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Section 11: Resolution of disputes through conciliation or arbitration

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 2002
Section 10 All 42 Sections of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 Section 12

Legal Commentary & Landmark Judgments: Section 11

Section 11 of the SARFAESI Act, 2002 establishes the statutory dispute resolution framework through conciliation or arbitration under the Arbitration and Conciliation Act, 1996 for disputes arising between banks, financial institutions, ARCs, and qualified buyers.

  • Inter-Institutional Dispute Domain: Applies exclusively to disputes relating to securitisation, asset reconstruction, or non-payment of amounts between institutional stakeholders (banks, FIs, ARCs, QBs).
  • Statutory Arbitration Mechanism: Deems dispute resolution between institutional parties to be governed by the Arbitration and Conciliation Act, 1996 as if parties executed a written arbitration agreement.
  • Borrower Exclusion: Delinquent borrowers have no locus standi to invoke Section 11 arbitration; borrower-creditor disputes fall exclusively within the jurisdiction of the DRT under Section 17.
Key Landmark Precedents:
  • HDFC Bank Ltd. v. Satpal Singh Bakshi (2013) 134 DRJ 566 (FB): A Full Bench of the Delhi High Court held that while inter-creditor disputes and disputes between ARCs/banks/QBs are arbitrable under Section 11, disputes between banks and borrowers under SARFAESI/RDDBFI are subject to the exclusive jurisdiction of the DRT/DRAT.
  • Vidya Drolia v. Durga Trading Corporation (2021) 2 SCC 1: The Supreme Court affirmed that debt recovery matters involving special statutory tribunals (DRT) with sovereign public-law recovery mechanisms are non-arbitrable, distinguishing commercial inter-lender disputes governed by Section 11.
Courtroom Practice & Strategic Litigation Guidance:

In inter-creditor consortium disputes or loan assignment percentage conflicts between banks and ARCs, file a Section 11 petition to compel arbitration. Resist debtor applications to refer SARFAESI disputes to arbitration by establishing that Section 11 expressly excludes borrower disputes.

Section 10 All 42 Sections of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 Section 12