Section 18 SARFAESI: The Mandatory Pre-Deposit for Appeal

A borrower cannot appeal to the DRAT by merely filing papers. Section 18 attaches a condition that has become one of the most litigated features of the Act: the appellant must first deposit a large part of the debt. The deposit is fifty per cent of the amount due, reducible to a floor of twenty-five, and the courts have held it mandatory, so the DRAT cannot waive it entirely. This note sets out the requirement, the reduction, and the mandatory nature of the deposit.

1. The Requirement

Fifty per cent of the debt due

Figure 1: Fifty per cent of the debt due

Fifty per cent of the debt. A borrower's appeal is entertained only on depositing with the DRAT fifty per cent of the amount of debt due from the borrower.
Whichever is less. The fifty per cent is of the debt as claimed by the secured creditor or as determined by the DRT, whichever is less, so the lower figure governs the deposit.
A condition precedent. The deposit is a condition precedent to the appeal being entertained, not a step that can be deferred to the final hearing.
Only the borrower. The pre-deposit binds a borrower appellant; a secured creditor appealing a DRT order is not required to deposit (Topic 38)

2. Reduction to the Floor

Fifty, reducible to not less than twenty-five

Figure 2: Fifty, reducible to not less than twenty-five

The default. The default is fifty per cent of the debt due, and that is the figure a borrower must deposit unless the DRAT orders otherwise.
The discretion. The DRAT may, for reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent of the debt due.
The floor is firm. Twenty-five per cent is the floor: the DRAT cannot go lower, however strong the borrower's hardship, so some deposit is always required.
A narrow, reasoned discretion. Reduction is not granted for the asking; it needs recorded reasons, and the ordinary expectation is the full fifty per cent.

3. The Mandatory Nature

No appeal without the deposit

Figure 3: No appeal without the deposit

Narayan Chandra Ghosh v UCO Bank (2011). The Supreme Court held the pre-deposit is mandatory: the DRAT has no power to waive it entirely, only to reduce it to the floor.
No complete waiver. The DRAT may bring the deposit down to twenty-five per cent for reasons, but cannot dispense with it altogether, even in a hard case.
A check on frivolous appeals. The deposit filters out appeals filed only to delay, so a borrower cannot stall the enforcement with a bare appeal while retaining the asset.
Constitutionally valid. The mandatory deposit has been upheld as a valid condition on the statutory right of appeal, which Parliament may attach, not a denial of remedy.

⚠ Exam trap

State the figures exactly: a borrower's s.18 appeal is entertained only on depositing fifty per cent of the amount of debt due, as claimed by the creditor or determined by the DRT, whichever is less, reducible by the DRAT for reasons recorded to not less than twenty-five per cent. The deposit is a condition precedent and binds only the borrower, not a secured creditor appellant. Cite Narayan Chandra Ghosh v UCO Bank (2011): the pre-deposit is mandatory and cannot be waived entirely, only reduced to the twenty-five per cent floor, and the condition is constitutionally valid as a limit on the statutory right of appeal.

4. Frequently Asked Questions

How much must a borrower deposit to appeal under Section 18?

A borrower appealing to the Debt Recovery Appellate Tribunal under Section 18 must deposit fifty per cent of the amount of debt due, as claimed by the secured creditor or as determined by the Debt Recovery Tribunal, whichever is less. The Appellate Tribunal may, for reasons to be recorded in writing, reduce the amount, but not below twenty-five per cent of the debt due. The deposit is a condition precedent to the appeal being entertained, so it must be made for the appeal to be heard at all. The requirement binds a borrower appellant; a secured creditor appealing a DRT order is not required to make the deposit.

Can the DRAT waive the pre-deposit entirely?

No. In Narayan Chandra Ghosh v UCO Bank (2011), the Supreme Court held that the pre-deposit under Section 18 is mandatory and that the Debt Recovery Appellate Tribunal has no power to waive it altogether. The DRAT's discretion is limited to reducing the amount, for reasons recorded in writing, to not less than twenty-five per cent of the debt due; it cannot dispense with the deposit entirely, however strong the borrower's hardship. The condition has been upheld as a constitutionally valid limit on the statutory right of appeal, which Parliament is entitled to attach, and it serves to filter out appeals filed merely to delay the enforcement.

5. Related Topics

Topic 38: Section 18 Appeal to the DRAT. The appeal the deposit gates.
Topic 37: The Appellate Tribunal. The forum the deposit is made with.