[Smt. Pushpalatha S. v. State Bank of Travancore & Anr.,
AIR 2009 Kerala 181]
The petitioner availed a loan from the first respondent,
under the available financial assistance scheme of the second respondent,
Khadi and Village Industries Commission. The petitioner states that the second
respondent recommended her application and forwarded it to the first
respondent bank. However, the bank did not duly honour its commitments and
hence margin money and other amounts payable by the second respondent, the
Commission, was not appropriately released.
On default in repayment, the bank initiated action under
the Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (in short, SARFAESI Act). A notice u/s. 13(2) was
issued. The petitioner replied stating that in view of the disputes between
the petitioner and the first respondent regarding the total amount outstanding
from her to the bank, the parties have to go for arbitration in terms of S. 11
of the SARFAESI Act read with the provisions of the Arbitration and
Conciliation Act, 1996.
The petitioner’s challenge is to the bank’s decision that
it does not agree for arbitration in terms of S. 11 of the SARFAESI Act.
The Court observed that a reading of S. 11 of the SARFAESI
Act shows that the disputes which could be resolved by recourse to that
provision are disputes relating to securitisation or reconstruction or
non-payment of any amount due including interest. Such a dispute could be
resolved only when that arises amongst any of the parties stated in that said
provision. They are the bank or the financial institution or the
securitisation company or the reconstruction company or a qualified
institutional buyer. Therefore any dispute between a secured creditor and a
debtor in relation to the security interest or secured debt does not fall for
arbitration under that provision. For that clear reason, S. 11 of the SARFAESI
Act cannot be initiated by a debtor. Hence the decision of the bank to that
extent is sustainable. Therefore, the petitioner’s plea based on S. 11 of the
SARFAESI Act was rejected.
