Powers and Scope of the DRT under Section 17 SARFAESI

Once the Debt Recovery Tribunal finds that an enforcement was not in accordance with the Act, it has real teeth: it can declare the measures invalid, restore possession or management to the borrower, and even set aside a sale. The 2016 amendment also let it decide the tenant's claim that so often clashes with possession. This note sets out the DRT's power to restore, its power over tenancy and lease, and the timelines and the appeal that follow.

1. Restoration and Setting Aside

Figure 1: The DRT's remedial power

• Restoration, s.17(3). If the DRT finds the measures were not in accordance with the Act, it may declare them invalid and restore possession or management of the secured asset to the borrower.
• Setting aside the sale. Where a sale was conducted in breach of the Rules, the DRT may set it aside, subject to the protection the law gives a bona fide purchaser for value (Topic 25)
• Putting the borrower back. The DRT may order the consequences that follow from an unlawful measure, including restoring the borrower to the position before the measure was taken.
• Only for unlawful measures. The power arises only where the enforcement was not in accordance with the Act; a lawful enforcement is upheld and the application dismissed.

2. Tenancy and Lease under Section 17(4A)

Figure 2: Deciding the tenant's claim

• The power, s.17(4A). Added in 2016, it lets the DRT examine the claim of a tenant or lessee of the secured asset when the creditor seeks possession.
• What the DRT checks. Whether the lease has expired, was created after the s.13(2) notice, or is contrary to the mortgage or the Transfer of Property Act (Topic 77)
• The effect. A tenant with a valid, subsisting lease may be protected, while a collusive or post-notice lease will not defeat the creditor's possession.
• Why it was added. To settle the frequent clash between a secured creditor seeking possession and a person claiming to be a tenant, which had crowded the courts.

3. Timelines and the Appeal

Figure 3: From disposal to the DRAT

• Disposal, s.17(5). The DRT is to dispose of the application within sixty days, extendable for reasons recorded in writing up to four months from the date of the application.
• Delay beyond four months, s.17(6). If the application is not disposed of within four months, either party may move the Appellate Tribunal for a direction to expedite the disposal.
• Appeal to the DRAT, s.18. A party aggrieved by the DRT's order may appeal to the Debt Recovery Appellate Tribunal, on the deposit the Act requires (Topic 39)
• A real but bounded review. The DRT's power is strong but defined: it tests legality and can undo an unlawful measure, but it is time-bound and subject to appeal, keeping enforcement moving.

4. Frequently Asked Questions

What can the DRT do if it finds the enforcement was unlawful?

Under Section 17(3), if the Debt Recovery Tribunal finds that the measures taken by the secured creditor were not in accordance with the Act or the Rules, it may declare the measures invalid and restore the possession or management of the secured asset to the borrower, putting the borrower back in the position before the measure was taken. Where a sale was conducted in breach of the Rules, the DRT may set the sale aside, subject to the protection the law gives a bona fide purchaser for value. The power is remedial and arises only where the enforcement was unlawful; if the enforcement was in accordance with the Act, the Tribunal upholds it and dismisses the application.

Can the DRT decide a tenant's claim over the secured asset?

Yes, since the 2016 amendment. Section 17(4A) empowers the Debt Recovery Tribunal, when a secured creditor seeks possession and a person claims to be a tenant or lessee of the secured asset, to examine that claim. The Tribunal considers whether the lease has expired, whether it was created after the Section 13(2) notice, and whether it is contrary to the terms of the mortgage or to the Transfer of Property Act. A tenant with a valid and subsisting lease may be protected, but a lease that is collusive or created after the notice to defeat the creditor will not stand in the way of possession. The provision was added to resolve the recurring conflict between secured creditors and claimed tenants.

5. Related Topics

• Topic 35: Section 17 Application. The application these powers decide.
• Topic 39: Section 18 Appeal and Deposit. The appeal from the DRT's order.