A DRT order does not necessarily bring a borrower’s legal fight to an end.
If a borrower, secured creditor or another eligible person is aggrieved by an order passed by the Debt Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act, the law provides a further remedy before the Debt Recovery Appellate Tribunal (DRAT).
This is where many borrowers face confusion.
How much time is available to file the appeal? Is a pre-deposit mandatory? Can the 50% requirement be reduced? What grounds can be raised before DRAT? And does filing an appeal automatically stop the bank from taking further recovery action?
The answer depends on the nature of the DRT order, the applicable law and the facts of the case.
Under Section 18 of the SARFAESI Act, an aggrieved person can appeal against an order passed by the DRT under Section 17. The appeal generally has to be filed within 30 days from the date of receipt of the DRT’s order. The section also contains a statutory pre-deposit requirement for a borrower, subject to the DRAT’s power to reduce the amount in accordance with the Act.
Quick Answer
A borrower can generally challenge a DRT order passed under Section 17 of the SARFAESI Act by filing an appeal before the DRAT under Section 18.
The appeal should ordinarily be filed within 30 days from the date of receipt of the DRT order.
For a borrower, Section 18 requires a 50% pre-deposit of the debt due, calculated according to the statutory provision. The DRAT has the power, for reasons to be recorded in writing, to reduce this amount to not less than 25% of the debt due.
The appeal should clearly explain why the DRT order is being challenged and should be supported by the relevant DRT order, pleadings, documents and grounds of appeal.
What Is a DRAT Appeal?
The Debt Recovery Appellate Tribunal, commonly known as DRAT, is the appellate forum for certain orders passed by the DRT.
In a SARFAESI matter, Section 18 provides the statutory right of appeal against an order passed by the DRT under Section 17.
For example, suppose a borrower files a Section 17 application challenging the bank’s possession or auction proceedings. If the DRT passes an order against the borrower, the borrower may have a right to challenge that order before the DRAT.
The appeal is not simply a second opportunity to repeat everything that was argued before the DRT.
The appellant should identify the specific errors in the DRT’s order and explain why the order should be modified, set aside or otherwise interfered with.
When Can a Borrower File an Appeal Before DRAT?
A borrower may consider a DRAT appeal where the DRT has passed an adverse order under Section 17 and the borrower has a legal basis for challenging that decision.
Common situations may include:
- The DRT dismissed the Section 17 application.
- The DRT rejected an important challenge to the bank’s SARFAESI action.
- The DRT upheld possession proceedings.
- The DRT upheld an auction or sale-related measure.
- The DRT refused relief sought by the borrower.
- The borrower believes the Tribunal incorrectly interpreted the law or evidence.
- The borrower believes relevant documents or arguments were not properly considered.
The exact grounds depend on the DRT’s order.
A borrower should first read the complete order rather than deciding on an appeal only from the operative portion.
What Is the Time Limit for a DRAT Appeal?
The limitation period under Section 18 of the SARFAESI Act is 30 days from the date of receipt of the DRT order.
This is considerably shorter than many borrowers expect.
The date on which the order was passed and the date on which the borrower received the order can therefore become important when calculating limitation.
If there is a delay, the appellant may need to address the delay in accordance with the applicable legal procedure and explain the circumstances.
It is better not to wait until the end of the 30-day period.
Preparing an appeal requires reviewing the DRT order, identifying grounds, arranging documents and dealing with the statutory pre-deposit requirement.
What Is the Pre-Deposit Requirement for a DRAT Appeal?
The pre-deposit is one of the most important aspects of a Section 18 appeal.
Under the second proviso to Section 18, a borrower is generally required to deposit 50% of the amount of debt due, as claimed by the secured creditors or determined by the DRT, whichever is less.
The provision allows the DRAT to reduce the required amount for reasons to be recorded in writing, but the reduced amount cannot be less than 25% of the debt due.
In other words:
- Normal requirement: 50%
- Possible reduction by DRAT: Up to 25%
- Minimum statutory level after reduction: 25%
The pre-deposit requirement is not merely a procedural formality. The Supreme Court has treated compliance with the statutory pre-deposit requirement as a condition connected with entertaining the appeal.
Can DRAT Reduce the 50% Pre-Deposit?
Yes, the DRAT has statutory power to reduce the pre-deposit, but it cannot reduce it below 25% of the debt due under Section 18.
The reduction is not automatic.
The borrower has to make an appropriate request and place the relevant circumstances before the Tribunal.
The application should explain why the borrower is seeking reduction and provide supporting material wherever relevant.
The fact that the borrower cannot conveniently arrange the amount should not be treated as the only point. The application should be properly prepared and based on the circumstances of the case.
The Supreme Court has considered disputes concerning how the pre-deposit is calculated and the amount that has to be deposited for a Section 18 appeal.
How Is the Pre-Deposit Amount Calculated?
This is an area where borrowers should be careful.
Section 18 refers to the amount of debt due as claimed by the secured creditors or determined by the DRT, whichever is less.
The calculation should therefore be examined in light of:
- The amount claimed by the secured creditor
- The amount determined by the DRT
- Payments already made
- Amounts received through sale of secured assets, where legally relevant
- The specific findings in the DRT order
- The nature of the dispute before the Tribunal
The Supreme Court has dealt with disputes concerning the basis on which the Section 18 pre-deposit is to be calculated.
A borrower should therefore not simply calculate 50% from an old bank statement without examining the DRT order and the statutory basis.
What Are the Grounds for a DRAT Appeal?
There is no single list of grounds that will apply to every case.
The grounds should arise from the actual errors or issues in the DRT’s order.
Depending on the facts, possible grounds may include:
Incorrect Interpretation of Law
The borrower may argue that the DRT applied the relevant provisions of the SARFAESI Act or Rules incorrectly.
Failure to Consider Relevant Documents
If important documents were placed before the DRT but were not properly considered, this may form part of the challenge where legally relevant.
Incorrect Findings on SARFAESI Procedure
A borrower may challenge findings concerning the procedure followed by the secured creditor.
Incorrect Findings Regarding Possession
If the DRT upheld possession proceedings that the borrower believes were legally defective, the issue may be raised before DRAT.
Issues Relating to Auction or Sale
Where the DRT has upheld a disputed sale-related measure, the borrower may challenge the relevant findings if there are proper legal grounds.
Failure to Consider Material Facts
A borrower may raise an argument that material facts relevant to the dispute were overlooked or incorrectly appreciated.
Incorrect Application of Judicial Precedent
Where applicable, the borrower may contend that the DRT failed to apply a binding judgment or applied a precedent incorrectly.
The grounds should be specific. A DRAT appeal is generally stronger when it explains what the DRT decided, why that finding is disputed and what legal or factual error is alleged.
What Documents Are Needed for a DRAT Appeal?
A proper document set can make the appeal easier to understand and prepare.
Depending on the matter, documents may include:
- Certified or authenticated copy of the DRT order
- Section 17 application
- Bank’s reply before the DRT
- Borrower’s rejoinder
- Documents filed before the DRT
- Loan documents
- Section 13(2) demand notice
- Possession notice
- Auction notice
- Sale documents, where applicable
- DRT interim orders
- Relevant payment records
- Account statements
- Documents relating to the disputed property
- Proof of receipt of the DRT order
- Details or proof of the required pre-deposit
The exact document requirements may vary according to the case and applicable DRAT filing procedure.
What Is the Procedure for Filing a DRAT Appeal?
The process generally begins with a detailed review of the DRT order.
Step 1: Obtain and Review the DRT Order
The appellant should first obtain the complete order and identify the findings that are being challenged.
Step 2: Identify the Grounds of Appeal
The grounds should be based on errors in law, facts, procedure or appreciation of the material, depending on the case.
Step 3: Calculate the Pre-Deposit
The amount required under Section 18 should be calculated carefully.
If the borrower is seeking reduction from 50%, an appropriate application should be prepared explaining the circumstances.
Step 4: Prepare the Appeal
The appeal should contain the relevant facts, grounds, documents and relief sought.
Step 5: File Before the Appropriate DRAT
The appeal and accompanying applications are filed before the appropriate appellate tribunal in accordance with the applicable procedure.
Step 6: Seek Interim Relief Where Necessary
If the DRT order permits the bank to proceed with possession, auction or another recovery step, the borrower may need to seek appropriate interim protection.
Step 7: Respond to the Bank’s Case
The secured creditor will have an opportunity to respond to the appeal.
Step 8: Hearing Before DRAT
The Tribunal considers the submissions, documents and grounds raised by the parties before passing an appropriate order.
Does Filing a DRAT Appeal Automatically Stay the DRT Order?
Not necessarily.
A borrower should not assume that merely filing an appeal means that the DRT order has automatically become ineffective.
If the DRT order permits the bank to proceed with possession, auction or another recovery action, the borrower may need to seek an appropriate stay or interim order from the DRAT.
This becomes particularly important where the bank is taking steps that could create irreversible consequences.
For example, if a sale is scheduled shortly after the DRT order, the borrower should address the urgency in the DRAT proceedings rather than waiting for the final disposal of the appeal.
Can DRAT Stop a Bank Auction?
Depending on the facts and the relief sought, DRAT can consider an application for interim protection in an appeal.
The borrower should clearly explain why immediate protection is required and what consequences may occur if the bank is allowed to proceed.
The Tribunal will consider the relevant circumstances before deciding the interim application.
A borrower facing an auction should therefore act quickly after receiving an adverse DRT order.
If the matter concerns Delhi, a DRT lawyer in Delhi with experience in SARFAESI and DRT proceedings can help assess the DRT order and the next appellate step.
What Happens After the DRAT Appeal Is Filed?
Once the appeal is filed, the matter moves into the appellate stage.
The bank or secured creditor may contest the appeal and defend the DRT’s order.
The DRAT may consider:
- The DRT order
- The grounds of appeal
- Documents already placed on record
- Additional material where legally permissible
- Applications for interim relief
- The statutory pre-deposit
- Submissions made by both parties
The appellant should remain prepared to address the bank’s response and any questions raised during the hearing.
Can New Evidence Be Introduced Before DRAT?
The focus of an appeal is generally on challenging the DRT’s decision, so a borrower should not assume that every new document can automatically be introduced at the appellate stage.
If additional evidence or documents are necessary, the appellant should address the legal basis for placing them before DRAT.
The safest approach is to maintain a complete record of documents from the DRT proceedings and identify any genuinely necessary additional material separately.
What Happens If DRAT Allows the Appeal?
If the DRAT finds that the DRT order cannot be sustained on the grounds raised, it may grant appropriate relief in accordance with its appellate powers.
Depending on the case, the result may involve:
- Setting aside or modifying the DRT order
- Remanding an issue for reconsideration
- Granting appropriate directions concerning SARFAESI measures
- Providing interim or consequential relief where legally justified
The exact outcome depends on the findings in the individual case.
What Happens If DRAT Dismisses the Appeal?
If the DRAT does not grant the relief sought, the legal options available after that point depend on the nature of the order and the applicable law.
A borrower should obtain advice based on the specific DRAT order rather than assuming that the same grounds can simply be repeated before another forum.
It is also important to distinguish a statutory appeal from a constitutional challenge. The Supreme Court has repeatedly emphasised the importance of the statutory remedies available in SARFAESI matters and has cautioned against using writ proceedings to bypass the statutory appellate mechanism.
DRAT Appeal vs Section 17 Application
These two remedies are connected but serve different purposes.
| Section 17 Application | DRAT Appeal |
| Filed before DRT | Filed before DRAT |
| Challenges relevant SARFAESI measures | Challenges the DRT’s order |
| Section 17 of SARFAESI Act | Section 18 of SARFAESI Act |
| Generally filed within 45 days of the relevant Section 13(4) measure | Generally filed within 30 days from receipt of DRT order |
| First statutory forum for challenging the relevant SARFAESI measure | Appellate stage after DRT order |
| No Section 18 pre-deposit because it is not a DRAT appeal | Borrower is subject to statutory pre-deposit requirement |
Understanding this difference is important because the limitation periods and procedural requirements are not the same.
What If the DRT Order Concerns a Large Loan Amount?
The financial requirement can become a significant issue when the debt involved is substantial.
Since Section 18 requires a statutory pre-deposit for a borrower’s appeal, the amount can be considerable in high-value matters.
This is why borrowers should calculate the amount carefully and, where appropriate, consider seeking reduction of the pre-deposit to the statutory minimum permitted by the provision.
The Supreme Court has made clear that the statutory framework does not permit the pre-deposit to be reduced below 25% of the debt due under Section 18.
Common Mistakes in DRAT Appeals
Missing the 30-Day Limitation
A borrower should not wait until the last few days before starting the appeal.
Treating the Pre-Deposit as Optional
The statutory pre-deposit is a significant requirement for a borrower’s Section 18 appeal.
Using the Same Grounds Without Addressing the DRT Order
The appeal should explain why the DRT’s specific findings are wrong or legally unsustainable.
Ignoring Interim Relief
If the bank can proceed with possession or auction, the borrower should consider whether immediate interim protection is required.
Filing an Incomplete Record
The DRT pleadings, orders and supporting documents can be important for understanding the appeal.
Assuming Appeal Means Automatic Stay
Filing an appeal and obtaining interim protection are not the same thing.
Focusing Only on the Loan Amount
The appeal should address the actual legal and factual errors in the DRT order rather than simply repeating that the borrower cannot pay.
When Should a Borrower Consult a DRAT Lawyer?
Legal advice becomes particularly important when the DRT has passed an adverse order involving:
- Possession of a secured property
- A proposed auction
- A completed auction
- Sale of the secured asset
- Rejection of a Section 17 application
- Disputed SARFAESI procedure
- A substantial pre-deposit requirement
- An urgent need for interim protection
For matters connected with Lucknow, borrowers can also seek assistance from a DRT lawyer in Lucknow when assessing the DRT order and possible appellate remedies.
Similarly, where the matter falls within the relevant jurisdiction in Uttar Pradesh, a DRT lawyer in Ghaziabad may assist with reviewing the DRT proceedings and preparing the next legal step.
DRAT Appeal Checklist for Borrowers
Before filing an appeal, the borrower should check:
- Complete DRT order is available
- Date of receipt of the DRT order is confirmed
- 30-day limitation has been calculated
- Grounds of appeal have been identified
- Relevant DRT pleadings are available
- Bank documents have been collected
- Pre-deposit amount has been calculated
- Application for reduction is prepared, if required
- Interim relief requirements have been identified
- Relevant supporting documents are ready
- Relief sought in the appeal is clearly drafted
Frequently Asked Questions
1. Can I appeal against a DRT order before DRAT?
Yes. Under Section 18 of the SARFAESI Act, an aggrieved person can appeal against an order passed by the DRT under Section 17, subject to the statutory requirements.
2. What is the time limit for a DRAT appeal?
The appeal generally has to be filed within 30 days from the date of receipt of the DRT order under Section 18 of the SARFAESI Act.
3. How much pre-deposit is required for a DRAT appeal?
For a borrower appealing under Section 18, the statutory requirement is generally 50% of the debt due, calculated as provided in the Act. The DRAT may reduce this to an amount not less than 25% for reasons recorded in writing.
4. Can DRAT reduce the 50% pre-deposit?
Yes. The DRAT can reduce the requirement from 50%, but the amount cannot be reduced below 25% of the debt due under Section 18.
5. Does filing a DRAT appeal automatically stay the DRT order?
A borrower should not assume that filing the appeal itself automatically stays every consequence of the DRT order. Where urgent protection is required, appropriate interim relief should be sought before the DRAT.
6. What are the common grounds for a DRAT appeal?
The grounds depend on the DRT order. They may involve incorrect interpretation of law, failure to consider material documents, incorrect findings regarding SARFAESI procedure, possession or sale, or other errors in the DRT’s decision.
7. Can DRAT stop a bank auction?
Depending on the facts, the borrower can seek appropriate interim protection from DRAT where an auction or another recovery measure is pending. The Tribunal decides whether such relief should be granted.
8. What happens after a DRAT appeal is filed?
The secured creditor gets an opportunity to respond. The DRAT considers the DRT order, grounds of appeal, documents and applications for interim relief before deciding the matter.
Conclusion
A DRT order is not always the final stage of a SARFAESI dispute. Where the statutory requirements are satisfied, an aggrieved party can approach the DRAT under Section 18.
For borrowers, the two issues that require particular attention are the 30-day limitation period and the statutory pre-deposit. The normal pre-deposit is 50% of the debt due as specified under Section 18, although the DRAT can reduce it to a minimum of 25% for recorded reasons.
The appeal itself should be built around the actual DRT order. Instead of simply repeating the arguments made before the DRT, the borrower should identify the specific legal or factual errors that are being challenged and explain the relief required.
Where possession, auction or sale proceedings are involved, timing is equally important. An appeal should be accompanied by an appropriate request for interim protection where the circumstances require it.
FixLegally helps borrowers understand DRT and DRAT proceedings, SARFAESI recovery actions and the legal options available after an adverse tribunal order.
