Supreme Court: Arbitration Mandatory for Inter-Bank Disputes Under SARFAESI Act

The Supreme Court has ruled that disputes between banks and financial institutions over secured assets must be resolved through mandatory arbitration under Section 11 of the SARFAESI Act.

The court held that debt recovery tribunals (DRTs) lack jurisdiction in such cases. The court emphasized that no written arbitration agreement is needed, as Section 11 creates a statutory fiction of consent.

The court further clarified that arbitration is compulsory, not optional, and applies only to disputes between secured creditors, not between a creditor and borrower.

The ruling arose from overlapping claims over pledged stock by the Bank of India and Punjab National Bank.