Dismissed

Anand Rathi Global Finance Limited v. Fedbank Financial Services Limited

DRT27 May 2026SA/196/2026

Case brief

AI extract

What is this about?

DRT-II Delhi dismissed the applicant's Section 17 SARFAESI Act application against a financial institution respondent, holding that disputes between banks regarding recovery priority fall under mandatory Section 11 arbitration, precluding DRT jurisdiction.

What did the court decide?

Application under Section 17 was dismissed; parties directed to pursue arbitration under Section 11 of the SARFAESI Act.

Anand Rathi Global Finance Limited versus Fedbank Financial Services… — Arbitration | DRT (2026)

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Debts RecovelY^{Tribunal-Il,Delhi}

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S.A'No.^L9612O26 ANAND^{RATHIGLOBAL FINANCE LTD. VS.} FEDBANK^{FINANCIAL SERVICES LTD'}

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27.05.2026

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Item no'²

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Present:^{Ms. Taru Saxena, counsel and Shri Aruind} Jadon,^{counsel for aPPlicantFI'} Shri Arun^{PrataPSingh' counselfor} resPondent^FEDBANK'

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Matter^{is taken through VC/Hybrid mode'}

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This^{SA has been filed by the applicantFI} against^{the Fedbank Financial SeruicesLtd' The Ld'} CounseloftherespondentFlhassubmittedthatthe present sA^{is not maintainable as per judgement} passedbytheHon,bleSupremeCourtinAppeal no.7t10l2025inmatterofBankoflndiaVs.M/sSri Nangli^{Rice Mills Private Limited and Ors' Itis} submitted^{that where there is a dispute with regardto} therecoveryoftheloansandwhereitistotredecided which secured^{creditorhas priority of the charges,the} SAshallnotbemaintainableunderSectiontTofthe SARFAESIActandthesecuredcreditorhastomove underSectionlloftheSARFAESIAct.Itis,therefore, submittedthatthepresentSAisliabletobedismissed in terms^{of the judgementpassed by the Hon'ble} SuPreme^Coutt.

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Heard^{the Ld' counsels of both the parties} and^{perusedthe judgement passed by the Hon'ble} Supreme^{Court.From perusal of the judgment in para} no.2itisclearthatthematterWasgoneinappeal before^{the Hon'ble Supreme Couft on a question} <l⁽

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whether the^{dispute inter-alia is between two banks,} theDRThasnojurisdictiontoadjudicatetheSame and accordingly^{the parties may be directed to resolve} the dispute^{through arbitration under Section 11 of} the sARFAESI^{Act. The Hon'ble supremecourt has} considered^{this aspect in detail and has framedfour} issues for^{determinationin para no' 42 of the} judgement which are^{as below:-}

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,42. Having heard the learned coun*l appearing forthepaftiesandhavinggonethroughthematerials onrecord,thefottowingquestionsfallforour consideration:

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f, What^{is the scope of Srction 11 of the SARFAESI} Act?Inotherwords,whatisthemeaningofthe expression,,anydisputeretatingtosecuritisationor reconstruction^{or non-payment of any amountdue} inctudinginterest,,occurringinSectionllofthe SARFAESI^ACt?

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ff, What^{is the significance of the expression,,arises} amongst^{any of the parties, namely' the bank or} financial^{institution or asset reconstruction company} or^{quatifid buyer" used in Section llread with} section^{2 0f the ,ARFAESIAct? what is the underlying} objectbehindprercribingarbitrationforthe adiudicationofdisputesbetweenabank'financial institution,^{asset reconstruction company or qualified} buyer,^{in Sution 11 of the SARFAESIAct?}

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ffi,Whethertheexistenceofawrittenarbitration agreementbetweenthepartiesisrequiredforthe purposeofresolutionofdisputesunderSectionllof theSARFAESIAct,2002?-Inotherwords'isthereany i q

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conflict between^{the decisionsof Oriental Bank of} Commerce^{(supra) and FderalBank (supra)?} ru, Whether^{Sgtion11 of the SARFAESIACt, 2002} should be^{construd as mandatoryor diredoryin iB} natttre?"

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The Hon'ble^{Supreme Couft has considered} various^{judgementspassedby the Hon'ble High court} and also^{by the Honble supreme court and after} makinganalysisofeachandeverySectionusedinthis regard and^{also the intentionof the enactment of the} SARFAESI^{Act, has came to the followingconclusionin} para no. !24,^{which is reproducedbelow:-}

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"124. we^{summarizeour final conclusion as under:}

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(I) Section 11 of^{the SARFAESI Act deals with} resolution of^{disputes retating to securitisation,} reconstruction^{or non-paymentof any amountdue} between^{the bank or financial institution or asset} reconstruction^{company or qualifid buyer'}

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(II)InordertoattracttheprovisionofSectionllof the SARFAESI^{Act, twin conditions have to be fulfrlled} being; first,^{the dispute must be between any bank or} financial^{institution or asset rrconstrudion company} or^{quatified buyer and secondly,the dispute must} relatetosecuritigtionorreconstrudionornonpaymentofanyamountdueinctudinginterest.Where the aforesaid^{two conditionsare found to be prima'} facie satisfid,^{there the DRT witt have no jurisdiction} and the^{proper recourfi would onty re through} section^{11 0f the ,ARFAESI Act read with the Act,} 1996. €^

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(IID The avpression^{"non-paymentof any amount} duq inctuding^{interest" ud in Sstion 11 of the} SARFAESI^{Act is of wide inportand would include a} uarious range^{of renarios of 'disputes'onnted to} unpaid amounb^{including those arising due to third-} party defauhs,^{such as indirect defaulb of the} (IV) AnY disPute^{betwen two funk, financial} or asset qualifid buyerc etc.,^{where the jural relation betwen} the two^{is of a lender and furower,then ffiion 11} of the^{SARFAESI Act witt have no appliation} The use of^the Phrase^{"anY Prcon" in} the definition^{of 'bonower' in kction 2(t) of the} SARFAESI Act,^{makesit abundantly clear that even a} bank, financial^{institution or asset} company or^{qualified buYer can be} a if they receive^{financial asis'tancefroma} bank or^{financiatinstitutionetc by} or creating a^{suritY interest. Thus, a} bonower woutd^{also fall within the wpe of a} Act and shall^be "borrower"^{under the *ARFAESI} framework^{as anY} governd bY the sme^stututory ordinary^bonower. (V) Section 11 of^{the SARFAESIAct, providx for a} statutory^{arbitration for any disputementiondtherein} betwen any^{of the parties enumerated thereunder'} There is no^{ned for an explicit written agrement to} arbitrate futwen^{such patties in order b attrad} Section 11^{of the ARFAESI Act' The aid provision} crates a lqat^{fiction as rqardsthe exienceof an} arbitration agreement^{notwrthstandng whether such} agrement^{exists or not in actlllry}

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(VDSectionlloftheSARFAESIActismandatoryin nature,^{The use of the word ,,shall,, therein,the} mandate^{of the said provisionannot be bypassedor} subveftd^bY the^{parties bY seking rffourfr} elsewhere."

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From^{perusal of the above conclusion and} discussion^{made in the judgement it is clear that the} Hontle^{SupremeCouft has held that where the} dispute is^{between the two financialinstitutions} regarding^{recoveryof dues, whether there is any} disputerelatingtothepriorityofthecharges'the dispute^{shall be referred to the arbitrationdespitethe} fact that^{there is no any clausefor arbitration and the} DRThasnojurisdictiontoentertaintheapplication under Section^{t7 of the SARFAESIAct'}

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In the light^{of the above, this Tribunalis of} the view^{that the present SA is not maintainable and} therefore,theSAisdismissedinthelightoftheabove judgement passed^{by the Honble SupremeCouft and} the^{parties may approach for the arbitrationunder} Section^{11 of the SARFAESIAct'}

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Order

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SA no. tgill2}26^{is herebydismissed'}

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File be consigned^{to records'}

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q. (susHIL KUMAR^RASf,OGI) PRESIDING^OFFICER DRT-II,^DCIhi

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