Dismissed

Union Bank of India v. Indian Bank

DRT24 Jul 2025SA/62/2025

Case brief

AI extract

What is this about?

The Applicant Bank filed a Special Application under Section 17 of the SARFAESI Act against the Respondent Bank. The Tribunal dismissed the application, holding that under a recent Supreme Court judgment, disputes between banks regarding recovery and priority of charges must be resolved via Section 11 statutory arbitration, depriving the DRT of jurisdiction.

What did the court decide?

Dismissal of Special Application no. 6212025 with direction to parties to approach for arbitration under Section 11 of the SARFAESI Act.

Union Bank of India versus Indian Bank — Arbitration | DRT (2025)

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s[l6212O2s UNION BANK OF INDIA Vs INDIAN BANK

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Debts Recovery Tribunal-Il, Delhi

24.07.2025

Item no.31

Present:

Mr. Akhil Gupta, Counsel for applicant bank Mr. Sushant Dahiya, Counsel for auction purchaser Mr. Aayush Gupta, Counselfor respondent bank

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Matter is taken through Video Conferencing/Hybrid mode.

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The ld. counsel for respondent bank submitted that auction has already been failed.

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This SA has been filed by the applicant bank against tre Indian Bank. The Ld. Counsel of the respondent bankhas submitted that the present SA is not maintainable as per judgement passed by the Hontle Supreme Court in Appeal no.7ll0l2025 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 t7 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 Hontle Supreme Court.

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Heard the Ld. counsels of both the parties 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 Hontle 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 Honble Supreme Court has A

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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 hard the learned counsel apparing for the parties and having gone through the materials on ruorQ the following questbns fall for our consideration:

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I. What is the rcope of tubn 11 of the SARFAESI Act? In other words, what is the meaning of the expression 'bny dispute relating to ssuritisation or rrconstruction or non-payment of any amount due including interest" occurring in tuion 11 of the SARFAESI Act?

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II. What is the signifrance of the expression 'briw amongst any of the prttes, namely, the bank or financial institution or asset rsonstruction company or qualifid buyer" ud in fuion 11 read with fuion 2 of the SARFAESI Act? What is the underlying object behind prescribing arbitration for the adjudication of disputes betwen a bnfi financial institutio4 asset r*onilruction com@ny or qualifid buyer, in fuion 11 of the SARFAESI Act?

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III. Whether the existence of a written arbitration agrement betwen the partiu is rquird for the purpos of rsolution of disputes under fution 11 of the SARFAESI Aq 2002? In other words, is there any conflict betwen the dsisions of Oriental funk of Commerce (supn) and Meral tunk (supr|?

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IV. Whether S*tion 11 of the SARFAESI Aq 2002 should be construd as mandatoty or dirutory in ib nature?"

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The Hontle Supreme Court has considered various judgements passed by the Hontle High Court and also by the Honble Supreme Court and after making analysis of each and every Section used in this reg_a4 and also the intention of the A.

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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: - ion 11 of the SARFAESI Act dals with reslution of @ disputes relafr'ng to srcuritisatio4 rffinstruction or nonpayment of any amount due futween the bank or finanoal institution or asset rsonstruction company or qualifid buyer.

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(II) In order to attract the prouision of Sstion 11 of ffie SARFAESI Act, twin conditions have to be fulfilld being; first, the dspute must be futwen any bank or financial institution or asset ruonstruction company or qualifid buyer and suondly, the dispfie must relate to scuritistion or raonstruction or non-payment of any amount due including interest Where the aforsaid two conditbns are found to be prima-facie stisfid there the DRT will have no juriilictrbn and the proryr r&ourse would only b through Section 11 of the SARFAESI Act read with the Ad 1996.

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(III) The expresaon "non-payment of any amount duq includng interest" used in Mion lI of the SARFAESI Act is of wide import and would include a various range of scenarios of Aisputes' connstd to unpaid amounb including those arising due to third-party defaulb, such as indirqt defaulB of the borrowers.

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(IV) Any dispute between two bant<s, ftnancial institutrbns, asset rtronstruction compant?s or qualifid buyerc etc., where the jural relation betwen the two is of a lender and borrower, then ftction 11 of the SARFAESI Act witt have no appliatbn whaboever. The use of the phrase^,bny person" in the definition of 'borrower' in fuion 2(f) of the SARFAESI Aq, makes it abundanily clear that even a banlg financnl institution or asset rffonstruction @m@ny or

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qualifid buyer an be onsiderd a borrower, if they rseive financnl asstrtance from a bank or financrbl inrtitution etc by prouiding or creating a security interst Thus, a lender-turned-borrower would also fa// within the *ope of a "borrower" under the S4RFAESI Act and shall be governd by the same statutory framework as any ordinary furrower.

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(V) ftctron 11 of the SARFAESI Acl prouides for a statutory arbitrabion for any dispute mentiond therein betwen any of the partbs enumerated thereunder. There is no ned for an explicit written agrrement to arbitrate betwen such partt?s in order to attract Section 11 of the SARFAESI Act The sard prouisbn creats a lqtal ftction as rqards the exrrtence of an arbitration agrement notwithstanding whether such agrement exists or not in aduality.

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(W) ffion 11 of the SARFAESI Act is mandatory in nature. The use of the word '9hall" therein, the mandate of the aid prowsion cannot fu bypasd or subvertd by the parties by seking rffoutre elrewhere. "

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From perusal of the above conclusion and discussion made in the judgement it is clear that the Hon'ble Supreme Couft has held that where the dispute is between the two financial institutions regarding recovery of dueq 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 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 TSA is not maintainable and therefore, the TSA 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 of lhejSAnfAfSl nA. sA

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ORDER

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SA no. 6212025 is hereby dismissed.

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File be consigned to records.

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c, ) (susHrl KUMAR RASTOGD PRESIDING OFFICER DRT-II, Delhi

Union Bank of India v. Indian Bank

Case brief

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Union Bank of India v. Indian Bank

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