Legal provisions involved: Section 35 of the SARFAESI Act, 2002; Article 371A of the Constitution of India
Judgement by: Supreme Court of India
Judge/Bench: Justice Dipankar Datta and Justice Aravind Kumar
Fact
The North Eastern Development Finance Corporation Ltd. gave a loan to a company to set up a cold storage unit. When the company did not repay, the corporation used the SARFAESI Act to take over the company’s assets. The company challenged this, saying the corporation had no right to use the Act. The High Court agreed with the company, so the corporation appealed to the Supreme Court.
Key legal provisions
Article 371A of Constitution of India
Issues raised
Can Section 35 override the Constitution?
Arguments of the case
The corporation said Section 35 lets it bypass other laws. The company said constitutional rules for Nagaland prevent this.
Judgement
The Supreme Court said Section 35 cannot override the Constitution. At the time, Nagaland had not adopted the SARFAESI Act, so the corporation had no jurisdiction. Also, the corporation was not a secured creditor, so it could not use the Act. The appeal was dismissed
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