DRAT Appeals and Pre-Deposit Matters Under Section 18 of the SARFAESI Act: Procedure, Strategy and Key Issues in DRT Litigation
Appeals before the Debt Recovery Appellate Tribunal (DRAT) under Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, constitute a crucial stage of SARFAESI litigation. A party dissatisfied with an order passed by the Debts Recovery Tribunal (DRT) under Section 17 may, subject to the statutory requirements, approach the DRAT. Section 18 therefore provides the principal appellate mechanism for challenging orders passed by the DRT in proceedings concerning enforcement of security interests.
The importance of a Section 18 appeal extends beyond simply challenging the findings recorded by the DRT. The appellant must satisfy several statutory and procedural requirements, including limitation and, in cases covered by the statutory provision, the mandatory pre-deposit. For borrowers and other appellants, the pre-deposit requirement can become one of the most significant practical issues because failure to comply with the requirement can affect the maintainability of the appeal.
Section 18 generally provides that an appeal against an order passed by the DRT under Section 17 may be filed before the DRAT within 30 days from the date of receipt of the order. The limitation period therefore requires immediate attention after the DRT delivers its order. A practitioner handling the matter must obtain the complete order, determine the relevant date for limitation and ensure that the appeal and accompanying applications are filed within the prescribed period.
Delay in filing a DRAT appeal can create an additional procedural hurdle. Where the statutory framework permits consideration of delay, the appellant must provide a legally sufficient explanation for the delay and seek appropriate condonation. However, limitation should not be treated as a matter that can safely be addressed later. In practice, obtaining the certified or authenticated order, preparing the memorandum of appeal, arranging the statutory deposit and compiling the relevant DRT record should begin immediately after the order is received.
The most distinctive feature of Section 18 proceedings is the statutory pre-deposit requirement. Where the appeal is filed by a borrower, the borrower is required to deposit the prescribed percentage of the amount of debt due from the borrower as claimed by the secured creditors or determined by the DRT, whichever is less, subject to the statutory framework. The provision permits the DRAT, for reasons to be recorded in writing, to reduce the amount of deposit, but the reduction cannot ordinarily take the deposit below the statutory minimum.
The statutory structure makes the pre-deposit substantially different from an ordinary court fee or filing expense. It is a condition associated with the exercise of the appellate remedy by a borrower. The Supreme Court has repeatedly recognised that the requirement cannot simply be dispensed with on the ground that the appellant disputes the underlying liability. The statutory requirement therefore needs to be addressed as part of the appellate strategy from the beginning.
A particularly important distinction must be made between the amount claimed by the secured creditor and the amount determined by the DRT. Section 18 contains a specific mechanism for determining the amount against which the pre-deposit is calculated. Consequently, lawyers must carefully examine the demand notice, pleadings before the DRT, the amount determined in the DRT’s order and the exact statutory formulation applicable to the particular appeal.
The issue becomes more complicated where the amount due is itself disputed or where different figures appear in the demand notice, DRT proceedings and final order. In such circumstances, the appellant must carefully establish the statutory basis on which the pre-deposit is calculated. A recent Supreme Court matter in 2025 demonstrated the practical significance of conflicting calculations of the amount due and the resulting dispute over the appropriate pre-deposit. The case illustrates why the computation of the statutory deposit must be addressed with precision rather than treated as a routine mathematical exercise.
The power of the DRAT to reduce the pre-deposit is another major area of practice. The statute permits reduction of the required deposit for reasons to be recorded in writing, but the DRAT cannot reduce the deposit below the minimum percentage prescribed by Section 18. The application seeking reduction should therefore explain the relevant circumstances and provide a reasoned basis for requesting exercise of the DRAT’s discretion.
Financial hardship may be raised in support of a request for reduction, but a claim of financial difficulty does not automatically eliminate the statutory requirement. The application must be supported by relevant facts and documents and should demonstrate why the circumstances justify reduction within the limits permitted by Section 18. The appellate tribunal retains discretion, and the outcome depends upon the circumstances of the individual case.
The Supreme Court’s approach has consistently emphasised that the statutory pre-deposit requirement must be respected. In a 2023 order concerning Section 18, the Supreme Court reiterated that a High Court could not simply dispense with the mandatory pre-deposit requirement for entertaining a statutory DRAT appeal. This reinforces the importance of complying with the statutory appellate mechanism rather than attempting to bypass it through ordinary proceedings.
A significant development occurred in April 2026 when the Supreme Court considered a Section 18 pre-deposit issue and permitted the borrower to make a 25 percent deposit while seeking waiver of a further 25 percent, leaving the matter of reduction to be considered by the DRAT on its own merits. The order demonstrates that the statutory scheme allows the DRAT to consider an application for reduction, but the process remains governed by the statutory limits and the tribunal’s assessment of the circumstances.
Pre-deposit applications therefore require careful drafting. The application should identify the amount considered relevant under Section 18, state the amount already deposited or proposed to be deposited, explain the grounds for seeking reduction and address the statutory minimum. Supporting financial and factual material can be important where the applicant relies upon circumstances such as inability to arrange the full deposit within the permissible range.
The question of what constitutes the “debt due” for purposes of Section 18 can also become contentious. The calculation may involve principal, interest and other amounts forming part of the secured creditor’s claim. Where the borrower disputes the calculation, the practitioner must distinguish between the merits of the debt dispute and the statutory mechanism for calculating the pre-deposit. The appeal cannot necessarily avoid the deposit merely because the borrower disputes the amount claimed.
An important practical principle is that the DRAT is an appellate forum and the Section 18 proceeding is ordinarily directed against the order passed by the DRT. The memorandum of appeal should therefore identify specific errors in the DRT’s reasoning rather than simply reproduce the pleadings filed before the Tribunal. Grounds may concern findings on statutory compliance, possession, auction, valuation, limitation, security interest, procedural irregularity, jurisdiction, evidence or other questions arising from the DRT’s decision.
The preparation of the memorandum of appeal is consequently a critical part of DRAT practice. The practitioner should carefully distinguish findings of fact, questions of law, procedural errors and issues concerning the exercise of discretion. Each ground should be connected to the relevant portion of the DRT order and supported by the documents forming part of the record.
The DRT record itself becomes extremely important at the appellate stage. The DRAT may examine the pleadings, documents, applications, affidavits, evidence and orders that formed the basis of the DRT’s decision. Lawyers should therefore obtain a complete and properly organised record before drafting the appeal. Missing documents or unclear references to the proceedings before the DRT can make appellate presentation unnecessarily difficult.
Stay applications are another major component of DRAT practice. A borrower whose DRT challenge has been rejected may face continued possession, auction, sale or other enforcement measures while the appeal is pending. The appellant may therefore seek an interim order protecting the subject property or suspending further enforcement, subject to the tribunal’s consideration of the case and applicable legal requirements.
A stay application should be supported by a clear explanation of the urgency and the potential consequences of allowing enforcement to continue. The applicant generally needs to demonstrate a serious challenge to the DRT order and explain why interim protection is necessary. Merely filing an appeal does not by itself guarantee suspension of the creditor’s enforcement measures.
Where an auction has already been conducted, the appellate strategy can become considerably more complicated. The practitioner may need to address the rights of the auction purchaser, the stage of confirmation of sale, payment of consideration, issuance of a sale certificate and possession of the property. The presence of an independent auction purchaser can materially affect the relief sought before the DRAT.
Third-party rights therefore become particularly important in appeals concerning completed or substantially completed enforcement actions. The DRAT may have to balance the borrower’s statutory challenge against the rights that may have accrued to purchasers or other persons during the enforcement process. The precise relief sought should consequently be framed with an understanding of the current stage of the recovery process.
Pre-deposit and stay are also closely connected in practical litigation. An appellant seeking urgent protection against enforcement must ordinarily be prepared to demonstrate compliance with the statutory requirements for maintaining the appeal or seek appropriate orders concerning the deposit. Lawyers must therefore address both issues together rather than treating the pre-deposit application and stay application as completely separate proceedings.
Another significant issue is the treatment of the deposited amount after the appeal is decided. The statutory pre-deposit is connected to the appellate proceeding and its ultimate consequences may depend upon the result of the litigation and subsequent orders. The Supreme Court has considered disputes concerning refund and treatment of amounts deposited pursuant to Section 18, demonstrating that questions concerning the deposit can continue even after the immediate appellate controversy changes.
The interaction between Section 18 of the SARFAESI Act and other statutory appellate mechanisms can also require careful analysis. In some matters, parties may attempt to invoke constitutional jurisdiction of the High Court despite the existence of a statutory remedy. Courts have generally emphasised the importance of the statutory appellate mechanism where an effective remedy exists, although constitutional jurisdiction remains subject to established principles governing writ proceedings.
DRAT practice can also involve appeals filed by persons other than the principal borrower. Depending upon the nature of the DRT order and the person’s legal status, questions may arise concerning who is entitled to maintain an appeal and whether the statutory pre-deposit requirement applies in the same manner. The precise language of Section 18 and the nature of the appellant’s grievance must therefore be examined before filing.
Guarantors can present particularly complex questions. A guarantor may have been impleaded before the DRT and may seek to challenge findings affecting the guarantor’s liability or rights in secured assets. Whether and to what extent the statutory pre-deposit applies must be analysed in light of the statutory language and the person’s position in the proceedings rather than assumed automatically.
Asset Reconstruction Companies also feature prominently in DRAT litigation. Where a financial asset has been assigned to an ARC, the appellate dispute may involve questions concerning the assignment, amount claimed, enforcement measures and the ARC’s rights as secured creditor. The practitioner must therefore understand both the original lending transaction and the subsequent assignment history.
Settlement negotiations can continue even after a DRT order and during a DRAT appeal. A borrower may negotiate an One-Time Settlement or other arrangement with the secured creditor while the appeal is pending. Any settlement strategy should, however, address the pending appeal, the pre-deposit, enforcement proceedings and the consequences of compliance or default under the proposed settlement.
For secured creditors, defending a DRAT appeal requires attention not only to the merits of the DRT’s decision but also to maintainability, limitation and pre-deposit. A creditor may challenge an attempt by the appellant to proceed without satisfying the statutory requirements and may oppose an application seeking reduction of the deposit where the statutory or factual basis is inadequate.
For borrowers, the first priority after receiving an adverse DRT order should generally be an immediate assessment of the appeal period and the amount relevant for pre-deposit. The borrower should obtain the complete order, calculate the limitation period, determine the statutory deposit, assess whether reduction should be requested and identify whether urgent stay protection is required.
The quality of a Section 18 appeal ultimately depends upon preparation at the DRT stage as well. Since the DRAT primarily examines the legality and correctness of the DRT’s order, a well-maintained record before the DRT can significantly assist appellate advocacy. Important documents, objections, evidence and legal submissions should therefore be properly placed before the DRT rather than being left for introduction at the appellate stage.
DRAT appeals under Section 18 consequently represent a specialised area of banking and financial litigation involving substantially more than ordinary appellate advocacy. The practitioner must understand SARFAESI enforcement, DRT procedure, limitation, statutory pre-deposit, interim relief, secured transactions, auction law and the appellate jurisdiction of the DRAT.
The pre-deposit requirement remains the defining procedural feature of Section 18 appeals. It serves as a statutory condition governing the appellate remedy and cannot ordinarily be ignored or completely waived. At the same time, the statutory mechanism permits the DRAT to exercise limited discretion in reducing the amount where the circumstances justify such relief, subject to the statutory floor.
DRAT appeals and pre-deposit matters under Section 18 therefore require a carefully coordinated strategy from the moment the DRT order is received. Limitation, computation of the debt for pre-deposit, preparation of the appeal, application for reduction where necessary, interim protection and the substantive challenge to the DRT order must all be considered together. For lawyers practising in DRT and DRAT litigation, expertise in these matters is essential to effectively protect the interests of borrowers, guarantors, secured creditors and other affected parties in SARFAESI proceedings.
