DRT and DRAT Lawyer in Delhi

DRT lawyers in Delhi: what we do

We appear before the Debt Recovery Tribunals in Delhi, the Debts Recovery Appellate Tribunal (DRAT) at Delhi, and the Delhi High Court where a banking dispute reaches it. Our work falls into four groups:

• Borrowers and guarantors facing SARFAESI action: a Section 13(2) demand notice, a possession notice, a sale notice or an auction.
• Defendants in recovery applications filed by a bank or financial institution under the Recovery of Debts and Bankruptcy Act, 1993.
• Lenders and creditors filing recovery applications, defending Section 17 applications and pursuing recovery certificates.
• Appeals to the DRAT, including applications to reduce the pre-deposit.

We are a litigation firm and do not act in loan transactions.

The two laws the DRT applies

The Recovery of Debts and Bankruptcy Act, 1993

Renamed in 2016 from the Recovery of Debts Due to Banks and Financial Institutions Act, this law lets a bank or financial institution file an original application before the DRT to recover a debt, instead of a civil suit. Since a notification of 6 September 2018, it applies only where the debt is twenty lakh rupees or more. A smaller debt goes to the civil court.

Under Section 19:

• The defendant must file a written statement within 30 days of service of summons. The DRT may extend this, in exceptional cases, by no more than 15 days, and these limits have been applied strictly.
• The defendant can plead set-off and a counter-claim against the bank, for example for wrongful debits or charges, decided with the bank’s claim.
• At the end, the DRT issues a recovery certificate to the Recovery Officer, who enforces it by attachment and sale of property, among other modes. An order of the Recovery Officer can be appealed to the DRT within 30 days.

Limitation for the bank’s application is governed by the Limitation Act, 1963, generally three years from default, extended by any written acknowledgment of the debt.

The SARFAESI Act, 2002

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 lets a secured creditor enforce its security without going to court first. It is used by banks, financial institutions, asset reconstruction companies and some non-banking finance companies. The borrower’s account must first be classified as a non-performing asset under the Reserve Bank of India’s norms, which for most loans means an instalment or interest overdue for more than 90 days.

How SARFAESI enforcement unfolds, step by step

1. Section 13(2) demand notice. The lender demands the full outstanding amount within 60 days, giving the amount payable and the secured assets it intends to enforce against.
2. Section 13(3A) representation. Within those 60 days the borrower or guarantor may object in writing. The lender must consider it and, if it rejects it, communicate reasons within 15 days.
3. Section 13(4) measures. If the dues remain unpaid after 60 days, the lender can take possession of the secured asset, take over management of the business, appoint a manager, or require a person who owes money to the borrower to pay the lender instead.
4. Possession notice. Under Rule 8 of the Security Interest (Enforcement) Rules, 2002, the lender issues a possession notice and publishes it in newspapers.
5. Section 14 application. If physical possession is resisted, the lender applies to the Chief Metropolitan Magistrate in Delhi for assistance in taking possession.
6. Valuation and sale notice. For immovable property, the lender must give the borrower a 30-day sale notice, and the first sale cannot take place before 30 days from the public notice or the notice to the borrower.
7. Auction and confirmation. The buyer pays 25 per cent immediately and the balance within 15 days of confirmation, extendable in writing to three months at most.

The borrower’s right to stop the sale by paying the full dues, costs and charges under Section 13(8) lasts only until the auction notice is published. In Celir LLP v. Bafna Motors (2023) the Supreme Court held that, after the 2016 amendment, the right of redemption ends on publication, not on registration of the sale.

Our guide to what to do after a Section 13(2) notice sets out a borrower’s 60-day plan in more detail.

Challenging SARFAESI action before the DRT

Section 17 allows any person aggrieved by a Section 13(4) measure, including a borrower, guarantor, tenant or other occupant, to apply to the DRT within 45 days of the measure. The DRT with jurisdiction is the one where the cause of action arose, where the secured asset is located, or where the branch maintaining the account is located. No pre-deposit is required: in Mardia Chemicals v. Union of India (2004) the Supreme Court struck down the condition that once applied.

Grounds we commonly examine:

• The account was not properly classified as an NPA on the date of the notice.
• The Section 13(2) notice was defective, misstated the dues or was not served on every borrower and guarantor.
• The representation was not considered or answered with reasons.
• The asset is outside SARFAESI under Section 31, for example agricultural land, a loan of not more than one lakh rupees, or a case where less than 20 per cent of the principal and interest remains due.
• The sale notices did not give the time the rules require, or the reserve price and valuation were not properly fixed.

The Act asks the DRT to decide a Section 17 application within 60 days, extendable to four months in total. If the DRT finds the measure unlawful, it can declare it invalid and restore possession.

Appeals to the DRAT and the pre-deposit

An appeal from a DRT order goes to the Debts Recovery Appellate Tribunal. Under both laws the period is 30 days from receiving the order, with delay condonable for sufficient cause.

The appeal will not be entertained unless the borrower makes a pre-deposit:

Appeal under	Base for the deposit	Deposit
Section 18, SARFAESI Act	Debt claimed by the lender or determined by the DRT, whichever is less	50%, reducible to not less than 25%
Section 21, Recovery of Debts and Bankruptcy Act	Debt determined by the DRT	50%, reducible to not less than 25%

In Narayan Chandra Ghosh v. UCO Bank (2011) the Supreme Court held the Section 18 deposit mandatory, and in Kotak Mahindra Bank v. Ambuj A. Kasliwal (2021) it held that the DRAT cannot waive the Section 21 deposit entirely. Our post on DRAT appeals and the pre-deposit explains how to apply for the reduction.

Guarantors, settlement and insolvency

Guarantor liability

Under Section 128 of the Indian Contract Act, 1872 a surety is liable to the same extent as the principal debtor, so a lender may proceed against a guarantor first. A guarantor who mortgaged property is a “borrower” under Section 2(1)(f) of the SARFAESI Act and must receive the same notices. Variation of the loan terms without the surety’s consent can be a defence, and we check for it.

One-time settlement

Banks settle defaulted accounts under their board-approved compromise policies and the Reserve Bank of India’s framework for compromise settlements. A borrower has no legal right to an OTS: in Bijnor Urban Co-operative Bank v. Meenal Agarwal (2021) the Supreme Court held that a court cannot order a bank to grant one.

Interaction with the Insolvency and Bankruptcy Code

Once a company is admitted to corporate insolvency, the moratorium under Section 14 of the Insolvency and Bankruptcy Code bars DRT proceedings and SARFAESI action against the company and its property. It does not protect a personal guarantor: State Bank of India v. V. Ramakrishnan (2018). Insolvency proceedings against a personal guarantor of a company’s debt are heard by the NCLT, and an application there brings its own interim moratorium under Section 96. See our page on NCLT matters in Delhi.

When the Delhi High Court is the right forum

In United Bank of India v. Satyawati Tondon (2010) the Supreme Court held that a High Court should not ordinarily entertain a writ petition against SARFAESI or DRT action when the statutory remedies are available, and it repeated the point in PHR Invent Educational Society v. UCO Bank (2024). A writ may still lie where the action is wholly without jurisdiction, breaches natural justice or challenges the validity of a law. Our writ petition page covers when that route is open.

Where the debt is below twenty lakh rupees or the claim is not by a bank or financial institution, the dispute belongs in a civil or commercial court. See our page on commercial disputes in Delhi.

Realistic timelines

• Section 13(2) notice to Section 13(4) action: at least 60 days, often a few months.
• Possession notice to auction: commonly a few months, longer where a Section 14 order is needed.
• Section 17 application: meant to be decided within four months, often longer when contested.
• Recovery application before the DRT: commonly one to a few years.
• DRAT appeal: commonly several months to a few years.

These are ranges, not promises. They depend on the tribunal’s workload, the conduct of each side and how much is disputed.

What to bring

Bring the loan sanction letter and agreement, the mortgage or hypothecation documents, any surety documents, account statements, every notice received (Section 13(2), the reply to your representation, the possession and sale notices), newspaper publications, any DRT or DRAT papers, and correspondence about restructuring or settlement. Lenders should bring the loan file and the notices issued.

Talk to us

The first step is a consultation. Call 99115 44811 or write to manujalawyers@gmail.com with the date of the most recent notice you have received. Our principal chamber is at S-307, 3rd Floor, Delhi High Court, Pragati Vihar, New Delhi 110003, with a chamber at Saket in the Lawyers Block and offices at the Dwarka District Court and at Pitampura, opposite Rohini Court. We have no office at any tribunal. Consultations are arranged in advance and can be by phone or video.

This page gives general information about the law as it stands and is not advice on your particular case. No lawyer can guarantee the outcome of a DRT or DRAT matter, since every case turns on its own facts and papers.