Synopsis

A housing finance company (applicant) took over a loan from Axis Bank on behalf of the borrowers. The applicant paid the outstanding amount directly into the borrowers’ accounts with Axis Bank, expecting the bank to release the title deeds of the mortgaged property so that the applicant could create its own mortgage. A small amount (approx. ₹2.36 lakhs) remained outstanding due to interest accrual during the time gap between the foreclosure statement and actual disbursal. Axis Bank refused to hand over the title deeds, and the borrowers colluded with the bank to lift a debit freeze and draw further amounts. The applicant invoked arbitration against the borrowers (under the loan agreement) and also sought arbitration against Axis Bank under Section 11 of the SARFAESI Act, which provides for statutory arbitration between banks, financial institutions, etc., without requiring a written arbitration agreement. The key issue was whether a financial institution that is not yet a secured creditor can invoke Section 11 of the SARFAESI Act against a bank over a dispute arising from a loan takeover transaction. The Bombay High Court held that Section 11 of the SARFAESI Act has a wide ambit and covers disputes triggered by the borrower’s non-payment, even if the financial institution has not yet perfected its security interest. The court appointed a sole arbitrator to adjudicate disputes between all parties.

Court: High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction

Coram: Hon’ble Mr. Justice Sandeep V. Marne (Single Judge)

Date of Judgment: 6th May 2026

Citation: Commercial Arbitration Application No. 95 of 2026 (unreported)

Core Law: Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 11 (statutory arbitration); Arbitration and Conciliation Act, 1996 – Section 11 (appointment of arbitrator)

1.  Heading of the judgment

High court of judicature at bombay ordinary original civil jurisdiction

Commercial arbitration application no. 95 of 2026

Aditya birla housing finance limited (applicant) vs. Axis bank limited & ors. (respondents)

Coram: hon’ble mr. justice sandeep v. marne

Reserved on: 23rd april, 2026; pronounced on: 6th may, 2026

2. Legal framework

Major laws and provisions involved:

Securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 (sarfaesi act) – section 11 (resolution of disputes by arbitration), section 2(zf) (security interest), section 31(b) (exclusion for pledge of movables), section 13 (enforcement of security interest), section 14 (assistance to secured creditor)

Arbitration and conciliation act, 1996 – section 11 (appointment of arbitrator), section 7 (arbitration agreement)

Transfer of property act, 1882 – section 100 (charge)

Subject matter of the judgment:

Whether a dispute between a financial institution (housing finance company) and a bank, arising out of a loan takeover transaction where the financial institution has paid the bank but the bank refuses to release title deeds, can be referred to arbitration under Section 11 of the SARFAESI Act, even in the absence of a written arbitration agreement between the financial institution and the bank, and even if the financial institution has not yet become a secured creditor.

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