertainment of the appeal,  it means that the appeal such as was filed will not  be  admitted  to  consideration  unless  there  is  satisfactory proof available of the making of the  deposit of admitted tax.”  

21.   We are also conscious of  the fact  that such a pre-

condition  is  present  in  several  statutes  while  providing  for  

statutory appeals, like The Income-Tax Act, 1961, The Central  

Excise  Act,  1944,  The  Consumer  Protection  Act,  1986,  The  

Motor Vehicles Act, 1988, etc. However, unlike those statutes,  

the purpose of the SARFAESI Act is different, it is meant only for  

speedy recovery of the dues, and the scheme under Section  

13(4) of the Act, permits the secured creditor to proceed only  

against the secured assets. Of course, the secured creditor is  

free to proceed against the guarantors and the pledged assets,  

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notwithstanding the steps under Section 13(4) and without first  

exhausting the recovery as against secured assets referred to  

in  the  notice  under  Section  13(2).  But  such  guarantor,  if  

aggrieved, is not entitled to approach DRT under Section 17.  

That  right  is  restricted  only  to  persons  aggrieved  by  steps  

under  Section  13(4)  proceeding  for  recovery  against  the  

secured assets.  

22. The Appeal under Section 18 of the Act is permissible  

only against the order passed by the DRT under Section 17 of  

the Act. Under Section 17, the scope of enquiry is limited to the  

steps taken under Section 13(4)  against  the secured assets.  

The  partial  deposit  before  the  DRAT  as  a  pre-condition  for  

considering the appeal on merits in terms of Section 18 of the  

Act, is not a secured asset. It is not a secured debt either, since  

the  borrower  or  the  aggrieved  person  has  not  created  any  

security interest on such pre-deposit in favour of the secured  

creditor.  If  that  be  so,  on  disposal  of  the  appeal,  either  on  

merits or on withdrawal, or on being rendered infructuous, in  

case,  the  appellant  makes  a  prayer  for  refund  of  the  pre-

deposit, the same has to be allowed and the pre-deposit has to  

be returned to the appellant, unless the Appellate Tribunal, on  

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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.  

23. We are also unable to agree with the contention that  

the Bank has a lien on the pre-deposit made under Section 18  

of  the  SARFAESI  Act  in  terms  of  Section  171  of  The  Indian  

Contract  Act,  1872.  Section  171 of  The Indian  Contract  Act,  

1872 on general lien, is in a different context:

“171. General  lien  of  bankers,  factors,  wharfingers, attorneys and policy-brokers.— Bankers, factors, wharfingers, attorneys of a High  Court and policy-brokers may, in the absence of a  contract to the contrary, retain as a security for a  general balance of account,  any goods bailed to  them; but no other persons have a right to retain,  as  a  security  for  such  balance,  goods  bailed  to  them, unless there is an express contract to that  effect.”

24. Section 171 of The Indian Contract Act, 1872 provides  

for retention of the goods bailed to the bank by way of security  

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for the general balance of account. The pre-deposit made by a  

borrower  for  the  purpose  of  entertaining  the  appeal  under  

Section 18 of the Act is not with the bank but with the Tribunal.  

It is not a bailment with the bank as provided under Section  

148 of The Indian Contract Act, 1872.  Conceptually, it should  

be  an  argument  available  to  the  depositor,  since  the  goods  

bailed are to be returned or otherwise disposed of,  after the  

purpose is accomplished as per the directions of the bailor.

25. In the case before us, the first respondent had in fact  

sought  withdrawal  of  the  appeal,  since  the  appellant  had  

already proceeded against the secured assets by the time the  

appeal came up for consideration on merits. There is neither  

any order of appropriation during the pendency of the appeal  

nor any attachment on the pre-deposit. Therefore, the deposit  

made by the first respondent is liable to be returned to the first  

respondent.  

26. Though for  different reasons as well,  we endorse the  

view taken by the High Court. Thus, there is no merit in the  

appeal. It is accordingly dismissed.

27. We make it  clear  that  the dismissal  of  the appeal  is  

without prejudice to  the liberty  available  to  the appellant  to  

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take appropriate steps under Section 13(10) of the SARFAESI  

Act read with Rule 11 of the Security Interest (Enforcement)  

Rules, 2002.

28. There shall be no order as to costs.

........................................J.        (KURIAN JOSEPH)

......………………………………J.    (ROHINTON FALI NARIMAN)

New Delhi; April 22, 2016.

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