S.H.Stalin Chinnappan vs INDIAN BANK on 5 November 2026

IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

IA 1421/2026 (Waiver) in A.IR:2762/2026

S.H.Stalin Chinnappan V/S INDIAN BANK & 3 ors 05/11/2026

Learned Counsel for Petitioner/Appellant and 1st Respondent Bank are presenThis appeal is filed against the interim order dated 11.9.2026 passed by the Learned Presiding Officer, DRT, Madurai in IA No. 3863 of 2026 (Stay) filed in SA No. 798 of 2026 for staying the further proceedings in SA No. 798 of 2026. SA No. 798 of 2026 has been filed to set aside the order dated 21.8.2026 passed in Criminal M.P. No.1684 of 2026 by the Learned Chief Judicial Magistrate, Kanniyakumari at Nagercoil, and declare all actions and measures initiated by the 1st Respondent Bank under Section 13(4) and Section 14 of the SARFAESI Act, 2002, in respect of the schedule items 1 and 2 properties, as illegal, arbitrary, void ab initio, and not binding on the appellant, and for other consequential and incidental reliefs. To stay further proceedings in pursuance of the order under Section 14 of the SARFAESI Act, 2002, the stay application in IA 3863 of 2026 was filed. On dismissal of IA 3863 of 2026 (Stay), this appeal is filed. It is the submission of the Learned Counsel for Petitioner/Appellant that Petitioner is neither a borrower nor a guarantor, but a third-party to the SARFAESI proceedings. In June, 2018, Petitioner availed a loan of Rs.50.00 lakhs from the 4th Respondent. The 4th Respondent made the Petitioner to execute two sale deeds in respect of two properties on 29.6.2018 for a consideration of Rs.40.00 lakhs and Rs.25,70,000/-, respectively, by exercising fraud and deceit on the Petitioner. Petitioner filed a civil suit in OS No.117 of 2021 on the file of Learned Principal District Judge, Kanniyakumari at Nagercoil to declare the impugned sale deeds dated 29.6.2018 bearing document Nos. 1896 of 2018 on the file of SRO, Thiruvattar, and 1974 of 2018 on the file of SRO, Thuckalay, as null and void and liable to be cancelled on the grounds of mis-representation, fraud, breach of trust, cheating and without consideration, etc, along with other reliefs. The said suit is still pending. When the civil court is seized of the matter with regard to the issue of title, the SARFAESI proceedings cannot go on, especially when the Petitioner is neither a borrower nor a guarantor, but only a third-party. The Petitioner is in continuous possession of the secured asset. In the said circumstances, Learned Counsel for Petitioner submitted that Petitioner is not liable to make pre-deposit and seeks consideration of this matter without pre-deposit. No other ground is urged for waiver of pre-deposit.

In response, learned counsel for the first respondent submitted that pre-deposit is mandatory for entertaining the appeal. Petitioner cannot claim himself as a third party when he sold the properties in favour of the 4th respondent and in-turn, 4th respondent availed loan facility from the first respondent on mortgaging the properties. He also submits that debt due as of now is Rs.6,31,43,022/-. It is seen from the additional documents produced i.e. copies of sale deed dated 29.01.2007 and settlement deed dated 24.03.2008 that the petitioner got item No.2 of the properties through these documents. As per sale deed dated 26.08.2013, petitioner got item 1 of the property. It is not in dispute that a sale deed has been executed in respect of these properties by the petitioner in favour of the 4th respondent. Petitioner now claims that he was duped to execute these sale deeds in favour of the 4th respondent under the guise of executing the mortgage deed. Therefore, he filed OS 117/2021 for declaring the sale deeds as null and void and for other reliefs. After purchase, 4th respondent availed loan facility from the first respondent-bank by mortgaging the properties. On his default to pay the loan amount, the Bank had proceeded under the SARFAESI Act and obtained order under Section 14 of the SARFAESI Act. Petitioner has not pointed out any defect in the order passed under Section 14 of the SARFAESI Act except saying that he is a third party and he is not aware of the order passed under Section 14 of the SARFAESI Act and therefore, he is not liable to make pre-deposit. He pressed into service of the decision of the Hon’ble High Court of Karnataka in ITTIAM Systems Private Limited – Vs. – Bharath Co-operative Bank (Mumbai) Limited, reported in (2026 NCKHC 24820) to support his submissions. In the said decision, the Hon’ble High Court of Karnataka observed in paras- 11.22 & 11.23 as follows:- “ 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 the appeal. The only obligation cast upon such non-borrower is payment of the prescribed appellate fee in terms of the Rules.”- 25 - The facts in this case are totally different. There is a registered sale deed executed by the petitioner in favour of the 4th respondent in respect of the property concerned in this appeal. Petitioner is barred from giving any evidence against the registered document, especially, the sale deed through which, title of the properties was transferred to the 4th respondent. However, this Tribunal is not going to decide this issue. The suit filed in OS 117/2021 is still pending and it is for the Civil Court to adjudicate this issue. The Bank has initiated SARFAESI proceedings for realizing its due. Taking physical possession of the secured asset is absolutely necessary for selling the secured asset for right price. After executing the sale deed in favour of the 4th respondent, petitioner cannot claim himself as a genuine and bonafide third party entitling for waiver of pre-deposit. Pre-deposit is mandatory for entertaining this appeal. The debt due is inclusive of interest as per the definition of debt under Section 2(1)(ha) of the SARFAESI Act, 2002, read with Section 2(g) of the RDB Act 1993, which had been settled by the Hon’ble Supreme Court of India in re, M/s. Sidha Neelkanth Paper Industries Private Limited & Another Vs. Prudent ARC Limited & Others (Civil Appeal No. 8969 of 2022, decided on 05.01.2023) reported in 2023 SCC Online SC 12. Taking into consideration all these factors into account, this Tribunal, for entertaining this appeal, directs the petitioners to make pre-deposit of 25% of Rs.6,31,43,022/- i.e. 1,57,85,755.50p. rounded off to Rs.1,57,85,756/-. in two equal instalments within a period of four weeks from today. First instalment of Rs.78,92,878/- on or before 19.11.2026 and the second instalment of Rs.78,92,878/- on or before 03.12.2026, failing which, this appeal would stand rejected. The said pre-deposit should be paid in the form of Demand Draft in favour of Registrar, DRAT, Chennai, payable at Chennai. In case pre-deposit is made within the stipulated period, Registrar shall invest the same in a Nationalized Bank for a reasonable period and renew it periodically, till further orders are passed. Post the matter on 07.12.2026 for reporting compliance.

Sd/-

Chairperson