Shri Siddhi Vinayak Traders vs Maharashtra State Co op. Bank Ltd. & Ors

Ashok Menon, Chairperson

Appeal Nos. 160 of 2016 and 165 of 2016 impugn the orders in Securitisation Application Nos. 19 of 2015 and 18 of 2015, respectively, on the files of the Debts Recovery Tribunal, Nagpur dated 10/12/2015.

The interesting question that arises for consideration in these Appeals is whether a creditor who has earned a money decree in a civil suit with respect to the secured assets proceeded against under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’ for short) is an “aggrieved person” coming within the purview of Section 17(1) of the said Act.

The common Appellant in both these appeals is Mr Santosh M Sharma, the sole proprietor of two proprietorships namely, “Perfect Roller Balls India” and “Shri Siddhi Vinayak Traders”. The 3rd Respondent sugar factory, namely Ramganesh Gadkari Sahakari Sakhar Kharkhana Ltd. had business transactions with the said proprietorships of the Appellant and he had supplied hardware and electrical materials from time to time, and on that account of that, was liable to pay a sum of ₹ 2,027,765/-to Perfect Roller Balls India and ₹ 4,885,573/- to Siddhi Vinayak Traders. Civil suits filed before the Civil Judge, Senior Division, Nagpur were decreed and the execution petitions for the realisation of the decree debts due filed with applications for attachment of properties belonging to the judgement debtor sugar factory. The attachment was ordered on 29/03/2010. When the Appellant along with the bailiff went to execute the attachment warrant, the objection was raised and the attachment resisted stating that the 2nd Respondent has purchased the factory belonging to the 3rd Respondent in an auction in the Sarfaesi proceedings on 06/02/2008. Orders were subsequently passed by the Civil Judge to get the order executed with police aid on 15/04/2010. On the same day, the 1st Respondent bank appeared in the executing proceedings and filed an objection to the execution petition as a third party. The 2nd Respondent auction purchaser also appeared on 21/04/2010 and filed an objection. The executing court passed an order directing that property worth ₹1 crore should not be moved from the factory. It is contended that the order of the civil court tantamounst to the creation of a charge and lien over the property belonging to the 3rd Respondent. It is further contended that the sugar factory worth more than ₹90 crores has been sold for a paltry sum of ₹12.95 crores. The debt due to the 1st Respondent bank was ₹83 crores and the sale of the factory has not been able to satisfy the debt due to the bank. The Appellant has challenged the sale proceedings and contends that it is not in accordance with Rules 5, 6, 7, 8 and 9 of the Security Interest (Enforcement) Rules, 2002 (‘Rules’ for short). It is further contended that the land on which the sugar factory is situated, is agricultural land incapable of being proceeded against under section 31 (i) of the SARFAESI Act. Under the circumstances, the Appellant filed Securitisation Applications for setting aside the sale of the secured assets in violation of the SARFAESI Act and Rules.

The Respondents refuted the allegations and pointed out that the Appellant is neither a borrower nor a guarantor or a person interested in the secured assets who could be described as an ‘aggrieved person’ within the meaning of section 17 of the SARFAESI Act. It is also contended that there is no violation of the Act or Rules as alleged.

The Ld. Presiding Officer has in the impugned orders observed that none of the contentions raised by the Appellant is sustainable. It is held that under the provisions of the SARFAESI Act, the secured creditor would have precedence over all other debts pertaining to the secured assets. None of the rules have been violated. Being a sugar cane factory, the embargo under Sec.31 (i) of the SARFAESI Act is not attracted. The Appellant will not come under the definition of an ‘aggrieved person’ under the Act, holds the Ld. P.O. The S.As are, therefore, dismissed.

The SARFAESI Act was enacted with the intention to give impetus to industrial development in the country by providing a speedy recovery procedure. SARFAESI Act is applicable to all secured debts and would take precedence over any other statute or modes of recovery. In the instant case, the attachment by the civil court was after the sale of the property and therefore, the secured assets could not have been attached by the civil court exercising jurisdiction under the general law. The provisions of the special statute would prevail over the provisions of the general law. After realising the debt due to the secured creditor, if anything remains as value of the property, it could be realised in the execution of a decree debt due from the borrower. The Appellant is raising a claim over the secured assets wherein he did not have any right prior to the attachment or the initiation of the Sarfaesi measures. Even in cases where there are more than one mortgage over the secured assets, the one earlier in point of time would take precedence over the later. The borrower in this case has not raised any objection regarding the impropriety in the Sarfaesi measures initiated by the secured creditor. The Appellant being a third party is not entitled to challenge the sale or the other Sarfaesi measures since he is not an ‘aggrieved person’. The Ld. Presiding Officer was, therefore, perfectly justified in dismissing the Securitisation Applications. I find no reason to interfere. The appeals are only to be dismissed and I do so.

In the result, the appeals are dismissed.