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SUPREME COURT OF INDIA
J.B. PARDIWALA, PANKAJ MITHAL, JJ
Bank Of India – Appellant
Versus
M/s Sri Nangli Rice Mills Pvt. Ltd. & Ors. – Respondents
Civil Appeal No. 7110 of 2025 (Arising out of Special Leave Petition (Civil) No. 16735 of 2022)
Decided on : 23-05-2025
The AMRCD (Administrative Mechanism for Resolution of CPSEs Disputes) is a structured framework established by the Government of India to facilitate the resolution of disputes among Central Public Sector Enterprises (CPSEs). Its primary purpose is to provide a formal, streamlined process for resolving disagreements related to the interpretation and application of commercial contracts between CPSEs, or between CPSEs and government departments/organizations, excluding disputes related to Railways, Income Tax, Customs, and Excise Departments (!) .
However, its applicability is limited to disputes concerning the interpretation and implementation of contractual provisions between CPSEs and does not extend to disputes arising from other types of agreements or rights, such as those related to security interests or claims over assets outside the scope of commercial contracts (!) .
In the context of disputes between banks, financial institutions, or other entities concerning security interests or claims over assets, the AMRCD Memorandum is generally not the appropriate mechanism. Such disputes are primarily governed by the statutory provisions of the SARFAESI Act, which prescribes specific procedures, including arbitration under Section 11 of the SARFAESI Act, for resolving inter-se disputes related to securitization, reconstruction, or non-payment of dues (!) (!) .
Therefore, while the AMRCD provides a specialized process for resolving certain inter-CPSE disputes, it does not replace the statutory arbitration provisions under the SARFAESI Act for disputes between financial institutions or secured creditors over security interests or claims. The statutory framework, including Section 11, creates a legal fiction of mutual consent to arbitration, which is deemed to exist among the specified parties for disputes falling within its scope, irrespective of whether a formal arbitration agreement exists (!) (!) .
In summary, the AMRCD is a dispute resolution mechanism tailored for inter-CPSE contractual disputes, but it does not supersede or substitute the statutory arbitration process mandated by the SARFAESI Act for conflicts involving secured creditors and security interests. Disputes that are related to securitization, reconstruction, or non-payment of dues between banks, financial institutions, or similar entities must be addressed through the arbitration process provided under Section 11 of the SARFAESI Act, and not through the AMRCD mechanism.
| Table of Content |
|---|
| 1. clarification of parties involved (Para 1 , 3 , 4 , 5) |
| 2. resolution of disputes between financial institutions must adhere to the sarfaesi act process. (Para 2 , 29) |
| 3. arguments regarding jurisdiction and applicability of sarfaesi act (Para 30 , 31 , 32 , 33 , 34) |
| 4. legislative history and intent of the sarfaesi act (Para 42 , 43 , 44 , 45) |
| 5. disputes related to security interest creation methods require judicial examination. (Para 51 , 53) |
| 6. conclusions and mandatory nature of section 11 (Para 124 , 125) |
JUDGMENT :
J.B. PARDIWALA, J.
For the convenience of the exposition, this judgment is divided in the following parts: -
| INDEX | |
| A. | FACTUAL MATRIX |
| B. | PROCEEDINGS UNDER THE SARFAESI ACT. |
| i. | First round of proceedings before the DRT. |
| ii. | Second round of proceedings before the DRT. |
| C. | IMPUGNED ORDER |
| D. | SUBMISSIONS OF THE PARTIES |
| i. | Submissions on behalf of the Appellant Bank. |
| ii. | Submissions on behalf of the Respondent Bank. |
| E. | ISSUES FOR DETERMINATION. |
| F. | ANALYSIS |
| i. | Legislative History and Scheme of the SARFAESI Act. |
| ii. | Scope of Section 11 and expression “dispute” thereunder. |
| a. | Various Decisions on the subject. |
| b. | Scope and ambit of Section 11 of the SARFAESI Act. |
| c. | Meaning of the expression “non-payment of any amount due including interest”. |
| d. | Section 11 will not apply to disputes between Bank(s), Financial Institution(s), ARC(s) or Qualified Buyer(s), who are otherwise a Borrower. |
| iii. | There is no requirement of existence of a written arbitration agreement under Section 11 of the SARFAESI Act. |
| iv. | Section 11 of the SARFAESI Act is mandatory in nature. |
| G. | FINAL CONCLUSION |
1. Leave granted.
2. This appeal arises from the judgment and order passed by the High Court of Punjab and Haryana at Chandigarh dated 07.10.2020 in CWP No. 13538 of 2020 (O&M) (hereinafter referred to as the “Impugned Order”) by which the High Court upheld the decision of the Debt Recovery Tribunal-I, Delhi (for short, the “DRT”) which inter-alia held that since the dispute in the present is between two banks, the DRT has no jurisdiction to adjudicate the same and accordingly directed the parties herein to resolve the dispute through arbitration under Section 11 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the ”SARFAESI Act”) and thereby dismissed the writ petition filed by the appellant herein.
3. For the sake of convenience, we clarify that the appellant herein, ‘Bank of India’ is a nationalized bank (hereinafter referred to as the “appellant bank”), the respondent no. 1 herein, ‘M/s Sri Nangli Rice Mills Pvt. Ltd. is a manufacturing unit dealing in rice and other allied products and the borrower herein (hereinafter referred to as the “borrower”), the respondent no. 2 herein, ‘Punjab National Bank’ is also a nationalized bank, (hereinafter referred to as the “respondent bank”) and the respondent no. 3 herein, ‘National Bulk Handling Corporation’ is the collateral manager of the respondent bank (hereinafter referred to as the “collateral manager”).
A. FACTUAL MATRIX
4. It appears from the material on record that the borrower herein on 31.07.2003 had availed credit facility from the appellant bank herein by hypothecating stocks of paddy and other assets. Pursuant thereto, a Credit Facility Agreement dated 23.09.2006 was executed between the borrower company and the appellant bank, with the following relevant terms and conditions: -
| “CREDIT FACILITY AGREEMENT [...] 4.6 BORROWER NOT TO BORROW MONIES FROM OTHER BANKS AND FINANCIER WITHOUT CONSENT' OF THE BANK: The Borrower confirms that he has not borrowed any monies from any other Bank or financier and further agrees that so long as the Borrower continues to be indebted or liable to Bank in respect of Sanctioned Credit Facilities, the Borrower shall |
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