2025 Supreme Court of India Latest Judgments on DRT and Sarfaesi Act

Supreme Court of India – Key Judgments (2025) on DRT and SARFAESI Act

In 2025, the Supreme Court of India delivered several landmark judgments interpreting the Debt Recovery Tribunal (DRT) framework and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). These rulings collectively refined the jurisdictional boundaries of DRTs, clarified borrowers’ and lenders’ rights, and emphasized procedural discipline under the Act.

1. DRT Jurisdiction and Civil Court Powers

The Supreme Court clarified that Debt Recovery Tribunals do not have jurisdiction to grant declarations regarding mortgage deeds, sale deeds, or title disputes. Such matters fall squarely within the jurisdiction of civil courts under Section 9 of the Code of Civil Procedure (CPC).

The Court stressed the importance of proper title clearance reports by banks to safeguard public interest and prevent lending against defective titles. It also encouraged collaboration between the Reserve Bank of India (RBI) and stakeholders to standardize title search reports and their fee structures.

2. M/S Parthas Textiles v. Asset Reconstruction Company (India) Ltd.

The Supreme Court granted leave to appeal against a Kerala High Court decision that had dismissed an application under Section 17 of the SARFAESI Act, reaffirming the strict statutory compliance required in securitisation and enforcement proceedings.

The Court emphasized that Section 17 applications must be entertained and disposed of strictly in accordance with the statutory mandate, underscoring the need for DRTs to act within defined timelines and scope.

3. Indian Overseas Bank v. M/s Radhey Infra Solutions

In this case, the Court examined delays in disposal of securitisation applications before DRTs. While acknowledging the systemic delay, the Court refrained from issuing extra-statutory directions but reaffirmed the necessity of expeditious disposal under the SARFAESI framework.

It stressed that DRTs must adhere to the timeframe specified in Section 17(5) of the Act, which mandates that proceedings be concluded within 60 days (extendable only for recorded reasons).

4. Revival of Section 17(5) Timelines

The Supreme Court revived and reaffirmed the importance of adhering to procedural timelines under Section 17(5). The Court noted that prolonged pendency of securitisation applications undermines the purpose of the SARFAESI Act — which was enacted to ensure speedy recovery and enforcement of security interests.

5. Jurisdictional Boundaries and the Mardia Chemicals Precedent

Reiterating its earlier decision in Mardia Chemicals Ltd. v. Union of India, the Supreme Court reaffirmed that civil courts’ jurisdiction is barred in matters where the DRT and Debt Recovery Appellate Tribunal (DRAT) are empowered to decide under SARFAESI. However, civil courts retain jurisdiction in cases involving fraud, title validity, or document authenticity.

6. M. Rajendran & Ors. v. M/s KPK Oils and Proteins India Pvt. Ltd. & Ors.

The Supreme Court clarified the borrower’s right of redemption under Section 13(8) of the SARFAESI Act.

• The right ceases once a valid composite auction/sale notice has been issued — that is, after both publication in newspapers and service upon the borrower.

• The Court explained that following the 2016 amendment, the right of redemption is not open-ended and must align with statutory language.

• The Court also suggested that the legislature may consider further clarification to eliminate ambiguity around the timeline for exercising redemption rights.

7. Bank of India v. M/s Sri Nangli Rice Mills Pvt. Ltd. & Ors. (2025 INSC 765)

The Court ruled that disputes between banks, financial institutions, and asset reconstruction companies regarding securitisation or recovery are subject to mandatory arbitration under Section 11 of the SARFAESI Act — even without a written arbitration agreement.

Conditions for Section 11 to apply:

1. The dispute must be between entities covered under Section 11 (banks, FIs, ARCs, etc.).

2. The dispute must concern securitisation, reconstruction, or recovery of dues.

Practical takeaway: Inter-creditor disputes must be resolved through arbitration rather than DRT or civil courts.

8. Central Bank of India & Anr. v. Prabha Jain & Ors. (2025 INSC 95)

The Court reaffirmed the limited jurisdiction of the DRT.

• A third party who is neither the borrower nor in possession of the secured asset when the bank takes possession cannot seek restoration under Section 17(3).

• Civil courts have jurisdiction over title and ownership disputes.

• The Court further stressed that banks must conduct robust title verification before sanctioning loans to prevent litigation and protect public funds.

9. PNB Housing Finance Ltd. v. Manoj Saha (July 2025)

The Court held that High Courts should not interfere with SARFAESI proceedings under Article 226/227 except in exceptional circumstances such as lack of jurisdiction or violation of natural justice.

It also clarified that tenants now have a specific remedy under Section 17(4A) before the DRT. The Court noted that unregistered or oral tenancies carry a high burden of proof, ensuring protection only to bona fide tenants.

10. M.S. Sanjay v. Indian Bank (January 2025)

In this case, the Supreme Court examined auction sales under the SARFAESI framework. It held that technical or procedural defects alone do not invalidate a sale unless they cause substantial prejudice to the borrower or evidence bad faith.
The Court reaffirmed that High Courts’ discretionary writ powers must be exercised sparingly to preserve the finality of concluded sales and maintain confidence in recovery mechanisms.

11. Pre-Deposit Requirement under Section 18

The Supreme Court clarified that the pre-deposit requirement for filing appeals before DRAT under Section 18 applies only to final or substantive DRT orders that determine liability, and not to procedural or interim orders.
This distinction ensures that borrowers and third parties can challenge non-final DRT orders without the financial burden of pre-deposit.

Supreme Court Judgments on DRT & SARFAESI Act (2025)

Practical Guidance for 2025

• For Banks and Financial Institutions:

  • Conduct rigorous title and document verification before lending.

  • Follow Section 11 arbitration for inter-creditor disputes.

  • Ensure timely SARFAESI action and compliance with Section 17(5).

• For Borrowers and Third Parties:

  • Approach DRT for statutory remedies first.

  • Use civil courts for title or fraud issues.

  • Exercise redemption rights before auction notice publication.

• For Practitioners:

  • Evaluate whether a DRT order is procedural or final before appeal.

  • Use Section 18 appeals strategically without unnecessary pre-deposit.

  • Advise clients on arbitration options and civil jurisdiction boundaries.