CHENNAI: The Madras High Court has permitted the City Union Bank in Nagapattinam district to go ahead with the auction of the secured assets — jewels and immovable properties — of a borrower who had defaulted repayment after availing Rs 13 crore from the bank.
The court also ruled that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act prevails over the provisions of the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019 once a security interest (right over secured assets) is created under the former and is registered with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI).
The orders were passed by Justice N Sathish Kumar recently on the petitions filed by the bank challenging the communications sent by the EoW in 2023 and 2024 for stopping the auction till attachment of the properties were made under the TN Protection of Investors and Depositors Act and handing the keys of the immovable properties.
“A combined reading of the provisions stated supra and the judgment of the full bench of Bombay High Court makes it clear that once a secured interest is created under SARFAESI Act and registered with the CERSAI, as required under law and under Section 26-D of the Act, the secured creditor (bank) has a priority superior over all other dues,” he said.
The judge explained that a combined reading of Sections 12 and 13 of the BUDS Act clearly indicates that the right under this Act will be subject to the right already created under the SARFAESI Act, provided the security interest created under the SARFAESI Act is registered with the CERSAI.
“As the registration has been done properly as per the Statute, Section 26-E of SARFAESI Act will come into play. The secured creditor, viz., the petitioner bank, shall be paid in priority over all other debts,” he said.