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TMI Blog2024 (7) TMI 1461X X X X Extracts X X X X X X X X Extracts X X X X ..... inciples laid down by the Apex Court in several judgments including Solidaire India s case [ 2001 (2) TMI 968 - SUPREME COURT] So also, in SBICAP s case [ 2023 (3) TMI 1509 - BOMBAY HIGH COURT] held that the provisions of the Prevention of Money Laundering Act, 2002 (for short the PMLA ) would be subservient to the rights of a secured creditor under the SARFAESI Act which would prevail and override the provisions of the PMLA. In the instant case, in the light of the undisputed fact that the SARFAESI Act, 2002 is a later Act / law, the same would prevail over the earlier Act / law, i.e., FEMA, 1999 and having regard to the language employed in Section 26E of the SARFAESI Act, the provisions contained therein would have a overriding effect over the provisions of the FEMA and the SARFAESI Act would prevail over FEMA; as a natural corollary, the dues payable in favour of the petitioner Bank which is a secured creditor would prevail over the dues allegedly payable to the respondents 1 and 2 by the 3rd respondent under FEMA and consequently, the impugned order purporting to seize / attach the schedule property for alleged dues under FEMA are clearly without jurisdiction or authority of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention urged by the respondents 1 and 2 cannot be accepted. Insofar as the contention as regards availability of equally efficacious and alternative remedy by way of an appeal under Section 37A (5) of the FEMA is concerned, in the light of the findings recorded by me hereinbefore that the impugned order is without jurisdiction or authority of law and the same is not only illegal and arbitrary but also contrary to the provisions contained in the SARFAESI Act and RDBI Act and consequently, mere availability of a remedy by way of an appeal cannot be construed or treated as denuding this Court of its jurisdiction under Article 226 of the Constitution of India and the said contention of the respondents 1 and 2 in this regard cannot be accepted. Petition is hereby allowed. The impugned order at Annexure-A dated 31.03.2022 passed by the 2nd respondent insofar as it relates to the schedule property mortgaged by the 3rd respondent in favour of petitioner Bank is hereby quashed.The 2nd respondent is hereby directed to release the schedule property mortgaged to the petitioner - HON'BLE MR JUSTICE S.R.KRISHNA KUMAR For the Petitioner (By Sri. Dhyan Chinnappa, Senior Counsel for Sri. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 2nd respondent issued a reply dated 04.08.2022 intimating the petitioner that a petition under Section 37A (2) of FEMA had already been filed by the 2nd respondent before the competent authority and objections may be submitted by the petitioner before the authority. In pursuance of the same, petitioner submitted a representation/objections dated 23.08.2022 to the 1st respondent Commissioner and since no decision has been taken by him and the order of seizure continues to subsist in respect of the schedule property, petitioner is before this Court by way of the present petition. 4. The 2nd respondent has filed statement of objections and has contested the petition. 5. Heard Sri. Dhyan Chinnappa, learned Senior counsel for the petitioner and Sri. H. Shanthi Bhushan, learned DSGI for 1st respondent and Sri. H. Jayakar Shetty, learned counsel for 2nd respondent. 6. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned Senior counsel for the petitioner has made the following submissions:- (i) That by virtue of Section 26E of the SARFAESI Act, the petitioner being a secured creditor, the debt due to the petitioner s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly efficacious alternative remedy before the appellate tribunal under Section 37A (5) of the FEMA, the present petition was not maintainable and liable to be dismissed. 8. By way of reply, learned Senior counsel for the petitioner submits that since the impugned order was without jurisdiction or authority of law, mere availability of an appeal under Section 37A (5) of the FEMA would not come in the way of this Court entertaining and adjudicating upon the present petition. 9. I have given my anxious consideration to the rival submissions and perused the material on record. 10. Before adverting to the rival contentions, it would be profitable to extract the statutory provisions which are germane and relevant for consideration of the issue involved in the present petition. 11. Section 26E of SARFAESI Act, reads as under:- 26E. Priority to secured creditors.-- Notwithstanding anything 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 revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law, other than this Act, or in any decree or order of any court, tribunal or other authority. 9. It is clear that both these Acts are special Acts. This Court has laid down in no uncertain terms that in such an event it is the later Act which must prevail. The decisions cited in the above context are as follows: Maharashtra Tubes Ltd. v. State Industrial Investment Corpn. of Maharashtra Ltd. (1993) 2 SCC 144 ; Sarwan Singh v. Kasturi Lal (1977) 1 SCC 750 : (1977) 2 SCR 421 ; Allahabad Bank v. Canara Bank (2000) 4 SCC 406 and Ram Narain v. Simla Banking Industrial Co. Ltd. AIR 1956 SC 614 : 1956 SCR 603. 13. So also, in SBICAP s case supra, the Division Bench of the Bombay High Court held that the provisions of the Prevention of Money Laundering Act, 2002 (for short the PMLA ) would be subservient to the rights of a secured creditor under the SARFAESI Act which would prevail and override the provisions of the PMLA. 14. In the instant case, in the light of the undisputed fact that the SARFAESI Act, 2002 is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en passed by the 2nd respondent being prospective in nature and operation, the said provision could not have been invoked by the 2nd respondent for the purpose of passing the impugned order of seizure / attachment in relation to the schedule property which had undisputedly stood mortgaged in favour of the petitioner Bank prior to Section 37A coming into force and consequently, the said provision was not applicable to the schedule property and the 2nd respondent did not have jurisdiction or authority of law to invoke or apply Section 37A of the FEMA for the purpose of passing the impugned order which deserves to be quashed on this ground also. 16. Section 31B of the RDBI Act, reads as under:- 31B. Priority to secured creditors. Notwithstanding anything contained in any other law for the time being in force, the rights of secure creditor to realise secure debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts and Government dues including revenues, taxes cesses and rates due to the Central Government, State Government or local authority. Explanation . For the purposes of this sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority. This section introduced in the Central Act is with notwithstanding clause and has come into force from September 1, 2016. 4. The law having now come into force, naturally it would govern the rights of the parties in respect of even a lis pending. 5. The aforesaid would, thus, answer question (a) in favour of the financial institution, which is a secured creditor having the benefit of the mortgaged property. 6. In so far as question (b) is concerned, the same is stated to relate only to auction sales, which may be carried out in pursuance to the rights exercised by the secured creditor having a mortgage of the property. This aspect is also covered by the introduction of section 31B, as it includes secured debts due and payable to them by sale of assets over which security interest is created . 7. We, thus, answer the aforesaid reference accordingly. 8. The matters be placed before the roster Division Bench for dealing with the individual cases. 18. A perusal of Section 31B of the RDBI Act and the principles laid down by the Full Bench of the Madras High Court supra, is sufficient to come to the conclusion that in the proceedings sought to be initiated by the petitioner Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X
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