Dismissed

Gambit Leasing and Finance Private Limited v. Fedbank Financial Services Limited

DRT29 Jul 2025SA/156/2025

Case brief

AI extract

What is this about?

Debts Recovery Tribunal dismissed an appeal filed by a financial institution against another, holding it non-maintainable based on a Supreme Court judgment mandating arbitration under Section 11 of the SARFAESI Act for disputes between financial entities.

What did the court decide?

The appeal (Section A) no. 156/2025 was dismissed; parties directed to approach under Section 11 for arbitration.

Gambit Leasing and Finance Private Limited versus… — Civil Procedure and Limitation | DRT (2025)

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Debts Recovely Tribunal-Il,^Delhi

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sAlLs6l2o2s

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GAMBIT LEASING AND^{FINANCEPRIVATE LIMITEDVS} FEDBANK FINANCIAL SERVICES^LIMITED

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29.07.2025

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Item no. 1

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Present: Mr. Manish Miglani, counsel for^{applicant FI.} None for respondent FI.

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Matter is taken through^{Video Conferencing/ hybrid Mode.}

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This SA has been filed by^{the applicant FI against the} Fedbank Financial Services Limited.^{As the present SA is not} maintainable as^{per judgementpassedby the HonbleSupreme} Court in Appeal no.711012025^{in matter of Bank of India Vs. M/s} Sri Nangli Rice Mills Private^{Limited and Ors.}

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Proof of seryice filed by^{the applicantFI on 25.07.2025} through online. Despite^{repeatedcalls, no one is appearedon} behalf of the respondent^FI.

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Heard the Ld. counsel of^{the applicantFI and perusedthe} judgement passed by the Honble Supreme Court.^{From perusalof} the^judgment in^{para no.2 it is clear that the matterwas gone in} appeal before the Honble^{Supreme Court on a question whether} the dispute inter-alia is between^{two banks, the DRT has no} jurisdiction to adjudicate the same and accordingly^{the parties may} be directed to resolve^{the dispute through arbitrationunder} Section 11 of the SARFAESI^{Act. The Honble Supreme @urt has} considered this aspect in detail^{and has framed four issues for} determination in^{para no. 42 of the judgement which are as} below:-

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"42. Hauing heard the learned counsl^appearingfor the parties and having 9ln.eJhrough^{the materials} s)

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on rffor4 the following questions fall for our consideration:

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L What is the sape of kction 11 of the SARFAESI Act? In other words, what is the meaning of the expression 'bny dispute relating to securitisation or reconstruction or non-pyment of any amount due including interst" occuring in ffiion 11 of the SARFAESI Act?

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II. What is the significance of the expr*sion 'briw amongst any of the^parties, namely, the bank or financial institution or asset r&onstruction @mryny or qualifid buyer" usd in Section 11 read^with ffiion 2 of the SARFAESI Act? What is the underlying object behind^prescribing arbitration^for the adjudication of disputes betwen a bank, frnancial institutr'o4 asset ruonstruction^company or qualifid buyer, in Sxtion 11 of the^9ARFAESI Act?

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III. Whether the existence of a written arbitration agrement futwen the^{prties is} rquitd^{for the} purpore of reslution of disputes under Section 11 of the SARFAESI Aq^2002? In other^{words, is there} any conflict betwen the dsisions of^{Oriental Bank} of Commerce^(supra) and Meral^{Bank (supra)?}

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IV. Whether tuion 11 of the SARFAESI^{Ad, 2002} should be construd as^{mandatory or dirxtory in its} nature?"

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The Honble Supreme^{Court has consideredvarious} judgements passed by the Honble High Couft and also by the Hontle Supreme Court and after^{making analysis of each and} every Section used in this regard and^{also the intention of the}

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s"l

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enactment of the SARFAESI Act, has came to the^following conclusion in^para no.l24, which is reproduced below:-

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"124. We summarize our final conclusion^as

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under:^-

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@ ion 11 of the SARFAESI Act deals^with resolution of dispute relating to wuritiation, ruonstruction or non-payment of^{any amount due} betwen the bank or financial^{institution or asset} rxonstruction company or^{qualifid buyer.}

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(II) In order to attract the^provision of Sution¹¹ of the SARFAESI Act, twin conditions^{have to be} fulfilted being; fifi the dispute^{must be between} any bank or financial^{inrtitution or asset} rtonstruction company or^{qualifid buyer and} srcondly, the dispute^{must relateto ssuritistionor} rsonstruction or non-payment^{of any amount due} inctuding interest.^{Where the aforesid two} conditions are found^{to be prima-facieatisfted,} there the DRT will^{have no jundiction and the} proper rffourse would only be through^{Sxtion 11} of the SARFAESI^{Act read with the Act, 1996.}

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(III) The expression "non-payment^{of any amount} duq inctuding interest" ud^{in Sstion 11 of the} SARFAESI Act is of^{wide import and would include a} various range of scenarios^{of 'disputes'connectdto} unpaid amounts^{includingthox arising due to third-} party defaults, such as indir*t defaulE^{of the} borrowers.

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(IV) Any dispute betwen^{two banks, financial} institutions, as#t^{rffonstrudion ompaniesor} qualified buyerc etc., where the^{jural relaUbn} betwen the two^is of^{a lender and borrower, then} Section 11 of the^{SARFAESI Act will have no} e)

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appliation whafuever. The us of the^phrae 'bny person" in the definition of 'borrower' in fubn 2(f) of the SARFAESI Act, makes it abundantly^clear that even a banlg financial institution or^asset raonstruction @mpany or^qualifid buyer can^be considerd a borrower, if they rseive^financial assistance from a funk or financial^{institutionetc by} providing or creating a wuriU interest. Thus, a lender-turned-borrower would als^{fall within the} rcope of a "bonower" under^{the SARFAESIAct and} shatt be^governed by the same^{statutory framework} as any ordinary borrower.

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(V)^gction 11 of the SARFAESI^{Act, providesfor a} statutoty arbitration for^{any dispute mentiond} therein betwen any of^{the parties enumeratd} thereunder. There^{is no} nd^{for an explicitwritten} agrtrment to arbitrate^{betwensuch prtiesin} order to attract Sution^{1 I of the SARFAESIAct. The} aid^provision creates a lqal^{fiction as rqards the} existence of an arbitration^agrement notwithstanding^{whether such agrement exisB or} not in actualitY.

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(W) kction 11 of the SARFAESIAcT^{is mandatory in} nature. The use of the^{word "shall" therein, the} mandate of the aid^{provision cannot fu bypssd} or subvertd by he Nrties^{by wking rffoutre} elftwhere."

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From^perusal of^{the above conclusionand discussion made} in the^judgement it^{is clearthat the Honble SupremeCourt has} held that where the^{dispute is betweenthe two financial} institutions regarding^{recovery of dues, whether there is any} dispute relating to^{the priority of the charges, the dispute shall be} referred to the arbitration^{desoite the fact that there is no any} 1')'

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clause for arbitration and the DRT has no^jurisdiction to enteftain the application under Section 17 of the SARFAESI Act.

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In the light of the above, this Tribunal is of the view that the present SA is not maintainable and therefore, the SA is dismissed in the light of the above^judgement passed by the Hontle Supreme Court and the^parties may approach for the arbitration under Section 11 ofthe SARFAESI Act.

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ORDER

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SA no.156/2025 is hereby dismissed.

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The date already fixed on 27.OA.2O25 before the Ld. Registrar stands cancelled.

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File be consigned to records.

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(SUSHIL KUMAR RASTOGI)'} PRESIDING OFFICER, DRT-II, Delhi