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Kumar Aluminium Ltd. v. Asset Reconstruction Company India Ltd. and Anr.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 8258 of 2016)Decided 23 Aug 2016
Civil Appeal No. 8258 of 2016
Justice Kurian Joseph · Justice Rohinton Fali Nariman

Background

Kumar Aluminium Ltd. had deposited money with the Debt Recovery Appellate Tribunal (DRAT), Delhi, as the mandatory pre-condition under Section 18(1) of the SARFAESI Act to pursue an appeal. When it sought a refund of that pre-deposit, the DRAT refused, and the Delhi High Court upheld that refusal in a judgment dated 19.8.2014.

Decision Breakdown

The Supreme Court applied its recent ruling in Axis Bank vs. SBS Organics Private Limited & Anr. (Civil Appeal No. 4379 of 2016), which held that a SARFAESI pre-deposit is neither a "secured asset" nor a "secured debt," and must ordinarily be refunded to the appellant once the appeal is disposed of, unless it has already been appropriated with the depositor's consent or is under attachment. Applying this principle, the Court set aside both the High Court's judgment and the DRAT's order, and remitted the matter back to the DRAT to decide the refund question afresh in light of this settled legal position, with parties directed to appear before the DRAT on 3.10.2016.

Lesson Learnt

A pre-deposit made only to secure the right to appeal under SARFAESI is not automatically forfeited, once the appeal concludes, the depositor is ordinarily entitled to get that money back, and authorities cannot withhold it without a valid, specific reason recognised by law.

Official source (sci.gov.in)View Judgment (PDF)

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