Dismissed

Fedbank Financial Services Ltd. v. Unity Small Finance Bank

DRT24 Apr 2026SA/141/2026

Case brief

AI extract

What is this about?

The Tribunal held that a Special Application filed by one financial institution against another regarding recovery dues is not maintainable. Relying on a Supreme Court judgment, the Tribunal directed the parties to resolve their dispute through arbitration under Section 11 of the SARFAESI Act instead of adjudication by the DRT.

What did the court decide?

The Special Application no. 1411/2026 is dismissed. The parties are directed to approach the competent authority for arbitration under Section 11 of the SARFAESI Act.

Fedbank Financial Services Ltd. versus Unity Small Finance Bank — Arbitration | DRT (2026)

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Debts Recovery Tribunal-Il, Delhi

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sAlt4Ll2026

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FEDBANK FINANCIAL sERvIcEs LTD. vs UNITY SMALL FINANCE BANK

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24.04.2026

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Item no. 11

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Present: Mr. Raj Vardhan Upadhyay alongwith Ms. Reena Jain Malhotra, counsel for applicant 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 Unity small Finance Bank. As the present sA is not maintainable as per judgement passed by the Hon,ble Supreme Court in Appeal no.711012025 in matter of Bank of India Vs. M/s Sri Nangri Rice Mills Private Limited and Ors.

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Heard the Ld. counsel of the applicant FI and perused the judgement passed by the HonUe 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 whethe'r the dispute inter-alia is between two bank, the DRT nas no jurisdiction to adjudicate the same and accordingly the parties mai be directed to resolve the dispute through arbitration undei Section 11 of the SARFAESI Act. The Honble supreme c-ourt has this aspect in detail and has framed four issues for determination in para no. 42 of the judgeme nt which are as below:-

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"42. Having heard the larned counsl apparing for i,l,: the pafties and having gone through the materials on rwrQ the following questions fall for our ,lt ::si I. Whatistheopof kctrbn.ll of the4RFAESI Act? In other wordg meaning of the sr'

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expression "any dispute relating to securitisation or reconstruction or non-payment of any amount due including interest" occuring in Section 11 of the SARFAESI ACt?

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IL What is the significance of the expression^,,arises amongst any of the partieg namely, the bank or financial institution or asset reconstruction company or qualified buyer' used in Section 11 read with Section 2 of the SARFAESI Act? What is the underlying object behind prescribing arbitration for the adjudication of disputes between a bantg frnancial institution, asset reconstruction company or qualified buyer, in Section 11 of the SARFAESI Act?

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ilL Whether the existence of a written arbitration agreement between the parties is required for the purpose of resolution of disputes under Section 1l of the SARFAESI Act, 2002? In other words, is there any conflict between the decisions of Orientat Bank of Commerce (supra) and Federal Bank (supra)? IV. Whether Section 11 of the SARFAESI Act, 2002 should be construed as mandatory or directory in ib natttre?"

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The Hon'ble supreme couft has considered various judgements passed by the Hon'ble High couft and also by the Honble supreme couft and after making anatysis 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 conclusion as under:

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(I) Section 11 of the SARFAESI Act deats with resolution of disputes relating to securitisation, reconstruction or non-payment of any amount due between the bank or frnancial institution or asset reconstruction company or qualified buyer.

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

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(W The expression "non-payment of any amount due, including interest" used in Section 11 of the SARFAESI Act is of wide import and would include a uarious range of scenarios of 'disputes' connectd to unpaid amounts including those arising due to thirdparty defaults, such as indirect defaul9 of the borrowers.

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(IV) Any dispute between two banks, financial institutions, asset reconstruction companies or qualified buyers etc., where the jural relation between the two is of a lender and borower, then Section 11 of the SARFAESI Act will have no application whatsoever. The use of the phrase^nany person" in the definition of 'borower' in Section 2(f) of the SARFAESI Act, makes it abundantly clear that even a bank, financial institution or asset reconstruction company,oJ qualifred buyer can be s.I

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considered a borower, if they receive financial assistance from a bank or financial institution etc by providing or creating a security interest. Thus, a lender-turned-borower 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 borrower.

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(V) Section 11 of the SARFAESI A4^provides for a fiatutory arbitration for any dispute^mentioned therein between any of the^{parties enumerated} thereunder. There is no need for an explicit^written agreement to arbitrate between such^{pafties in} order to attract Section 11 of the^{SARFAESIAct. The} said provision creates a lqal fiction as^{regards the} existence of an arbitration^agreement notwithstanding whether such agreement^{exists or} not in actuality.

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(VI) Section 11 of the SARFAESI Act is mandatory in nature. The use of the word "shall" therein,^the mandate of the said^{provision cannot} be^bypassed or subverted by the^parties by^{seeking recourse} elsewhere, "

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From^perusa! of the above^{conclusionand discussionmade} in the^judgement it is clear that the^{Hon'ble SupremeCouft 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 jurisdictionto entertain} the application under Section L7 of the SARFAESI^Act.

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In the tight of the above, this^{Tribunal is of the view that the} present SA is not maintainabte and thelefore, the SA is dismissed .;i

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Srl

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in the light of the above judgement passed by the Hon'ble supreme couft and the parties may approach for the arbitration under Section 11 of the SARFAESI Act.

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ORDER

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SA no.L4Ll2026 is hereby dismissed.

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File be consigned to records.

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

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I I

Fedbank Financial Services Ltd. v. Unity Small Finance Bank

Case brief

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Fedbank Financial Services Ltd. v. Unity Small Finance Bank

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