Karnataka High Court
Ittiam Systems Private Limited vs Bharath Co Operative Bank (Mumbai) … on 19 May, 2026
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
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WP No. 14841 of 2026
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®
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 19TH DAY OF MAY, 2026
PRESENT
THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ
AND
THE HON'BLE DR. JUSTICE K.MANMADHA RAO
WRIT PETITION NO.14841 OF 2026 (GM-DRT)
BETWEEN:
ITTIAM SYSTEMS PRIVATE LIMITED
A COMPANY INCORPORATED UNDER THE
COMPANIES ACT, 1956.
HAVING OFFICE AT:
4TH AND 5TH FLOOR,
'CONSULATE-1',
NO.1, RICHMOND ROAD,
BENGALURU- 560 025.
REPRESENTED BY ITS POWER
OF ATTORNEY HOLDER,
MS. KATYAYINI SURENDRAN.
Digitally signed by ...PETITIONER
VIJAYALAKSHMI
BN (BY SRI. T. SURYANARAYANA, SENIOR COUNSEL A/W
MS. SMITHA R.B.,ADVOCATE)
Location: HIGH
COURT OF
KARNATAKA AND:
BHARATH CO-OPERATIVE BANK (MUMBAI) LIMITED
MOHAN TERRACE FLOOR,
64/72, MODY STREET FORT,
MUMBAI-400 001.
REPRESENTED HEREIN BY
ITS MANAGER
...RESPONDENT
(BY SRI. PUNDIKAI ISHWARA BHAT, ADVOCATE)
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THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE
CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF
CERTIORARI OR ANY WRIT IN THE NATURE OF CERTIORARI OR ANY
OTHER WRIT, ORDER OR DIRECTION SETTING ASIDE THE
IMPUGNED ORDER DATED 29/04/206 PASSED BY THE HONBLE DRAT
ON IA NO.1556/2025 IN A.I.R. NO.1801/2025 (ANNEXURE-D) AND
ETC.
THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER
WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE SURAJ GOVINDARAJ
and
HON'BLE DR. JUSTICE K.MANMADHA RAO
ORAL ORDER
(PER: HON’BLE MR. JUSTICE SURAJ GOVINDARAJ)
1. The petitioner is before this Court seeking for the
following reliefs:
(i) Issue a writ of certiorari or any writ in the nature of
certiorari or any other writ, order or direction setting
aside the impugned order dated 29.04.2026 passed by
the Hon’ble DRAT on I.A.No.1556/2025 in AIR
No.1801/2025 (Annexure-D); and
(ii) Consequently issue a writ, order or direction to allow
I.A.No.1556/2025 (Annexure-D) filed in AIR
No.1801/2025 before the Hon’ble DRAT; and
(iii) pass such further or other orders as this Hon’ble
Court may deem fit in the facts and circumstances of
the case, in the interests of justice and equity.
2. The petitioner claims to be a tenant in respect of Unit
Nos. 401, 402 and 404 situated on the fourth floor of
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the building known as “Consulate-1”, bearing Khata
Nos. 1/10, 1/11 and 1/13, having an aggregate
super built-up area of 7,045 square feet together
with five car parking spaces, constructed on property
bearing No. 1, Richmond Road, Bengaluru – 560 025.
3. It is stated that the said property originally belonged
to Ms. Consulate Constructions, which subsequently
sold the leasehold rights therein to Mr. Hiro
Uttamchandani under an Indenture of Sale of
Leasehold Rights dated 11.01.2008. The petitioner
contends that even prior thereto, it had been
inducted into the premises as a lessee in the year
2001 and that the tenancy has continued ever since.
4. It is further stated that Mr. Hiro Uttamchandani had
availed a loan from the respondent and, upon default
in repayment, the respondent initiated proceedings
under Section 13(2) of the SARFAESI Act by issuing
a demand notice thereunder, followed by measures
under Section 13(4) of the Act. Thereafter,
proceedings under Section 14 of the SARFAESI Act
were also initiated for taking physical possession of
the secured asset. The petition filed under Section 14
came to be allowed in favour of the respondent.
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5. The petitioner states that it had challenged the said
order before this Court, which challenge came to be
dismissed. Subsequently, the petitioner instituted
proceedings in S.A. No. 322/2023 under Section 17
of the SARFAESI Act contending that, being a tenant
in occupation of the premises, its possession ought
not to be disturbed by the secured creditor, namely,
the respondent. The said S.A. No. 322/2023 came to
be dismissed by order dated 31.07.2025.
6. Aggrieved thereby, the petitioner preferred Appeal in
AIR No. 1801/2025 before the Debt Recovery
Appellate Tribunal, Chennai, along with I.A. No.
156/2025 seeking waiver of the statutory pre-
deposit. The said application came to be dismissed
by order dated 29.04.2026, which is impugned in the
present proceedings.
7. The submission of Sri.Suryanarayana, learned senior
counsel is that:
7.1. It is contended that the petitioner is merely a
tenant in occupation of the subject premises
and has no manner of involvement in the
transaction giving rise to the liability owed by
the landlord to the respondent-bank. The
petitioner is neither a borrower nor a guarantor
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and is not liable to discharge any part of the
dues claimed by the respondent. Hence,
according to him, there would be no
requirement for the petitioner to make any pre-
deposit for maintaining an appeal under Section
18 of the SARFAESI Act.
7.2. He submits that the Appellate Tribunal has
completely misconstrued the scope and ambit
of Section 18 of the SARFAESI Act. Referring to
Section 18(1), he contends that any person
aggrieved by an order passed by the Debts
Recovery Tribunal under Section 17 is entitled
to prefer an appeal before the Debts Recovery
Appellate Tribunal. However, insofar as the
requirement of pre-deposit is concerned, the
same is specifically restricted only to a
“borrower”.
7.3. Drawing attention to the second proviso to
Section 18(1), he submits that the provision
mandates 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 creditor or as determined by the Debts
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Recovery Tribunal, whichever is less. Thus,
according to him, the statutory requirement of
pre-deposit contemplated under the second
proviso applies only to a borrower and cannot
be extended to a third party such as the
petitioner, who, being aggrieved by the order
passed by the Debts Recovery Tribunal under
Section 17, has preferred an appeal under
Section 18 of the SARFAESI Act.
7.4. His submission is that this aspect has been
categorically dealt with by a co-ordinate Bench
of this court, wherein it was ordered on 26th
October 2018 in WP No.19445 of 2018, M/s
Hindustan Polymers -v- The Authorised
Officer, more particularly in para 14 thereof,
which is reproduced hereunder:
Para 14. Therefore, wherever the word “borrower”
is used in the Act, the definition would necessarily
has to be read therein. The definition of the word
“borrower” does not include a tenant. Therefore, a
tenant cannot be deemed to be a “borrower”.
Thus, a tenant, certainly, cannot be brought within
the definition of the word “borrower”. Hence, a
tenant is a non-borrower. Therefore, he would fall
within the words “by the person other than the
borrower”. Thus, clearly, the liability to make a
pre-deposit under the proviso is limited only to the
“borrower”, and cannot, by any stretch of
imagination, be extended to a “non-borrower”.
The only liability imposed under Section 18 upon a
non-borrower is the liability to pay the fees as
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prescribed by the rules. Thus, it is only this
particular liability which could have been imposed
upon the petitioner who claims to be the tenant.
Therefore, the DRAT is certainly unjustified in
directing the petitioner to make a pre-deposit of
Rs.2,10,00,000/-. Such a direction, obviously, is
contrary to the requirement of second proviso to
Section 18(1) of the Act.
7.5. By referring to Hindustan Polymers case, his
submission is that the legal position is now well
settled insofar as the interpretation of the
second proviso to Section 18(1) of the
SARFAESI Act is concerned. According to him,
the statutory mandate requiring pre-deposit is
specifically and consciously confined by the
legislature only to a “borrower”, and such
requirement cannot be enlarged so as to
include within its fold a tenant or any other
third party claiming independent rights in the
secured asset.
7.6. It is his submission that the petitioner has
never availed any financial assistance from the
respondent-bank, has not created any security
interest in favour of the respondent, and is
neither a guarantor nor a mortgagor in respect
of the subject transaction. The petitioner is
merely asserting its independent possessory
rights as a tenant in occupation of the
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premises. Therefore, the petitioner cannot be
treated on par with the borrower for the
purposes of Section 18 of the Act.
7.7. Learned Senior Counsel further submits that
Section 18 itself makes a clear distinction
between a “borrower” and “any person
aggrieved”. While the substantive right of
appeal is conferred upon any person aggrieved
by an order passed under Section 17, the
condition relating to pre-deposit is consciously
restricted only to the borrower. According to
him, such legislative distinction is deliberate
and meaningful and cannot be rendered otiose
by extending the requirement of pre-deposit
even to non-borrowers.
7.8. He further contends that if the interpretation
adopted by the Appellate Tribunal were to be
accepted, it would virtually amount to rewriting
the statutory provision and imposing a
condition which the legislature itself has not
contemplated. Such an interpretation,
according to him, would not only run contrary
to the plain language employed in the second
proviso to Section 18(1), but would also result
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in serious prejudice to tenants and other third
parties who may have bona fide and
independent claims over the secured asset.
7.9. It is further submitted that a tenant who seeks
to protect his possession cannot be compelled
to deposit enormous sums allegedly due from
the borrower, despite having no contractual or
financial nexus with the loan transaction.
Imposing such a condition would, in effect,
render the statutory remedy of appeal illusory
and inaccessible to non-borrowers. Learned
Senior Counsel submits that this could never
have been the intention of the legislature.
7.10. He submits that the Co-ordinate Bench has
categorically held that the liability to make a
pre-deposit is limited only to the borrower and
cannot, “by any stretch of imagination”, be
extended to a non-borrower such as a tenant.
He submits that the ratio laid down therein
squarely applies to the facts of the present case
and is binding on this Court.
7.11. Hence, according to him, the Appellate Tribunal
has committed a patent error apparent on the
face of the record in directing the petitioner to
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comply with the condition of pre-deposit while
considering the application for waiver. On that
ground alone, he submits that the impugned
order dated 29.04.2026 is liable to be quashed.
8. Mr.Pundikai Ishwara Bhat, learned counsel appearing
for the respondent-Bank, would vehemently oppose
the submissions advanced on behalf of the petitioner.
8.1. At the outset, he contends that the petitioner
cannot seek exemption from the requirement of
pre-deposit merely by styling itself as a tenant.
According to him, before claiming the benefit
available to a non-borrower under Section 18 of
the SARFAESI Act, the petitioner must first
establish that it is in lawful and subsisting
possession under a legally valid tenancy. Unless
the tenancy itself is legally recognised and
enforceable, the petitioner cannot seek to avoid
the statutory consequences flowing from the
proceedings initiated under the SARFAESI Act.
8.2. Learned counsel places reliance on Section
17(4-A) of the SARFAESI Act to contend that
whenever any claim of tenancy or leasehold
rights is raised in respect of a secured asset, it
is for the Debts Recovery Tribunal to examine
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the factual matrix and the material produced on
record and determine whether such tenancy or
lease is valid and binding on the secured
creditor. According to him, the statute itself
contemplates adjudication on the validity of the
tenancy and does not mandate automatic
acceptance of every claim made by an alleged
tenant.
8.3. He submits that, in the present case, the Debts
Recovery Tribunal has already undertaken such
an examination and has categorically held that
the tenancy claimed by the petitioner is neither
valid nor subsisting. Referring to the findings
recorded by the Tribunal, he submits that the
tenancy agreement relied upon by the
petitioner came to be executed only in the year
2022, whereas the mortgage in favour of the
respondent-Bank had already been created in
the year 2018. Thus, according to him, the
alleged tenancy has admittedly been created
subsequent to the creation of the security
interest in favour of the Bank.
8.4. Learned counsel further submits that even
according to the petitioner, the earlier tenancy
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arrangement had expired and a fresh tenancy
was purportedly created with effect from
01.04.2022. Therefore, the petitioner itself
admits that the tenancy presently relied upon is
not an old continuing tenancy anterior to the
mortgage, but a fresh arrangement entered
into after the mortgage had already come into
existence. Such a tenancy, according to him,
cannot prejudice the rights of the secured
creditor.
8.5. He further submits that even assuming, without
admitting, that the tenancy agreement dated
01.04.2022 could be looked into, the said
agreement was admittedly for a fixed term of
three years and, therefore, expired by efflux of
time in the year 2025 itself. Consequently, as
on the date of consideration of the present
proceedings, there is no subsisting landlord-
tenant relationship between the borrower and
the petitioner.
8.6. Apart from the aforesaid aspects, learned
counsel also raises an objection regarding the
legal enforceability of the tenancy agreement
itself. He submits that the tenancy agreement
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being for a period exceeding eleven months
was compulsorily registerable under Section 17
of the Indian Registration Act, 1908. Since the
document admittedly has not been registered,
the same cannot be relied upon for proving or
enforcing any leasehold rights in respect of the
immovable property in question.
8.7. According to him, in the absence of registration,
the alleged lease deed becomes inadmissible
for the purpose of establishing any legally
enforceable tenancy. Hence, he submits that
there was no valid or subsisting tenancy either
on the date when the proceedings before the
Debts Recovery Tribunal were initiated, or on
the date when the appeal was preferred before
the Debts Recovery Appellate Tribunal, much
less as on date.
8.8. In that background, learned counsel submits
that the petitioner cannot claim the status of a
bona fide tenant so as to seek total waiver of
the statutory requirement of pre-deposit. He
contends that the Appellate Tribunal, having
regard to the facts and circumstances of the
case, has in fact shown considerable indulgence
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by directing only a conditional pre-deposit while
entertaining the appeal.
8.9. Learned counsel lastly submits that the
apprehension sought to be projected by the
petitioner regarding appropriation of the
deposited amount is wholly misconceived. He
submits that in the event the pre-deposit is
made, the respondent-Bank would not seek
withdrawal or appropriation of the said amount
during the pendency of the appeal. According to
him, the amount could always be invested in an
interest-bearing fixed deposit, subject to the
final outcome of the proceedings before the
Appellate Tribunal.
9. Heard Sri.T.Suryanarayana, learned senior counsel
along with Ms.Smitha, learned counsel for the
petition and Sri.Pundikai Ishwara Bhat, learned
counsel for the respondent.
10. The points that would arise for determination are:
i. Whether the requirement of pre-deposit under
Section 18(1) would include a third party like
a tenant?
ii. Whether for the purpose of claiming the
waiver of pre-deposit under Section 18 of
SARFAESI Act, it is required to be established
that the person claiming such waiver is a
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tenant under valid document and the tenancy
is required to be subsisting?
iii. Whether the impugned order passed by the
DRAT dated 29th April 2026 in DRAT in AIR
No.1801/2025 suffers from any legal
impugnity requiring interference in the hands
of this court?
iv. What order?
11. Answer to point No.1: Whether the requirement
of pre-deposit under Section 18(1) would
include a third party like a tenant?
11.1. Section 18 of the SARFAESI Act is reproduced
hereunder:
Section 18.Appeal to Appellate
Tribunal.-
(1) Any person aggrieved, by any order
made by the Debts Recovery Tribunal [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
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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.]11.2. A plain and meaningful reading of Section 18(1)
of the SARFAESI Act would indicate that the
legislature has consciously conferred a right of
appeal upon “any person aggrieved” by an
order passed by the Debts Recovery Tribunal
under Section 17 of the Act. The expression
employed in the substantive part of Section
18(1) is of wide amplitude and is not confined
merely to the borrower. The legislature, in its
wisdom, has deliberately refrained from
restricting the appellate remedy only to the
borrower and has instead extended the remedy
to every person who may be adversely affected
by an order passed under Section 17.
11.3. The use of the expression “any person
aggrieved” assumes significance in the context
of proceedings under the SARFAESI Act, where
several categories of persons, apart from the
borrower, may assert independent or derivative
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rights in respect of the secured asset. Such
persons may include tenants, lessees,
purchasers, guarantors, co-owners or any other
person claiming lawful possession or interest in
the secured asset. Thus, the statutory
framework itself recognises that proceedings
initiated under the SARFAESI Act may affect
rights of persons other than the borrower and,
therefore, consciously provides them with an
appellate remedy under Section 18.
11.4. The first proviso to Section 18(1) assumes
considerable importance in understanding the
legislative intent. The said proviso authorises
prescription of different fees for filing an appeal
by a borrower and by a person other than the
borrower. The very fact that the proviso
separately refers to “the borrower” and “the
person other than the borrower” demonstrates
that the statute itself creates and recognizes
two distinct categories of appellants.
11.5. The distinction made in the first proviso is
neither incidental nor superfluous. It reflects a
conscious legislative classification between:
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11.5.1. a borrower, who is directly liable for the
debt due to the secured creditor; and11.5.2. a non-borrower, who may nevertheless
be aggrieved by orders passed under
Section 17 on account of independent
rights claimed in respect of the secured
asset.
11.6. Therefore, the statutory scheme under Section
18 itself clearly contemplates that appeals may
be filed both by borrowers and by non-
borrowers.
11.7. The second proviso to Section 18(1), however,
is couched in materially different language. The
second proviso stipulates 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 creditor or as
determined by the Debts Recovery Tribunal,
whichever is less.
11.8. The language employed in the second proviso is
explicit, precise and restrictive. Unlike the
substantive provision, which uses the expansive
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expression “any person aggrieved”, and unlike
the first proviso which specifically refers to “a
person other than the borrower”, the second
proviso refers only to the “borrower”.
11.9. In our considered opinion, this distinction is
deliberate and cannot be ignored while
interpreting the provision. The legislature,
having consciously used different expressions in
different parts of the same provision, must be
presumed to have intended different
consequences to flow from such usage. It is a
settled principle of statutory interpretation that
where the legislature uses a particular
expression at one place and omits the same at
another, such omission is intentional and
meaningful.
11.10. If the legislative intent were to impose the
condition of pre-deposit upon every appellant
irrespective of status, nothing prevented the
legislature from employing the expression “any
person aggrieved” even in the second proviso.
Equally, the legislature could have used the
phrase “borrower or any other person” while
prescribing the condition of pre-deposit.
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Significantly, the legislature has chosen not to
do so.
11.11. The Court cannot, under the guise of
interpretation, enlarge the scope of the second
proviso by reading into it words which the
legislature has consciously omitted. Any such
interpretation would amount to judicial
legislation, which is impermissible in law. The
Court is required to interpret the provision as it
stands and give effect to the plain meaning
emerging from the statutory language.
11.12. The object underlying the requirement of pre-
deposit also supports the aforesaid
interpretation. The liability to make pre-deposit
is linked to the existence of a debt due from the
borrower. The second proviso specifically refers
to “the amount of debt due from him”. Thus,
the statutory condition is founded upon the
borrower’s liability arising out of the loan
transaction.
11.13. A non-borrower such as a tenant neither avails
financial assistance from the secured creditor
nor undertakes liability to repay the debt. Such
a person is not privy to the loan transaction and
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does not owe any debt to the secured creditor.
Therefore, compelling a non-borrower to
deposit amounts allegedly due from the
borrower would not only be inconsistent with
the statutory scheme but would also lead to
manifestly inequitable consequences.
11.14. In the present case, the petitioner claims
independent tenancy rights in respect of the
secured asset and challenges the measures
taken by the secured creditor insofar as such
measures allegedly affect its possession.
Whether such tenancy is ultimately valid or
otherwise is a matter falling for adjudication in
the appeal. However, merely because the
petitioner’s claim is disputed, the petitioner
cannot automatically be treated as a borrower
for the purpose of imposing the condition of
pre-deposit.
11.15. The question as to whether the tenancy is
legally valid and enforceable pertains to the
merits of the appeal. Such disputed questions
cannot be pre-judged for the purpose of
importing into the statute a condition which
otherwise applies only to borrowers.
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11.16. The Co-ordinate Bench of this Court in M/s.
Hindustan Polymers case, has examined the
aforesaid issue in detail. The Co-ordinate
Bench, after analysing the scheme of Section
18, specifically considered whether a tenant
could be brought within the meaning of the
expression “borrower” occurring in the second
proviso to Section 18(1).
11.17. The Co-ordinate Bench answered the said issue
in unequivocal terms by holding that a tenant
cannot be construed as a borrower and that the
liability to make pre-deposit under the second
proviso is confined only to the borrower. The
Bench further held that the requirement of pre-
deposit cannot, “by any stretch of imagination”,
be extended to a non-borrower.
11.18. The Co-ordinate Bench also held that insofar as
a non-borrower is concerned, the only
obligation contemplated under Section 18 is
payment of such fee as may be prescribed
under the Rules. On that basis, the direction
issued by the DRAT in that case requiring the
tenant to make substantial pre-deposit was
held to be contrary to Section 18(1) of the Act.
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11.19. We are in respectful agreement with the ratio
laid down in the case of M/s. Hindustan
Polymers. The interpretation adopted therein,
in our considered opinion, flows directly from
the plain language employed in Section 18 and
accords with settled principles governing
statutory interpretation.
11.20. Judicial discipline also requires that a Bench of
co-equal strength follow the decision rendered
by another Co-ordinate Bench unless the same
is distinguished on facts or referred to a larger
Bench. In the present case, we find that the
ratio laid down in the case of M/s. Hindustan
Polymers squarely governs the controversy
involved herein.
11.21. The contention urged on behalf of the
respondent-Bank that the petitioner must first
establish a valid and subsisting tenancy before
seeking exemption from pre-deposit cannot be
accepted in the manner sought to be
canvassed. The requirement of pre-deposit
flows from the statutory status of the appellant
as a borrower and not from the eventual
success or failure of the claim raised in appeal.
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11.22. Once the appellant is admittedly not a borrower
within the meaning of the Act, the statutory
requirement of pre-deposit under the second
proviso cannot be imposed merely because the
respondent disputes the appellant’s claim on
merits. To hold otherwise would amount to
converting every disputed claimant into a
borrower for the limited purpose of insisting
upon pre-deposit, which would defeat the very
distinction consciously created by the
legislature.
11.23. Accordingly, we answer Point No.1 by holding
that an appeal under Section 18 of the
SARFAESI Act can be preferred not only by a
borrower but also by any other person
aggrieved by an order passed under Section 17
of the Act. The mandatory requirement of pre-
deposit contemplated under the second proviso
to Section 18(1) applies only to a borrower and
not to a non-borrower. Consequently, a person
other than the borrower, though aggrieved by
an order passed under Section 17 and seeking
to avail the appellate remedy under Section 18,
cannot be compelled to make any pre-deposit
as a condition precedent for maintainability of
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the appeal. The only obligation cast upon such
non-borrower is payment of the prescribed
appellate fee in terms of the Rules.
12. Answer to point No.2: Whether for the purpose
of claiming the waiver of pre-deposit under
Section 18 of SARFAESI Act, it is required to be
established that the person claiming such
waiver is a tenant under valid document and
the tenancy is required to be subsisting?
12.1. Sri Pundilikai Ishwara Bhat, learned counsel
appearing for the respondent-Bank, has
vehemently contended that even assuming,
without conceding, that exemption from the
requirement of pre-deposit under Section 18 of
the SARFAESI Act may in a given case be
available to a tenant or a non-borrower, such
benefit can only be extended where the person
claiming such status establishes the existence
of a lawful, valid and subsisting tenancy
recognised in law.
12.2. According to him, the mere assertion of tenancy
or production of an unverified lease
arrangement would not automatically entitle a
person to seek waiver of pre-deposit. He
submits that before claiming the status of a
non-borrower tenant for the purpose of
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avoiding statutory pre-deposit, the appellant
must first demonstrate prima facie that the
tenancy relied upon is legally enforceable,
validly created and subsisting as on the
relevant date.
12.3. Learned counsel submits that, in the present
case, even according to the petitioner, the
tenancy agreement relied upon by it is of the
year 2022 and was operative only for the
period from 2022 to 2025. Thus, by the
petitioner’s own showing, the lease period has
already expired by efflux of time and there is
presently no subsisting tenancy in favour of the
petitioner.
12.4. He submits that once the contractual period of
tenancy itself has expired, the petitioner cannot
continue to claim protection as a tenant so as
to avoid compliance with the statutory
conditions governing the appellate remedy
under Section 18 of the Act.
12.5. Learned counsel further contends that the
alleged tenancy agreement itself suffers from
serious legal infirmities. According to him, the
lease deed relied upon by the petitioner is
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neither executed on stamp paper of adequate
value nor registered in accordance with law.
Since the alleged tenancy is for a period
exceeding eleven months, the document was
compulsorily registerable under Section 17 of
the Indian Registration Act, 1908.
12.6. In the absence of compulsory registration, he
submits that the document cannot be relied
upon for proving creation of any valid leasehold
interest in the immovable property in question.
Consequently, according to him, the petitioner
cannot assert any legally enforceable tenancy
rights on the basis of such an unregistered
instrument.
12.7. Learned counsel therefore submits that the
petitioner, who has failed to establish the
existence of a valid and subsisting tenancy,
cannot seek to place itself in the category of a
bona fide non-borrower tenant for the purpose
of claiming exemption from pre-deposit. He
submits that unless the foundational
requirement of a lawful tenancy is established,
the petitioner cannot derive any benefit from
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the interpretation sought to be placed upon
Section 18(1) of the SARFAESI Act.
12.8. Learned counsel further submits that these very
aspects have already been considered by the
Debts Recovery Tribunal while adjudicating the
proceedings under Section 17 of the SARFAESI
Act. According to him, the Tribunal, upon
appreciation of the material placed on record,
has returned findings against the petitioner on
the question of validity and subsistence of the
tenancy. Such findings, according to him,
cannot be ignored while examining the
challenge to the order passed by the Debts
Recovery Appellate Tribunal directing pre-
deposit.
12.9. It is therefore his submission that the issue
relating to waiver of pre-deposit cannot be
decided in isolation or in the abstract merely on
the basis of the nomenclature adopted by the
petitioner as a tenant. The Court would
necessarily have to examine whether the
tenancy claimed is prima facie lawful,
subsisting and legally recognisable, particularly
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in light of the findings already recorded by the
Tribunal against the petitioner.
12.10. The Debt Recovery Appellate Tribunal has held
as under:
“Pre-deposit is mandatory for entertaining
the appeal under Section 18 of the SARFAESI
Act. The issue raised on maintainability of
this appeal, as the tenancy is based on the
unregistered lease agreement, will be decided
in the main appeal.”
12.11. A careful reading of the aforesaid observation
would indicate that the Appellate Tribunal has
proceeded on the premise that pre-deposit is
mandatory even in respect of the present
petitioner. It is this finding regarding the
mandatory requirement of pre-deposit which
forms the subject matter of challenge in the
present writ petition and which we have already
considered while answering Point No.1.
12.12. Insofar as the issue relating to maintainability
of the appeal on the basis of the alleged
tenancy and the effect of the unregistered lease
agreement is concerned, the Appellate Tribunal
itself has consciously kept the said issue open
for adjudication in the main appeal. The
Tribunal has categorically observed that the
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question as to whether the appeal is
maintainable in light of the tenancy being
founded upon an unregistered lease agreement
would be decided at the stage of final hearing
of the appeal.
12.13. Thus, the Appellate Tribunal has not rendered
any conclusive finding at this stage either on
the validity of the tenancy, the legal effect of
the unregistered lease deed, or the
maintainability of the appeal preferred by the
petitioner. The Tribunal has merely deferred
consideration of those issues to the stage of
adjudication of the appeal on merits.
12.14. Once the Appellate Tribunal itself has chosen
not to adjudicate upon the said questions while
considering the application for waiver of pre-
deposit, in our considered opinion, it would
neither be appropriate nor necessary for this
Court, in exercise of jurisdiction under Article
226 of the Constitution of India, to undertake
such an examination at this interlocutory stage.
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12.15. The questions as regards:
12.15.1. whether the petitioner is a lawful tenant;
12.15.2. whether the tenancy claimed is valid and
subsisting;
12.15.3. whether the lease deed requires
compulsory registration;
12.15.4. the effect of non-registration of the lease
deed;
12.15.5. whether the tenancy created subsequent
to the mortgage is binding upon the
secured creditor; and12.15.6. whether the appeal filed by the
petitioner is maintainable,are all matters which squarely fall within the
domain of adjudication by the Appellate
Tribunal in the pending appeal.
12.16. Any observation by this Court on the aforesaid
issues at this stage may unnecessarily
prejudice the rights and contentions of either
party before the Appellate Tribunal. Judicial
propriety therefore requires that such issues be
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left open for consideration by the Appellate
Tribunal on their own merits and in accordance
with law.
12.17. In that view of the matter, while we have held
that the mandatory requirement of pre-deposit
under the second proviso to Section 18(1) is
not applicable to a non-borrower, we refrain
from expressing any opinion whatsoever on the
merits of the petitioner’s claim of tenancy or
the maintainability of the appeal before the
Debts Recovery Appellate Tribunal.
12.18. All contentions of both parties in that regard are
expressly kept open. Liberty is reserved to the
respondent-Bank to raise all objections
available in law before the Debts Recovery
Appellate Tribunal, including objections relating
to validity, subsistence and enforceability of the
alleged tenancy, admissibility of the lease deed,
maintainability of the appeal and all other allied
issues. The Appellate Tribunal shall consider
and decide the same independently and
uninfluenced by any observations made in the
present order, except insofar as the question
relating to mandatory pre-deposit is concerned.
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12.19. This aspect would also be relevant here by
considering Section 17(4)(A) of the SARFAESI
Act, which is reproduced here under for
perusal:
Section 17. [Application against
measures to recover secured debts.]xxx
xxx
xxx
xxx(4A)[ Where-
(i) any person, in an application under
sub-section (1), claims any tenancy
or leasehold rights upon the secured
asset, the Debt Recovery Tribunal,
after examining the facts of the case
and evidence produced by the parties
in relation to such claims shall, for
the purposes of enforcement of
security interest, have the
jurisdiction to examine whether lease
or tenancy,-
(a) has expired or stood
determined; or
(b) is contrary to section 65A of
the Transfer of Property Act,
1882 (4 OF 1882); or
(c) is contrary to terms of
mortgage; or
(d) is created after the issuance of
notice of default and demand
by the Bank under sub-section
(2) of section 13 of the Act;
and
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(ii) the Debt Recovery Tribunal is
satisfied that tenancy right or
leasehold rights claimed in secured
asset falls under the sub-clause (a)
or sub-clause (b) or sub-clause (c) or
sub-clause (d) of clause (i), then
notwithstanding anything to the
contrary contained in any other law
for the time being in force, the Debt
Recovery Tribunal may pass such
order as it deems fit in accordance
with the provisions of this Act.]12.20. Though Section 17(4-A), in terms, confers
jurisdiction upon the Debts Recovery Tribunal,
the principles and parameters contained therein
necessarily continue to govern adjudication
even at the appellate stage under Section 18 of
the SARFAESI Act. An appeal being a
continuation of the original proceedings, the
Debts Recovery Appellate Tribunal, while
considering an appeal arising out of an order
passed under Section 17, would also be
required to examine the issues contemplated
under Section 17(4-A), insofar as they arise in
the facts of the case.
12.21. A careful perusal of Section 17(4-A) would
indicate that the statute itself contemplates a
detailed factual adjudication whenever tenancy
or leasehold rights are asserted in respect of a
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secured asset. The provision specifically
empowers the Tribunal to examine:
12.21.1. whether the tenancy has expired or
stood determined;
12.21.2. whether the tenancy is contrary to
Section 65-A of the Transfer of
Property Act, 1882;
12.21.3. whether the tenancy is contrary to the
terms of mortgage; and12.21.4. whether the tenancy has been created
after issuance of notice under Section
13(2) of the SARFAESI Act.
12.22. These are all matters requiring examination of
facts, appreciation of evidence and adjudication
on merits.
12.23. In the present case, the Debts Recovery
Tribunal has already recorded findings on some
of the aforesaid aspects, including the question
whether the tenancy was created subsequent to
the mortgage and whether the tenancy has
expired by efflux of time. Those findings are
presently under challenge before the Debts
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Recovery Appellate Tribunal in the appeal
preferred by the petitioner under Section 18 of
the Act.
12.24. Once an appeal has been preferred, the entire
matter, including the findings recorded by the
Debts Recovery Tribunal on the issue of
tenancy, becomes subject to appellate scrutiny.
The Debts Recovery Appellate Tribunal would
necessarily be required to independently
examine the factual and legal issues arising
under Section 17(4-A) and arrive at its own
conclusions on the basis of the pleadings,
documents and evidence available on record.
12.25. At this stage, it is also necessary to note that
the enquiry contemplated under Section 17(4-
A) is not a mere summary or superficial
exercise. The provision expressly mandates
examination of the “facts of the case and
evidence produced by the parties”. Therefore,
the determination as regards validity, legality
and subsistence of tenancy is essentially a
matter to be adjudicated in the substantive
proceedings before the Tribunal and, where
challenged, before the Appellate Tribunal.
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12.26. In our considered opinion, such adjudication
cannot be pre-empted at the threshold stage
while considering the limited issue relating to
maintainability of the appeal or applicability of
pre-deposit under Section 18. To insist that the
Appellate Tribunal must conclusively determine
the validity of the tenancy even before the
appeal is entertained would, in effect, amount
to requiring adjudication of the very subject
matter of the appeal at the preliminary stage
itself.
12.27. The contention urged on behalf of the
respondent-Bank that the petitioner must first
establish a valid and subsisting tenancy before
the appeal can be entertained cannot therefore
be accepted in the manner canvassed. Whether
the tenancy is valid, subsisting, enforceable,
contrary to the mortgage, hit by Section 65-A
of the Transfer of Property Act, or rendered
unenforceable on account of non-registration
are all issues which properly fall within the
ambit of adjudication in the appeal itself.
12.28. The Appellate Tribunal would therefore be
required to consider all such contentions on
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their own merits after the appeal is taken on
record and after affording opportunity to both
parties to advance their submissions and place
material in support of their respective claims.
12.29. Hence, we answer Point No.2 by holding that at
the stage of filing of an appeal under Section
18 of the SARFAESI Act, it is not necessary for
the Appellate Tribunal to conclusively determine
whether there exists a valid and subsisting
tenancy as a condition precedent for
entertaining the appeal. The said issue forms
part of the subject matter of the appeal itself
and is required to be adjudicated on merits in
the appellate proceedings.
13. Answer to point No.3: Whether the impugned
order passed by the DRAT dated 29th April
2026 in DRAT in AIR No.1801/2025 suffers
from any legal impugnity requiring interference
in the hands of this court?
13.1. In view of our findings on Point Nos.1 and 2, we
have already held that the requirement of
mandatory pre-deposit under the second
proviso to Section 18(1) of the SARFAESI Act
applies only to a borrower and not to a person
other than the borrower who is aggrieved by an
order passed under Section 17 of the Act.
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13.2. We have further held that the question as to
whether the petitioner is able to ultimately
establish a valid and subsisting tenancy is a
matter falling for adjudication in the appeal
itself and that such determination is not
required to be conclusively rendered at the
threshold stage while considering
maintainability of the appeal or the question of
pre-deposit.
13.3. In the present case, the Debts Recovery
Appellate Tribunal, while passing the impugned
order dated 29.04.2026, has proceeded on the
premise that pre-deposit is mandatory for
entertaining the appeal under Section 18 of the
SARFAESI Act. Such a conclusion, in our
considered opinion, runs contrary to the plain
language employed in the second proviso to
Section 18(1) of the Act.
13.4. The Appellate Tribunal has failed to notice the
clear statutory distinction between a borrower
and a non-borrower, despite such distinction
being expressly recognised in the substantive
provision as well as in the first proviso to
Section 18(1).
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13.5. The Appellate Tribunal did not have the benefit
of appropriately appreciating the ratio laid down
by the Co-ordinate Bench of this Court in M/s.
Hindustan Polymers, wherein it has been
categorically held that the requirement of pre-
deposit cannot be extended to a non-borrower,
such as a tenant and that the only obligation
imposed upon such a person under Section 18
is payment of the prescribed appellate fee.
13.6. The law declared by the Co-ordinate Bench was
binding upon the Appellate Tribunal and ought
to have been duly considered while adjudicating
the application seeking waiver of pre-deposit.
13.7. Significantly, the Appellate Tribunal itself has
observed in the impugned order that the
question relating to maintainability of the
appeal, particularly in the context of the alleged
tenancy being founded upon an unregistered
lease agreement, would be considered at the
stage of final hearing of the appeal.
13.8. Thus, the Appellate Tribunal consciously
deferred adjudication on the issue of validity
and maintainability of the tenancy claim to the
stage of disposal of the appeal on merits.
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Having done so, the Appellate Tribunal could
not simultaneously insist upon mandatory pre-
deposit by treating the petitioner as disentitled
to the status of a non-borrower at the threshold
stage itself.
13.9. In our considered opinion, the approach
adopted by the Appellate Tribunal suffers from
a clear legal inconsistency. On the one hand,
the Tribunal kept open the issue relating to
maintainability and validity of the tenancy for
consideration in the main appeal; on the other
hand, it proceeded to impose the condition of
mandatory pre-deposit as though the petitioner
stood conclusively excluded from the category
of a non-borrower.
13.10. Such an approach, in our view, is legally
unsustainable.
13.11. The impugned order therefore suffers from an
error apparent on the face of the record insofar
as it proceeds on an erroneous interpretation of
Section 18(1) of the SARFAESI Act and imposes
upon the petitioner a condition of mandatory
pre-deposit which, in law, is applicable only to a
borrower.
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13.12. We are therefore of the considered opinion that
the impugned order dated 29.04.2026 passed
by the Debts Recovery Appellate Tribunal in AIR
No.1801/2025 suffers from legal infirmity and
perversity warranting interference in exercise of
jurisdiction under Articles 226 and 227 of the
Constitution of India.
13.13. Accordingly, the impugned order dated
29.04.2026 passed in I.A. No.156/2025 in AIR
No.1801/2025 by the Debts Recovery Appellate
Tribunal, Chennai, insofar as it directs the
petitioner to make pre-deposit for entertaining
the appeal, is liable to be and is hereby set
aside.
13.14. It is however made clear that this Court has not
expressed any opinion on the merits of the rival
claims relating to the validity, legality or
subsistence of the alleged tenancy claimed by
the petitioner. All contentions in that regard are
kept expressly open to be urged before the
Debts Recovery Appellate Tribunal, which shall
consider the same independently and in
accordance with law while adjudicating the
appeal on merits.
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14. Answer to point No.4: What order?
14.1. In view of our finding in respect of point Nos.1,
2 and 3, we pass the following
ORDER:
i. Writ Petition is allowed
ii. A certiorari is issued the order/direction of
the DRAT in its order dated 29th April
2026 passed on IA No.1556/2025 and AIR
(SA) 1801/2025 directing the petitioner to
pre-deposit 25% of Rs.13,33,02,744/-
which comes to Rs.3,33,25,686/- in two
equal instalments of Rs.1,66,62,843/- on
or before 13.05.2026 and second
instalment of Rs.1,66,62,843/-to be paid
on or before 27.05.2026 is set aside.
iii. I.A.No.1556/2025 is allowed. The pre-
deposit required of by the petitioner is
waived.
iv. The DRAT is directed to consider the
appeal of the petitioner on merits without
insisting on pre-deposit.
v. All contentions as regards to
maintainability of the appeal, the
subsistence or otherwise of the tenancy
entitling the tenant for protection are left
open to be decided by the DRAT on
merits.
vi. Counsel appearing for the petitioner
submits that the petitioner will co-operate
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in all respects for expeditious disposal of
AIR No.1801/2025.
vii. The submission of Sri.Pundikai Ishwara
Bhat, learned counsel for the respondent
also wishes for expeditious disposal of
AIR.
viii. The submissions of the counsel for the
petitioner as well as respondent is placed
on record.
ix. The DRAT is directed to consider the
appeal expeditiously and pass necessary
orders within a period of eight weeks from
the first date on which the matter is taken
up for hearing.
SD/-
(SURAJ GOVINDARAJ)
JUDGE
SD/-
(DR.K.MANMADHA RAO)
JUDGE
BNV
List No.: 1 Sl No.: 34
