M/s Classic Cotton Private Limited vs STATE BANK OF INDIA on 30 September 2026

1. Present as under: Ms. Neeta Pandit along with Mr. A. R. Gupta i/b M/s. A. R. Gupta & Associates, Counsel for Applicants. Mr. Zulfiq Multani along with Mr. Manoj Mishra, Counsel for Respondent Bank.

2. The Learned Counsel for the parties would submit that before hearing on the merits of the application for interim stay, the applicant/borrower has to obviate the hurdle of making the mandatory pre-deposit as per section 18 of the SARFAESI Act.

3. At this stage, the Counsel for the Respondent Bank files reply to the Waiver Application along with the documents. Taken on record.

4. Heard.

5. The Learned Counsel for the Applicant/Borrower would submit that the Waiver to the extension of 25 % as per third proviso of section 18 be provided for the reason of the financial hardship of the Applicant/Borrower and on ground that prima facie case is in the favour of Applicant/Borrower.

6. The Learned Counsel for the Applicant/Borrower would submit that the notice under section 13 (2) of SARFAESI Act is not issued and served upon Applicant No. 2, 3, 4, 5 & 6 ; that , the amount stated in the notice under section 13 (2) issued to the Appellant No. 1 is incorrect. She would further submit that the amount stated in 13 (2) notice which was issued in December 2025 is more than the amount stated in the application filed later on in the month of March, 2026 before the Judicial Magistrate under section 14 of the SARFAESI Act and that is the case of the Respondent Bank in the application before the Judicial Magistrate that no amount was paid by the Applicant/Borrower after issuance of the notice under section 13 (2) of SARFAESI Act.

7. Per Contra, the Counsel for the Respondent Bank would submit that the notices were indeed issued and served upon Applicant Nos. 2, 3, 4, 5 & 6. He would refer to the track-report filed along with the reply to the Waiver Application.

He would further submit that as per notice under section 13 (2) of SARFAESI Act, the amount demanded is Rs. 20,67,48,105/- and the Applicant/Borrower is to deposit 50% of the same for the application for stay and appeal to be heard.

8. Considered and perused the record.

9. In case of the first limb of argument of Applicant/Borrower regarding the financial hardship of the Applicant/Borrower, this argument has not been substantiated by any documents. The rest of the submissions made in respect of the legality and incorrectness of the notice under section 13 (2) is the subject matter of the merit of the case itself, therefore, without hearing the appeal on merits completely, no opinion can be made on this point at this stage.

10. As per the Respondent, the notices were sent to the Applicant No. 2, 3, 4, 5 & 6 and the Respondent Bank has substantiated this submission by the track-report of the mail.

11. In view of the submissions made by the parties above, this Appellate Tribunal is of the considered opinion that the amount of the notice under section 13 (2) is taken as base for the mandatory pre- deposit and the ends of justice would be served if the mandatory pre- deposit in accordance with section 18 of the SARFAESI Act be waived to the extent of 40% under the third proviso to the section. Accordingly, this Tribunal directs the Applicants/Borrowers to deposit 40% of ₹22,35,98,892/- which comes to ₹8,94,39,557/- before the next date of hearing.

12. With this observation, the I.A. No. 529/2026 is disposed of. On deposit of the amount, the Registry is directed to register this appeal and interlocutory application, if otherwise in order under the rules. The amount shall be deposited in the form of a Demand Draft with the Registrar of this Appellate Tribunal. As and when the said amounts are deposited, the same shall be invested in term deposits in the name of the Registrar, DRAT, Mumbai with any nationalised Bank, initially for 13 months, and thereafter to be renewed periodically. The Respondent Bank is at liberty to file a reply to the grounds of the Appeal and stay application with an advance copy to the other sides.

13. At this stage, the Learned Counsel for the Applicant/Borrower would pray for Application (Diary) No. 1521/2026 for staying the order dated 25.08.2026 passed by the Ld. Presiding Officer, DRT-II, Ahmedabad and restrain the Respondent from taking possession.

14. The Learned Counsel for the Respondent oppose for grant for any stay on the ground that the Appeal is not yet registered due to non-payment of mandatory pre-deposit.

15. The Learned Counsel for the Respondent relied upon the judgment dated 04.03.2026 in Writ Petition No. 15718/2025 in Anil Kumar Pawar & Anr V/s The Authorised Officer, Union Bank of India & Ors, the Hon’ble High Court of Bombay observed that after depositing the pre-deposit amount under section 18 of the SARFAESI Act within time, the matter be sent before the Ld. Registrar for registering the Appeal and Interlocutory Application. Only after registration, the I.A. for stay or appeal be heard and decided.

16. Considered and perused the record. The relevant part of the judgment of the Hon’ble High Court of Bombay is reproduced here as under. “8. We find on perusal of the impugned order that it suffers from a serious procedural infirmity. The Application considered and decided in the impugned order dated 14th May 2025 was only the Application seeking waiver of pre-deposit under Section 18 of the Securitisation Act. The only prayer made on behalf of Respondent Nos. 2 and 3 before the DRAT was for such waiver on the basis of statements made in the said Application. While considering the said Application the DRAT discussed the rival submissions, made certain observations and thereupon found that the Respondent Nos.2 and 3 were required to deposit 40% of the amount due and that complete waiver from pre-deposit was not warranted. Having reached the said conclusion the DRAT was expected to issue a positive direction to Respondent Nos.2 and 3 to deposit such 40% amount towards pre-deposit so that the Appeal could be registered and then take up the Application for interim relief and the Appeal for further consideration. (emphasis supplied)

9. ……………………………………………

10. We find that the aforesaid approach adopted by the DRAT suffers from serious procedural irregularity and infirmity. It appears that the DRAT proceeded on an assumption that the moment a pre-deposit direction was issued in an Application seeking waiver thereof, the interim relief would follow as a matter of course upon the amount so directed to be deposited, in fact being deposited by the Appellants (Respondent Nos.2 and 3 herein). We find that the approach of the DRAT is unsustainable.”

17. In re Anil Pawar Case (Supra) the Hon’ble High Court has castigated the approach of DRAT of granting stay or interim relief before the registration of the appeal on deposit of mandatory pre- deposit under Section 18 of the SARFAESI Act for filing of the appeal. It would be important to revisit Section 18 of the Act. It reads: “18. Appeal to Appellate Tribunal.—(1) Any person aggrieved, by an order made by the 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.

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18. In view of the proviso to section 18 of the SARFAESI Act and observations of the Hon’ble High Court of Bombay in re “Anil Kumar Pawar” (Supra), this Appellate Tribunal is of the considered view that an appeal and application for interim relief can only be heard and decided only after registration of appeal on mandatory pre-deposit under section 18 of the SARFAESI Act. That is to say that before registration of an appeal on deposit of an amount as per section 18 of the ‘Act’, no Appeal or any Interlocutory Application therein can be entertained. Hence, no interim stay can be granted at this stage before registration of the Appeal and the interim stay application after depositing the mandatory amount under section 18 of the SARFAESI Act.

19. If the deposit is made as stated in para 11 above on or before 01.10.2026, list the Appeal on 01.10.2026 for reporting compliance and hearing.

In the event of failure to deposit the said amount till 01.10.2026, the Appeal shall stand dismissed automatically without further reference to this Appellate Tribunal. Sd/- Chairperson 29.09.2026 VKC-01