[Cites 8, Cited by 0]
Calcutta High Court
Union Bank Of India And Anr vs Indian Bank And Anr on 9 December, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
OCD 10
ORDER SHEET
AP-COM/870/2025
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
UNION BANK OF INDIA AND ANR
VS
INDIAN BANK AND ANR
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 9th December, 2025.
Appearance:
Mr. Ranjit Chowdhury, Adv.
Ms. Sampoorna Saha, Adv.
. . .for the petitioners.
Mr. Shiv Mangal Singh, Adv.
. . .for the Indian Bank.
The Court:
1. This is an application for appointment of an Arbitrator to resolve the
disputes arising between the petitioners and the Indian Bank with
regard to the same secured asset which were mortgaged to both the
banks by two borrowers. It is submitted by Mr. Chowdhury that one
Mr. Munna Yadav being a sole proprietor of a proprietorship concern
was extended a cash credit of Rs.48 lakhs vide sanction letter dated
July 12, 2022, for availing and/or enjoying the credit facility. Several
documents were executed and mortgage by deposition of title deed being
deed No.6781 of 2021 dated June 24, 2022, was created.
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2. Such mortgage was in respect of a flat measuring about 1030 Sq. Ft. on
the second floor along with one car parking space measuring about 120
Sq. Ft. on the ground floor of the building situated at 81A,
R/K/Chatterjee Road, P.O. & P.S. Kasba, Kolkata 700042, with the
petitioner no.1. On July 14, 2022, the petitioner no.1 duly registered
such mortgaged property with the Central Registry of Securitization
Assets Reconstruction and Security Interest of India (hereinafter
referred to as 'CERSAI') in terms of Section 23 of the Securitization &
Reconstruction of Financial Assets & Enforcement of Security Interest
Act (SARFAESI). The petitioner no.1 contends that the borrower
executed a debit balance confirmation letter in favour of the petitioner
no.1 by which the borrower unconditionally acknowledged the liability
of his proprietorship concern to the tune of Rs.48,48,547.54p as on
August 2, 2023. As the borrower was not in a position to repay and
conform to the terms and conditions of repayment as per the
agreements, the loan account was declared an NPA on September 19,
2023.
3. Subsequently, the account of the borrower was duly transferred to the
Assets Recovery Section at Kolkata. It is alleged that in spite of several
notices, the borrower failed and neglected to pay the dues to the
petitioner no.1 or any part thereof in spite of having knowledge
regarding NPA of his account. A notice was issued under Section 13(2)
of the SARFAESI Act, 2002 to the borrower, demanding a sum of
Rs.48,34,459.54p including interest as on September 19, 2023.
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4. A total sum due to the petitioner no.1 was approximately
Rs.60,20,059.79p as on July 31, 2025. The petitioner no.1 filed an
application under Section 19(1) of the Recovery of Debts and
Bankruptcy Act, 1993 before the learned Debts Recovery Tribunal - 1,
Kolkata, inter alia, claiming for a certificate for the said sum. Petitioner
no.2 came to know that the respondents had put the same mortgaged
property for sale/auction on September 17, 2025 by fixing the reserve
price for an amount of Rs.49,96,000.00. Immediately after having such
information, the petitioner no.2 informed the respondents that the
petitioners had a prior claim. The mortgage in favour of the petitioner
No. 1 was a prior one. Request was made for withdrawal of the sale
notice. The respondents did not reply.
5. The petitioners have approached this Court by filing this application on
the basis of Section 11 of the SARFAESI Act which states as follows:-
"11. Resolution of Dispute:
Where any dispute relating to securitization or reconstruction
or non-payment of any amount due including Interest arises
amongst any of the parties, namely, the bank or financial
Institution, or securitization company or reconstruction
company or qualified Institutional buyer, such dispute shall be
settled by conciliation or arbitration as provided in the
arbitration and conciliation act, 1996, (26 of 1996), as if the
parties to the dispute by consented in writing determination of
such dispute by conciliation or arbitration and the provisions
of that act shall apply accordingly."
6. The said provision requires resolution of dispute by arbitration or
conciliation under the Arbitration and Conciliation Act, 1996. In the
event disputes arise with regard to securitization or reconstruction or
non-payment of any due including interest arising therefrom between
the parties, namely, the bank or the financial institution or the
securitization company or the reconstruction company or the qualified
institutional buyer, the same shall be resolved by arbitration.
7. The section also provides for conciliation. When the withdrawal of the
sale notice was claimed by the petitioners, the respondents did not take
any initiative to resolve the dispute by conciliation. Thus, finding no
other alternative, the petitioners have approached this Court for
appointment of an Arbitrator.
8. In order to attract Section 11 of the SARFAESI Act, the dispute must be
between the bank or the financial institution or the asset reconstruction
company or qualified buyer and secondly, the disputes must relate to
securitization or reconstruction or non-payment of any amount due
including interest.
9. Mr. Singh learned advocate for the respondents submits that the
respondents have also taken steps against the same property. An NPA
was declared in respect of loan account of another borrower, namely,
one Mr. Debkanti Chandra. Further, the respondents are in physical
possession of the property and the property was put up for sale in terms
of the provision of the SARFAESI Act.
10. Having considered the provisions of Section 11 of the SARFAESI Act,
and the decision of the Hon'ble Apex Court in the matter of Bank of
India versus Sri Nangli Rice Mills Private Limited and Others reported in
(2025) 9 SCC 225, this Court is of the prima facie, view, that the prayer
of the petitioners should be allowed and the an Arbitrator should be
appointed to resolve the disputes between the parties. All issues and
objections, including the question of jurisdiction and arbitrability shall
be decided by the learned Arbitrator.
11. This order shall not preclude the parties from re-conciliating if they
wish to do so. The conclusion of the Hon'ble Apex Court in the said
decision was as follows:-
"G. Final conclusion
127. We summarise our final conclusion as under:
127.1. Section 11 of the SARFAESI Act deals with resolution of
disputes relating to securitisation, reconstruction or non-payment of
any amount due between the bank or financial institution or asset
reconstruction company or qualified buyer.
127.2. 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 financial 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 satisfied, there DRT will have
no jurisdiction and the proper recourse would only be through
Section 11 of the SARFAESI Act read with the 1996 Act.
127.3. 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 various range of scenarios of "disputes"
connected to unpaid amounts including those arising due to third-
party defaults, such as indirect defaults of the borrowers.
127.4. 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 borrower, then Section 11
of the SARFAESI Act will have no application whatsoever. The use of
the phrase "any person" in the definition of "borrower" in Section 2(f)
of the SARFAESI Act, makes it abundantly clear that even a bank,
financial Institution or asset reconstruction company or qualified
buyer can be considered a borrower, if they receive financial
assistance from a bank or financial institution, etc. by providing or
creating a security interest. Thus, a lender-turned-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 borrower.
127.5. 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 agreement 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
notwithstanding whether such agreement exists or not in actuality.
127.6. Section 11 of the SARFAES! 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.
128. Thus, for all the foregoing reasons, we have reached the
conclusion that there is no infirmity in the impugned order passed
by the High Court, directing the appellant and the respondent Banks
to resolve their dispute by way of arbitration in terms of Section 11 of
the SARFAESI Act.
129. In the result, the present appeal fails and is hereby dismissed.
The parties shall bear their own costs. Pending application(s), if any,
shall also stand disposed of.
130. The Registry is directed to circulate one copy each of this
judgment to all the High Courts and all the Benches of DRTs and
DRATS, respectively."
12. Section 11 provides for a statutory arbitration. The dispute here is
between the two secured creditors, i.e., which creditor will have a prior
claim over the mortgaged property. Section 11 of the SARFAESI Act is
mandatory as held by the Hon'ble Apex Court. The provision cannot be
bypassed or subverted by the parties, by seeking recourse to any other
proceeding.
13. Under such circumstances, the Court appoints Mr. Ranjan
Bachawat, learned Senior Advocate, as the Arbitrator, to arbitrate upon
the dispute between the parties. This appointment is subject to
compliance of Section 12 of the Arbitration and Conciliation Act, 1996.
14. The learned Arbitrator shall fix his own remuneration as per the
Schedule of the Arbitration and Conciliation Act.
15. AP-COM/870/2025 is, accordingly, disposed of.
(SHAMPA SARKAR, J.)
SP/
