DRAT Appeal and Pre-Deposit Under SARFAESI and the RDB Act

Is my DRAT appeal under SARFAESI or under the RDB Act?

Look at what the DRT actually decided. If you had gone to the DRT under section 17 of the SARFAESI Act to challenge the bank's demand notice, possession or auction, and the DRT dismissed your application, your appeal lies under section 18 of the SARFAESI Act. If the bank had filed an Original Application under section 19 of the Recovery of Debts and Bankruptcy Act 1993 and the DRT allowed it and issued a recovery certificate, your appeal lies under section 20 of the RDB Act.

The two routes look alike because both go to the same appellate tribunal, but they differ on the three things that matter most: the number of days, the percentage of the deposit and the figure on which that percentage is calculated. People lose appeals at the filing counter by applying the wrong one. A borrower who thinks he has 45 days when the order was under section 17 has already missed the deadline on day 31.

Some borrowers have both proceedings running together: the bank's OA for the money and their own section 17 application against the possession. If both are decided, each order needs its own appeal, under its own provision, with its own deposit. The DRAT may hear them together, but it will not treat one deposit as covering both unless it says so in an order. Ask for that order expressly if the debt in both cases is the same.

The two DRAT appeals side by side

Keep this table next to the DRT order when you plan the appeal.

The pre-deposit binds the person from whom the money is due. A bank that loses before the DRT can appeal without depositing anything, which is one reason the deposit rule feels one-sided to borrowers. Parliament made that choice deliberately, and the Supreme Court has upheld it.

How many days do I have to file a DRAT appeal?

Thirty days under SARFAESI and 45 days under the RDB Act, counted from the day you received the DRT order, not the day it was pronounced. If the order was pronounced in your presence or uploaded and you applied for a copy, the date you actually received the copy is what you should be able to prove. Keep the envelope, the email or the screenshot from the DRT website showing when the order was made available.

Do not treat the time limit as soft. The DRAT does have power to condone delay for sufficient cause, but an application for condonation adds a contested hearing before the appeal is even admitted, and the bank will use that time to proceed with the sale. Courts are also less sympathetic to a borrower who was in possession of the order and simply delayed. A delay explained by illness, a change of advocate or a genuine wait for the certified copy has a chance. A delay explained by settlement talks with the bank usually does not, unless the bank put something in writing that misled you.

In practice, plan to file within the first two to three weeks. That leaves room for the appeal to be listed before the bank publishes a fresh sale notice, and it gives you time to arrange the deposit or to prepare a properly supported application for reducing it.

How much is the pre-deposit under section 21 of the RDB Act?

Seventy-five per cent of the amount of debt that the DRT has determined as due from you. The figure is the amount in the DRT's final order and the recovery certificate, not the amount the bank claimed in its Original Application and not your own calculation of what you owe. If the DRT allowed the OA in full, the figure is the full amount decreed. If it allowed only part, the deposit is 75% of that part.

Section 21 says that no appeal by a person from whom the debt is due shall be entertained by the DRAT unless that person has deposited 75% of the debt so determined. The DRAT may, for reasons recorded in writing, reduce the amount, but not below 25%. Before the 2016 amendments the DRAT could waive the deposit altogether. That power was removed, and the floor of 25% has applied since.

The question of interest often comes up. The DRT order usually decrees a principal sum with pendente lite and future interest. The safer course is to calculate the deposit on the amount stated as due in the order on the date of the order, and to ask the DRAT at the first hearing to fix the exact figure. Paying a lower amount on your own reading of the order and hoping the DRAT accepts it is a common way to have an appeal dismissed for non-compliance.

How much is the pre-deposit under section 18 of SARFAESI?

Fifty per cent of the amount of debt due from the borrower, as claimed by the secured creditor or as determined by the DRT, whichever is less. The comparison is built into the proviso to section 18(1), and it often makes a real difference, because the figure in the bank's notice and the figure the DRT accepts are rarely the same.

What counts as the bank's claim? The Supreme Court answered this in Sidha Neelkanth Paper Industries v Prudent ARC (2023). Where the borrower challenged the steps under section 13(2) or 13(4), the claim is the amount stated in the section 13(2) demand notice. Where the challenge was to the sale of the secured asset, the amount stated in the sale certificate is used. The Court also held that auction proceeds already realised by the bank cannot be adjusted against the 50% deposit. The borrower has to deposit fresh money.

So the first job is to find three figures: the amount in the 13(2) notice, the amount in any sale certificate, and any amount the DRT itself recorded as due. Work out which figure the law requires in your case, then calculate 50% of the lower of the claim and the determined amount. If the DRT dismissed your section 17 application without determining any debt, the claim figure will usually govern.

Can the DRAT reduce or waive the pre-deposit?

The DRAT can reduce it, down to 25% of the debt, and it must record reasons. It cannot waive it. The Supreme Court made this clear in Kotak Mahindra Bank v Ambuj A. Kasliwal (2021), where it set aside an order that had effectively excused the deposit and directed 25% to be paid within eight weeks, failing which the appeal would not survive. The earlier position, that the DRAT could waive the whole amount in a deserving case, no longer applies after the 2016 amendments.

A reduction is discretionary, so the application has to give the DRAT something to hold on to. Tribunals look at the value of the security already in the bank's hands, the strength of the appeal on its face, whether the borrower has paid anything since the default, the conduct of the borrower during the DRT case, and genuine financial hardship shown by documents. An application that just says the borrower is in difficulty, with nothing attached, usually ends with an order for the full statutory deposit.

Reduction to exactly 25% is not automatic either. DRATs often settle on a figure between 25% and the statutory amount, or allow the deposit in two or three instalments with a firm date for each. Treat the instalment order as strictly as the deposit itself. Missing an instalment date can mean the appeal is dismissed without a hearing on the merits.

What persuades the DRAT to lower the deposit, and what does not

From the orders we see, these are the points that move the needle and the ones that do not.

• Security far above the debt. A recent valuation showing that the mortgaged property alone covers the dues is the strongest single point, because the bank is not exposed if the deposit is reduced.
• A clear legal error on the face of the DRT order. For example, a 13(2) notice that did not give 60 days, an objection under section 13(3A) that was never answered, or an auction notice with less than the 30 days' notice of sale the rules require. The DRAT is not deciding the appeal at this stage, but a visible error matters.
• Payments made after the default. Proof that you kept paying something, even irregularly, separates you from a borrower who stopped engaging.
• Documented hardship. Audited accounts, bank statements and income tax returns that show what you can actually raise. A bare statement of hardship carries little weight.
• Not persuasive: pending settlement talks. The DRAT will not reduce the deposit because you say an OTS proposal is with the bank. It may adjourn briefly if the bank confirms the talks are real.
• Not persuasive: arguments about interest rates alone. A dispute over penal interest is a ground of appeal. On its own it rarely justifies going below the statutory deposit.

Who has to make the pre-deposit: borrower, guarantor or third party?

The borrower always does, and under SARFAESI the word borrower includes a guarantor and a person who has mortgaged property as security for someone else's loan. A guarantor who appeals an RDB Act decree against him is also a person from whom the debt is due, so section 21 applies to him. Guarantors sometimes assume the deposit is the principal borrower's problem. It is not.

A genuine third party stands differently. A tenant, a purchaser who says he bought the property before the mortgage, or a family member claiming an independent share may approach the DRT under section 17 as a person aggrieved. The proviso to section 18 speaks of the deposit by the borrower, and tribunals have generally not demanded it from a true outsider to the loan. Expect the bank to argue that the third party is a front for the borrower. Your papers need to show an independent right that existed before the bank's charge.

The bank, as noted above, appeals without any deposit. So does an auction purchaser who challenges a DRT order setting aside the sale, since no debt is due from him.

How to file a DRAT appeal, step by step

The sequence below is how an appeal against a Delhi DRT order is usually put together. DRATs take filings through the e-DRT portal, and the registry may still ask for paper sets.

1. Get the order and fix the deadline

   Download or collect the DRT order and note the date you received it. Count 30 days for a SARFAESI order and 45 days for an RDB order, and write the last date on the file.

2. Work out the deposit figure

   Find the 13(2) notice amount, any sale certificate amount and the amount determined by the DRT. Apply the correct provision and calculate the statutory deposit before you speak to anyone about reducing it.

3. Draft the memo of appeal

   The memo sets out the facts, the dates, the errors in the DRT order and the relief sought. Grounds should be specific: which finding is wrong and why, with reference to the documents the DRT had.

4. Prepare the application for reduction

   If you cannot deposit the full amount, file a separate application with valuation reports, financial statements and a clear proposal: how much, by when. A proposal backed by a bank draft or proof of funds is taken more seriously.

5. Add a stay application if needed

   If the bank has fixed an auction or the Recovery Officer is proceeding, file an application for interim stay. The DRAT will usually link any stay to the deposit.

6. File, pay the fee and serve the bank

   File on the portal with the prescribed fee, then serve an advance copy on the bank's counsel. Keep proof of service; the first hearing often turns on whether the bank had notice.

7. Deposit as ordered and report compliance

   Deposit exactly the amount and in the manner the DRAT directs, within the time given, and file a compliance affidavit with the receipt. Until compliance is on record, the appeal is not heard on merits.

Documents to gather for the appeal

Collect these before the first draft. Missing papers are the main cause of a rushed filing.

What happens at the first hearing in the DRAT?

The first hearing is almost always about the deposit. The DRAT checks that the appeal is within time, hears the borrower on the application for reduction, hears the bank's objection and passes an order fixing the amount and the time to deposit it. If the appeal is late, the condonation application comes first.

Expect the bank to say the borrower has been delaying for years and that any reduction rewards that delay. Expect the tribunal to ask directly how much you can deposit and by when. A vague answer hurts. When Advocate B.K. Singh prepares a deposit application, he usually puts the borrower's concrete offer in the first paragraph, with the source of funds, because the DRAT's first question is nearly always the same: how much, and from where.

If the deposit order is passed and you comply, the appeal is admitted and the bank is asked to file its reply. The DRAT will often continue any interim protection it granted, on condition that the borrower does not alienate the property. The RDB Act asks the DRAT to try to dispose of appeals within six months. Actual timelines depend on the bench and the backlog.

Does a DRAT appeal stop the auction or the recovery?

Not by itself. Filing the appeal does not suspend the DRT order, the recovery certificate or the bank's SARFAESI steps. You need a specific stay order from the DRAT, and the DRAT normally grants a stay only after the deposit is made or on a condition that it is made by a fixed date.

In SARFAESI cases the timing is often tight. If the bank has published a sale notice, the appeal and the stay application have to be filed and mentioned before the auction date. Once a sale is confirmed and the certificate issued to the purchaser, undoing it is far harder, and the deposit figure moves to the sale certificate amount. Our post on stopping a bank auction covers the auction rules in detail.

For RDB Act decrees, recovery is carried out by the Recovery Officer of the DRT under the recovery certificate. The Recovery Officer can attach and sell property while the appeal is pending unless the DRAT stays the certificate. If the Recovery Officer's own orders are the problem, the remedy is first an appeal to the DRT under section 30 of the RDB Act, not directly to the DRAT. Our post on recovery certificates and Recovery Officer proceedings explains that stage.

What happens to the pre-deposit if I win or lose?

The deposit is held under the DRAT's directions, usually invested in a fixed deposit with a nationalised bank or kept with the tribunal, while the appeal is pending. If the appeal succeeds, the DRAT orders the amount returned, normally with the interest it has earned. If the appeal fails, the DRAT usually directs that it be paid to the bank and adjusted against the debt.

The bank may ask for the deposit to be released to it while the appeal is pending, especially if the appeal is likely to take time. Tribunals usually resist that, because it defeats the point of the appeal, but they sometimes allow it on an undertaking by the bank to refund the amount with interest if the borrower wins. Oppose such a request if the merits are strong.

If the matter settles, the deposit is usually counted towards the settlement amount. Put that expressly in the settlement terms and in the consent order, or you may find the bank treats the deposit and the settlement amount as separate.

Can I go to the High Court instead of the DRAT?

Usually not. The Supreme Court in United Bank of India v Satyawati Tondon (2010) told High Courts not to entertain writ petitions in SARFAESI and recovery matters where the borrower has an effective remedy before the DRT and the DRAT. A writ petition filed to avoid the pre-deposit is likely to be dismissed with liberty to appeal, and the time spent in the High Court will not always be excluded.

The High Court route opens after the DRAT has decided. A DRAT order can be challenged before the High Court under Article 226 or 227 of the Constitution, and the Delhi High Court hears such petitions against orders of DRAT Delhi. That challenge is narrower than an appeal: the High Court looks at jurisdictional errors, perversity and breach of natural justice, not at a fresh assessment of the evidence. A further appeal to the Supreme Court is possible by special leave.

There are narrow exceptions where a writ is entertained directly, for example where the bank acted with no authority of law at all or where the DRT is not functioning. Those cases are rare, and a lawyer should look at the facts before you rely on one.

What does the DRAT actually look at in a SARFAESI or recovery appeal?

The DRAT re-examines the DRT's decision on the record. In SARFAESI appeals the questions that most often decide the case are procedural: whether the account was properly classified as an NPA, whether the 13(2) notice was valid and gave 60 days, whether the bank answered the 13(3A) objection within 15 days with reasons, whether the possession notice was published as the rules require, whether the reserve price was based on a proper valuation and whether the borrower got the 30 days' notice of sale. These are matters of record, which is why the appeal file has to include every notice and its proof of service.

In RDB Act appeals the questions are more about the account: whether the statement of account was proved, whether penal interest and charges were allowed without basis, whether the limitation for the bank's claim was saved by acknowledgments, and whether the guarantor's liability was properly made out. The DRAT can take additional evidence only in limited circumstances, so the case you made before the DRT largely sets the limits of the appeal.

A point Advocate B.K. Singh often makes to clients at this stage is that a DRAT appeal is not a second chance to raise everything. The grounds that succeed are usually two or three clean points supported by documents already on record. A memo of appeal with twenty grounds tends to bury the good ones.

Can I settle with the bank while the DRAT appeal is pending?

Yes, and many appeals end that way. The deposit and the pending appeal often bring the bank to the table, because the bank has to weigh the risk of losing on a procedural point against a settlement now. If terms are agreed, the parties file a joint application and the DRAT records the settlement and disposes of the appeal in terms of it.

Two things to watch. First, the settlement should say exactly how the pre-deposit is treated, whether it is released to the bank and adjusted, and what happens to the appeal if you default on a later instalment. Second, the bank's sanction letter for the settlement should be obtained before the appeal is withdrawn. Withdrawing an appeal on the strength of an oral assurance is a mistake that cannot easily be undone. Our post on negotiating a one-time settlement goes through the terms in detail.

What to do this week if the DRT has ruled against you

• Note the date you received the DRT order and calculate the last date for appeal (30 or 45 days).
• Identify whether the order was under section 17 SARFAESI or section 19 RDB Act.
• Find the 13(2) notice amount, any sale certificate amount and the amount the DRT determined.
• Calculate the statutory deposit, then decide what you can actually raise and by when.
• Get a fresh valuation of the secured property if the last one is more than a year old.
• Collect three years of accounts or income tax returns and recent bank statements.
• Check whether the bank has published or is about to publish a sale notice.
• Brief an advocate early enough for the appeal and stay application to be filed before any auction date.

Mistakes that sink DRAT appeals

The most common mistake is the deadline. Borrowers wait for settlement talks to produce something and file on day 40 of a 30-day appeal. The second is depositing a figure of their own choosing instead of the amount the DRAT fixed, which leads to dismissal for non-compliance. The third is filing an application for reduction with nothing attached.

Others are quieter. Guarantors assume the borrower's deposit covers them. Companies file without a board resolution and lose a date curing it. Borrowers withdraw a section 17 application or an appeal on the bank's verbal promise of a settlement that never comes through. And some go to the High Court first, lose two months and come back to the DRAT with less time and a weaker position.

If you want an advocate to read the DRT order and tell you which appeal lies, the last date and a realistic deposit figure, the team of Advocate B.K. Singh at B.K. Singh & Associates can look at the papers through our online enquiry. You can also read about his practice before the DRT and DRAT, and our wider banking law practice.