Bombay High Court Allows SBI To Auction Mortgaged Assets Despite MPID Attachment

The Bombay High Court has allowed State Bank of India to proceed with the auction of mortgaged properties belonging to Mynah Industries Ltd., holding that the bank's rights as a secured creditor under the SARFAESI Act could not be stopped merely because the same properties were later attached under the Maharashtra Protection of Interest of Depositors Act.

A Division Bench of Justice A.S. Gadkari and Justice Kamal Khata allowed SBI's appeals against an order of the Special Judge under the MPID Act, which had rejected the bank's plea to lift the attachment and proceed against the secured assets.

The dispute arose from credit facilities granted by SBI to Mynah Industries. The borrower had executed mortgage deeds in favour of the bank between 2009 and 2012. After default, SBI classified the account as a non-performing asset in February 2015 and initiated proceedings under Section 13 of the SARFAESI Act.

The same properties, however, later became part of proceedings connected with the NSEL scam. The Economic Offences Wing had registered offences under the IPC and the MPID Act, and the competent authority attached properties of Mynah Industries.

The High Court noted that SBI's mortgage rights existed before the MPID attachment. It held that the bank, as a secured creditor, could not be denied its statutory remedy under SARFAESI merely because it had not complied with an earlier deposit direction.

The Bench observed that preventing SBI from being heard or proceeding against the secured assets would be disproportionate. It further noted that allowing the auction would not prejudice the interests of depositors, since the sale proceeds could later be directed to be deposited or accounted for if required in the MPID proceedings.

The Court therefore set aside the trial court's order and permitted SBI to proceed in accordance with law.