Secured creditor priority prevails over MSMED recovery claims; refusal to deliver possession under SARFAESI was beyond jurisdiction.

Section 26E of the SARFAESI Act gives a secured creditor priority of payment over all other debts once the security interest is registered, and that specific later provision prevails on the question of recovery priority. Sections 15 to 23 of the MSMED Act create a mechanism for delayed payment, interest and adjudication before the Facilitation Council, but they do not confer an express priority over secured creditors' dues. Authorities acting under Section 14 are confined to assisting possession and cannot decide inter se creditor claims; refusal to deliver possession on the basis of an MSMED recovery certificate was therefore beyond jurisdiction and unsustainable. The appeal was allowed and the High Court view was set aside.

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Issues: Whether recoveries under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 have priority over recoveries under the Micro, Small and Medium Enterprises Development Act, 2006, and whether the local authority could refuse to deliver possession of the secured assets on the basis of an MSMED recovery certificate.

Analysis: Sections 15 to 23 of the MSMED Act create a special mechanism for delayed payments, interest, and adjudication before the Facilitation Council, but they do not confer an express statutory priority over the dues of secured creditors. By contrast, Section 26E of the SARFAESI Act, inserted by amendment, expressly provides that the debts of a secured creditor shall be paid in priority over all other debts and revenues after registration of the security interest. Both statutes contain non obstante clauses, but the later provision in Section 26E specifically governs priority of payment and therefore prevails on that limited subject. The refusal by the Naib Tehsildar to act under the District Magistrate's order under Section 14 was beyond jurisdiction, because the authorities acting under Section 14 are only to assist in taking possession and cannot adjudicate inter se claims between creditors.

Conclusion: The priority under Section 26E of the SARFAESI Act prevails over recovery under the MSMED Act, and the refusal to take possession on the basis of the MSMED recovery certificate was unsustainable. The appeal was allowed and the High Court's view was set aside.

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