Can I get a stay order against Bank recovery in DRT?

Facing a bank recovery action can be overwhelming—especially when notices, possession threats, or auction proceedings arrive unexpectedly. Many borrowers, guarantors, and business owners often ask: “Can I get a stay order against bank recovery in the Debt Recovery Tribunal (DRT)?”

The short answer is yes, it is possible—but it depends on the facts of your case, the applicable laws (such as the SARFAESI Act, 2002 and the Recovery of Debts and Bankruptcy Act, 1993), and compliance with certain conditions like pre-deposits. This blog will explain the legal remedies available, the debt recovery tribunal process, and how you can seek a stay order against bank recovery.

What is the Debt Recovery Tribunal (DRT)?

The Debt Recovery Tribunal (DRT) is a specialized forum in India established to deal with cases of bank loan defaults and recovery of debts by financial institutions.

• The primary objective of DRT is to ensure speedy recovery of debts owed to banks and financial institutions.
• Proceedings in DRT are more streamlined than civil courts, and banks often prefer using the SARFAESI Act for quicker enforcement.

Borrowers or guarantors, however, have the right to approach DRT under Section 17 of the SARFAESI Act to challenge recovery measures such as possession of secured assets or auction notices.

What is a Stay Order in DRT?

A stay order is a legal direction from the tribunal that temporarily halts the bank’s recovery action. It provides temporary relief to the borrower until the tribunal decides the case.

For example, if the bank has issued a possession notice for your property, obtaining a DRT stay order can stop the bank from taking possession until further orders.

When Can You Seek a Stay Order Against Bank Recovery?

You can approach DRT for a stay order in the following situations:

1. Possession Notice Issued by Bank – When banks take possession of secured assets under Section 13(4) of SARFAESI Act.
2. Bank Auction Proceedings – To stop the auction sale of mortgaged property.
3. Unlawful or Excessive Recovery Action – If the bank is proceeding beyond its legal authority.
4. Pending Dispute on Debt Amount – When the debt amount claimed is disputed or miscalculated.
5. Violation of SARFAESI Provisions – Such as improper service of demand notice or possession notice.
6. Harassment by Recovery Agents – If recovery steps are taken in an unlawful or coercive manner.

Legal Basis for Seeking a Stay Order

1. Section 17, SARFAESI Act, 2002

Borrowers or guarantors can file an application under Section 17 before DRT against measures taken by banks under SARFAESI. Once filed, DRT has the power to grant a temporary stay order to protect the borrower’s interest.

2. Appeal before DRAT (Debt Recovery Appellate Tribunal)

If DRT rejects the stay, borrowers can file an appeal before DRAT. However, there is a pre-deposit requirement, usually 50% of the claimed debt amount, which can be reduced to 25% in some cases.

3. Interim Applications (IA)

While filing your petition in DRT, you can simultaneously move an interim application requesting a conditional stay on recovery proceedings, subject to conditions like part-payment.

Conditions for Obtaining a Stay Order

The tribunal usually considers the following factors:

• Prima Facie Case: Whether the borrower has a genuine legal argument.
• Irreparable Harm: If the borrower would suffer significant loss (e.g., losing a home or business property) without stay.
• Balance of Convenience: If granting stay won’t cause disproportionate loss to the bank.
• Pre-Deposit Requirement: In DRAT appeals, part of the outstanding dues must be deposited.

Common Types of Stay Orders in DRT

1. Complete Stay – Halts all recovery proceedings until further orders.
2. Conditional Stay – Granted subject to deposit of a certain percentage of the loan amount.
3. Stay Against Bank Auction – Stops the scheduled auction of property.
4. Interim Stay – Temporary order valid until the next hearing.

The Debt Recovery Tribunal Process for Stay Orders

Here is a simplified breakdown of the debt recovery tribunal process:

1. Filing of Application: Borrower/guarantor files a Section 17 application before DRT.
2. Submission of Interim Application: A request for temporary relief or stay is made.
3. Preliminary Hearing: Tribunal hears arguments from borrower’s lawyer and bank’s lawyer.
4. Interim Order: DRT may pass a stay order, either conditional or complete.
5. Final Hearing: Case proceeds on merits, where both sides present evidence.
6. DRAT Appeal (if required): If DRT refuses stay, the borrower can approach DRAT, subject to pre-deposit conditions.

Key Challenges in Getting a Stay Order

• Strict Pre-Deposit Rules: DRAT requires significant deposit before entertaining appeals.
• Time Sensitivity: Recovery actions, especially auctions, move quickly—delays can make your case weaker.
• Bank’s Strong Position: Banks are given priority in recovery laws, making borrower defense challenging.
• Limited Grounds: Stay orders are granted only if a strong legal ground exists.

Practical Example

Imagine a business owner whose factory property is about to be auctioned by the bank. If the bank violated procedural requirements under SARFAESI (for example, giving insufficient notice), the owner can file a petition before DRT under Section 17 SARFAESI and seek a stay on the auction. The DRT may grant a conditional stay order requiring partial deposit of dues, thereby giving the borrower time to negotiate or settle.

Why Legal Representation Matters

While the law provides remedies, the DRT process is technical and time-bound. Drafting a strong application, identifying procedural lapses by banks, and negotiating conditional stays require expert legal assistance. Without professional help, borrowers risk losing valuable property.

Conclusion

Yes, you can get a stay order against bank recovery in DRT, but it is not automatic. You need to establish strong grounds, comply with conditions like pre-deposit, and act quickly before the bank completes recovery actions. The tribunal examines factors such as prima facie case, balance of convenience, and irreparable harm before granting relief.

If you are facing bank recovery proceedings, possession threats, or auction notices, don’t delay. Legal remedies exist—but they require timely action and professional representation.

We specialize in handling DRT cases, SARFAESI stay orders, DRAT appeals, and recovery proceedings. Our team has successfully protected borrowers and businesses from unlawful or premature recovery actions.

Contact us at +91-8920599818 or whatsapp or visit our Contact Us page today for expert advice and immediate legal assistance in DRT and DRAT matters.