The main legal point established in the judgment is that the secured creditor has first claim/charge over the sale proceeds of the secured assets towards the recovery of the outstanding dues, and the District Magistrate's role is ministerial and does not involve adjudicatory powers.

ORDER :

1. Heard learned advocate Mr. P.R. Abichandani for the petitioner and learned Assistant Government Pleader Mr. Dhawan Jayswal for the respondent-State through video conference.

2. By this petition under Article 227 of the Constitution of India, the petitioner has prayed for the following reliefs :

“A. To quash and set aside the impugned order dated 23.12.2021 passed by the Ld. District Magistrate, Navsari in section 14 application and pleased to hold that the SARFAESI actions initiated by the petitioner is valid, legal and in accordance with law.

B. To stay pending the admission, hearing and final disposal of the present petition, the operation and implementation of the impugned order dated 23.12.2021 during the pendency of the petition.

C. To grant ad-interim relief in terms of para-B above.

D. To provide for the costs of this Special Civil Application.

E. To pass such other and further orders as this Hon’ble Court deems fit and proper in the facts and circumstances of the case.”

3. Brief facts of the case are as under :

3.1 M/s. SSVB Business Limited (For short “the borrower company”) had availed financial assistance from the petitioner in the years 2013 and 2015. For such loan, Mr. Vinod Sahebrav Rasal, Shrirang Prakashbhai Pol and Vikaram Prakashbhai Pol stood as mortgagors.

3.2 Due to default in repayment of such loan, the accounts of the borrower company was classified as Non Performing Asset.

3.3 The petitioner issued Demand Notice dated 28th February, 2020 under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(For short “the SARFAESI Act”) to the borrower company for recovery of the dues.

3.4 The Deputy Secretary, Home department, Gandhinagar vide passed order dated 9th September, 2020 stating that the borrower company is involved in illegal activities of financial fraud and therefore, the designated authority has been appointed to attach the assets of the borrower company and accordingly, the order of attachment of the properties of the borrower company is passed till the final outcome of the said proceedings in the Designated Court.

3.5 The borrower company failed to discharge the liability as per the demand notice and therefore, the petitioner had taken symbolic possession of the properties under mortgage on 19th September, 2020.

3.6 The petitioner thereafter filed application under section 14 of the SARFAESI Act against the borrower company on 23rd September, 2021.

3.7 The District Magistrate, Navsari by communication dated 23rd December, 2021 informed the petitioner-bank that no proceedings can be initiated under the SARFAESI Act against the borrowers. Being aggrieved by such communication, the petitioner preferred this petition with the aforesaid prayers.

4. Learned advocate Mr. P.R. Abichandani for the petitioner submitted that respondent-District Magistrate could not have have issued the impugned communication dated 23rd December, 2021 since the mortgage is created in favour of the petitioner on 13th December, 2013 and the attachment order is passed on 9th September, 2020 and therefore, the mortgage was created in favour of the petitioner before the attachment order is passed.

4.1 It was submitted that when there is a conflict between the Local Act and the Special Act, the priority is to be given to the Special Act and in the facts of the case, SARFAESI Act is a Special Act whereby the secured creditor can enforce security against the borrowers and therefore, the respondent - District Magistrate could not have passed the impugned order.

4.2 It was submitted that the petitioner has rightful claim over the secured assets which are attached by the State Government pursuant to the FIR registered with Vejalpur police station being FIR No. 45/2018 under the provisions of sections 3 and 7 of the Gujarat Protection of Interest of Depositors (In Financial Establishment) Act, 2003 and sections 409, 406, 420, 120-B of the Indian Penal Code as well as section 4