Pre-Deposit for DRAT Appeals under Section 18 SARFAESI: Calculation, 25% Reduction and Exceptions (Hyderabad)

Introduction

A borrower who loses a Section 17 case before DRT Hyderabad-1 or DRT Hyderabad-2 does not get an automatic second chance. The next forum is the Debts Recovery Appellate Tribunal (DRAT), Kolkata, under Section 18 of the SARFAESI Act, 2002. For the borrower, that appeal is not maintainable unless a statutory pre-deposit is first made with the Appellate Tribunal.

This article explains the pre-deposit for DRAT appeals under Section 18 SARFAESI in practical terms: how the 50% figure is calculated, when DRAT can reduce it to 25%, who need not deposit, what documents to file, Hyderabad-specific forums, and the mistakes that get appeals dismissed at the threshold.

The right of appeal exists. The money condition is real. Treating them as the same thing is how many Hyderabad borrowers lose the only statutory appeal they have.

What Section 18 Actually Requires

Any person aggrieved by an order of the Debts Recovery Tribunal under Section 17 may file an appeal to the Appellate Tribunal within 30 days of receiving that order, along with the prescribed fee.

The second proviso then adds a separate condition for the borrower: the appeal shall not be entertained unless the borrower has deposited with the Appellate Tribunal 50% of the amount of debt due, as claimed by the secured creditors or as determined by the DRT, whichever is less.

The third proviso gives DRAT a narrow discretion. For reasons recorded in writing, it may reduce that deposit — but not below 25% of the same “debt due”.

Three points matter immediately:

• Pre-deposit is a condition for entertaining the appeal, not a later payment after numbering.
• The deposit is to be made with the Appellate Tribunal, not with the bank.
• Complete waiver is not written into the statute. The Supreme Court in Narayan Chandra Ghosh v. UCO Bank (2011) 4 SCC 548 held that the requirement is mandatory and that DRAT cannot grant a full exemption.

A Section 17 application before DRT itself does not require this 50% deposit. The old 75% deposit at the DRT stage was struck down in Mardia Chemicals. Confusing the two stages is a frequent and expensive error.

Which Forum Applies in Hyderabad and Telangana

Stage	Forum	Time	Money condition
Challenge to Section 13(4) measures	DRT Hyderabad-1 or DRT Hyderabad-2 (Section 17)	45 days from the measure	No Section 18 pre-deposit
Appeal against the DRT order	DRAT, Kolkata (Section 18)	30 days from receipt of the DRT order	50% of debt due, reducible to 25%
Further challenge	Telangana High Court (writ), only in exceptional cases	Limitation for writs is fact-specific	High Court is not a substitute for pre-deposit

Appeals from DRT Hyderabad go to DRAT Kolkata, not DRAT Chennai. That territorial allocation has been treated as settled in practice, including in matters that later reached the Calcutta High Court on the question of which High Court supervises a DRAT Kolkata order arising from DRT Hyderabad. A challenge to such a DRAT order is generally to be filed before the Telangana High Court, because the original tribunal and cause of action sit in Telangana.

DRAT Kolkata has functioned from 9, Old Post Office Street, 7th Floor, Kolkata – 700001. Confirm the current address, cause-list and e-filing path on the official DRT/DRAT portal before you travel or remit funds. Addresses have changed in the past.

How to Calculate the Pre-Deposit

Start with the statutory formula, then apply the Supreme Court’s calculation rules.

Step 1 — Identify the “debt due”.Take the amount claimed by the secured creditor or the amount determined by the DRT, whichever is less. If the DRT has not quantified the debt and has only decided the legality of SARFAESI measures, High Courts (including the Kerala High Court in 2026) have held that the creditor’s claim is the working figure.

Step 2 — Apply 50%.Default deposit = 50% of that figure.

Step 3 — Ask for reduction only if the facts support it.DRAT may come down to 25%, never below, and only with written reasons. Hardship alone, without a working calculation and a prima facie case, is a weak application.

The Sidha Neelkanth rules (Supreme Court, 5 January 2023)

In Sidha Neelkanth Paper Industries Pvt. Ltd. v. Prudent ARC Ltd., the Supreme Court answered the question “50% of which amount?”:

1. If the appeal challenges Section 13(2)/13(4) measures against the secured assets, the amount stated in the Section 13(2) notice is the usual reference for “debt due”.
2. If the appeal challenges only the sale of the secured asset, the amount in the sale certificate is relevant.
3. If both the enforcement measures and the auction sale are under challenge, “debt due” means the liability claimed as due — inclusive of interest as understood in the Recovery of Debts and Bankruptcy Act definition — and the borrower cannot pick the lower convenient number.
4. “Debt” includes interest. The Delhi High Court’s attempt to exclude interest was disapproved.
5. Auction money paid by a purchaser cannot be treated as the borrower’s pre-deposit when the borrower is still attacking that sale. Adjustment is available only if the borrower unequivocally accepts the sale.

That last point is the one that surprises most Hyderabad clients after an auction. The sale proceeds sit with the bank. They do not automatically open the door to DRAT.

Worked example

Assume the Section 13(2) demand was ₹80 lakh (principal plus interest as claimed). DRT did not independently quantify a lower figure. The property later sold for ₹50 lakh. The borrower challenges both possession and the sale.

• You cannot treat the ₹50 lakh sale as 50% of ₹80 lakh and walk into DRAT empty-handed.
• Working “debt due” is the claimed liability (including interest as claimed), not the hammer price.
• Default pre-deposit is 50% of that claimed figure, unless DRAT reduces it to not less than 25% with reasons.
• If you accept the sale and only fight residual issues, the calculation can change. That is a strategic choice, not a drafting shortcut. Get it recorded clearly.

High Courts have not spoken with one voice on whether future interest after the Section 13(2) notice is added on top of the notice figure. The safe drafting approach is to compute on the notice / DRT figure first, disclose recoveries already made by the borrower (not disputed auction money), and invite DRAT to fix the exact sum. Flag the interest component for human review against the latest order that will bind DRAT Kolkata in your matter.

Who Must Deposit — and the Real Exceptions

The appeal under Section 18 can be filed by any person aggrieved. The pre-deposit proviso speaks of the borrower.

That distinction is the source of most “exceptions”.

Persons who should plan for 50% / 25%

• Principal borrower.
• Guarantor. Section 2(1)(f) treats a guarantor as a borrower for SARFAESI purposes. Section 13(11) also lets the bank proceed against the guarantor without first exhausting the principal debtor.
• Third-party mortgagor who created the security. Bombay High Court (2026) treated such a mortgagor as a borrower for the Section 18 deposit. Do not assume that “I only gave the house” is an exemption.

Persons who may not have to make the borrower deposit

• A tenant, occupant or allottee who is neither a borrower nor a guarantor. Bombay High Court (January 2026) revived a tenant-allottee’s appeal and held that DRAT cannot mechanically impose the proviso on a third party who does not fall within “borrower”. The facts of title, consent to mortgage, and date of occupation still matter.
• The secured creditor / bank appealing a DRT order that went against it. The proviso is aimed at the borrower.
• A true third-party claimant to the asset who is not liable on the debt — subject to how DRAT Kolkata characterises that person on the papers.

These are not automatic passports. DRAT will look at the cause title, the guarantee deeds, and the mortgage documents. Mis-describing a guarantor as a “third party” is a fast way to have the appeal kept unnumbered.

What is not an exception

• Poverty or “the property is already sold”.
• A pending OTS proposal. Calcutta High Court (2026) has treated rejection of an OTS-related request as a substantive order, not a free pass around Section 18.
• Payment already made to the bank during SARFAESI, unless DRAT accepts that payment as the statutory deposit. Kerala High Court (January 2026) held that the statute requires deposit before DRAT, not before the lending bank.
• A writ before the Telangana High Court filed only to avoid the deposit. High Courts repeatedly send parties back to the statutory appeal.

There is a separate line of cases under Section 21 of the RDB Act (bank recovery suits, not SARFAESI SAs) where Telangana High Court has said pre-deposit may not apply to a purely procedural appeal, such as delay in setting aside an ex parte OA order. Do not import that reasoning blindly into a Section 18 SARFAESI appeal. The two statutes use different language. Treat any “procedural order” argument under SARFAESI as fact-specific and for human review.

How to Seek Reduction from 50% to 25%

File a separate interlocutory application with the appeal. Ask DRAT to reduce the deposit and record reasons.

Useful material, if true and documented:

• DRT did not determine a quantified debt, and the bank’s claim is inflated.
• Substantial amounts already paid by the appellant (statements, receipts).
• Only a limited asset or a limited issue is under challenge, and 50% is disproportionate to the subject matter (some High Courts have criticised a deposit larger than the asset in dispute — still not a substitute for the statute).
• Prima facie defects in the Section 13(2) notice, Rule 8/9 sale notice, or Section 14 process.
• Genuine inability supported by ITRs, bank statements, and asset disclosure — not a bare affidavit.

What usually fails:

• “Please waive fully.”
• “Auction already covered 50%.”
• Copy-paste hardship with no numbers.

Even a 25% order is a condition. Miss the time granted to deposit, and the appeal is dismissed for non-compliance. That dismissal is harder to repair than a delayed first filing.

Step-by-Step: Filing a Section 18 Appeal from Hyderabad

1. Diary the limitation. 30 days run from receipt of the DRT order, not from the date it was pronounced if you received it later. Keep the acknowledgement.
2. Decide the challenge. Measures only, sale only, or both. That choice drives the Sidha Neelkanth calculation.
3. Compute two figures: 50% and 25%, with a one-page working sheet annexed.
4. Draft the appeal against the DRT order under Section 17. Attach the certified / downloaded order, SA papers, 13(2)/13(4) notices, sale notice and sale certificate if any, and valuation.
5. Pay the statutory appeal fee under Rule 13 of the Security Interest (Enforcement) Rules, 2002 (fee is separate from pre-deposit; current slab should be verified before filing). Demand draft / IPO in favour of the Registrar as the Rule requires.
6. File the reduction IA on day one if you cannot put in 50%.
7. Do not wait for numbering to arrange money. If you can deposit 25% immediately, do it. It signals bona fides even while the reduction IA is pending.
8. Remit the deposit to DRAT, obtain the official receipt, and place it on record. Do not treat a payment into the loan account as compliance unless DRAT has said so in your case.
9. If delayed, file a condonation application. Section 18(2) applies RDB Act procedure “as far as may be”, and High Courts have held that delay can be condoned on sufficient cause. Condonation is not a right. Explain each day.
10. Stay is not automatic. Pre-deposit makes the appeal entertainable. A separate stay application is still required if the bank is moving on possession or confirmation of sale.

After the appeal ends, the deposit is not the bank’s security. In Axis Bank Ltd. v. SBS Organics Pvt. Ltd. (2016) 12 SCC 18, the Supreme Court held that the Section 18 deposit is neither a secured asset nor a secured debt. On disposal, withdrawal, or the appeal becoming infructuous, it is refundable to the appellant on request, unless DRAT has already appropriated it with the depositor’s consent, or there is a lawful attachment.

Documents Checklist for a Hyderabad File

• DRT final / impugned order and proof of receipt date
• Complete Section 17 paper book (SA, reply, evidence affidavits)
• Section 13(2) notice, 13(3A) reply and bank’s response if any
• Possession notice, newspaper publications, sale notice, bid sheet, sale certificate
• Loan documents, guarantee, mortgage deed, statement of account
• Calculation sheet of debt due and proposed deposit
• Proof of amounts paid by the appellant
• ITRs / financials for a reduction plea
• Appeal fee instrument and, separately, pre-deposit instrument / challan
• Vakalatnama and board resolution / authorisation for companies
• Delay affidavit if beyond 30 days

Common Mistakes That Kill the Appeal

• Filing a Telangana High Court writ as the first reaction to a DRT dismissal, then watching limitation against DRAT run out.
• Assuming the DRT SA itself needed 50% and, having not paid it then, thinking the case is already dead.
• Paying the bank and informing DRAT later.
• Challenging the auction and simultaneously asking that auction money be counted as pre-deposit.
• Treating a guarantor or mortgagor as a “third party tenant”.
• Asking for 0% waiver in the main appeal without a reasoned IA.
• Missing the deposit deadline fixed in the reduction order.
• Using Section 21 RDB Act case law as if it rewrote Section 18 SARFAESI.

When a Writ Still Makes Sense

A writ to the Telangana High Court is not the Section 18 substitute. It is useful when DRAT refuses to look at a genuine third-party appeal, demands deposit from a person who is not a borrower, computes “debt due” in a manner contrary to Sidha Neelkanth, grants a reduction but then travels below or above the statute without reasons, or dismisses for non-deposit without granting a fair window. Even then, expect the Court to ask why the statutory deposit was not at least tendered at 25%.

Bullet-point checklist

• Read the DRT order and mark the date of receipt.
• Count 30 days. Diary the last date.
• Classify the appellant: borrower / guarantor / mortgagor / tenant / bank.
• Prepare a one-page “debt due” calculation using the 13(2) figure, any DRT quantification, and the sale certificate if the sale is in challenge.
• Do not net off disputed auction proceeds.
• File appeal + fee + reduction IA + stay IA together.
• Deposit with DRAT, not the branch.
• Keep the original deposit receipt.
• If DRAT grants 25%, pay inside the time granted.
• After disposal, apply in writing for refund unless you consent to adjustment.

Conclusion

Section 18 is a short provision with a hard financial gate. For a Hyderabad borrower, the path is DRT first, DRAT Kolkata next, and the Telangana High Court only if the statutory route is blocked in a legally recognised way. Calculate “debt due” the way the Supreme Court calculated it in Sidha Neelkanth, do not count on auction money you are still disputing, and do not ask DRAT to do what Narayan Chandra Ghosh said it cannot do — waive the deposit altogether. If 50% is unrealistic, file a reasoned 25% application on day one and keep the deposit instrument ready. The appeal that is never entertained is the most expensive appeal of all.

Short disclaimer

This article is for general information for borrowers, guarantors and occupants in India, with a Hyderabad / Telangana practice focus. It is not legal advice and not a substitute for an opinion on your papers. Pre-deposit calculations, limitation and third-party status turn on documents and the latest binding orders. Confirm current DRAT Kolkata filing practice, fee slabs under Rule 13, and any later statutory change before you file.

Related reading

• How to File a DRT Stay to Stop Bank Auction (Section 17 SARFAESI) — Hyderabad Practice
• Section 13 vs Section 14 SARFAESI — Differences, Timelines and Remedies
• Challenge CMM / District Collector Orders under Section 14 SARFAESI
• Symbolic vs Physical Possession under SARFAESI — Borrower Rights
• Drafting Section 13(3A) SARFAESI Objections — Template and Key Arguments
• Protecting Guarantor Property from SARFAESI Action
• Restitution after Illegal SARFAESI Auction — Remedies and Limitation
• One Time Settlement (OTS) 2026 — How to Negotiate with Banks

If DRT Hyderabad has dismissed your SA, or a sale is in confirmation, have an advocate compute the Section 18 figure before the 30-day clock ends. Bring the DRT order, the 13(2) notice, the sale certificate and your payment proofs. We can map the 50%/25% working, draft the reduction IA, and file the DRAT Kolkata appeal without burning limitation on a writ that will not replace the deposit.