DRT Stay Application Lawyer & Legal Representation

WHY DOES DRT STAY APPLICATION become IMPORTANT in 20-26?

Borrowers often need a DRT stay application when bank recovery action is reaching a stage beyond which it cannot be reversed. Borrowers may be in the middle of negotiating an OTS or arranging for payment of dues while bank initiates/stays its statutory proceedings.

Borrower serving in Noida may receive sale notice of an under construction commercial property even when discussions are ongoing. Family in Ghaziabad may get a possession notice against their residential flat. Owner of a business running from a commercially rented premise in Gurugram may find that the auction date is already announced.

Negotiations will not automatically pause SARFAESI process. Nor does filing an application before DRT automatically halt the auction process. Interim relief is normally has to be sought and granted.

Borrowers have lost property in the past because they took a verbal branch official’s word for it that “the matter is under control”. BK Singh cautions borrowers not to rely on informal discussions when statutory deadlines are about to be crossed.

DNCR borrowers will note that DRT benches across India are seeing applications seeking stay of sale, stay of possession and other form of interim relief being listed. Check current DRT cause list.

What Is a DRT Stay Application?

A DRT stay application is an interim application wherein the Debts Recovery Tribunal is requested to grant relief from or regulate a recovery action pending consideration of the underlying dispute.

For example, in a SARFAESI proceeding the main application is likely to be a Securitisation Application under Section 17 of the SARFAESI Act, 2002. An interim application for protection can be filed along with that application when there is an urgent need for relief.

The nature of the relief sought can differ. Based on facts, a borrower might ask for relief from taking possession, auctioning the asset, confirmation of an auction sale, or any further action with respect to the secured asset.

Additionally, the Tribunal will not simply provide relief because the borrower has hit hard times. A more compelling application will usually tie the relief being requested to a specific legal issue, supporting documents and true urgency.

This distinction is important. Financial hardship does not always equal a legal challenge.

BK Singh guides borrowers through this distinction when determining the best way to frame a DRT stay application.

What Legal Framework Applies to a DRT Stay Application?

Legally speaking, the main legislation involved in SARFAESI matters is The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or the SARFAESI Act.

While Section 13 outlines the mechanism for secured creditors to enforce security interests in compliance with the Act’s mandates, Section 13(2) relates to the demand notice phase, and Section 13(4) pertains to the actions a secured creditor may take upon fulfilling requisite conditions.

Section 17 allows an aggrieved person to challenge such measures taken under Section 13(4). As per the SARFAESI Act, the application can be made within 45 days from the date of taking the relevant measure to the DRT having jurisdiction under this section.

Likewise, the Security Interest (Enforcement) Rules, 2002 gain relevance, especially in cases involving possession & sale of secured immovable property. Notices of possession, valuation, the reserve price, sale notice and auction procedure are factors that would need to be reviewed under both the Act and Rules.

It is important to note that the remedy available can vary depending on the stage of the procedure. A borrower looking to challenge a possession action may have an immediate different concern than a borrower whose property has already been sold in an auction.

When Can a Borrower Seek Stay Against Bank Possession?

Issuance of possession notice is a matter of serious concern especially where the underlying secured asset is the borrowers family home or income generating asset such as a commercial property or business premises.

The borrower can consider applying for interim relief if the underlying dispute involves legally arguable points as to the actions of the secured creditor or process adopted in exercising the statutory power of recovery eg:

Were notices served properly? What is the underlying account? Who has an interest in the security property? Was the secured creditor procedure compliant? Are there any other facts which call into question the legality of the recovery action?

Simply because there is a dispute does not automatically entitle the borrower to a stay. Each application will be judged on its individual merits by the DRT.

Looking at DRT cause lists today, we see that matters tagged as “APPLICATION FOR STAY” are regularly placed on the cause list at the same time as the securitisation proceedings with possession notices.

Where possession is imminent, there is a risk in waiting until informal negotiations have run their course. Adequate time should be allowed to seek legal advice to ascertain what remedies are available.

Can a DRT Stay Application Stop a Bank Auction?

It is possible for a borrower to apply for interim relief from a proposed auction if the statutory remedy allows and the facts justify such relief. However, simply because an application can be filed, this does not mean that the auction will be automatically halted.

The precise relief will often depend on the timing of the auction. Prior to bidding, the reliefs sought may involve preventing the sale from happening. Following bidding, the concerns raised may relate to confirmation of sale or later events. After further action has taken place, the legal situation can become more nuanced.

There are currently cases on the cause lists of the DRTs which involve applications made for a specific stay of sale or auction type action.

Therefore a borrower should not regard an auction date as simply being a distant administrative milestone. Once the process gets going the practical remedies can evolve.

An individualized analysis of the auction notice, prior possession notice, valuation etc. sale history and correspondence should be conducted by a DRT Stay Application Lawyer before deciding on the exact nature of the interim prayer.

What Documents Should Be Prepared for a DRT Stay Application?

Ideally a working document file should start with the original loan and security related documents followed by the sequence of recovery efforts undertaken.

Some of the documents which can be assembled are:

• Loan Agreement/Sanctioning documents.
• Statement of account and pertinent payment entries.
• Section 13(2) demand notice.
• Deficiency /objection/representation (if any) sent by borrower.
• Bank’s reply to the objection (if any).
• Notice of possession and affidavit of service.
• Newspaper advert/clp regarding possession (if any).
• Valuation report or valuation/party related documents (if any).
• Notice of sale/e-auction notice.
• Correspondence with the bank.
• OTS/settlement proposal and reply in writing.
• Receipts of payment/deposits acknowledgements.
• Title documents of property.
• Any previous orders passed by Court/Tribunal (if any).

Advocate BK Singh can peruse through the existing record and point out the documents which will be relevant in DRT proceeding.

There is no point in filing a bundle of papers. These documents would put across what action the bank took, when it took it; what the borrower was served and what exact legal point is being disputed.

What Issues Can Be Examined Before Seeking Interim Relief?

All facts are unique, but there are common queries that need consideration. Did the bank follow the SARFAESI process?

The borrower ought to assess if notices and recovery actions were made under the SARFAESI Act and rules. Is the outstanding amount contested?

The dispute of accounts/recovery amount may have to be backed by documentary evidence. Simply stating that the figure proposed by the bank is incorrect carries less muster than providing a detailed reconciliation along with proof of payments made. Was the asset identifiable?

Identification of property, interest therein and the borrower’s link with the secured property, may become relevant facts in suitable cases. Was the valuation or sale process fair?

If an auction is being announced, the valuation and reserve price aspects as well as compliance towards conducting the sale may be challenged under the relevant laws. Has the borrower delayed?

Delay plays a role in the urgency and practical strength of an interim application. The limitation period prescribed for invoking the remedy under Section 17 cannot be overlooked.

Thus a meritorious application for stay from DRT would be fact-specific and not built on boiler-plate allegations against the bank.

When Should You Consult a DRT Stay Application Lawyer?

You should think about getting legal advice as soon as you get a notice of possession, auction or any notice that sets a date of sale.

• possession is about to be enforced;
• a residential property which is mortgaged is set to be auctioned;
• a commercial property is scheduled for e-auction;
• the bank has disallowed an OTS and is pressing ahead with recovery;
• you think the amount due is not correctly calculated;
• the notices were not received or served properly;
• there is a dispute over who owns the property (or someone else has an interest in the property);
• there is already a proceeding or order from the DRT; or
• the auction date is already fixed and time is running short.

For instance, the latest DRT Delhi cause list has several cases where stay was pleaded in respect of possession and sale notices (stay of sale also being requested).

Too often borrowers wait until the date of auction is very close before thinking of a lawyer. Sometimes at the last minute something can still be done. But the earlier a lawyer can review the facts, the better prepared he will be to understand the facts and decide on the right remedy.

Does Filing a DRT Case Automatically Stop Recovery?

This is perhaps one of the most critical points borrowers must know.

Filing an application under Section 17 and obtaining an interim stay are two separate actions. The borrower can appeal the bank's action and separately apply for interim relief.

Whether the matter gets automatically stayed depends on the order passed by the Tribunal & terms of such order. So when the borrower tells the bank / auction purchaser/RO that the auction is automatically stayed because a case has been filed, is absolutely incorrect.

Same logic would apply for settlement discussions. Merely filing an OTS request does not automatically grant you a legal stay against auction.

Advocate BK Singh will help you evaluate if your case demands an immediate interim relief, settlement or both. Neither of these is automatic in nature.

How Can DRT Lawyer Help With a Stay Application?

Take the example of DRT Lawyer offers DRT/SARFAESI services such as DRT stay, Section 17 proceeding, auction objections and interim relief. The DRT stay service description clearly mentions recovery,possession and auction related stay protections.

A borrower walking into BK Singh Advocate’s office would immediately get a legal analysis based on the timeline of recovery and urgency of the threat.

Drafting could include analysis of the notices sent by the bank, pinpointing the action being objected to, evaluating the record created, determining the territorial jurisdiction of DRT and drafting the proceeding and interim relief application.

If a settlement is still a commercial option, legal proceedings can in many cases proceed simultaneously with settlement negotiations. But they are not the same thing. Offering to settle is a commercial proposition; asking for interim relief is a legal request for relief from the court.

BK Singh Advocate’s existing DRT practice even deals with loan settlement during an ongoing recovery proceeding, such as when a borrower is hard pressed for money during the pendency of a DRT issue.

BK Singh Advocate can evaluate your case (only in Delhi NCR & other important cities of India) on actual documents instead of guaranteeing a specific outcome.

Frequently Asked Questions

Final Thoughts

Do not be lulled into a false sense of security just because you can file a DRT stay application. DRT stay applications are a remedy but are not a sure thing. The ability to obtain a stay depends on the legal issue, timing of the application, documents available, procedural posture of the case and relief sought. Borrowers in Delhi NCR (Delhi, Noida, Ghaziabad, Gurugram, Faridabad, Meerut, Lucknow) as well as Mumbai, Pune, Bengaluru, Hyderabad, Chennai, Kolkata, Ahmedabad and other cities in India need to be mindful of the stage of the SARFAESI proceedings instead of relying on phone calls with the bank.

BK Singh Advocate can review what record is available to you and advise if an auction, possession action or other recovery action is imminent and whether a proceeding in DRT and application for interim relief makes sense. Just because you send in a request to settle does not mean an auction will be stopped. Just because you file a case does not mean you will get a stay. Check the position NOW when there is still time to do something about it.