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TMI Blog2023 (8) TMI 1364X X X X Extracts X X X X X X X X Extracts X X X X ..... ecovery of Dues) Act, 2000 while granting further consequential reliefs. (ii) Appropriate writ, order and directions may kindly be issued thereby ordering and directing the respondents Np. 1 to 3 to register Sale Certificate dated 15.01.2021 Annexure P-3 in respect of Flat having supper Area of 93.52 sq. meters situated on 6th floor of Seven storied building known as Shankar House stand built on land comprised in Khewat/Khatauni No. 15/36, Khasra No. 247, total area 0-01-87 Hectare Mauja Totu, Shimla H.P. (Missal Haquiat) in favour of Sh. Vishal son of Sh. Bhagwant, Resident of Flat No. 301, Maya Garden City, Zirakpur, SAS Nagar Mohali, Punjab, respondent No.6 in accordance with provisions of Section 17(2)(xii) read with Section 89(4) of Indian Registration Act, 1908; (iii) That appropriate writ in the nature of certiorari may kindly be issued thereby quashing the impugned actions of the respondents No. 1 to 3 whereby already mortgaged and sold property i.e. Flat having supper Area of 93.52 sq. meters situated on 6th Floor of Seven storied building known as Shankar House stand built on land comprised in Khewat/Khatauni No.15/36, Khasra No.247, total area 0-01-87 Hectare Mauja T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent No.5 did not clear the outstanding dues within the statutory period of 60 days under Section 13(2) of the SARFAESI Act, therefore, the Petitioner-Bank, took possession of the aforesaid mortgaged property on 25.10.2018. In order to recover the outstanding liability, the Petitioner-Bank put the secured asset referred to above to E-auction/Sale as per notice, which was published in accordance with the Act and the Rules framed thereunder. Consequently, the mortgaged property i.e. the secured asset was auctioned by the Authorized Officer-Chief Manager Central Bank of India, Chandigarh on 15.01.2021, Annexure P-3, and the Sale Certificate was issued in favour of Auction Purchaser i.e. Respondent No.6-Sh. Vishal also. 2(ii) It is the case of the Petitioner-Bank that after the issuance of Sale Certificate, the aforesaid property ought to have been registered in the name of Auction Purchaser i.e. respondent No.6, for which the Bank as well as respondent No.6 requested the Respondent No.3 i.e. Sub-Registrar (Rural) Shimla and Tehsildar (Rural) Shimla to do the needful but the Respondent No.3 conveyed its inability as per the Rapat No. 68, and letter No. 8226 dated 2.11.2020, Annexure P- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditor 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. Explanation- For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency of bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that code. 35. The provisions of this Act to override other laws-The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." 4(ii) The aforesaid legal provisions came up for discussion before the Hon'ble Supreme Court in Punjab National Bank vs. Union of India & Ors (2022) 7 SCC 260, which are reproduced hereinbelow:- 42. "Secondly, coming to the issue of priority of secured creditor's debt over that of the Excise Department, the High Court in the impugned judgment has held that "In view of the matter, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay High Court stands dismissed by this Court on 17.07.2009 by relying upon the judgement in the matter of Union of India vs SICOM Ltd. & Anr. Reported in [(2009) 2 SCC 121], wherein the question involved was "Whether realization of the duty under the Central Excise Act will have priority over the secured debts in terms of the State Financial Corporation Act, 1951" and this Court held as under:- "9. Generally, the rights of the crown to recover the debt would prevail over the right of a subject. Crown debt means the debts due to the State or the king; debts which a prerogative entitles the Crown to claim priority for before all other creditors. [See Advanced Law Lexicon by P. Ramanatha Aiyear (3rd Edn.) p. 1147]. Such creditors, however, must be held to mean unsecured creditors. Principle of Crown debt as such pertains to the common law principle. A common law which is a law within the meaning of Article 13 of the Constitution is saved in terms of Article 372 thereof. Those principles of common law, thus, which were existing at the time of coming into force of the Constitution of India are saved by reason of the aforementioned provision. A debt which is secured or which by rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4(iii) While dealing with the scope of MSMED Act, 2006 vis-à-vis SARFAESI Act, 2002 and the validity of the order of attaching of mortgaged secured assets, in view of recoverable dues, the Hon'ble Apex Court has categorically held in (2023) 3 SCC 210, titled as Kotak Mahindra Bank Ltd. vs. Girnar Corrugators Private Limited and Others, that non-obstante clause in Section 26E of SARFAESI Act shall prevail over the MSMED Act, in absence of any specific express provision giving priority for payment under the MSMED Act over the dues of the secured creditors or over any taxes or cesses payable to central/state government or local authority. In this background, the Hon'ble Apex Court has held as under:- "26. The short question which is posed for the consideration of this Court is whether the MSMED Act would prevail over the SARFAESI Act? The question is whether recovery proceedings / recoveries under the MSMED Act would prevail over the recoveries made / recovery proceedings under provisions of the SARFAESI Act? 27. It is the case on behalf of respondent No.1 that in view of Section 24 of the MSMED Act which provides that the provisions of Sections 15 to 23 of the MSMED Act w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a 'priority' conferred / provided under Section 26E of the SARFAESI Act would prevail over the recovery mechanism of the MSMED Act. The aforesaid is to be considered along with the fact that under provisions of the MSMED Act, more particularly Sections 15 to 23, no 'priority' is provided with respect to the dues under the MSMED Act, like Section 26E of the SARFAESI Act. 32. At this stage, the object and purpose of the enactment of SARFAESI Act is required to be considered. SARFAESI Act has been enacted to regulate securitization and reconstruction of financial assets and enforcement of security interest and to provide for a central debts of security interest created on property rights, and for matters connected therewith or incidental 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held as under:- 6. "Therefore, once the fifth respondent bank exercises its power of selling the property through the Authorized Officer, the attachments made by the other respondents were rendered otiose. Thereafter, the only right of the sixth and seventh respondents was to claim their dues if any surplus money is left with the Authorized Officer under the SARFAESI Act. This position is no longer res integra and is recently reiterated by the Hon'ble Supreme Court of India in Kotak Mahindra Bank Ltd vs. Girnar Corrugators Private Limited and Others (2023 (3) SCC 210) and it is useful to extract paragraph No.32 which reads as hereunder:- "...32. At this stage, the object and purpose of the enactment of the SARFAESI Act is required to be considered. The SARFAESI Act has been enacted to regulate securitization and reconstruction of financial assets and enforcement of security interest and to provide for a Central database of security interest created on property rights, and for matters connected therewith or incidental thereto. Therefore, the SARFAESI Act has been enacted providing specific mechanism/provision for the financial assets and security interest. It is a special legi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in case of Punjab National Bank and Kotak Mahindra Bank (supra) and the judgment of the Coordinate Bench of this Court in LPA No. 156 of 2021 (supra), and, therefore, the impugned order(s) passed by the State Authorities in disallowing registration of Sale Certificate and the consequential mutation etc. being dehors the provisions of SARFAESI Act and the mandate of law, referred to above, are illegal and unsustainable. 5. CONCLUSION AND DIRECTION(S) 5(i) In view of the discussion, made hereinabove, the writ petition is allowed, with the following directions:- (i) The Order-Report dated 2.11.2020, Annexure P-4, issued by Respondent No.3 or Tehsildar (Rural) Tehsil Shimla, District Shimla, H.P. denying registration of Sale Certificate in revenue records is quashed and set aside. (ii) Similar note recorded in the Jamabandi, Annexure P-5, denying registration of Sale Certificate qua Respondent No.6 herein, is also quashed and set aside. (iii) Respondents No. 1 and 3 are directed to register the Sale Certificate in favour of Respondent No.6, on the basis of Sale Certificate dated 15.01.2021, Annexure P-3 and to extend all benefits accruing therefrom i.e. mutation etc. within ..... X X X X Extracts X X X X X X X X Extracts X X X X
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