Dismissed

Ms Hinduja Housing Finance Ltd. v. Ms Supreme Housing Financing Ltd. and Ors.

DRT18 Sept 2025SA/231/2022

Case brief

AI extract

What is this about?

The Tribunal dismissed the applicant's Special Appeal, holding that the DRT lacks jurisdiction to adjudicate a dispute between two financial institutions over recovery of dues or priority of charges. The court followed the Supreme Court's precedent directing parties to resolve such disputes via Section 11 of the SARFAESI Act through statutory arbitration.

What did the court decide?

Special Application no.23/2022 dismissed; parties directed to approach for arbitration under Section 11 of the SARFAESI Act.

Ms Hinduja Housing Finance Ltd. versus Ms Supreme Housing Financing… — Arbitration | DRT (2025)

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Debts Recovery Tribuna!-Il, Dethi

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s,.l23tl2022 MS HINDUJA HOUSING FINANCE LTD Vs Ms SUPREME HOUSING FINANCING LTD. AND ORS

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18.09.2025

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Item no.33

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Present: Sh. Aakash Kumar, Counsel for applicant FI None for respondent FI

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Matter is taken through Video Conferencing/ Hybrid Mode.

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The Ld. Counsel for the applicant FI submitted that the DRT couft has no jurisdiction to entertain the present matter because there is a decision from the Honbre supreme court of India and the matter is going to arbitration.

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This SA has been filed by the applicant FI against the M/s Supreme Housing Finance Ltd. & Ors. The present SA is not maintainable as per judgement passed by the Honbre Supreme Court in Appeal no.7Lt0l2025 in matter of Bank of India Vs. M/s Sri Nangli Rice Mills^private Limited and ors. It is submitted that where there is a dispute with regard to the recovery of the roans and where it is to be decided which secured creditor has priority of the charges, the sA shail not be maintainable under section 17 of the SARFAESI Act and the secured creditor has to move under section 11 of the SARFAESI Act. It is, therefore, submitted that the present sA is liable to be dismissed in terms of the recent judgement passed by the Honble Supreme Court.

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Heard the Ld. counsel for the applicant FI and perused the judgement passed by the Honble Supreme Court. From perusal of the judgment in para no.2 it is clear that the matter was 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 accordingry the parties may be directed to resolve the disorrtethrough arbitration under section

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11 of the SARFAESI Act. The Hon'ble Supreme Court 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. Having heard the learned counsel appearing for the parties and having gone through the materials on recorQ the following questions fall for our consideration:

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I. What is the scope of Section 11 of the SARFAESI Act? In other wordg what is the meaning of the expression^,any dispute relating to securitisation or reanstruction or nonpayment of any amount due including interest,, occurring in S*tion 11 of the SARFAESI Act?

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II. What is the significance of the expression^,briw amongst any of the parties, namely, the bank or financial institution or asset reconstruction company or qualified buyer" used in Sxtion 11 read with Section 2 of the SARFAESI Act? What is the underlying oblEct behind prescribing arbitration for the adjudication of disputes betwen a banlg financial institution, asset reconstruction company or qualifid buyer, in Section 11 of the SARFAESI Ad?

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III. Whether the existence of a written arbitration agreement betwen the parties is required for the purpose of reslution of disputes under Section 11 of the SARFAESI Act, 2002? In other words, is there any conflict between the dsisions of Orienbl Bank of Commerce (supra) and FederalBank (supra)?

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IV. Whether Section 11 of the SARFAESI Act, 2002 should be construd as mandatory or directory in its nature?"

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The Honble Supreme Court has considered various judgements passed by the Honble High Court and also by the Honble Supreme Court and after making analysis of each and every Section used in this rfprO and also the intention of the

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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 under: - (I) Section 11 of the SARFAESI Act deals with resolution of disputes relating to securitistio4 r$onstruction or nonpayment of any amount due between the bank or financial institution or asset reconstruction company or qualified buyer.

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(II) In order to attract the prouisrbn of Section tt of the SARFAESI AQ, twin conditions have to be fulfilled being; first, the dispute must be between any bank or financial institution or asset reconstruction company or qualified buyer and secondly, the dispute must relate to squritistion or reconstruction or non-payment of any amount due including interest Where the aforesaid two conditions are found to be prima-facie atisfid, there the DRT will have no jurisdiction and the proper recourse would only be through Section 11 of the %RFAESI Act read with the Act, 1996.

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(III) The expression "non-payment of any amount dug including interest" used in Section 11 of the SARFAESI Act is of wide import and would include a uarious range of scenarios of Abputes' connected to unpaid amounb including thox arising due to third-pafty defaults, such as indirect defaulB of the bonowerc.

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(IV) Any dispute between two banks, financial institutiong asset ruonstruction companies or qualifid buyerc etc., where the jural relation between the two is of a lender and borrower, then kction 11 of the SARFAESI Act will have no application whatsoever. The use of the phrase "any pernn" in the deftnition of borower'in Section 2(f) of the SARFAESI Ad, makes it abundantly clear that even a bank, financial institution or asset reonstruction company or qualifid buyer can be considerd a forrower, if they receive financial qi

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assistance from a bank or financial institution etc by providing or creating a s*urity interest. Thus, a lenderturnd-borrower would als fall within the scope of a "borrower" under the SARFAESI Act and shall be governed by the same statutory framework as any ordinary brrower. (V) kction 11 of the SARFAESI Act provides for a statutory arbitration for any dispute mentiond therein between any of the parties enumerated thereunder. There is no ned for an explicit written agrement to arbitrate futwen such parties in order to attract Section 11 of the SARFAESI Act. The said provision creates a legal ftction as regards the existence of an arbitration agrement notwithstanding whether such agrement exists or not in actuality.

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(W) Section 11 of the SARFAESI Act is mandatory in nature. The use of the word 'bhall" therein, the mandate of the sid provision cannot be bypassed or subverted by the pafties by seeking recourse elsewhere. "

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From perusal of the above conclusion and discussion made in the^judgement it is clear that the Honble Supreme Court has held that where the dispute is between the 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 despite the fact that there is no any clause for arbitration and the DRT has no^jurisdiction to entertain the application under Section L7 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 Honble Supreme Court and the pafties may approach for the arbitration under Section 11 of the SARFAESIA*2/

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ORDER

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SA no.23112022 is hereby dismissed.

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File be consigned to records.

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