Gauhati High Court sends Canara Bank, PNB fight over one mortgaged plot to arbitration
The Gauhati High Court held on 2 November 2026 that a dispute between Canara Bank and Punjab National Bank over the same mortgaged land must go to statutory arbitration under the SARFAESI Act.
Key points
- The Gauhati High Court directed Canara Bank and Punjab National Bank to settle their claims over one mortgaged plot by arbitration.
- The court held that arbitration under Section 11 of the SARFAESI Act is mandatory for such disputes between banks, per its 2 November 2026 judgment.
- The auction buyer may now get the land mutated in revenue records, but must disclose the dispute before creating any third-party interest.
Photo: Joe Mabel / Wikimedia Commons, CC BY-SA 4.0 (cropped). Representational image.
The Gauhati High Court on 2 November 2026 held that a dispute between Canara Bank and Punjab National Bank over the same mortgaged plot of land in Assam's Dhemaji district must be settled by arbitration under Section 11 of the SARFAESI Act. A division bench set aside a District Magistrate's order that had halted the transfer of the auctioned land to its buyer.
What Happened
According to the judgment, Canara Bank lent Rs 25 lakh to a borrower against an equitable mortgage of the plot. The account was classified as a non-performing asset in March 2021. The bank used the SARFAESI Act, the law that lets lenders seize and sell secured assets without going to court, and in August 2024 the District Magistrate, Dhemaji authorised it to take physical possession. The bank took possession, auctioned the plot and adjusted the sale money against the dues.
In March 2025, Punjab National Bank told the District Magistrate that the same borrower had taken a Rs 17 lakh loan from it in 2019, secured by the same property. The District Magistrate then stayed his own earlier order without hearing Canara Bank, and directed that the land records not be changed in the auction buyer's name. Canara Bank challenged this.
The court held that Section 11 of the SARFAESI Act makes arbitration mandatory when a dispute between banks or financial institutions relates to an unpaid amount, relying on a Supreme Court ruling. It directed the two banks to go to arbitration and set aside the District Magistrate's stay order of 24 March 2025. All questions of fact and law remain open before the arbitrator.
What It Means
When two lenders claim the same security, the court said, the route is statutory arbitration, which needs no written agreement between the banks. The court allowed the auction buyer, who said the purchase was made in good faith, to have the land mutated in the revenue records in the meantime, on the condition that no third-party interest is created without fully disclosing the dispute. For borrowers and buyers, the case shows why checking for existing charges on a property before a loan or an auction purchase matters. Customers with a complaint against a bank's service can approach the RBI at https://cms.rbi.org.in.
Source: High Court judgment
Sources & Citations
- High Court judgment — Gauhati High Court