SARFAESI Act | Provisions Override Other Laws Including Principles Of Res Judicata: Supreme Court

"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." Supreme Court, in a significant ruling dated 09 September 2026, held that the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), possess an overriding effect that precludes the application of common law principles like res judicata to impede recovery proceedings.

A bench of Justice B.V. Nagarathna and Justice R. Mahadevan observed that the non-obstante clause under Section 35 of the Act renders the SARFAESI mechanism autonomous, effectively rejecting the argument that a prior decree from a Debt Recovery Tribunal (DRT) merges a cause of action so as to bar subsequent enforcement actions.

The petitioner had sought a declaration that once a dispute has been adjudicated upon and resulted in a decree by the DRT, the original cause of action undergoes transit in rem judicatam and merges with the decree. Relying on this doctrine, the petitioner contended that the respondent bank could only execute the decree and could not initiate fresh, parallel, or simultaneous proceedings under the SARFAESI Act.

The primary issue before the court was whether the principle of res judicata and the doctrine of merger operate to bar recovery actions under the SARFAESI Act once a debt has already been reduced to a decree by a DRT. Further, the court examined whether the legislative intent behind the SARFAESI Act, specifically regarding its overriding nature, permits the initiation of recovery measures despite the existence of a prior judicial decree.

Legislative Supremacy of SARFAESI

The court's reasoning centered on the interpretation of Section 35 of the SARFAESI Act, which serves as a wide-ranging non-obstante provision. The bench underscored that this section is designed to ensure that the recovery process remains unencumbered by procedural roadblocks found in other statutes or general legal principles. By emphasizing that the Act overrides any inconsistent laws, the court effectively insulated the SARFAESI enforcement mechanism from being restrained by arguments concerning the finality of prior decrees.

Rejection of the Merger Doctrine

The court unequivocally rejected the contention that the cause of action merges with a DRT decree to the extent that it precludes future action under the SARFAESI Act. By dismissing the petition, the bench affirmed that the special enforcement powers granted to secured creditors under the Act operate independently of the litigation history of the debt. The court’s refusal to accept the petitioner’s reliance on res judicata underscores the status of the SARFAESI Act as a robust, self-contained statutory framework for debt recovery.

Statutory Override Prevails

The bench concluded that the legislative mandate contained in Section 35 is clear and unambiguous. Consequently, the court held that any argument seeking to apply the doctrine of merger or res judicata to defeat the operation of the SARFAESI Act is legally unsustainable. The petition, which also challenged the constitutional validity of various sections of the SARFAESI Act and the RDB Act, was dismissed in its entirety.

Date of Decision: 09 September 2026