SARFESI Act 2002 has an overriding effect on other laws, including Code of Civil Procedure

A peculiar situation came before the Bombay High Court in the matter of M/s Corporation Bank vs. Hon’ble Chief Metropolitan Magistrate (Writ Petition No. 11729/2018) which was decided on 22nd October, 2018. In this matter Corporation Bank invoked the provision of Section 14 SARFESI Act 2002 against its defaulter. Corporation Bank applied for permission of the Metropolitan Magistrate to grant police aid in taking possession of the property which was secured with the Bank, which was granted. Alternatively, two ex-employees of the defaulter approached the Civil Court seeking recovery of their unpaid wages and prayed for interim injunction against transfer of the property of the defaulter. Civil court granted an order of the status quo. The request of the Bank to provide police aid to take possession was turned down by the police on the face of contradictory order of status quo granted by the Civil Court.

The issue before the Bombay High Court between the orders of Metropolitan Magistrate or Civil Court, which one should prevail.

The High Court after considering the judgements of the Supreme Court in the matter of Jagdish Singh vs Hira Lal; (2014) 1 SCC 479 and Sree Anandhakuma Mills Ltd vs. Indian Overseas Bank, Civil appeal no. 7214-7216 of 2012, decided on 3rd May, 2018 held Section 34 of the SARFAESI Act ousts the jurisdiction of Civil Court in respect of any action taken or to be taken in pursuance of any power conferred by or under the SARFAESI Act. The said section categorically bars any civil Court to entertain any suit or proceeding ‘in respect of any matter’ which a DRT or an Appellate Tribunal is empowered by or under the SARFESI. It was held that expression ‘in respect of any matter’ will include measures provided under sub-section (4) of Section 13.

Section 35 SARFESI categorically provides that Securitization Act will override other laws which will include Section 9 of CPC.  Effect of Section 35 thus is that a civil court is barred from entertaining any proceedings where the remedy would lie before DRT or writ Court. The Court declined to grant relief to the ex-employees of the defaulter as drawing an interpretation in favour of the employees would amount to defeating the purpose of SARFESI.

The Bombay High Court while disposing of the writ petition held that order of the Metropolitan Magistrate will prevail over the order of the Civil Court.