Dismissed

India Bulls Housing Finance Ltd. v. Union Bank of India

DRT17 Dec 2025SA/377/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal held that it lacks jurisdiction to entertain an application under Section 17 of the SARFAESI Act. Relying on a Supreme Court judgment, the Tribunal ruled that disputes over priority of charges between two financial institutions must be resolved through arbitration under Section 11.

What did the court decide?

The Special Application (SA no.377/2023) is dismissed; parties directed to approach for arbitration under Section 11 of the SARFAESI Act.

India Bulls Housing Finance Ltd. versus Union Bank… — Contract and Commercial Disputes | DRT (2025)

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Debts Recovery Tribunal-Il, Delhi

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sAl377l2023 INDIA BULIS HOUSING FINANCE LTD Vs UNION BANK OF INDIA

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L7.t2.2025

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L7.t2.2025 Item no.29 Present: Ms. Tanveer lGur, Prory Counsel for Ms. Sangeeta Sondhi, Counsel for ARCIL (India Bulls Housing Finance Ltd.) Mr. Janendra Lal, Counselfor respondent bank no.1 e-mailidnen ail. Mr. Raghav Sharma, Counselfor respondent no. 2 to 5

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Matter is taken through Video Conferencing/Hybrid mode.

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The Ld. Counsel for the respondent bank submitted that the DRT Couft has no jurisdiction to entertain the present matter because there is a decision from the Honble 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 Union Bank of India. The Ld. Counsel of the respondent FI has submitted that the present SA is not maintainable as per judgement passed by the Hontle Supreme Court in Appeal no.7Lt0l2015 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 loans and where it is to be decided which secured creditor has priority of the charges, the SA shall 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 HonUe Supreme Court.

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Heard the Ld. counsels of both the parties and perused the judgement passed by the Honble Supreme C_oyt. From perusal of <A

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the^judgment in para no.z 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 accordingly the parties may be directed to resolve the dispute through arbitration under Section 11 of the SARFAESI Act. The Hontle 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 aunsel apparing for the parties and having gone through the materials on r*ord, the following questions fall for our consideration:

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I. What is the rcope of Sution 11 of the SARFAESI Act? In other words, what is the meaning of the expression 'any dispute relating to suritisation or rsonstruction or nonpayment of any amount due including interest" occuring in Stion 11 of the SARFAESI Act?

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II. What is the significance of the expression "ariw amongst any of the pafties, namely, the bank or financial institution or asset rffinstruction company or qualifted buyer" usd in ion 11 read with Sution 2 of the SARFAESI Act? What is the underlying object behind prercribing arbitration for the adjudicatbn of disputes betwen a banlg frnancial institution, asset reconstruction company or qualifid buyer, in Section 11 of the SARFAESI Act?

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ill. Whether the existence of a written arbitration agreement betwen the pafties is requird for the purpoft of reslution of disputes under kction 11 of the SARFAESI Act, 2002? In other words, is there any conflid betwen the dxisions of Oriental Bank of Commerce (supra) and Federal Bank (supra)?

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IV. Whether kction 11 of the SARFAESI Aq 2002 should be construed as mandatory or directo{ its nature?"

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The Honble Supreme Court has considered various judgements passed by the Hontle High Court 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 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 anclusion as under: - (I) kction 11 of the SARFAESI Act dals with restution of disputes relating to sauritisatio4 rtronstruction or nonpayment of any amount due betwen the hnk or financial institution or aset reconrtruction company or qualified buyer.

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(II) In order to attract the provision of ion 11 of the SARFAESI Act, twin conditions have to be fulfilld being; first, the dispute must be futwen any bank or financial institution or asst reconstruction @mpany or qualifid buyer and wondly, the dispute must relate to srcuritistion or reconstrucfrbn or non-payment of any amount due including interest Where the aforesid two conditions are found to be prima-facie atisfid, there the DRT witt haue no juriiliction and the proper rffourse would only be through tuion 11 of the 94RFAESI Act read with the Act, 1996.

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GID^{fhe expression"non-payment} of any amount due, including interest" used in Sution 11 of the SARFAESI Act is of wide impoft and would include a uarious range of scenarios of disputes' connstd to unpaid amounB including tho* arising due to third-party defaulB, such as indirect defaulB of the borrowerc.

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(IV) Any dispute between two banks, financial institutions, asset reconstruction ompanies or qualifid buyerc etc., where the jural relation futwen the two is of a lender and borrower, then ion 11 of the SARFAEQI Act will have no

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applict tion whatsoever. The us of the phra* 'bny per5on,, in the definition of 'furrower'in kcfrbn 2(t) of the SARFAESI Act, makes it abundantly clear that even a banlg financiat institution or asset ruonstruction company or qualifid buyer can fu considerd a borrower, if they rxeive ftnancial assistance from a bank or financial institution etc by providing or creating a urity interest. Thus, a tenderturned-borower would atso fatl within the scop of a "borrower" under the SARFAESI Act and shall be governd by the same statutory framework as any ordinary borrower. (V) Section 11 of the 9ARFAESI Act, provides for a sbtutory arbitration for any dispute mentiond therein futwen any of the parties enumeratd thereunder. There is no ned for an explicit written agrement to arbitrate betwen such parties in order to attnct fuion 11 of the SARFAESI Act. The said provision creates a legal fiction as regards the existence of an arbitration agrement notwithstanding whether such agrement exisb or not in actuality.

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-i-.-

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(W) Section 11 of the SARFAESI Ad is mandatory in nature. The use of the word "shall" therein, the mandate of the said provision cannot be bypassd or subverted by the pafties by seeking recours elsewhere. "

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From perusal of the above conclusion and discussion made in the judgement it is clear that the Hon'ble 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 TSA is not maintainable and therefore, the TSA is dismissed in the light of the above judgement passed lylhe Honble Supreme C"\

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Court and the parties may approach for the arbitration under section 11 0f the SARFAESI Act.

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ORDER

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SA no.377 12023 is hereby dismissed.

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File be consigned to records.

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

India Bulls Housing Finance Ltd. v. Union Bank of India

Case brief

What is this about?

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India Bulls Housing Finance Ltd. v. Union Bank of India

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