PUNJAB NATIONAL BANK vs STATE BANK OF INDIA on 23 October 2026

I)Elt'l-s IrECovl.]tty AI'r'ELLATIi'I'RIrluNAL, DIILIII Arisingour,f .,^tL'#il;;1Tr3,lJi_rr,chandigarh) I'>unjab National llank V. Statc liank ol'India ltcm No.25 23'10'2026 ,,n'rrrc r)r. .rus(icc Srrrrrir Kunrar.Iai, I)r'cs,rt: Sh. Ilashrrat Nabi, Ac,lvocatc Ior appclrant through vc Ms. I)rcrna Marra.a, Ac,vr>car-c I,r rcsponcrcnt ,<l. r thr.ugh VC 'l'his nrattcr is tal<or up tlrrough I Iybrid hcaring. oRt)t{t{ (ottAL) l' 'l'hc oricntal Ilanl< o1'('l<tlrrlrtcrcc ,ow 'cprcscntcc.r through rrunjab Nationar Ilarrl< lllccl S'A. bcaring n<'t.72712017 titrccl as Pun.iab Nationat llank v State Ilank ol'Intlia which rvas statccl [o [-rc pcncling bclirrc I)l{'l'-ll, ohancligarh. I)l{.1.- II' (llra,cligarh viclc irnpLrgrrccl ,r'dc. clatccl l(r.r0.20ilJ has clisrrissccl thc S.A. ars tlrc p.csctlt S'A' was lilcd by onc llnanoial institurtion/banl< against anothcr Il.ancial irlstitLrti.n/ba,l<' 'l'hc appcllant bcing ,ggricvccr Iilccl tl-rc prcscnt appcal bcaring no.2,\512019. 2' Sh' Ilaslrrllat Nabi, Ac'lvocatc lor thc appcllant ancl Ms. I)rcrna Merhara, Acivocatc Ior lhc rcsponclctlt no. I statccl that in vicw ol' Scction I I of'tho sAl{lrn IlSI Act, 2002 iis prcscrtt clispr-rl-c ilrvolvccl in thc appcal is bctwccr-r thc two Irnar-rcial institr-rtiorrs ancl thc saicl clispLrl-c can only bc rcsolvccl cithcr by c.,ciliation or a|bitratitlrl etncl praycci [hat appr'<lpriatc orclcr nray bc passccl accorclipgly. 3' Scction ll ol'thc SAI{lrAlrSI Acl, 2002 clcals witl-r rcsolr-rtior-r ol'c.lisputcs ancl proviclcs that whcrc any clispLrtc is bcl-wcur thc [ranl</llnancial institution thc, thc clispr-rtc shall bc scttlccl by conciliation ur ar.bi{-ration. 4' Irl vicrv ol'scctioll II anci thc Suprcnrc (-''ourt jr-rclgrncnt c]r:livcrcd in casc I]anl< ol' lndia v Sri Nangli lticc Mills l)rivatc l,imitcd ancl othcrs, Oivil Appcal Ntr.7ll012025 dcciclcd {>n 21 .05.2025. thc prcscnt clispr-rtc sub.jcct nrattcr of.thc Pt'cscttt appcal cillr ollly bc <,lcciclccl cithcr by conciliatiep gr"arrbitration in tcrrns,{'

Scction 11 of thc SAIUTAI]SI Act. rcproduccd as undcr: 'l'hc rclcvanL paragraph ol-thc jr"rdgmcnt is 124'wc summarizc our linar c<lncrusion as uncrcr: -

(l) Scction ll of thc sAl{l'n ESI Act dcals with rcsrlution of disputcs rclating t, sccuritisation, rcc,nstr-uction 0r n,n-paymcnt of any amount cluc bctlvccn lhc banl<.r Ii,ancial institution or assct rcc,nstruction conrpany rlr qualilicd brrycr.

(ll) In tlrdcr to attract thc provision 0f Scction Il of thc SAIUT.AIISI Act, twin c.nditi.ns havc t, hc lirlfillccl bcing; iirst, thc disp,tc must bc bctlvccn any bank or financial institution or assct rcconst.rction cornpany or qtrarificd bry,' and scc,ncily, thc dispute must reratc to sccuritis:rtion or rcc,nstrtrcti,n. or n'n-pryrncnt of- any amount duc including intcrcst' whcrc thc alrlrcsaicl tw<l conrlitions arc fbund to be prirna*lircic satislicd, therc thc I)lt'l'will havc n,,jurisdiction ancl the propcrrccoursc would only bc through Scction I I of thc SAIUT.AIiISI Act read with thc Act, 1996. (l I I) 'l'hc cxprcs-sion "n,n-p:rymcnt of any am,unt cruc, incrucring ili:fi..ilfi:,l': ]::*. '] :li thc SArtrr'Attsi Act is or wirrc imporr and u n p a i d n * u, n t I ri:ililqTilffi ;1.',',? ;i il:,,'li ; l.i:il fl m n:::1, j: as indircct dcfhults of thc brlrrowcrs.

(lv) Any dispute bctwccn two bunks, Iinancial institutions, assct rcconst^rcti.n c,mpanics or qualilicd buycrs ctc., whcrc thc jural rclatitln bctwcen thc tlvtl is ol'a lcntlcr an<I brlrrowcr, thcn Sccti,n I I of' thc SAI{lr'AItSI Act will havc no application whatsocvcr. 'l'hc usc ol'thc phrasc ""y pcrson" in thc dctiniti<ln of 'borrowcr, in Scction 2(t) ,f thc SAltl"AIlSI Act, makcs it abtrndantly clcar that cvcn a bank, financial institution or assct rcconstruction .urrpony or quarificcr buyer can bc c0ttsidcrcd a lrtlrro]vcr, i{' thcy receivc I'inancial assistancc fr,m a bank ttr ['inancial institution ctc by provicling rlr crcating a scc,rity intcrcst. 'l'hus, a lcndcr-turncd-borrowcr would also lall within the scopc of a "borrowcr" tlndcr thc SAltlr'AIISI Act antl shall bc g<lvcrnod by the samc statutrlry I'ranrcwork as any ordinary borrr)wcr. (V) Scctirln l l of thc SAIf F'AI|SI Act, provitlcs fbr a statutory arbitrzrtion lbr any disputc mcntioncd thcrcin bctween :rny of thc partics cnumcratcd thcrcunclcr.'l'hcrc is no nccd fbr an explicit written agrccmcnt to arbitratc bctlvccn such parties in rlrclcr t<l attract Scctign I I ol' thc SAltlr'AItSI Act. 't'hc said provision crcatcs a lcgal fiction as rcgards thc cxistencc ol'zln arbitration agrccmcnt notwithstanding whcthcr such agrccmcnt cxists rlr not in actuality. (VI) Scction ll ol'thc SAltlr'AItSl Act is mandatory in nalrrrc.'l'hc usc ol' thc lvtlrd "shall" thcrcin, thc mandatc ol'thc said provision cannot bc bypasscd or subvcrtcd by thc partics by sccking rccoursc clscwhcre.

5' sh' Ilashmat Nabi' Advocatcftrr the appcrlantstatccr that as thc s.A. was fircd ffi:l TiT,1;'L;1,H:l : ;:*rcd bv,unjab Na,i.nar rlank, arbitratictnror rcsolution ordispurc bctwccn ,n. *l,.l,ffffj L#:":i which arc thc primc contcsting partics. Ihc prcsc ntappealis accordingry disposcd of along with pencling applications, if any. v$

(l) r. .I usticc Sudhi; il;;;;;;; C'hairpcrson