Securitisation Act Prevails Over State Legislation: Kerala HC Sets Aside KSFDRC’s Order Interfering with SBI’s Recovery Process

The High Court of Kerala dealt with the issue of whether the Kerala State Fishermen Debt Relief Commission (KSFDRC) can interdict actions taken under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Securitisation Act) by a secured creditor.

Facts and Issues: The State Bank of India (SBI) challenged an order by the KSFDRC, which directed the bank to cease its recovery actions under the Securitisation Act. The case revolved around the question of whether the KSFDRC could intervene in a recovery process initiated by a secured creditor under the central legislation (Securitisation Act).

Jurisdictional Conflict: The court examined whether the KSFDRC had the jurisdiction to issue directives to SBI, restraining them from proceeding under the Securitisation Act.

Primacy of Securitisation Act: Justice Easwaran S. Noted that Section 35 of the Securitisation Act contains a non-obstante clause, giving it an overriding effect over other laws, as observed in Rajan P Kuttan vs State of Kerala and reiterated in State Bank of India Vs. Santhosh Gupta.

Constitutional Provision: The judgement emphasized the supremacy of the Parliament-enacted legislation (Securitisation Act) over state laws under Article 246 of the Constitution of India.

Invalidity of KSFDRC’s Order: The court found that the KSFDRC lacked jurisdiction and its order directing SBI to refrain from the recovery process was invalid.

Decision: The High Court set aside the order of the KSFDRC, allowing SBI to continue its recovery process under the Securitisation Act. The court affirmed that the Securitisation Act overrides the Kerala Fisherman Debt Relief Commission Act in matters of secured creditors’ rights.

Date of Decision: 27^th March 2024

State Bank of India vs. Jespin Raju & Kerala State Fishermen Debt Relief Commission