TaxTMI 
TaxTMI 
2026 (7) TMI 2035
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....itiated proceedings under the SARFAESI Act, 2002 and a demand notice under Section 13(2) of the SARFAESI Act dated 21.05.2018 came to be issued, followed by a notice under Section 13(4) of the SARFAESI Act, dated 11.10.2019. It is the further case of the petitioner that consequent to the issuance of possession notice, they issued paper publication dated 12.12.2022 bringing the properties for auction. However, later, it came to their knowledge that there is an entry made in the Encumbrance Certificate to the effect that there is an interim order of attachment made in respect of the properties in favour of the second respondent in an arbitration proceedings. Hence, the petitioner-bank had come up with the present writ petition. 3. Learned counsel appearing for the petitioner-bank submitted that the bank is having priority over the secured asset and as per Section 26E of the SARFAESI Act, 2002, even if the second respondent had obtained an interim order of attachment in an arbitration proceedings, the SARFAESI Act, being a special enactment, will prevail over the Arbitration and Conciliation Act and therefore, the mortgage executed in favour of the petitioner-bank would prevail and....
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....the rival submissions and perused the material available on record. 7. It is not in dispute that the borrowers, namely, A. Kavinraj and R. Dhandapani, had secured financial assistance from the petitioner bank by availing working capital/overdraft facility for a sum of Rs.60 lakhs on 27.06.2016. In respect of the loan availed, they have executed mortgage of deposit of title deeds dated 06.07.2016 in favour of the petitioner-bank and the same has been registered in the office of the first respondent on 06.07.2016. 7.1. The borrower failed to repay the dues and due to the default committed, the accounts were classified as Non-performing asset and the bank took proceedings under the SARFAESI Act, whereby demand notice under Section 13(2) and possession notice under Section 13(4) came to be issued. It is the case of the petitioner-bank that they are not able to proceed with the sale in view of the entry made in the encumbrance certificate, which culminated at the instance of the second respondent by obtaining an interim order of attachment in an arbitration proceedings. 8. The issue in respect of the priority of the bank over the loan extended by them came up for consideration ....
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....ceedings. 5. The learned counsel appearing on behalf of the fourth respondent would submit that even though there is priority as per Section 26E of the SARFAESI Act, 2002, the Arbitration and Conciliation Act, 1996 is equally a special legislation and when Section 17 of the said Act permits the arbitrator to grant such orders by way of interim measure, it cannot be said that Section 26E would override the attachment made by the arbitrator and therefore, he would submit that even though he does not have any objection for registering the sale certificate, the attachment shall be subsisting and the fourth respondent will be entitled for such relief as may be further decided in the arbitration. 6. We are not in agreement with the said submission of the learned counsel appearing for the fourth respondent. Firstly, the fourth respondent is not a secured creditor. The property is mortgaged in favour of the petitioner and as such the petitioner as a secured creditor is in a higher pedestal. The sale of the property has been conducted under the SARFAESI Act and Section 26E clearly grants priority to the secured creditor over the other debtors. It contains a non-obstante cl....
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....: "5. Further under Section 26E of Sarfaesi Act, the financial institution is having priority charge over other creditors, including decree of the Court/Tribunal. The issue was considered in Assistant Commissioner (CT) Anna Salai-III Assessment Circle Vs. Indian Overseas Bank and another (AIR 2017 Mad 67 FB) and was held that the financial institutions are having priority over other charges. The Full Bench of Bombay High Court has held in Jalgoan Janta Sahakari Bank Ltd and another Vs. Joint Commissioner of Sales Tax and another (2022 Online SCC Bom 1767), wherein it is held that the secured creditor would have the priority charges as contemplated under section 26E of Sarfaesi Act, 2002. As rightly pointed out by the Learned Counsel appearing for the petitioner the First Bench of this Court vide order dated 18.04.2024 passed in W.P.No.1434 of 2024 filed by M/s. City Union Bank Vs. Sub Registrar, Vazhapady and 2 others has held that "the issue is no longer res integra and has been settled by a catena of judgments, wherein it has been held that in view of Section 26E of the Act of 2002, the secured creditor has a priority charge over all other creditors, including decree of ....