Secured creditors have priority over unsecured creditors, including State debts, as established by Sections 26E and 31B of the respective Acts.

JUDGMENT :

SHEKHAR B. SARAF, J.

The present writ petition has been filed under Article 226 of the Constitution of India wherein the petitioner (hereinafter referred to as the ‘bank’) have prayed for the issuance of a writ of certiorari quashing the impugned attachment order dated February 9, 2015 passed by Sub-Divisional Magistrate Sadar, Jaunpur (hereinafter referred to as the ‘respondent no.4’). The petitioner in furtherance prays for the issuance of a writ of mandamus commanding the respondent no.4 to withdraw the attachment order dated February 9, 2015 and direct him to not interfere in recovery proceedings initiated by the bank in view of priority of dues of bank over the dues of State Government/Central Government/Local Bodies in view of the provisions laid down under Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the ‘SARFAESI Act’) and 31B of the Recovery of Debts and Bankruptcy Act, 1993 (hereinafter referred to as the ‘RDB Act’).

FACTS

2. The factual matrix of the present writ petition is delineated below:

a. The bank sanctioned a cash credit facility of Rs.30,00,000 on November 10, 2011 in favour of M/s L.G. Corporation, a proprietorship firm owned by one Smt. Geeta Devi (hereinafter referred to as the ‘respondent no.9’) wherein respondent no.9 had mortgaged 20407.23 square feet land out of 0.089 Hectare from her land situated at Siddiqpur, Pargana Haveli, Tehsil Sadar, District Jaunpur, Khata No. 603, 255/0.809 (new no. 825/809) as secured asset in favour of bank by depositing title deeds.

b. Since respondent no.9 was unable to maintain financial discipline and defaulted in payment of interest on the loan, the account was declared as Non-Performing Asset (NPA) on September 11, 2015 and consequently bank initiated proceedings under SARFAESI Act against respondent no.9.

c. On December 28, 2015, bank issued demand notice to respondent no.9 and other guarantors under Section 13(2) of the SARFAESI Act for discharging liability of Rs.42,27,417/- towards bank within 60 days from the date of notice.

d. Upon failure to discharge the liability within 60 days period, the bank issued possession notice on March 1, 2016 under Section 13(4) of the SARFAESI Act and also took over the symbolic possession by pasting over the possession notice on the same date.

e. Bank then moved an application under Section 14 of the SARFAESI Act, wherein order was passed by the Additional District Magistrate (Finance and Revenue) (hereinafter referred to as ‘respondent no.3’) for handing over physical possession of the property to the bank.

f. However, during the pendency of the execution of the aforesaid order before civil authorities, it was encountered that before passing of the aforesaid order a recovery certificate had already been issued on October 16, 2014 by the department of Food and Civil Supply, U.P. , Jaunpur for the recovery of outstanding amount of Rs.54,75,499 from respondent no.9 and on default of payment of dues the mortgage property was confiscated vide order dated February 9, 2015 passed by respondent no.4 but could not be auctioned due to absence of participants. Similarly, another notice dated September 12, 2014 was issued for recovery of tax liability of petitioner from commercial tax department. Therefore, the bank raised specific objections before the concerned authority with regard to the priority of charge of the bank over the properties .

g. The bank