Already Have a DRT Decree on the Debt? The Bank Can Still Come After You Under SARFAESI, Rules Supreme Court

Case at a glance: The Supreme Court has held that an asset reconstruction company is not barred from invoking SARFAESI Act enforcement measures merely because the Debts Recovery Tribunal had already passed a decree on the very same debt. Dismissing a borrower's writ petition, the Court held that Section 35's overriding clause lets secured creditors pursue SARFAESI action notwithstanding an existing DRT decree — res judicata does not stand in the way.

J.M. Financial Asset Reconstruction Company, having acquired the debt as an ARC, invoked SARFAESI Act measures — issuing notices under Sections 13(2) and 13(4), and seeking possession under Section 14 — against the borrower, K.K. Praveen. Praveen resisted, pointing to an earlier decree the Debts Recovery Tribunal, Ernakulam had passed in Original Application No. 439 of 2014 concerning the same underlying debt, arguing this decree had already settled the matter and barred the ARC from separately pursuing SARFAESI enforcement.

Rather than filing a fresh application before the DRT or the concerned High Court, Praveen approached the Supreme Court directly under Article 32, seeking to restrain the SARFAESI proceedings as barred by res judicata given the prior decree on the same debt.

The Key Question Before the Court

Where a Debts Recovery Tribunal has already passed a decree on a debt, does that decree bar a secured creditor or asset reconstruction company from separately invoking SARFAESI Act enforcement measures on the very same debt?

Why Section 35 Settled the Question

The Court anchored its reasoning in Section 35 of the SARFAESI Act — the non-obstante clause providing that the Act's provisions have effect notwithstanding anything inconsistent contained in any other law. On that footing, the general judicial doctrine of res judicata could not operate to bar SARFAESI enforcement simply because a DRT decree already existed on the identical debt.

This confirms that banks and asset reconstruction companies effectively have multiple, non-mutually-exclusive recovery routes for the same underlying debt — pursuing an Original Application to decree before the DRT does not exhaust or extinguish the separate remedy of SARFAESI enforcement, and vice versa.

What the Ruling Means for Recovery Proceedings

• A prior DRT decree on a debt does not, by itself, bar a secured creditor from separately pursuing SARFAESI Act measures on the same debt.
• Section 35's overriding effect prevails over general res judicata arguments raised to block parallel recovery routes.
• An ex-parte or otherwise favourable-seeming DRT outcome for the borrower does not insulate them from subsequent SARFAESI enforcement on the same underlying debt.
• The borrower's writ petition under Article 32 challenging the SARFAESI proceedings was dismissed.

Why This Judgment Matters

• It confirms that banks and ARCs can run DRT recovery proceedings and SARFAESI enforcement side by side on the same debt, rather than being confined to one exclusive remedy.
• It forecloses a res judicata defence that borrowers have sometimes raised to resist SARFAESI action once a DRT proceeding on the same debt has concluded.
• It reinforces SARFAESI's overriding character under Section 35 as a recurring theme in the Court's approach to secured-creditor enforcement.
• It is a reminder that a writ petition directly under Article 32 is an unusual route for what is, in substance, a SARFAESI enforcement dispute — worth noting for practitioners considering maintainability in similar matters.

What This Means in Practice

For Banks and Asset Reconstruction Companies

• Do not treat a prior DRT decree, even one favourable to the borrower in some respects, as foreclosing SARFAESI enforcement on the same debt — Section 35's overriding effect keeps that route open.
• Where recovery is proving difficult through one forum, consider running SARFAESI measures and DRT proceedings in parallel rather than sequentially.

For Borrowers and Their Counsel

• A res judicata argument based on a prior DRT decree is unlikely to succeed in blocking separate SARFAESI action on the same debt — other defences (procedural compliance under Sections 13(2)/13(4), valuation disputes, and so on) will need to carry more weight.
• Consider whether a challenge is better routed through the DRT or the jurisdictional High Court rather than a direct Article 32 writ, given the maintainability questions this case raises.

For Recovery and Banking Law Practitioners Generally

• Treat this ruling as the latest word reinforcing Section 35's overriding effect whenever a client argues that another statute or a prior judicial proceeding should displace SARFAESI enforcement.

Key Takeaways

Frequently Asked Questions

Yes, according to this ruling. The Supreme Court held that Section 35 of the SARFAESI Act's overriding clause allows secured creditors to pursue SARFAESI enforcement measures even where a DRT decree already exists on the same debt.

Not necessarily. This judgment holds that res judicata does not bar SARFAESI enforcement simply because a DRT decree has already been passed on the identical debt, given SARFAESI's overriding statutory effect.

The borrower filed a writ petition under Article 32 directly in the Supreme Court, which is an unusual procedural route for a dispute of this nature; the petition was ultimately dismissed on the merits of the SARFAESI/res judicata question.

Conclusion