Provisions Of SARFAESI Act Will Override Provisions Of Kerala Fisherman Debt Relief Commission Act 2008: Kerala HC
The Kerala High Court held that the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) will override the provisions of the Kerala Fisherman Debt Relief Commission Act, 2008 (KFDRC Act).
The Court was deciding a writ petition preferred by the State Bank of India (SBI) in which the question was “Can the Kerala Fishermen Debt Relief Commission interdict a secured creditor from enforcing the security interest created under the provisions of the Securitisation Act?”
A Single Bench of Justice Easwaran S. observed, “… it is to be presumed that the State Legislature was aware of the its limitation in the matter of recovery measures of an institutional creditors and wanted the Act 18 of 2008 to be taken out of the purview of cases covering Institutional Creditors. Though Sub Section (3) of Section 5 of the Act 2008 opens with a non obstante clause, this Court is firm in its view that when the said non obstante clause is pitted against a central Legislation, there would be a direct conflict between the Central Law and the State Law giving way for operation of Article 246 of the Constitution of India and thus the provisions of Securitisation Act will override the provisions of Kerala Fisherman Debt Relief Commission Act 2008.”
Advocate Amal George appeared for the petitioner while Standing Counsel T.G. Sunil appeared for the respondents.
In this case, the petitioner, SBI challenged the order passed by the Kerala State Fishermen Debt Relief Commission (KSFDRC) wherein the measures under the Securitisation Act were interdicted. The main ground of challenge against the order was that the Securitisation Act overrides the provisions of the Kerala Fisherman Debt Relief Commission Act 2008. The averments in the writ petition showed that by an application, the respondent availed a credit facility in the form of housing loan. On default, the bank initiated measures under the Securitisation Act. Once the measures were initiated, the respondent approached the Court by filing the writ petition which resulted in the judgment wherein, the respondent was given liberty to pay the outstanding amounts in twelve monthly installments.
On default, the bank moved the jurisdictional Magistrate under Section 14 of the Securitisation Act and obtained the order appointing a Commissioner for taking physical possession of the secured asset. In the meantime, the respondent approached the KSFDRC, with an application for waiver. The bank raised an objection and also stated that the issues could be amicably settled. The KSFDRC issued the order by which the secured creditor was directed to hand over the keys of the secured asset to the complainant with a further direction to the petitioner bank not to take coercive steps without the permission of KSFDRC. Challenging the aforesaid directions, the petitioner approached the High Court via the writ petition.
The High Court in view of the facts and circumstances of the case said, “When one reads the provisions of Section 35 of the Securitisation Act it gives a plain impression that the Act overrides the provisions of any other law for the time being in force. Furthermore, the Securitisation Act was enacted by virtue of the powers vested on the Parliament under Entry 45 List 1 Schedule VII of the Constitution of India which provides for the matters relating to banking. On the other hand, a cursory glance on the enactment of the Kerala State Fishermen Debt Relief Commission Act, 2008 shows that it is intended to provide for benefit entirely different from the purpose for which the Securitisation Act is enacted. The preamble of the Kerala State Fishermen Debt Relief Commission Act, 2008 shows that it is intended to provide urgent relief to the fishermen who are in distress due to indebtedness, by constituting a committee for recommending the relief measures. Under no stretch of imagination, it could be construed that the Commission constituted under the Kerala State Fishermen Debt Relief Commission Act, 2008 would get the authority to interdict the secured creditor acting in terms of the provisions of the Securitisation Act to restrain the secured creditor from taking measures for enforcement of the security interest.”
The Court noted that under Article 246 of the Constitution, the law enacted by the Parliament has to be given primacy over the State laws and Article 246 of the Constitution relates to the federal supremacy of the law enacted by the Parliament. In this regard, the Court held that the Securitisation Act will definitely have predominance over the Kerala State Fishermen Debt Relief Commission Act, 2008.
“Therefore on a conjoint application of Article 246 of the Constitution of India and Section 35 of the Securitisation Act, this Court has no hesitation to hold that the Securitisation Act definitely has primacy over the Kerala Fisherman Debt Relief Commission Act 2008”, it added.
Furthermore, the Court said that even if it assumed for a moment that the Act of 2008 applies on facts of the case, even the order impugned cannot be sustained and that a reading of Section 5 of the Act shows that the powers and duties of the Commission are well defined. It also observed that Section 5(b) provides the power to the Commission to determine in case of creditors other than institutional creditors to determine the fair rate of interest and an appropriate level of debt the fisherman is liable to pay.
“Section 5(2) further provides power of the Commission to issue orders keeping in abeyance the repayment of all debts of fisherman in the disaster affected areas to the creditors other than to institutional creditors. … It is declared that the 2nd respondent has no jurisdiction to interfere with the recovery proceedings against the 1st respondent under the Securitisation Act and the application filed by the 1st respondent before the 2nd respondent is held to be not maintainable. Resultantly, Exhibit P8 order is set aside. The petitioner bank is at liberty to proceed with the recovery measures in accordance with the provisions of the Securitisation Act”, it concluded.
Accordingly, the High Court allowed the writ petition.
Cause Title- State Bank of India v. Jespin Raju & Anr. (Neutral Citation: 2024:KER:24709)
Appearance:
Petitioner: Advocates Manu George Kuruvilla and Amal George.
Respondents: Standing Counsel T.G. Sunil, Advocates T.B. Hood, and M. Isha.
