Mardia Chemicals Ltd v. Union of India
Rule established
SARFAESI Act is constitutionally valid; but 75% pre-deposit requirement for DRT appeal struck down as making remedy illusory
Facts
- Several borrowers challenged the constitutional validity of the SARFAESI Act
- Arguments included: violation of Art.14 (no safeguards for borrowers), Art.19(1)(g) (restricts business), Art.300A (deprives property without authority of law)
- Original S.17(2) required borrowers to deposit 75% of the claimed amount before the DRT would entertain their appeal against S.13(4) measures
Issues
- Whether the SARFAESI Act, 2002 is constitutionally valid
- Whether the 75% pre-deposit requirement under original S.17(2) is constitutionally permissible
Held
- The Supreme Court held: (1) The SARFAESI Act is constitutionally valid. It serves the legitimate public purpose of efficient NPA recovery, which is essential for banking system health. The measures under S.13(4) are not arbitrary because the Act provides safeguards: 60-day notice, right to make representation, right to appeal to DRT. (2) However, the 75% pre-deposit requirement was struck down. Requiring an aggrieved borrower to deposit 75% of the entire debt before even being heard made the remedy practically illusory. This violated the fundamental right to access justice. Parliament subsequently amended the provision.
Ratio Decidendi
SARFAESI is constitutionally valid as a reasonable mechanism for NPA recovery. However, conditions that render the borrower's right to challenge practically illusory (like 75% pre-deposit) are unconstitutional. Access to justice must be meaningful, not theoretical.
How to use it in an exam
Primary authority for SARFAESI constitutionality and borrower's rights. Key line: "SARFAESI is valid but the right to challenge must be meaningful; conditions making appeal illusory are unconstitutional."
Source
Source: SCC Online
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.