SARFAESI: Only Expressly Created Statutory First Charges Under Central/State Laws Can Take Precedence Over Secured Creditors' Claim: SC [Read Judgment]
Only expressly created statutory first charges under Central and State laws can take precedence over the claims of secured creditors under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, the Supreme Court has reiterated on Wednesday. The issue considered in Maharashtra State Co-operative Bank Ltd. vs. Babulal Lade was whether the Karkhana employees' dues can take precedence over the claim of the secured creditor in respect of the proceeds from sale of secured assets of the Karkhana under the SARFAESI Act. However, the bench of Justice Mohan M. Shanthanagoudar and Justice Krishna Murari noted that the recovery certificate issued under Section 50 of the Maharashtra Recognition of Trade Unions & Prevention of Unfair Labour Practices Act, Act only makes employees' dues recoverable as arrears of land revenue. In this context, the bench said: Further, as has been held by this Court in Central Bank of India v. State of Kerala, 4 SCC 94, only expressly created statutory first charges under Central and State laws can take precedence over the claims of secured creditors under the SARFAESI Act.
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