The relationship between the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act“) and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“RDDB Act“) has long been a source of litigation, with borrowers seeking to characterise the two statutes as mutually exclusive. In K.K Praveen v. J.M Financial Asset Reconstruction Company Pvt. Ltd. & Ors. (Writ Petition (Civil) No. 1091/2026), the Supreme Court was confronted with the contention that the doctrine of transit in rem judicatam whereby a cause of action merges with the decree upon adjudication precluded SARFAESI enforcement after a DRT decree. The Court rejected this argument, holding that Section 35 of the SARFAESI Act confers an overriding effect notwithstanding any other law.

FACTUAL BACKGROUND

In 2004, certain borrower availed credit facilities from a bank, which later assigned the loans to an Asset Reconstruction Company (“ARC“) under Section 5(2) of the SARFAESI Act. ARC filed an Original Application under Section 19(1) of the RDDB Act before the Debts Recovery Tribunal, Ernakulam (“DRT“). Borrower was proceeded against ex parte, and on November 27, 2015, DRT passed its final order and issued a Recovery Certificate (“DRT Order“).

ARC then initiated proceedings under the SARFAESI Act to enforce the security interest.

Borrower thereafter filed a Writ Petition under Article 32 of the Constitution, contending inter alia that: (i) the cause of action had undergone transit in rem judicatam and merged with the DRT decree, barring fresh SARFAESI proceedings; and (ii) the principle of ne bis in idem (that no person can be prosecuted or punished twice for the same offense or criminal conduct) barred multiple proceedings on the same cause of action. Relying on Section 35 of SARFAESI Act, Supreme Court rejected both contentions and dismissed the petition.

LEGAL ANALYSIS

A.     Transit in Rem Judicatam and the In Personam/In Rem Distinction

The doctrine of transit in rem judicatam holds that when a cause of action culminates in a judgment, it merges with the decree and ceases to have independent existence. The borrower in this case sought to extend this principle to contend that both the debt and the security interest merged with the DRT decree, leaving execution as the ARC’s sole remedy.

This argument conflates two distinct concepts: the in personam adjudication of the debt, which does merge with the decree, and the in rem security interest over the mortgaged properties, which subsists until satisfaction. The DRT decree quantifies the debt and creates a right of execution; it does not extinguish the secured creditor’s pre-existing statutory right to enforce its security interest under the SARFAESI Act. As the Supreme Court held in Kotak Mahindra Bank Ltd. v. A. Balakrishnan ((2022) 9 SCC 186), once a claim fructifies into a decree and recovery certificate, a fresh right and cause of action accrues, and proceedings based thereon are not barred by res judicata.

B.     Section 35 of the SARFAESI Act: The Overriding Effect

Section 35 of the SARFAESI Act contains a non obstante clause which provides that the SARFAESI Act shall have effect notwithstanding anything inconsistent in any other law. This was the statutory cornerstone of the Supreme Court’s decision, making clear that SARFAESI enforcement is not contingent upon, or constrained by, proceedings under the RDDB Act. In Transcore v. Union of India ((2008) 1 SCC 125), Supreme Court held that remedies under the two Acts are complementary, not mutually exclusive, and the doctrine of election does not apply. In Mathew Varghese v. M. Amritha Kumar ((2014) 5 SCC 610), the Court affirmed that proceedings under both Acts may continue simultaneously.

C.     Inapplicability of Ne Bis In Idem and the Doctrine of Election to Civil Debt Recovery

The invocation of ne bis in idem, a criminal-law doctrine enshrined in Article 20(2) of the Constitution in civil debt-recovery proceedings is misconceived. As held in Transcore, simultaneous proceedings under RDDB Act and SARFAESI Act neither attract the bar of res judicata nor amount to double recovery, provided the creditor does not recover more than what is due. SARFAESI enforcement after a DRT decree is not a “second trial” of the debt; it is enforcement of a statutory right over collateral, directed at realisation of the amounts already adjudicated.

ANALYSIS OF THE DECISION AND KEY TAKEAWAYS

The Supreme Court decision is a welcome reaffirmation of the settled position. The SARFAESI Act’s non obstante clause (Section 35) and harmonisation clause (Section 37) together establish a self-contained enforcement regime, unaffected by DRT proceedings. The borrower’s attempt to adopt common-law doctrines to circumvent statutory enforcement was correctly rejected. The case also illustrates the growing phenomenon of borrowers deploying creative but legally unsustainable arguments to delay enforcement.

The key takeaways of the Supreme Court decision are:

1. A DRT decree does not bar SARFAESI enforcement under the doctrine of transit in rem judicatam;
2. A DRT decree adjudicates the debt, an in personam claim, whereas the security interest, an in rem right, subsists until the debt is satisfied;
3. Section 35 of the SARFAESI Act overrides any inconsistent provision of any other law, including the RDDB Act;
4. Remedies under the SARFAESI Act and the RDDB Act are complementary, not mutually exclusive; a secured creditor may pursue both without having to elect between them;
5. Ne bis in idem is a criminal-law principle and does not apply to civil debt-recovery proceedings.

The Supreme Court decision thus confirms that a DRT decree fixes the borrower’s personal liability for the debt but leaves the secured creditor’s security interest intact, and secured creditors and ARCs may enforce that interest under the SARFAESI Act without regard to the decree, subject only to the bar against recovering more than is due.