The court held that Section 26E of the SARFAESI Act grants priority to secured creditors over all debts, including those recoverable by SEBI, reinforcing secured creditors' recovery rights.

JUDGMENT

A.Muhamed Mustaque, J

This appeal filed by Dhanlaxmi Bank raises an important question of law. The question of law is about the overriding effect of Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act), 2002 over the provisions of Section 11 , 11-A, 11-B and Section 28-A(3) of the Securities Exchange Board of India Act (SEBI Act), 1992.

2. The appellant/bank claims that on the introduction of Chapter IV A in the SARFAESI Act, with effect from 24/01/2020, the secured creditor, who had registered secured interest with the Central Registry will have priority right over all other debts and all revenues, taxes and other rates payable to Central Government or State Government or local authority. This is a primary question to be decided. There are two more questions to be answered in this appeal regarding the registration of secured assets with the Central Registry and also defining what are the priority rights of the secured creditor under Section 26E of the SARFAESI Act. This contention arises in the context of a claim made by the SEBI that the amount due to SEBI recoverable under Section 11 -B of the SEBI Act does not come under of the SARFAESI Act.

3. The learned Single Judge considered a writ petition filed by the Dhanlaxmi Bank, the appellant herein, challenging the action of the SEBI to sell a secured asset, which was mortgaged with the appellant/bank under proceedings initiated under Section 11 -B of the SEBI Act and dismissed the writ petition. The Learned Single Judge interpreted Section 26E of the SARFAESI Act and took the view that the amount recoverable by SEBI is not in the contemplation of of the SARFAESI Act. The Learned Single Judge also opined that of the SARFAESI Act cannot have any overriding effect on recovery proceedings under Section 28-A(3) of the SEBI Act. Accordingly, upheld sale notice. The sale has now been concluded as well.

4. We find the following points require to be considered:

(i) Whether the appellant/bank had valid registration of secured assets with the Central Registry or not.

(ii) Whether the amount recoverable by SEBI is covered by Section 26E of the SARFAESI Act, 2002 or not?

(iii) Whether the provisions of the SARFAESI Act which confer priority rights to secured creditors under Section 26E , have an overriding effect on the provisions of recovery under Section28-A(3) of the SEBI Act?

We are not narrating details of the facts of the case as it has been already dealt with by the learned Single Judge in the impugned judgment.

POINT No.1

5. There is no dispute that the appellant/bank registered secured assets with the Central Registry (CERSAI) on 28/09/2012. The case of SEBI is that the mortgage was created on 14/02/2011 and registration was done only on 28/09/2012.

6. Learned Senior Counsel appearing for the SEBI Sri. Raju Joseph points out that Rule 5 then existed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Central Registry) Rules, 2011. Rule 5 stipulates a time limit for registration and condonation of delay. Under sub- rule 5(1) of Rule 5, the particulars of every transaction shall be filed with the Central Registry within thirty days from the date of such transaction. It is further pointed out to sub-rule (2) to contend that if the particulars of the transaction are not registered within the further period of thirty days, the registration granted, if any is invalid as there is no provision to condone the delay beyond the period stipulated under Rule 5(2).

7. It is to be noted that this Rule has been