2020 (3) TMI 1479 - HC - Indian Laws

Lifting of attachment over the land which was the secured asset of the Indian Bank - Priority of secured creditors under Section 26E of SARFAESI Act - HELD THAT - It is settled beyond the pale of doubt that in view of the overriding non obstante provisions enacted in Section 26E of the SARFAESI Act as well as Section 31B of the RDB Act, the realisation of the secured interest for satisfying the debts of the secured creditors shall prevail over all other dues including the decretal dues under the decrees passed by the Civil Courts and the Government dues like taxes, cesses etc. The purpose of enacting this special provisions with non obstante clause is obvious i.e., to give them an overriding effect over the dues of other persons or Departments. Therefore, the dues under a decree held to the Appellant/TANFED has to take a back seat behind the secured interest claimed by the financial institutions or his assignee like ARCIL in the present case. Therefore, there is no iota of doubt that the learned Single Judge was justified in lifting or raising or removing the attachment over the secured interest or the land in question which is secured of the secured creditor Bank of India/ARCIL in the present case. As far as the claims, based on facts or objections like the extent of land, being the secured interest of the Bank/Assignee's concerned or its value being an excess etc. if any, are concerned, these factual issues are required to be gone into by the concerned Debts Recovery Tribunal or the Authorised Officer thereof, who is dealing with the said security interest under the provisions of the SARFASEI Act/RDB Act. The Appellant/ TANFED, the Decree Holder is of course free to raise all these factual objections or such claims before the concerned Debts Recovery Tribunal or the Authorised Officer of DRT. The present Original Side Appeal is disposed of.

Summary

Issues:
1. Priority of secured creditors under Section 26E of SARFAESI Act.
2. Validity of attachment over land in favor of ARCIL.
3. Effect of non obstante clause in Section 26E on decrees passed by Civil Courts.
4. Role of Debts Recovery Tribunal in determining factual issues related to secured interest.

Analysis:

1. The appeal was filed by Tamil Nadu Cooperative Marketing Federation Limited (TANFED) challenging the order lifting the attachment over land, secured asset of Indian Bank assigned to ARCIL, by the learned Single Judge. The issue revolved around the priority of secured creditors under Section 26E of the SARFAESI Act, which gives precedence to debts due to secured creditors over all other debts and government dues.

2. The appellant argued that the attachment in favor of TANFED was ordered by the Civil Court in 1997, and the application by ARCIL in 2014 was delayed, questioning the validity of the claim. Additionally, discrepancies in the extent of land claimed as secured interest were raised, suggesting that the excess land could satisfy the decree of TANFED.

3. On the contrary, ARCIL contended that the Full Bench of the Court had previously ruled that the rights of secured creditors under Section 26E prevail over all other dues, including government dues. The judgment emphasized the non obstante clause in Section 26E, similar to Section 31B of the RDB Act, giving overriding effect to the rights of secured creditors.

4. The Court, after hearing both parties, concluded that the provisions of Section 26E and Section 31B establish the supremacy of secured creditors in realizing debts over other dues, including decretal dues and government dues. The purpose of the non obstante clause was to prioritize the rights of financial institutions or assignees like ARCIL over other claimants. The Court upheld the decision to lift the attachment over the secured interest in favor of ARCIL.

5. The Court directed that factual issues regarding the extent or value of the secured interest should be addressed by the Debts Recovery Tribunal or the Authorized Officer under the SARFAESI Act/RDB Act. TANFED was granted the opportunity to raise any objections before the relevant authority.

6. In conclusion, the Original Side Appeal was disposed of with no costs, and the connected Miscellaneous Petition was closed, emphasizing the supremacy of secured creditors under Section 26E and the role of the Debts Recovery Tribunal in resolving factual disputes related to secured interests.