Dismissed

Union Bank of India v. Smt. Rajni Gosain & Anr.

DRT22 Aug 2025TA/1987/2022

Case brief

AI extract

What is this about?

The Appellate Tribunal declined jurisdiction over a dispute between two banks concerning mortgage authenticity. Relying on a Supreme Court judgment, the Tribunal held that such inter-bank disputes require mandatory arbitration under Section 11 of the SARFAESI Act. The interim application was dismissed with directions to approach the arbitration forum.

What did the court decide?

The Temporary Application (TA) no. 1987/2022 was dismissed; parties directed to approach the arbitration forum under Section 11 of the SARFAESI Act.

Union Bank of India versus Smt. Rajni Gosain & Anr. — Execution and Attachment | DRT (2025)

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Ilebts Recovery Tribunal-Il, Delhi

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TAlL987l2022

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UNIOT{ BANK OF INDIA Vs SMT. RA,NI GosAIil & ANR

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22.08.2025

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Item no. 16

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Present Shri U.N. Singh, counsel for applicant bank. Ms. Navdip Kaur, counsel for defendant no.3. None for defendant no.1 and 2.

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Matter is taken through Video Conferencing/ Hybrid Mode.

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This OA has been filed by the applicant bank against the defendants and from perusal of the TA, it is clear that two banks are claiming moftgage on the same property and this to be decided which mortgaged is genuine and which is not. The borrowers and the guarantors are ex-parte and they are not appearing. As per ld. Counsel of the defendanfs bank Punjab National Bank has submitted that in view of the judgment passed by the Honble Supreme Court where the dispute between the two banks regarding the geniuses of the mortgage and priority of the charges is in question the remedy lies under Section 11 of the SARFAESI Act and this Tribunal has no^jurisdiction to decide the same. The l-d, Counsel of the applicant bank has no objection to the above submission.

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In this regard, I have perused the TA and it is clear that the dispute is between the two banks regarding the geniuses of the mortgage. 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. has recently observed that if there is the dispute between the two financial institutions regarding the validity of the mortgage the correct forum is to move under Section 11 of the SARFAESI Act for arbitration. The relevant portion of the judgment passed by the Hontle Supreme Court is as below:-

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"42. Hauing heard the larnd counsel apparing for the partio and hauing gone through the materials on ruorQ the following quefiions fall for our consideration:

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I. What is the rope of ffiion 11 of the SARFAESI Act? In other words, what is the meaning of the expresion hny dispute relating to sauritistion or ruonstruction or non-payment of any amount due including interest" occurring in fuion 11 of the 94RFAESI Act?

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II. What is the signifiance of the expression 'briss amongst any of ilte prtia, namely, the funk or financial institution or ast ruonstruction company or qualifid buyer" ud in ffiion 11 rad with fution 2 of ffie 9ARFAESI Act? What is the underlying objut behind prexribing arbitration for the adjudication of disputes betwen a bn$ financial institutb4 ast rmnstruction company or qualifid buyer, in ffiion 11 of the 9ARFAESI Act?

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III. Whether the existence of a wriXen arbitration agrement betwen the parties is rquird for the purpoft of resldion of dispute under fuion 11 of the SARFAESI Act, 2002? In offter words, is there any contlict between the dsisions of Oriental funk of Commerce (supra) and Fderal tunk (supra)?

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IV. Whether tutbn 11 of the SARFAESI Aq 2002 should fu construd as mandatory or dirxtory in iE nature?"

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The Honble Supreme Court has considered various^judgements passed by the Hontle High Court and also by the Honble Supreme Couft and after making analysis of each and every Section used in this regard and also the ittgg[ion of the enactment of the sx'

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SARFAESI Act, has came to the following conclusion in para no. 124, which is reproduced below:-

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"124. We summarize our final anclusion as under: - (I) tution 11 of the SARFAESI Act deals with reslubbn of disputes relating to suuritiation, rsonstruction or non-pyment of any amount due betwen the funk or financial institution or asst rmnstruction compny or qualifid buyer.

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(II) In order to attract the provision of tuion 11 of the 94RFAESI Act, twin conditions have to be fulfrlld tteing; ftrst, the dispute must be futwen any funk or financbl institution or asset rffonstruction comryny or qualifid buyer and wondly, the dispute must relate to uritistion or reonstrudbn or non-pyment of any amount due including interest Where the aforesid two conditions are found to be^prima-facie stisfid, there the DRT will have no^juriilidion and the propr rxourre would only be through ktion 11 of the 94RFAESI Act rad with the Act, 1996.

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(III) The expression "non-pyment of any amount due, including inter6t" ud in ffiion 11 of the SARFAESI Act is of wide impoft and would include a uarious nnge of xenarios of 'disputes' onnxtd to unpid amounts including thore arising due to thirdparty defaulB, such as indirut defaulb of the furrowerc.

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(IV) Any dispute futwen two bnk, financial institutions, ast ruonstrudion companies or qualifid buyerc etc., where the jural relation between the two is of a lender and borrower, then fuion 11 of the S RFAESI Act will have no application whafuever. The ue of the phra 'bny^petson" in the definition of 'borrowel'ln ion 2(0 of the SARFAESI <). i

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Acl, makes it abundantly clear that even a funfi financial institution or asst rffinstruction cdmpny or qualifid buyer can be considerd a brrower, if they rueive ftnancial assisbnce from a funk or financial institution etc by providing or creating a scurity interest. Thus, a lender-turnd-furrower would als fall within the fupe of a "borower" under the SARFAESI Act and shall be governd by the same sbtutory framework as any ordinary borower.

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(V) ffiion 11 of the SARFAESI Act, prouid* for a statubry arbitration for any dbpute mentrbnd therein betwen any of the parties enumeratd thereunder. There is no ned for an explicit written agrement to arbitrate betwren such prties in order to attract S*tion 11 of the ARFAESI Act^The aid^provision creates a lqal fiction as rqards the existence of^an arbitration agrement notwithstanding^whethersuch agrement exisb or not in actuality.

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(W) tution 11 of the SARFAESI Act is mandatory in nature. The us of the word "shallo therein,^the mandate of the aid^prouision cannot be bypsd^or subvertd by the prties by wking rffiuae el*where."

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From^perusal of the above conclusion^{and discussion madein} the^judgement it is clear that the above^{judgment has been passed} in the^provision filed under the SARFAESI Act^{but the question is} the same as where the dispute regarding the^{validityof the} moftgage the matter should be referred to arbitration^under Section 11 Of thc SARFAESI ACt.^{ThCRDB ACt ANdSARFAESI ACt} are complimentary to each other and^provisions of one^{Act will} apply to another Act. In light of the above,^{this Tribunalis of view} that where the dispute is betweel the two banks^{regarding the}

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validity of the mortgage the appropriate forum will be Arbitration under Section ll ofthe SARFAESI Act.

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In the light of the above, the TA is disposed of accordingly and the parties are directed to approach for the arbitration under Section ll ofthe SARFAESI Act.

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ORDER

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TA no. 1987/2022 is hereby dismissed.

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File be consigned to records.

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(SUSHIL KUn+rx RASTOGI) PRESIDING OFFICER, DRT-II, Delhi