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TMI Blog2023 (1) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... red to as 'debtor') advanced various credit facilities by the appellant bank - secured creditor. In order to secure the various credit facilities, Plot Nos. 16 and 14, situated in SEZ Area of Dhar were mortgaged along with certain movable fixed assets. 1.2 On account of default in payment of loan / debt, the bank-initiated recovery proceedings in respect of the secured assets contemplated under Section 13(2) of the SARFAESI Act. The bank - secured creditor filed an application before the District Magistrate on 17.06.2014 under Section 14 of the SARFAESI Act seeking assistance from taking possession of the secured assets. By order dated 24.09.2014, the District Magistrate allowed the said application by directing the SDM, District: Dhar to take vacant possession of the secured assets. However, no action was taken and therefore, the bank submitted applications to the District Magistrate and the SDM complaining non-compliance of the order to take possession of the secured assets. Finally, SDM issued direction to the Naib Tehsildar vide communication dated 07.11.2015 to comply the order of the District Magistrate and obtain the possession by taking police assistance. Thereafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Single Judge and has observed and held that MSMED Act being the later enactment, the same shall prevail over the SARFAESI Act. 1.5 The impugned judgment and order passed by the Division Bench of the High Court holding that MSMED Act being later enactment, the same would prevail over the SARFAESI Act the bank - secured creditor has preferred the present appeal. 2. Shri Amar Dave, learned counsel appearing for the appellant bank - secured creditor has vehemently submitted that as such, there is no repugnancy between the provisions of SARFAESI Act and MSMED Act. It is submitted that nonobstante clause in the MSMED Act, i.e. Section 24 provides that provisions under Sections 15 to 23 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. It is submitted that Sections 15 to 23 of the MSMED Act only provide for special mechanism for adjudication of the dispute along with enforcing certain other contractual and business terms on the parties such as time limit for payments and interest in case of delayed payments. It is submitted that the perusal of the said scheme, from Sections 15 to 23 of the MSMED Act, clearly show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Single Judge by holding that the recoveries under SARFAESI Act shall be accorded priority over recoveries under MSMED Act. 3. The present appeal is vehemently opposed by Shri Niranjan Reddy, learned Senior Counsel appearing for respondent No.1. 3.1 Learned counsel appearing for respondent No.1 has vehemently submitted that MSMED Act has been enacted to promote and protect the interests of the small and medium scale enterprises which is a source of livelihood for several citizens and contributes towards 27% to the GDP. It is submitted that therefore, aggressive provisions were brought in for the recovery of dues and compound interests are given in MSMED Act which is not present in any other legislations and is in the nature of a beneficial legislation. It is submitted that therefore, in view of Section 24 of the MSMED Act which provides for an overriding effect over other prevailing laws, the provisions with respect to recoveries under MSMED Act shall prevail over the recoveries under SARFAESI Act. 3.2 It is submitted that the financial institutions have various other means of recovery including SARFAESI Act, IBC etc. as being a secured creditor to an extent of also taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and nothing repugnant, then the non-obstante clause of the subsequent statute would prevail over the earlier enactments. It is submitted that the principle therefore would be that the court must look into the objectives of the two Special Acts. It is submitted that if the legislature still confers the later enactment with a non- obstante clause, it means the legislature wanted the enactment to prevail. It is submitted that therefore, non-obstante clause in MSMED Act, i.e. Section 24 would prevail over the recovery mechanism of SARFAESI Act, being enacted later in point of time, overriding all other laws being in force at that point of time. 3.6 It is submitted that the State Madhya Pradesh in exercise of powers conferred under Section 30 read with sub-section (3) of Section 21 of the MSMED Act made the Rules known as 'M.P. Micro and Small Enterprises Facilitation Council Rules, 2006' for procedure to be followed for recovery of amounts due. It is submitted that under the said Rules, the decree, award or order passed under provisions of MSMED Act shall be executed by the Collector of the District concerned and the amount due shall be recovered as arrears of land revenue. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest in case of delayed payments. In the entire MSMED Act, there is no specific express provision giving 'priority' for payments under the MSMED Act over the dues of the secured creditors or over any taxes or cesses payable to Central Government or State Government or Local Authority as the case may be. In sharp contrast to this, Section 26E of the SARFAESI Act which has been inserted vide Amendment in 2016, it provides that notwithstanding anything inconsistent therewith contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in 'priority' over all other debts and all revenue taxes and cesses and other rates payable to the Central Government or State Government or Local Authority. However, the priority to secured creditors in payment of debt as per Section 26E of the SARFAESI Act shall be subject to the provisions of the IBC. Therefore, such dues vis-a-vis dues under the MSMED Act, as per the decree or order passed by the Facilitation Council debts due to the secured creditor shall have a priority in view of Section 26E of the SARFAESI Act which is later enactment in point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental thereto. Therefore, SARFAESI Act has been enacted providing specific mechanism / provision for the financial assets and security interest. It is a special legislation for enforcement of security interest which is created in favour of the secured creditor - financial institution. Therefore, in absence of any specific provision for priority of the dues under MSMED Act, if the submission on behalf of respondent No.1 for the dues under MSMED Act would prevail over the SARFAESI Act, then in that case, not only the object and purpose of special enactment / SARFAESI Act would be frustrated, even the later enactment by way of insertion of Section 26E of the SARFAESI Act would be frustrated. If the submission on behalf of respondent No.1 is accepted, then in that case, Section 26E of the SARFAESI Act would become nugatory and would become otiose and/or redundant. Any other contrary view would be defeating the provision of Section 26E of the SARFAESI Act and also the object and purpose of the SARFAESI Act. 10. Even otherwise the Naib Tehsildar was not at all justified in not taking possession of the secured assets / properties as per order dated 24.09.2014 passed by the District Magis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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