2020 (1) TMI 1613
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....s the 'Borrower' from both the above establishments (Secured Creditor and Creditor). 2. The challenge involves mostly legal grounds, which may affect the very basis of the judgment with regard to rights declared in favour of the writ Petitioner-Bank, with regard to the relevant provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'SARFAESI Act'). 3. Heard Shri Ashish Surana, the learned counsel for the Appellant, Shri Ankit Singhal, the learned counsel for the Respondent-Bank, Shri Vikram Sharma, the learned Deputy Government Advocate representing the State as well as Shri J.K. Gupta, the learned counsel for the 5th Respondent. 4. The judgment passed by the learned Single Judge, which is subjected to challenge, highlights the rights and liberties of the 'Secured Creditor' - Bank, to have preference/priority in getting the debts satisfied, over and above the rights of other creditors including the State by way of revenue or taxes, by virtue of the amendment brought about in the SARFAESI Act by introducing 'Section 26E' as per the Amendment Act 44 of 2016. ....
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....n notice dated 14.09.2018 issued by the Respondent No. 3(Annexure P-8) in the interest of justice; and b. This Hon'ble Court may kindly be pleased to pass any other or further orders deemed fit and necessary in the facts and circumstances in the matter." 7. The prayers were sought to be resisted from the part of the Respondents concerned, including the Appellant herein. The main contention raised by the Bank before the learned Single Judge was that, by virtue of Section 26E of the SARFAESI Act introduced with effect from 01.09.2016 as per Amendment Act 44 of 2016, the Bank was having priority among all debts even in respect of tax or revenue payable to the Government and in the said circumstances, the course sought to be pursued by the State/Revenue Authorities by causing the property to be sold in auction invoking the Revenue Recovery Act, 1890 (hereinafter referred to as 'RR Act') without any regard to the rights and interest of the Petitioner-Bank was liable to be interdicted. 8. The said writ petition, filed on 24.09.2018, came up for consideration on 26.09.2018, the date on which the auction sale was scheduled. The learned Single Judge passed an interim order o....
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....es, by virtue of their preferential rights in terms of the relevant provisions of the SARFAESI Act. 11. The basic question to be considered and answered by this Court is with regard to the challenge raised by the Appellant, contending that Section 26E of the SARFAESI Act has not come into force so far, as the same has not been notified by the Central Government in the Gazette. The other contention is that, the prayer of the writ Petitioner-Bank in the writ petition was only to set aside the auction notice dated 14.09.2018; whereas the 'Revenue Recovery Certificate' issued by the District Collector was never sought to be challenged. This being the position, the observation made by the learned Single Judge in paragraph-9 is liable to be interdicted. 12. The learned counsel for the Appellant submits that there is a fundamental difference between meaning of the word 'priority' and 'first charge'. The terminology used in Section 26E of the SARFAESI Act is only 'priority' and not 'first charge'. Reference is made to other similar provisions like Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 (hereinafter referred to as 'RDB Act....
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.... and events, there is no dispute. The auction did not take place on the date when it was scheduled. The property, pursuant to the order passed by the competent Magistrate in terms of Section 14 of the SARFAESI Act, has already been handed over to the Bank. The pertinent question is with regard to application of 'Section 26E' of the SARFAESI Act. The said provision reads as follows : "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. Explanation.- For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in case 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." 15. As mentioned already, the primary contention raised by ....
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.... the Appellant that Section 26E of the SARFAESI Act is prospective and hence, not applicable to the case in hand, since the 'Revenue Recovery Certificate' was issued prior to introduction of Section 26E does not hold any water and it stands repelled. 17. Coming to the applicability of Section 26E of the SARFAESI Act, the learned counsel for the Appellant submits with all force that the said Section has not been notified in the Official Gazette and the observation made by the learned Single Judge to the effect that it has come into effect from '01.09.2016' is not correct. Various judgments have been referred to during the course of hearing by both the sides, as rendered by the Full Bench of the Madras High Court (Assistant Commissioner (CT) Anna Salai-III Assessment Circle, Chennai v. Indian Overseas Bank, Chennai & Anr reported in AIR 2017 Madras 67 FB), Division Bench of the Andhra Pradesh High Court (Dist. Manager, Mahabubnagar Dist v. Authorised Officer, Mahabubnagar Dist & 5 Others reported in 2017 SCC Online Hyd 252) and Division Bench of Bombay High Court (Axis Bank Limited v. State of Maharashtra & Another reported in 2017 SCC Online Bom 274), wherein observ....
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....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 section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in case where insolvency or bankruptcy proceedings are pending respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code." 21. The Central Government consciously issued a notification bringing the above provisions declaring the priority rights by way of notification dated 01.09.2016 bearing No. S.O. 2831 (E), in the statute book and as such, priority of the secured creditors are declared and notified insofar as RDB Act is concerned. Whether non-issuance of notification in respect of Section 26E of the SARFAESI Act, as dealt with Section 18 of the Amendment Act 44 of 2016, was a conscious decision or whether it was an inadvertent omission, lingered in our minds, which persuaded us to probe further. Ultimately, it has been noted that the Central Government has now issued a notification bearing N....