Who may file
Any person aggrieved by a measure taken by a secured creditor under Section 13(4), including a borrower, guarantor, mortgagor or a third party claiming an interest in the asset, may file an application under Section 17 before the Debts Recovery Tribunal (DRT) having jurisdiction.
Time limit
The application must ordinarily be filed within 45 days from the date on which the measure was taken. Missing the period can be fatal. Although courts have considered how far delay can be condoned, no borrower should plan around condonation.
Which DRT to approach
The application is filed before the DRT within whose local limits the cause of action arises, the borrower resides or carries on business, or the secured asset is situated. In Karnataka, matters are heard by the DRTs at Bengaluru, and appeals lie to the Debts Recovery Appellate Tribunal (DRAT) at Chennai.
What can be challenged
The Tribunal examines whether the measures were taken in accordance with the Act and the Rules. Typical challenges include invalid NPA classification, defective notices, incorrect computation of dues, irregular sale procedure, undervaluation of the asset and improper possession. Under Section 17(3), if the Tribunal finds the measures unlawful, it may declare them invalid and restore possession or management to the borrower.
Interim protection
Applicants usually ask for an interim order restraining sale or dispossession. Tribunals often grant limited protection on conditions such as deposit of part of the outstanding amount, so it is sensible to prepare a realistic offer at the outset.
Appeal and pre-deposit
An appeal to the DRAT under Section 18 must be filed within 30 days. After Mardia Chemicals struck down an earlier 75 percent requirement, the Act now requires a deposit of 50 percent of the debt due as claimed by the secured creditor or as determined by the DRT, whichever is less. The Appellate Tribunal may reduce this, for recorded reasons, to not less than 25 percent.
Writ jurisdiction
High Courts have repeatedly held that the alternative remedy under Section 17 should ordinarily be exhausted before a writ petition is entertained, with exceptions for cases involving a patent lack of jurisdiction or a violation of natural justice.
Frequently Asked Questions
Q. How long does a Section 17 application take?
A. The Act contemplates disposal within 60 days, extendable to four months, but in practice many matters take considerably longer, which is why interim relief matters.
Q. Can I go to a civil court instead?
A. No. Section 34 bars civil courts from entertaining matters that the DRT is empowered to decide.
Disclaimer: This article is for general information only and is not legal advice. The law may change, and the facts of each matter differ.