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CS Professional · Corporate Restructuring, Valuation and Insolvency · Debt Recovery and SARFAESI

Under SARFAESI, a DRT passes an order under section 17 against borrower Kaveri Textiles Pvt Ltd. The debt claimed by the secured creditor is Rs 8 crore and the DRT determines the debt at Rs 6 crore. Kaveri wants to appeal to the Appellate Tribunal. What minimum pre-deposit applies at the outset, and what is the lowest the Appellate Tribunal may reduce it to for recorded reasons?

The deposit is Rs 3 crore, being 50% of Rs 6 crore, the lesser of the claimed and determined debt. For recorded reasons, the Appellate Tribunal may reduce it to not less than 25% of Rs 6 crore, which is Rs 1.5 crore.

  1. ARs 3 crore at the outset; reducible to not less than Rs 1.5 croreCorrect
  2. BRs 4 crore at the outset; reducible to not less than Rs 2 crore
  3. CRs 3 crore at the outset; reducible to not less than Rs 2 crore
  4. DRs 4 crore at the outset; reducible to not less than Rs 1 crore

Explanation

Section 18 requires deposit of 50% of the debt as claimed by the secured creditor or determined by the DRT, whichever is less. The lesser is Rs 6 crore, so the deposit is Rs 3 crore. The Appellate Tribunal may reduce it, for reasons recorded in writing, to not less than 25% of that debt, i.e. Rs 1.5 crore. Using Rs 8 crore gives Rs 4 crore, which is the wrong base.

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