In Brief
Bank of India and Punjab National Bank both extended credit to a rice mill company, with Bank of India having hypothecated the stocks and PNB having pledged the same stocks in 2013. Upon the borrower's default in 2015, a dispute arose over priority of charges. The Debt Recovery Tribunal initially held it had jurisdiction but was later directed to reconsider. Ultimately, the tribunal and high court held that inter-se disputes between banks must be resolved through arbitration under Section 11 of the SARFAESI Act. The Supreme Court upheld this, holding that Section 11 creates a statutory arbitration agreement without requiring an explicit written agreement, applies to disputes arising from a common borrower's default, and is mandatory in nature.
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