SARFAESI Section 35 overriding effect defeats res judicata challenge, writ dismissed
Justices B.V. Nagarathna and R. Mahadevan dismissed an Article 32 petition, holding that Section 35 of the SARFAESI Act overrides inconsistent laws, rejecting the res judicata plea.
The Supreme Court dismissed a writ petition filed under Article 32 that sought to bar recovery action under the SARFAESI Act on the ground that the underlying cause of action had already merged into a decree passed by the Debts Recovery Tribunal, Ernakulam. A Bench of Justice B.V. Nagarathna and Justice R. Mahadevan heard the matter for admission on 9 September 2026.
The petitioner, K. K. Praveen, argued that once an ex-parte decree was passed in O.A. No. 439 of 2014, the doctrine of transit in rem judicatam and the general principle of res judicata barred any fresh proceedings on the same cause of action. The Court rejected the argument, pointing to Section 35 of the SARFAESI Act, which gives the statute overriding effect over inconsistent laws.
How the dispute reached the Court
The petition, K. K. Praveen v. J.M. Financial Asset Reconstruction Company P. Ltd & Ors., was brought directly under Article 32. The petitioner was represented by Mr. Mathews J Nedumpara.
The petitioner's central factual claim was that the DRT, Ernakulam, had passed an ex-parte decree in O.A. No. 439 of 2014. According to the argument, once that decree was passed, the cause of action merged into it and ceased to exist independently. The decree, it was said, could be enforced only by execution in accordance with law and by no other means.
What the petitioner sought
The prayers were wide. Beyond the merger and res judicata point, the petition asked the Court to declare that asset reconstruction companies are not banking companies within Entry 45 of List I of the Seventh Schedule, and that the RDB Act, 1993 and the SARFAESI Act, 2002 could not apply to them. It contended that ARCs neither accept deposits nor lend money.
The petition also challenged measures taken under Section 13(4) and the order passed by the jurisdictional Magistrate under Section 14 of the SARFAESI Act as unconstitutional and void. Further prayers invoked the principle of ne bis in idem, arguing that simultaneous proceedings under the SARFAESI Act, the RDB Act and the IBC on the same cause of action between the same parties were barred.
Additional prayers referred to the MSMED Act notification dated 29 May 2015 and the framework for resolution of stress for MSME borrowers, and sought the records leading to the classification of the account as a Non-Performing Asset along with an interim injunction restraining further action.
Why Section 35 decided the case
The Court considered the arguments advanced by Shri Nedumpara at length. Its answer turned on a single provision. Section 35 of the SARFAESI Act states that the Act shall have effect “notwithstanding anything inconsistent therewith contained in any other law” in force.
Because the statute carries an overriding effect over inconsistent laws and instruments, the Court held that its provisions would prevail. On that basis, the contention built on merger and res judicata could not be accepted. The reasoning is short: where a general common-law principle would block SARFAESI action, the express non-obstante clause in Section 35 controls.
Order
The Court held that the contentions could not be accepted and dismissed the writ petition. Pending applications were disposed of.