SARFAESI Act Overrides Inconsistent Laws; DRT Decree Does Not Bar Recovery Proceedings Under Doctrine Of Res Judicata: Supreme Court

"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." Supreme Court on September 9, 2026, held that recovery measures initiated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) are not barred by the doctrine of res judicata or the principle of transit in rem judicatam merely because a Debt Recovery Tribunal (DRT) has already passed a decree in respect of the outstanding debt.

A bench comprising Justice B.V. Nagarathna and Justice R. Mahadevan dismissed a writ petition filed under Article 32 of the Constitution, emphasizing that Section 35 of the SARFAESI Act accords statutory primacy and overriding effect to its provisions over inconsistent enactments or legal instruments.

The petitioner approached the top court under Article 32 seeking to halt enforcement proceedings initiated by an Asset Reconstruction Company (ARC). The dispute arose after the Debt Recovery Tribunal, Ernakulam, passed an ex-parte decree against the petitioner in O.A. No. 439 of 2014, following which the ARC pursued statutory recovery measures under the SARFAESI Act. Contending that the decree exhausted the cause of action, the borrower challenged the enforcement actions as unconstitutional and barred by res judicata.

The primary legal issue was whether the passing of an adjudication decree by a Debt Recovery Tribunal causes the underlying cause of action to undergo transit in rem judicatam, thereby barring secured creditors or ARCs from resorting to SARFAESI recovery proceedings under the doctrine of res judicata. The Court was also called upon to examine whether the non-obstante clause contained in Section 35 of the SARFAESI Act supersedes general procedural bars and parallel recovery limitations.

Petitioner Pleaded Merger Of Cause Of Action And Res Judicata Bar

Appearing for the petitioner, learned counsel Shri Mathews J. Nedumpara argued that upon the passing of an ex-parte decree in O.A. No. 439 of 2014 by the DRT, Ernakulam, the original claim underwent the process of transit in rem judicatam. Counsel asserted that the underlying cause of action merged entirely into the decree, leaving the respondent ARC with the sole legal remedy of executing the DRT decree in accordance with ordinary civil execution mechanisms.

It was further urged that the general principles of res judicata and the doctrine of ne bis in idem precluded the secured creditor from maintaining parallel or successive actions under the SARFAESI Act. The petitioner contended that financial institutions must elect one forum, and once an adjudication under the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) culminated in a decree, invoking Section 13(2), Section 13(4), or Section 14 of the SARFAESI Act was unconstitutional, ultra vires, and void ab initio.

Non-Obstante Mandate Under Section 35 Of SARFAESI Act

The Supreme Court closely examined the statutory framework of the SARFAESI Act, 2002, specifically adverting to the legislative intent behind Section 35. The Court noted that Parliament consciously engrafted an expansive non-obstante clause to arm secured creditors with independent, summary enforcement mechanisms untrammeled by external statutory hindrances or inconsistent procedural requirements.

Section 35 of the SARFAESI Act stipulates: "The provisions of this Act shall have 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 such law." The bench noted that this provision unequivocally protects actions taken under the statute from being eclipsed by other laws.

Statutory Primacy Defeats Plea Of Res Judicata And Cause Of Action Merger

Repelling the arguments raised on behalf of the petitioner, the bench held that the non-obstante operation of Section 35 comprehensively defeats the plea of procedural estoppel or cause-of-action merger. The statutory remedies provided under the SARFAESI Act for enforcement of security interests operate independently of proceedings before the Debt Recovery Tribunal under the RDB Act.

The bench concluded that the overriding effect conferred by the legislature ensures that SARFAESI remedies remain available to a secured creditor notwithstanding the existence of an adjudicated decree in an original application. Consequently, the plea that the cause of action had ceased to exist or that the ARC was restricted purely to executing the DRT decree could not be sustained in 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."

Finding no merit in the challenge to the statutory enforcement measures, the Supreme Court refused to entertain the writ petition and dismissed it along with all pending interlocutory applications.

The ruling firmly reinforces the principle that obtaining a recovery certificate or decree from the Debt Recovery Tribunal does not extinguish a secured creditor's independent right to invoke the SARFAESI Act. By underscoring the absolute non-obstante authority of Section 35, the Supreme Court clarified that procedural bars such as res judicata and transit in rem judicatam cannot impede summary security enforcement proceedings.

Date of Decision: 09 September 2026