Karnataka High Court
Canara Bank vs State Of Karnataka on 10 April, 2026
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WP No. 14220 of 2024
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 10TH DAY OF APRIL, 2026
BEFORE
THE HON'BLE SMT. JUSTICE LALITHA KANNEGANTI
WRIT PETITION NO. 14220 OF 2024 (GM-DRT)
BETWEEN:
CANARA BANK,
HOSKOTE BRANCH,
WARD NO.6, KAVERI COMPLEX,
COLLEGE MAIN ROAD, M.V. EXTENSION,
HSAKOTE - 562 114.
...PETITIONER
(BY SRI. SHETTY VIGNESH SHIVARAM.,ADVOCATE)
AND:
1. STATE OF KARNATAKA,
REPRESENTED BY PRINCIPAL SECRETARY,
REVENUE DEPARTMENT,
Digitally signed ROOM NO.627, 6TH FLOOR, GATE-1,
by SUVARNA T M.S BUILDING , DR.B.R.AMBEDKAR VEEDHI,
Location: HIGH
COURT OF BENGALURU 560 001.
KARNATAKA
2. SUB REGISTRAR,
HOSAKOTE SUB REGISTRAR OFFICE,
HOSAKOTE, BENGALURU.
3. ASSISTANT COMMISSIONER AND
COMPETENT AUTHORTY,
VINIVINK ORGANIZATION INVESTOR
CLAIMS ENQUIRY DIVISION, BENGALURU.
5TH FLOOR, VISHVESHWARAYYA KENDRA,
DR. AMBEDKAR VEEDHI, BENGALURU 560 001.
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4. UNDER SECRETARY TO GOVERNMENT
REVENUE DEPARTMENT (SPECIAL CELL)
VIDHANA SOUDHA, BENGALURU 560 001.
5. STATE OF KARNATAKA,
THROUGH HOSKOTE POLICE STATION,
HOSKOTE KARNATAKA,
REP. BY GOVERNMENT PLEADER.
6. SMT. SARVAMANGALA,
W/O SRI APPU RAO M.S.
MAJOR IN AGE,
R/A NO.22, SRI RAYARA NIVASA,
ROY SINGH LAYOUT, HOSAKOTE,
BENGALURU RURAL 562 114.
...RESPONDENTS
(BY SRI.MAHANTESH SHETTAR.,AGA FOR R1,R2,R4 & R5;
SRI.VEERESH BUDIHAL., ADVOCATE FOR R3;
SRI.SWAROOP S., ADVOCATE FOR R6)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
THE CONSTITUTION OF INDIA, PRAYING TO A) DIRECTION
SETTING ASIDE THE GAZETTE NOTIFICATION DATED
15/03/2023 BEARING NO. E-RD 22 GRC 2022 ISSUED BY THE
R4 IN SO FAR THE SCHEDULE PROPERTY IS CONCERNED
(ANNEXURE-E) AND B) SETTING ASIDE THE DIRECTION DATED
12/06/2023 BEARING NO. NGR/CR/01/2023-24 ISSUED BY
THE R3 TO THE R2 IN SO FAR THE SCHEDULE PROPERTY IS
CONCERNED (ANNEXURE-F) AND C) DIRECTION ON THE R2 TO
REGISTER THE SALE CERTIFICATE DATED 30/03/2024
BEARING REF. NO. RO/DEV/SC/SS/30032023 ISSUED BY THE
PETITIONER IN FAVOUR OF R6 (ANNEXURE-B) AND D)
DIRECTION ON THE JURISDICTIONAL POLICE TO ASSIST THE
PETITIONER IN HANDOVER POSSESSION OF THE SCHEDULED
PROPERTY TO THE AUCTION PURCHASER.
THIS WRIT PETITION, COMING ON FOR DICTATING
JUDGMENT HEARING, THIS DAY, ORDER WAS MADE THEREIN
AS UNDER:
CORAM: HON'BLE SMT. JUSTICE LALITHA KANNEGANTI
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ORAL ORDER
The present writ petition is filed by the petitioner/Canara
Bank seeking the following prayer:
“PRAYER
WHEREFORE the Petitioner prays that this Hon’ble court
may be pleased to:
a) Issue a writ in the nature of certiorari or any other
appropriate writ or direction setting aside the gazette
notification dated 15.03.2023 bearing No. E-RD 22 GRC
2022 issued by the Respondent No.4 in so far the
schedule property is concerned. (Annexure-E)
b) Issue a writ in the nature of certiorari or any other
appropriate writ setting aside the direction dated
12.06.2023 bearing No. NGR/CR/01/2023-24 issued by
the Respondent No.3 to the Respondent No.2 in so far as
the Schedule Property is concerned. (Annexure-F)
c) Issue a writ in the nature of mandamus or any other
appropriate writ or direction on the Respondent No.2 to
register the sale certificate dated 30.03.2024 bearing
Ref.No.RO/DEV/SC/SS/30032023 issued by the
Petitioner in favour of Respondent No.6. (Annexure-B)
d) Issue a writ in the nature of mandamus or any other
appropriate writ or direction on the jurisdictional police
to assist the Petitioner in handover possession of the
scheduled property to the auction purchaser.
e) Grant any other order or direction as may deem fit in
the circumstances of the case.”
2. The facts of the case are that one Late Shivakumar R
had approached the petitioner/Bank for a housing loan in the
year 2020 for an amount of Rs.2,32,00,000/- for construction
of residential building. For the said housing loan, one
Mr.Praveen Kumar S and one Smt. Varalakshmi S were the co-
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borrowers and also Mr. Pawan Kumar, who is the co-borrower
is also the legal heir of late Mr. Sivakumar. After considering
the application of the borrowers, the petitioner/Bank sanctioned
the housing loan facility of an amount of Rs.2,32,00,000/-.
They have executed the housing loan agreement. The
borrowers agreed to repay the said loan of Rs.2,32,00,000/-
within 348 monthly instalments of Rs.1,83,015/-. The
borrowers agreed to pay the interest on the loan amount at the
rate of 8.70% p.a. compounded monthly interest from the date
of grant of loan. On 27.03.2020, one Late Shivakumar R.,
created mortgage of the property bearing No.1, Hoskote
Municipal Khata No.6808/5517/2841/1 and PID No.23-17-86
situated at Ramakrishna Road, 2nd cross, Sir M.V. Layout,
Hosakote Town, Bangalore Rural District by executing
Memorandum of Deposit of Title Deed, which was registered on
27.04.2020 in the Office of the Sub-Registrar, Hoskote.
3. After the borrowers executed the loan documents, the
petitioner/Bank released the loan amount and permitted the
borrowers to utilise the housing loan amount. When the
borrowers failed to pay the amount, the account was classified
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as Non-Performing Asset on 29.01.2022 in accordance with the
directives/guidelines relating to asset classification issued by
the Reserve Bank of India. The Bank issued notice under
Section 13(2) of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(for short ‘SARFAESI Act‘) on 09.02.2022 and the same was
received by the borrowers and guarantors. In spite of receipt of
notices, they have neither liquidated their dues nor raised any
objection. Then the Bank has issued a notice under Section
13(4) of the SARFAESI Act dated 06.05.2022 and took symbolic
possession of the property.
4. Then the petitioner/Bank has filed a petition under
Section 14 of the SARFAESI Act before the Chief Judicial
Magistrate, Bangalore Rural and the Bank was allowed to take
possession of the secured assets vide order dated 07.11.2022
in C.Misc.No.1139/2022. Pursuant thereto, the Bank took
physical possession of the property on 21.11.2022. The
petitioner has simultaneously proceeded by filing
O.A.No.1146/2023 before the Debts Recovery Tribunal-II,
Bangalore under Section 19 of the RDB Act, 1993 and the same
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is pending adjudication. Then the petitioner has issued the sale
notices dated 21.07.2022, 04.11.2022, 30.11.2022,
20.01.2023 and 18.04.2023 by fixing the sale on 29.08.2022,
29.11.2022, 22.12.2022, 22.02.2023 and 24.05.2023
respectively. However, the respective sales did not take place
due to want of bidders. Another sale notice was issued on
19.10.2023 fixing the sale on 23.11.2023. In the said sale, the
scheduled property was sold on 23.11.2023 for an amount of
Rs.7,10,66,000/- and the sale was confirmed.
5. The borrowers and guarantors had filed
WP.No.27699/2023 before this Court. Initially, a conditional
interim stay was granted on 22.01.2024 subject to payment of
Rs.50 lakhs on or before 22.02.2024. However, they did not
comply with the interim order and withdrew the writ petition
vide order dated 20.02.2024. It is stated that after emerging as
the successful bidder, respondent No.6 had deposited the entire
consideration of an amount of Rs.7,10,66,000/-. Accordingly,
the sale certificate was issued on 30.03.2024 executed by the
authorized officer of the bank in favour of respondent No.6.
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6. The respondent No.6/auction purchaser gave a
representation dated 05.04.2024 to respondent No.2 seeking
registration of the sale certificate dated 30.03.2024. An
endorsement dated 10.04.2024 was issued by respondent
No.2, wherein the registration of the scheduled property was
denied on the ground that respondent No.4 had issued a
gazette notification dated 15.03.2023 inter alia prohibiting the
registration of the scheduled property. Respondent No.3 on the
basis of the said gazette notification had also issued a direction
to respondent No.2 vide letter dated 12.06.2023 restricting the
registration of the property. Subsequently, the petitioner tried
to hand over the physical possession of the property to
respondent No.6. However, the petitioner could not handover
the possession due to the ruckus and commotion created by
unruly elements/persons at the behest of the borrowers and
guarantors at the scheduled property. The petitioner/Bank is
aggrieved by the endorsement dated 10.04.2024, gazette
notification dated 15.03.2023 and letter dated 12.06.2023.
Assailing the same, the present writ petition is filed.
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7. Learned counsel appearing for the petitioner/Bank
submits that the charge of the Bank under SARFAESI Act
overrides any other charge under any other enactment. The
mortgage which existed much earlier to the proceedings under
the Karnataka Protection of Interest of Depositors in Financial
Establishments Act, 2004 (for short ‘KPIDFE Act‘) takes
precedence. In view of the same, the gazette notification dated
15.03.2023, letter dated 12.06.2023 and consequent
endorsement dated 10.04.2024 restricting registration of the
schedule property are unsustainable and liable to be set aside.
It is submitted that the attachment under the KPIDFE Act would
not have any priority over the actions of respondent No.3.
Further, Section 26-E of the SARFAESI Act relates to the
priority of secured creditors and stipulates that notwithstanding
anything contained in any other law for the time being in force,
after the restriction of a security interest, the debts due to any
secured creditor shall be paid in priority over all other debts.
The auction in favour of the auction purchaser by the secured
creditor is free from all encumbrances. Hence, the Sub-
registrar cannot refuse to register the sale certificate. It is
stated that the SARFAESI Act being a Central Legislation has
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precedence over the State Legislation such as KPIDFE Act. It is
submitted that SARFAESI Act contains overriding clause under
Section 35 which is clear that it prevails over any law overriding
its provisions. Hence, on the pretext of attachment under
KPIDFE Act, registration of sale certificate of respondent
No.6/auction purchaser cannot be curtailed.
8. It is submitted that this issue is fairly covered by the
decisions of the Apex Court in case of Punjab National Bank
Vs. Union of India and others1 and the learned counsel for
the petitioner/Bank has also relied on the judgment in case of
UCO Bank and another Vs. Dipak Debbarma and others
arising out of SLP(Civil)Appeal No.11250/2016. He has also
relied on another judgment of this Court in case of Bank of
India Vs. The Secretary to the Government, Revenue
Department arising out of WP.No.12038/2017 and held that
the charge under SARFAESI Act overrides attachment under the
KPIDFE Act. He had relied on the judgment of the High Court of
Judicature at Bombay in case of SBICAP Ventures Ltd. Vs.
Joint Director, Directorate of Enforcement (Bengaluru
1
2022 SCC OnLine SC 227
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Zonal Office) & others arising out of WP.No.1360/2023. He
had relied on paragraph No.24 which reads thus:
“24. We are unable to see any provision of the PMLA
that has, combined with the non obstante clause, an
overriding charge that would defeat, efface or render
subservient the rights of a secured creditor. It is even
unclear whether the attachment by the PMLA
constitutes a sovereign debt in a case like this. Even if
it did, it would not prevail over the rights of a secured
creditor claiming security under a contract. We are
unable to see from the impugned order a single finding
rendered after the due process of law that there is
anything remotely untoward let alone illegal within the
meaning of the PMLA in the Petitioner’s acquisition of
rights over the flats in question, the project or the
receivables. It is no argument to say that the PMLA
proceedings are in the public interest. Every statute is
in the public interest. But is it being suggested that the
SWAMIH fund is not in the public interest, despite all
that is known? SBICAP is not even made a party to the
PMLA proceedings.”
9. Learned counsel for the petitioner/Bank had relied on
the judgment of the Apex Court in case of Solidaire India Ltd.
Vs. Fairgrowth Financial Services Ltd. and others2. He had
relied on paragraph No.11 which reads as follows:
“11. We are in agreement with the aforesaid decision
or the case, more so when we find that whenever the
Legislature wishes to do so it makes appropriate
provisions in the Act in that behalf. Mrs. Shiraz
Rustomjee has drawn our attention to Section 34 of the
Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 wherein after giving an
overriding effect to the 1993 Act it is specifically2
(2001) 3 SCC 71
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provided that the said Act will be in addition to and not
in derogation of a number of other Acts including the
1985 Act. Similarly under Section 32 of the 1985 Act
the applicability of the Foreign Exchange Regulation
Act and the Urban Land (Ceiling and Regulation) Act is
not excluded. It is clear that in the instant case there
was no intention of the legislature to permit the 1985
Act to apply, notwithstanding the fact that proceedings
in respect of a company may be going on before the
BIFR. The 1992 Act is to have an overriding effect
notwithstanding any provision to the contrary in
another Act.”
10. Learned counsel had relied on the judgment of the
High Court of Madras in case of Assistant Commissioner
(CT) Vs. Indian Overseas Bank and Another3. He had
relied on paragraph No.3 which reads thus:
“3. There is, thus, no doubt that the rights of a secured
creditor to realise secured debts due and payable by
sale of assets over which security interest is created,
would have priority over all debts and Government
dues including revenues, taxes, cesses and rates due to
the Central Government, State Government or Local
Authority. This section introduced in the Central Act is
with ”notwithstanding” clause and has come into force
from September 1, 2016.”
11. He had relied on the judgment of the Co-ordinate
Bench of this Court in case of Sri.T.Bharathgowda Vs. State
of Karnataka and Others arising out of WP.No.7872/2024
dated 28.05.2024. He had relied on paragraph No.14 which
reads thus:
3
2016 SCC OnLine Mad 10030
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“14. Scores and scores of cases are filed before this
Court where the Sub-Registrars refuse to register the
documents – the documents could be sale certificates or
documents creating charge over the property. The Sub-
Registrars, on grounds that are not available to them,
refuse to register the documents, sometimes on the
score that the software in the Registration Department
or the Sub-Registrar’s office is not made to be in tune
with the necessities of registration of documents of the
Banks and therefore, it is not registered and in certain
cases, it is the statutory dues by the borrower or the
holder of the document, which are not cleared and
therefore, would not be registered. All these are reasons
beyond the statute. Unless the Sub-Registrar notices
any violation as obtaining under Rule 171 of the Rules,
the Sub-Registrar does not have jurisdiction to refuse
registration of a document. Therefore, it is necessary for
the State Government to issue necessary circular in
terms of Rule 171 of the Rules and the law laid down by
the Apex Court in the judgment supra, so that every
person who goes for registration of documents should
not be denied registration except in accordance with the
observations supra as acts of Sub-Registrars are driving
every person who is denied registration to the doors of
this Court unnecessarily and if the Sub-Registrar would
not register a document, if it is found to be in tune with
law, the delay in registration would be attributable only
to those Sub-Registrars, who will be saddled with
exemplary costs when such cases are brought before
this Court seeking a direction for registration of a
document.”
12. Relying on these judgments, learned counsel for the
petitioner/Bank submits that the secured creditor has first
charge over the property and the provisions of the KPIDFE Act
cannot have an overriding effect on the SARFAESI Act. Hence,
it is submitted that the writ petition may be allowed and the
Sub-registrar may be directed to register the sale certificate.
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13. Learned counsel appearing for respondent
No.3/competent authority submits that the dispute that is
raised by the petitioner/Bank in the instant case is essentially
regarding the two enactments i.e., SARFAESI Act and the
Karnataka Protection of Interest of Depositors in Financial
Establishments Act, 2004 (for short ‘KPIDFE Act‘). It is stated
that the respondent No.3 is a competent authority appointed by
the Government of Karnataka by exercising the powers
conferred on it under the KPIDFE Act. The competent authority
is entrusted with the function of curbing the unscrupulous
activities of fraudulent financial establishment including its
promoters, partners, directors, manager or employee
responsible for the management of or the conduct of the
business or affairs of the financial establishment which has
fraudulently defaulted in the repayment of the deposits and has
also been vested with a statutory duty of attaching the
properties of the defaulters and realizing the money to disburse
the same to the depositors. It is submitted that the KPIDFE Act
is remedial and beneficial statute, intended to protect the
depositors and preserve assets derived from, or connected
with, defaulting financial establishments. The ad-interim
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attachment by the competent authority operates to maintain
the status quo and prevent alienation or creation of third party
interests that would frustrate eventual recovery. A purposive
interpretation therefore be adopted to give efficacy to these
protective steps.
14. It is submitted that the Government of Karnataka
issued an order of ad-interim attachment by exercising its
powers under Section 3(2) of the KPIDFE Act on 15.03.2023
and in terms of Section 3(4) of the KPIDFE Act, the property
stood vested in competent authority. The competent authority
directed the jurisdictional Sub-registrar to restrain registration
by virtue of communication dated 12.06.2023. It is submitted
that the Apex Court in the case of National Spot Exchange
Ltd. Vs. Union of India and others4, has upheld the
preposition that secured creditors cannot claim priority over
properties attached under a depositor-protection statute,
holding that MPID Act overrides any such claim of priority in
respect of properties attached thereunder. It is submitted that
the Apex Court is dealing with Maharashtra Protection of
4
2025 INSC 694
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Interest of Depositors Act and it is in pari materia with the
KPIDFE Act in object and mechanism, depositor protection,
attachment and vesting in the competent authority, supervision
by the Special Court and equitable realization and distribution.
It is submitted that in view of the same, attachment
proceedings under the KPIDFE Act are not rendered void or
inoperative merely because the security interest is created by
the Bank.
15. It is submitted that under Article 246 and the doctrine
of pith and substance, the KPIDFE Act is referable to entries 64,
65 of List II and entry 2, 11A, 13 and 46 of List III of the
Seventh Schedule to the Constitution of India and is a valid
exercise of State Legislative competence to curb fraudulent
financial establishment and protect depositors. It is submitted
that the SARFAESI Act enables expeditious recovery of Bank
dues through enforcement of security interests, whereas
KPIDFE is a public interest restitution regime for fraudulently
mobilized deposits, treating SARFAESI as automatically
overriding would enable encumbrances to become a ready
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device to defeat depositor protection statutes, contrary to the
Supreme Court’s recognition of their protective purpose.
16. It is submitted that in the light of the judgment of the
Hon’ble Supreme Court in National Spot Exchange Ltd.’s
case referred supra, the said issue is no more res integra and
the provisions of the KPIDFE Act which are pari materia with
that of the MPID Act has an overriding effect on the SARFAESI
Act. It is submitted that Section 26-E of the SARFAESI Act is
considered in the above referred judgment and that argument
is no more available to the petitioner. The judgment that is
relied on by the petitioner/Bank in Punjab National Bank’s
case referred supra will not apply to the facts of this case. It is
submitted that in National Spot Exchange Ltd.‘s case
referred supra, the Apex Court had examined the statute i.e.,
MPID which is pari materia with the KPIDFE Act. This judgment
is a direct judgment and other judgments which are relied on
by the petitioner do not apply to this case.
17. It is submitted that though a review petition is filed
challenging the judgment in National Spot Exchange Ltd.’s
case referred supra, mere filing and pendency of a review
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petition cannot be a ground and still it has the binding force
under Article 141 of the Constitution of India. Unless and until
the Hon’ble Supreme Court stays the operation of the judgment
or modifies/recalls it in review, the judgment continues to hold
the field and must be given full effect. It is submitted that the
Apex Court in case of Union Territory of Ladakh & Ors. Vs.
Jammu and Kashmir National Conference & Ors.5 had held
that pendency of a review cannot be treated as a good ground
at the current stage to withhold implementation or to keep
subordinate proceedings in abeyance. It is submitted that the
writ petition is liable to be dismissed.
18. In response to that, learned counsel appearing for the
petitioner/Bank submits that as the review petition is pending
against the judgement passed in National Spot Exchange
Ltd.‘s case referred supra, the same cannot be applied at this
point of time and in the light of the other judgments, the
SARFAESI Act has an overriding effect on all other Acts and the
writ petition has to be allowed.
5
2023 INSC 804
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19. Learned counsel appearing for respondent No.6/
auction purchaser submits that respondent No.6 has already
filed another writ petition and sought for refund of the amount.
20. Having heard the learned counsels on either side,
perused the entire material on record. The admitted facts in
this case are that the petitioner/Bank has initiated the
SARFAESI proceedings and sold the property in favour of
respondent No.6 and the Sub-registrar refused to register the
sale certificate in view of the notification issued by the
competent authority under the KPIDFE Act which made the
petitioner to come before the Court. According to the learned
counsel for the petitioner/Bank, the SARFAESI Act has an
overriding effect and relied on certain judgments referred
supra.
21. Learned counsel appearing for respondent
No.3/competent authority submits that in the light of the law
laid by the Apex Court in case of National Spot Exchange
Ltd.‘s case referred supra, the KPIDFE Act has an overriding
effect on the SARFAESI Act. There is no dispute that the first
charge is created by the Bank. In case of National Spot
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Exchange Ltd.‘s case referred supra, the question that fell for
consideration before the Apex Court is, whether the secured
creditors would have priority of interest over the assets
attached under the provisions of Prevention of Money
Laundering Act, 2002, (PMLA) and Maharashtra Protection of
Investors and Depositors Act, 1999 (MPID Act), by virtue of the
provisions of SARFAESI Act and RDB Act, 1993? The Apex
Court had referred to the objects and reasons of the relevant
provisions of the statute. When it comes to the MPID Act, it is
observed that the Act was enacted by the State of Maharashtra
to protect the interests of depositors of the financial
establishments and matters relating thereto. The Apex Court
had considered Section 2(c) which defines “deposit”, Section
2(d) which defines “Financial Establishments”, Section 3
pertaining to “fraudulent default by a financial establishment”,
Section 4 pertaining to “attachment of properties on default of
return of deposits”, Section 7 pertaining to “powers of
designated court regarding attachment” and Section 14 of the
MPID Act for “overriding effect of the Act”. Then the Apex Court
had considered various judgments and observed as follows:
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“40. In view of the above position of law settled by the
Constitution Bench, it is held that considering the pith
and substance of the State and the Central Legislations
in question, the Central Legislations i.e., SARFAESI Act
or RDB Act cannot be permitted to prevail over the State
Legislation i.e., MPID Act, merely because the Central
Legislations are enacted by the Parliament. Since all
these Acts have separate field of operations, provisions
of SARFAESI Act or RDB Act cannot be permitted to
override the provisions of MPID Act, which is a validly
enacted State Legislation, otherwise it would
tantamount to violation of federal structure doctrine
envisaged in the Constitution. The respective legislative
powers of the Union and the States are traceable to
Articles 245 to 254 of the Constitution. The State qua
the Constitution is Federal in structure, and independent
in its exercise of legislative and executive power.
Therefore, if provisions of SARFAESI Act or RDB Act are
permitted to override the provisions of MPID Act, then
the legislative powers of the State Legislature would be
denuded which would tantamount to subverting the law
enacted by the State Legislature.
41. It is true that sometimes the overlapping of
legislations enacted with regard to the matters relatable
to different Entries in List-I and List-II in Seventh
Schedule may occur, however in that case also as held
by the Constitution Bench in State of West Bengal vs.
Kesoram Industries Limited and Others13 , though, the
List-I has priority over List-III and List-II, and List-III
has priority over List-II, the predominance of Union List
would not prevent the State Legislature from dealing
with any matter within List-II, even if it may
incidentally affect any item in List-I. In the case at
hand, the SARFAESI Act and RDB Act having been
enacted by the Parliament for the subject matter falling
in List-I and the MPID Act having been enacted by the
State Legislature for the subject matter falling in List-II
in the Seventh Schedule, the latter would prevail in the
State of Maharashtra in respect of the specific subject
matter for which the said Act was enacted, in view of
Clause (3) of Article 246.
42. It was next sought to be submitted by learned
counsels appearing for the Secured Creditors that in
view of Section 26E of the SARFAESI Act, the debts due
to the Secured Creditor have to be paid in priority over
all other debts and all revenues, taxes, cesses and other
rates payable to the Central Government or State
Government or local authority, and therefore, the
security interest of the Secured Creditors in respect of
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HC-KAR
the properties attached under MPID Act should be given
priority. We do not find any merit in the said
submission. Apart from the fact that Section 26E has
come into force with effect from 1st September, 2016, it
gives right to the Secured Creditor, after the registration
of security interest, to be paid in priority over all other
debts and revenues, taxes etc. payable to the Central
Government or State Government or local authority.
43. In the instant case, the attachment of the properties
over which the Secured Creditors is said to have
security interest, have been attached under Section 4 of
the MPID Act. Such properties are believed to have been
acquired by the Financial Establishment i.e. NSEL either
in its own name or in the name of other persons from
out of deposits collected by the Financial Establishment.
All such properties and assets of the Financial
Establishment and the persons mentioned in the said
provision, vest in the Competent Authority appointed by
the Government, pending further orders from the
Designated Court. Such monies or deposits of
depositors/ investors, who have been allegedly
defrauded by the Financial Establishment, and for the
recovery of which the MPID Act has been enacted, could
not be said to be a “debt” contemplated in Section 26E
of the SARFAESI Act, and hence also the provisions of
Section 26E could not be said to have been attracted to
the facts of the case.
44. In that view of the matter, it is held that no priority
of interest can be claimed by the Secured Creditors
against the properties attached under the MPID Act and
that the provisions of MPID Act would override any
claim for priority of interest by the Secured Creditors in
respect of the properties which have been attached
under the MPID Act.”
22. In the light of the authoritative pronouncement of the
judgment of the Apex Court in the above case, the MPID Act
which is pari materia with that of the KPIDFE Act, the issue is
no more res integra and the KPIDFE Act will have the priority
over the SARFAESI Act. The second submission that the
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judgment in National Spot Exchange Ltd.‘s case referred
supra, a review petition is filed and the same cannot be
considered has also no legs to stand. In that view of the
matter, there cannot be any direction to the Sub-registrar to
register the document. As far as respondent No.6/auction
purchaser is concerned, he has already filed another writ
petition. In that view of the matter, this Court is passing the
following order:
ORDER
i. Accordingly, the writ petition is dismissed.
ii. All I.As. in this petition shall stand closed.
SD/-
(LALITHA KANNEGANTI)
JUDGEMEG
List No.: 1 Sl No.: 9
