The Supreme Court has recently dismissed a petition by a borrower challenging an Asset Reconstruction Company's (ARC) use of the SARFAESI Act to recover dues. The borrower argued that ARCs are not “banking companies” and therefore cannot invoke the recovery law.

The court, however, did not examine that broader question.

Instead, the court rejected the petitioner's separate contention that SARFAESI could not be invoked after the Debt Recovery Tribunal (DRT), Ernakulam, had passed a decree.

A Division Bench of Justice B.V. Nagarathna and Justice R. Mahadevan relied on Section 35 of the SARFAESI Act, which gives the law overriding effect over anything inconsistent with it contained in another law.

“Having regard to the fact that the provisions of the SARFAESI Act, 2002 have an overriding effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any other law, we find that the provisions of the said Act would override. Therefore, the contentions of learned counsel Shri Nedumpara cannot be accepted.”, the court ruled. 

The petition was filed by K.K. Praveen against JM Financial Asset Reconstruction Company and others. It concerned an ex-parte decree passed by the DRT, Ernakulam

The counsel for the aggrieved argued that the cause of action had merged into the DRT decree and therefore ceased to exist independently. He contended that the same cause could not be pursued through fresh proceedings under SARFAESI or any other law.

Praveen sought a declaration that the decree was final and binding and that the bank or ARC could enforce its rights only by executing it.

The petition also challenged the legal basis for treating ARCs as banking companies. Praveen sought a declaration that “banking” under Entry 45 of List I of the Seventh Schedule to the Constitution refers to acceptance of deposits and lending of money.

He argued that ARCs do not perform these functions and therefore cannot be treated as banking companies. On that basis, he sought declarations that the Recovery of Debts and Bankruptcy Act, 1993 and SARFAESI Act cannot apply to ARCs. He also challenged measures under Sections 13(2), 13(4) and 14 of SARFAESI.

The court did not decide whether ARCs qualify as banking companies or whether the RDB Act and SARFAESI Act can, on that ground, be applied to them.

The petition also raised issues concerning the MSME stress-resolution mechanism and alleged simultaneous proceedings under SARFAESI, the RDB Act and the Insolvency and Bankruptcy Code. The court did not examine these issues either.

The writ petition was dismissed. Pending applications were also disposed of.

For Petitioner: Advocates Mathews J Nedumpara, Maria Nedumpara, Hemali Suresh Kurne, Shameem Fayiz, Samuel Dara, Jeevan R. Patil, Rakesh Kumar, Dr. Linto K.B., AOR

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Case Title :  K. K. PRAVEEN VERSUS J.M. FINANCIAL ASSET RECONSTRUCTIONCase Number :  Writ Petition(s)(Civil) No(s). 1091/2026CITATION :  2026 LLBiz SC 307
To Read the full text of the Order CLICK HERE