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2020 Supreme(Chh) 49
IN THE HIGH COURT OF CHHATTISGARH AT BILASPUR
P.R. Ramachandra Menon, CJ. and Parth Prateem Sahu, J.
CHHATTISGARH STATE CO-OPERATIVE MARKETING FEDERATION LIMITED - Appellant
Versus
BANK OF BARODA - Respondent
Writ Appeal No. 330 of 2019
Decided On : 10-01-2020
Ashish Surana, Advocate, Ankit Singhal, Advocate, Vikram Sharma, Advocate, J.K. Gupta, Advocate
Headnote:
SARFAESI Act - Section 26E - Amendment Act - Section 26E - Revenue Authorities - Projecting their claim – Properties is also evident that Respondent was assigned work of custom milling of paddy by Appellant different points of time and because of non-supply of requisite quantity of rice after custom milling proceedings were taken against Respondent by Appellant in respect of outstanding liability to be cleared under said head- Since there was no positive efforts from part Respondent after completing procedural formalities Appellant moved State authorities for setting machinery under Revenue Recovery Act in motion for realisation of amount due to Appellant- Pursuant to requisition issued in this regard a Revenue Recovery Certificate was issued by District Collector as borne by Annexure R- Based on said certificate further steps were pursued by concerned who notified property for auction sale scheduled - On that day since nobody had turned up auction was adjourned as per notice informing next date -Held, Notwithstanding anything contained in any other law for time being in force rights of secured creditors to realise secured 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 Central Government State Government or local authority Central Government consciously issued a notification bringing above provisions declaring priority rights by way of notification bearing statute book and as such priority of secured creditors are declared and notified insofar as RDB Act is concerned- Whether non-issuance of notification in respect of Section SARFAESI Act dealt with Section Amendment 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 Central Government has now issued a notification bearing published in Gazette of India effect that will come into force from - Thus it is explicitly clear that Section SARFAESI Act was never brought into force and it being brought into force only with effect being amendment dealt with Section Amendment we find that ruling rendered by learned Single Judge observing in paragraph that Section SARFAESI Act has already come into effect from factual mistake- This being position finding given with reference to said provision and further declaration/observation in paragraph are declared as not correct or sustainable and hence it is set aside - Appeal allowed
JUDGMENT
P.R. Ramachandra Menon, C.J. - The verdict passed by the learned Single Judge in Writ Petition (C) No.2713 of 2018 filed by the Bank of Baroda (Secured Creditor) is put to test in this appeal preferred by Chhattisgarh State Co-operative Marketing Federation Limited (a Creditor) who was the 4th Respondent in the writ petition and it relates to the relative/preferential rights to proceed against the property of the 5th Respondent, who was 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.
5. Before going to the legal aspects, a reference to the factual matrix is necessary to understand the nature of challenge and as to the course pursued by the learned Single Judge in finalising the matter. The sequence of events reveals that the 5th Respondent had borrowed some amounts from the 1st Respondent-Bank, creating security interest over various properties in the year 2013. It is also evident that the 5th Respondent was assigned the work of custom milling of paddy by the Appellant at different points of time and because of non-supply of the requisite quantity of rice after the custom milling, proceedings were taken against the 5th Respondent by the Appellant, in respect of the outstanding liability to be cleared under the said head. Since there was no positive efforts from the part of the 5th Respondent, after completing the procedural formalities, the Appellant moved the State authorities for setting the machinery under the Revenue Recovery Act in motion, for realisation of the amount due to the Appellant. Pursuant to the requisition issued in this regard, a 'Revenue Recovery Certificate' was issued by the District Collector as borne by Annexure R-4/5 dated 20.08.2015. Based on the said certificate, further steps were pursued by the Tahsildar concerned, who notified the property for auction sale scheduled to be held on 24.08.2018. On that day, since nobody had turned up, the auction was adjourned as per notice dated 14.09.2018, informing the next date of auction on 26.09.2018.
6. While so, the 1st Respondent-Bank, from whom the loans were procured by the 5th Respondent had declared the assets as Non Performing Assets ('NPA') due to default of the Borrower in satisfying the dues/installments and initiated proceedings under the SARFAESI Act by issuing notice under Section 13(2) of the said Act. Meanwhile, the Bank came across the auction notice issued by the Revenue Authorities and on finding that such steps were detrimental to the rights and interest of the Secured CreditorBank, they chose to challenge the notice dated 14.09.2018, copy of which has been placed as Annexure P/1, by filing Writ Petition (C) No.2713 of 2018 with the following prayers :
"a. That this Hon'ble Court may kindly be pleased to pass an order, issue a direction or necessary command by way of writ of certiorari to quash and set aside the impugned auction notice date
