SARFAESI Act prevails over MSMED Act regarding the Recovery of Secured Assets
The High Court of Kerala at Ernakulam recently delivered a judgment in the case of Jayaprakash A v/s Union Bank of India, wherein Jayaprakash A (Petitioner), had filed a petition against Union Bank of India and other respondents, arguing that the provisions of the MSMED Act would prevail over the SARFAESI Act in the matter of recovery of secured assets. The petitioner had relied on a notification issued by the Ministry of Micro, Small & Medium Enterprises, which provided for a framework for the resolution of stressed assets and the formation of committees for stressed MSMEs.
However, the High Court of Kerala at Ernakulam held that the MSMED Act does not prevail over the SARFAESI Act in the matter of recovery of secured assets. The Hon’ble Court relied on the judgment of the Supreme Court in Kotak Mahindra Bank Limited v/s Girnar Corrugators Pvt.Ltd, which had held that there is no specific express provision giving ‘priority’ for payments under the MSMED Act over the dues of the secured creditors or over any taxes or cesses payable. The Apex Court further held that recoveries under the SARFAESI Act with respect to the secured assets would prevail over the recoveries under the MSMED Act to recover the amount under the award/decree passed by the Facilitation Council.
Thus, the High Court also held that the framework in the notification relied on by the petitioner and the other provisions of the MSMED Act cannot prevail over the statutory provisions of the SARFAESI Act in the matter of secured assets.

Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

Connect with Mr. Bhatt on Linkedin: https://www.linkedin.com/in/adit-ravishbhatt/

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