Section 18 SARFAESI Act: Right to lodge a caveat

Section 18 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002: Right to lodge a caveat

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under section 17, may prefer an appeal along with such fee, as may be prescribed to the Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal:

Provided that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less:

Provided further that the Appellate Tribunal may, for reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent of debt referred to in the first proviso.

Legal Commentary & Landmark Judgments: Section 18

Section 18 provides for an appeal to the Debts Recovery Appellate Tribunal (DRAT) against any order of the DRT under Section 17, mandating a mandatory pre-deposit of debt dues.

Appellate Remedies & Forum: Any person aggrieved by an order of the DRT under Section 17 may prefer an appeal to the DRAT within 30 days.
Core Legal Standard: The second and third provisos establish a mandatory condition precedent: the borrower must deposit 50% of the debt claimed by the secured creditor or determined by the DRT, with discretionary power vested in the DRAT to reduce the deposit to not less than 25% for reasons recorded in writing.

Deposit cannot be waived below 25%.

Key Landmark Precedents:

Narayan Chandra Ghosh v. UCO Bank (2011) 4 SCC 548: The Supreme Court held that the pre-deposit requirement under Section 18 is mandatory; the DRAT has no jurisdiction to entertain or hear an appeal on merits without the mandatory pre-deposit of at least 25%.
Kotak Mahindra Bank Ltd. v. Ambuj A. Kasliwal (2021) 3 SCC 549: Reaffirmed that the requirement of pre-deposit under Section 18 cannot be bypassed or waived even by High Courts exercising Article 226 jurisdiction, affirming statutory financial discipline.

Legal Commentary:

Section 18 prevents frivolous appeals designed to stall asset auctions. The non-negotiable 25% to 50% pre-deposit ensures that only borrowers with genuine financial commitment can access appellate review.

Section 18: Right to lodge a caveat

Section 18 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002: Right to lodge a caveat

Legal Commentary & Landmark Judgments: Section 18