Dismissed

Jana Small Finance Bank Limited v. Truhome Finance Limited

DRT29 May 2026SA/208/2025

Case brief

AI extract

What is this about?

Applicant bank challenged DRT jurisdiction claiming the dispute between two financial institutions regarding recovery priority must go to arbitration under Section 11 of the SARFAESI Act per Supreme Court precedent.

What did the court decide?

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

Jana Small Finance Bank Limited versus Truhome Finance Limited — Company and Corporate | DRT (2026)

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Debts Recovery Tribunal-Il, Delhi

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sA/2O8l202s

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JANA SMALL FINANCE BANK LIMITED^{VS TRUHOME} FINANCE LIMITED

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29.0s.2026

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Item no.31

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Present: Ms. Ojasvi Sharma, Counsel for applicant^bank Ms. Usha Singh, Counsel for^respondentFI

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Matter is taken through Video^{Conferencingl Hybrid Mode.}

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Z. The Ld. Counsel for the^{applicantbank submittedthat the} DRT Court has no^{jurisdictionto entertain the presentmatter} because there is a^{decisionfrom the Hon'ble Supreme Couft of} India and the matter^{is going to arbitration.}

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This SA has been^{filed by the applicant FI againstthe} Truhome Finance^{Ltd. The Ld. Counselfor the respondent FI has} submitted that the^{presentSA is not maintainableas per judgement} passed by the Honble Supreme^{Court in Appeal no.711012025 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^{toans 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 SARFAESIAct 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 passedby the Hon'ble} Supreme Court.

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Heard the Ld. counsels of^{both the parties and perused the} judgement passed by the Hon'ble Supreme Coutt. From^perusalof the^judgment in^{para no.2 it is clear that the matter was gone in} appeal before the Honble^{SupremeCouft on a question whether} the dispute inter-alia is between^{two banks, the DRT has no} jurisdiction to adjudicate the samqand-accordingly^{the paftiesmay} gA,.

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be directed to resolve the dispute^{through arbitrationunder Section} 11 of the SARFAESI Act. The Hon'ble^{Supreme Court has} considered this aspect in detail and^{has framed four issues for} determination in^para no.42of^{the judgementwhich are as below:-}

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"42. Having heard the learned^{counsel appearingfor} the pafties and having^{gone throughthe materialson} recor4 the following^{questions fall for our consideration:}

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I. What is the scope of Section^{11 of the SARFAESIAct? In} other words, what is the^{meaning of the expression'bny} dispute relating to^{securitisation or reconstructionor non-} payment of any amount due including interest"^occuTing in Section 11 of the SARFAESI^Act?

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fi. what is the signifiance^{of the expression narires} amongst any of the^{parties, namely,the bank or financial} institution or asset reconstruction^{company or qualified} bttyer" used in Sution^{11 read with Section 2 of the} flARFAESI Act? What^{is the underlying obiectbehind} prescribing arbitration for the adiudication^{of disputes} betwren a bank,^{financialinstitution, asset reconstruction} company or^quatified buyer,^{in section11 of the SARFAESI} ACt?

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ilL. Whether the existence of a^{writtenarbitration} agreement between the^{parties is required for the purpose} of resolution of disputes^{under Section11 of the SARFAESI} Act, 2002? In other^{words, is there any conflict between} the decisions of Orienbl^{Bank of Commerce(supra)and} Federal Bank^(supra)?

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IV. Whether Section 11 of^{the SARFAESI Act, 2002 should} be construed as mandatory^{or directory in its nature?"}

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The Honble Supreme^{Court has considered various} judgements passed by the Honble High Court and also by^the Honble Supreme^{Court and after mAking analysis of each and} S.)

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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:^- (I) Section 11 of the SARFAESI Act deals with resolution of disputes retating to securitisatioO reconstruction or nonpayment of any amount due futween the bank or frnancial institution or asret reconstruction company or^qualified buyer.

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(II) In order to attract the provision of S*tion 11 of the SARFAESI Act, twin conditions have to be fulfilld^being; first, the dispute must be between any bank or^frnancial institution or asset reconstruction company or^qualifred buyer and secondly, the dispute must^{relate to suuritisation} or reconstruction or non-payment of any^amountdue including interest. Where the aforesid two^{conditions are} found to be prima-facie stisfid, there the^{DRT will have no} jurisdiction and the proper rffourft would only be through Section 11 of the SARFAESI Act read^{with the} A4^1996. GII)^{The expression"non-paymentof any amount due,} including interest" used in Section¹¹ of^{the SARFAESIAct is} of wide import and would include a^{various range of} scenarios of 'disputes' connected to unpaid^amounB including those arising due to third-party defaulB,^{such as} indirect defaults of the borowers.

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(IV) Any dispute between two banks, financial institutions, asset reconstruction companies or^{qualifid buyers etc.,} where the^jural relation between the two is of a^lender and borrower, then Section 11 of the SARFAESI Act^{will have no} application whaRoever. The use of^{the phrase 'bny peren"} in the definition of 'borower' in Section 2(t) of^the SARFAESI Act, makes it abundantly clear that even a banlt^financial institution or asset reconstru.e[19;1 company or^qualified

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s'tr t

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buyer can be considerd a funower, if they rrceive financial assistance from a bank or ftnancial institution etc by providing or creating a suurity interest Thus, a lenderturned-borrower would also fall within the scope of a "borrower" under the SARFAESI Act and shall be^governed by the same statutory framework as any ordinary furower. (V) ftction 11 of the SARFAESI Act, provides for a statutory arbitration for any dispute mentiond therein futween any of the^parties enumerated thereunder. There is no nd for an explicit written agrement to arbitrate futwen such parties in order to attract Section 11 of the SARFAESI Act. The said. provision creates a lqal fiction as regards the existence of an arbitration agrement 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 'bhall" therein, the mandate of the sid provision cannot fu bypassd or subverted by the parties by seeking recourse 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 enteftain 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 by the Hon'ble Supreme Court 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.20812025 is hereby dismissed.

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File be consigned to records.

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e)\I

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(susHrL rufl/lnn RAsroGr) PRESIDING OFFICER DRT-II, Delhi