Attachment Under Banning Of Unregulated Deposit (BUDS) Act Doesn't Have Precedence Over SARFAESI/ IBC Proceedings: Kerala HC

The Kerala High Court held that attachment under the Banning of Unregulated Deposit Schemes Act (BUDS Act) does not have precedence over proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) or the Insolvency and Bankruptcy Code (IBC)Section 13 of the BUDS Act says that an order of provisional attachment passed by the Competent Authority shall have precedence and priority over any other attachment. However, the section starts with the expression, 'Save as otherwise provided in the SARFAESI Act or IBC Code, an attachment passed by the Competent Authority, shall have precedence and priority..'. Justice Gopinath P. held that this could only mean that the action/ proceedings under the SARFAESI Act and IBC were saved from the provision providing precedence to the BUDS Act.“Therefore, it is clear that the expression 'Save as otherwise provided in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002) or the Insolvency and Bankruptcy Code, 2016 (31 of 2016) can only mean that any action/ proceeding sunder SARFAESI Act and IBC is saved from the provision providing precedence to the BUDS Act."In the present case, the mortgaged land was attached and auctioned under the SARFAESI Act for defaulting on loan repayment. However, when the buyer who bought the land in the auction went to the Sub Registrar to register the sale certificate, it was informed that the Deputy Superintendent of Crime Branch, Economic Offence, had issued a communication restraining transfer of the property. It was informed that one of the 2 borrowers who had mortgaged the property has been booked for offences including those under the BUDS Act. The petitioner, the NBFC from where the borrowers had availed loan contended before the Court that the proceedings under BUDS Act will have no bearing on those initiated under SARFAESI. The petitioner specifically pointed to the saving clauses given in Sections 12 and 13 of the SARFAESI Act.This argument was accepted by the Court. The Court directed registration of the sale certificate issued by the petitioner in favour of the buyer. The petitioner was directed to deposit the excess amount received after setting off the liability before the competent authority under the BUDS Act.Counsel for the Petitioners: Advocates P. Paulochan Antony, Sreejith K.Counsel for the Respondents: Advocate P. S. Pappu (GP)Case No: WP(C) 15010 of 2024Case Title: HDB Financial Services Limited v The Sub Registrar and OthersCitation: 2025 LiveLaw (Ker) 140Click Here To Read/ Download Order

Attachment Under Banning Of Unregulated Deposit (BUDS) Act Doesn't Have Precedence Over SARFAESI/ IBC Proceedings: Kerala HC

Manju Elsa Isac

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