Dismissed

Hinduja Housing Finance Limited v. Karvy Financial Services Limited

DRT20 Mar 2026SA/424/2023

Case brief

AI extract

What is this about?

DRT-II, Delhi dismissed an application by Hinduja Housing Finance Ltd. against Karvy Financial Services Ltd., holding that jurisdiction lies with arbitration under Section 11 of the SARFAESI Act.

What did the court decide?

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

Hinduja Housing Finance Limited versus Karvy… — Contract and Commercial Disputes | DRT (2026)

¶1

Debts Recovery Tribunal-Il, Delhi

¶2

sAl42412023 HINDUJA HOUSING FINANCE LIMITED Vs KARVY FINANCIAL SERVICES LIMITED

¶3

20.03.2026

¶4

Item no.48

¶5

Present: Mr. Gaurav Srivastava, Counsel for applicant FI Mr. Harshit singh sisodia, counset for'respondent FI

¶6

Matter is taken through Video conferencing/Hybrid mode.

¶7

The Ld. counsel for the respondent FI submitted that the DRT court has no jurisdiction to entertain the present matter because there is a decision from the Hon'bte Supreme Court of India and the matter is going to arbitration.

¶8

This SA has been filed by the applicant FI against the Karvy Financial seruices Limited. The Ld. counsel of the respondent FI has submitted that the present sA is not maintainable as per judgement passed by the Hon'ble 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 toans and where it is to be decided which secured creditor has priority of the charges, the sA shall not be maintainabte under section L7 0f 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 Hon'ble Supreme Court.

¶9

Heard the Ld. counsets of both the parties and perused the judgement passed by the Honbre supreme court. From perusat of the judgment in para no.z it is ctear that the matter was gone in appeal before the Hon'ble supreme court on a question whether the dispute inter-alia is between twq banks, the DRT has no

¶10

ili

¶11

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 Hon'ble supreme court has considered this aspect in detair and has framed four issues for determination in para no. 4zof the judgement which are as below:-

¶12

"42. Having heard the learned counsel appearing for the parties and having gone through thb ma@riats on recorQ the following questions fail for our consideration:

¶13

I. what is the scope of section 11 of the 9ARFAEiI Act? In other words, what is the meaning of the expression^,,any dispute relating to securitisation or reconstruction or nonpayment of any amount due including interest" occurring in Section 11 of the SARFAESI Act?

¶14

il. what is the significance of the expression 'brises amongst any of the parties, namely, the bank or financial institution or asset reconstruction company or quatified buyer" used in section l l read with section 2 of the SARFAEST Act? what is the undertying object behind prescribing arbitration for the adjudication of disputes between a bank, frnancial institution, asset reconstruction company or qualified buyer, in section 11 of the SARFAESI Act?

¶15

ilL Whether the existence of a written arbitration agreement between the parties is required for the purpose of resolution of disputes under section 11 of the 9ARFAESI Aq 2002? rn other words, is there any conflict between the decisions of oriental Bank of commerce (supra) and Federal Bank (supra)?

¶16

IV. whether section t 1 of the SARFAESI Act, 2002 shoutd be construed as mandatory or directory in its natnre?"

¶17

The Honble supreme court has cbnsidered various judgements passed by the Hon'bte Hrgh court and also by the

¶18

Hon'ble supreme court and after making analysis of each and every section used in this regard and also the intention of the enactment of the SARFAESI Act, has came to the foilowing conclusion in para no. L24, which is reproduced below:-

¶19

"124. we summarize our final conclusion as under: -

¶20

(I) section 11 of the SARFAEST Act deats with resolution of disputes relating to securitisation, reconstruction or nonpayment of any amount due between the bank or financial institution or asset reconstruction company or quatified buyer.

¶21

(II) In order to attract the prouision of section Il of the SARFAEST Act, twin conditions have to be futfitted being; frrst, the dispute must be between any bank or financial institution or asset reconstruction company or quatified 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 satisfied, there the DRT will have no jurisdiction and the proper recourse would onty be through section 11 of the SARFAESI Act read with the Act, 1996. (W The expression "non-payment of any amount due, including interest" used in section 1l of the 9ARFAESI Act is of wide import and would incrude a uarious range of scenarios of 'disputes' connected to unpaid amounts including those arising due to third-party defautts, such as indirect defaulB of the bonowers.

¶22

(IV) Any drspute between two banks, financiat institutions, asret rrconstruction companies or quatifi*buyerc etc.,- - where the jural relation between the two is of a lender and borrower, then section 1I of the 9ARFAESI Act witt have no application whaRoever. The use of the phrase ',any person,, in the definition of 'borower' in section 2(f) of the 9ARFAESI Act, makes it abundantly cleaq that even a bantg financial

¶23

¶24

institution or asset reconstruction company or qualified buyer can be considered a borower, if they receive financial assistance from a bank or financial institution etc by providing or creating a security interest. Thus, a lenderturned-borower would also fall within the scope of a "borrower" tnder the SARFAESI Act and shall be governed by the same statutory framework as any ordinary borrower. (V) Section 11 of the SARFAESI Act, provides for a statutory arbitration for any dispute mentioned therein between any of the parties enumerated thereunder. There is no need for an explicit written agrement to arbitrate between such parties in order to attract Section 11 of the'SARFAESI Act. The said provision creates a legal fiction as regards the existence of an arbitration agreement notwithsbnding whether such agreement exisB or not in actuality.

¶25

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

¶26

From perusal of the above conclusion arid 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.

¶27

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 Honble Supreme Court and the parties may approach for the arbitration under Section 11 of the SARFAESI Act. ^.Yi

¶28

ORDER

¶29

SA no.42412023 is hereby dismissed.

¶30

File be consigned to records.

¶31

;-t

¶32

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

¶33