SC Holds MPID Attachments Override Secured Creditors’ SARFAESI Priority; MPID Assets Remain Outside IBC Moratorium

A bench of Justices Bela M. Trivedi and Satish Chandra Sharma heard challenges to orders passed by the Supreme Court Committee constituted under this Court’s order dated 04.05.2022 in proceedings arising out of the NSEL payment default. The Court considered two priority questions in Writ Petition (C) No.995 of 2019: (i) whether secured creditors took priority over assets attached under the PMLA and the Maharashtra Protection of Investors and Depositors Act, 1999 (MPID Act) by virtue of SARFAESI Act / RDB Act; and (ii) whether properties attached under the MPID Act remained available for execution of decrees despite moratoriums under Sections 14/96 of the IBC.

The Court upheld the Committee’s orders dated 10.08.2023 and 08.01.2024. It held that secured creditors could not claim priority over properties held to be proceeds of crime under PMLA or over properties attached under the MPID Act; the MPID regime would override claims of secured creditors in respect of properties attached under that State statute. The Court further held that properties attached under Section 4 of the MPID Act prior to any IBC moratorium vested in the Competent Authority and therefore were not to be treated as assets of the corporate debtor for the purpose of insolvency proceedings; such MPID-attached assets remained available for execution in terms of the 04.05.2022 order. The Court reiterated that the Article 142 power could not be used to “achieve something indirectly what cannot be achieved directly,” and that it must take express statutory provisions into account when there was direct conflict. The Court, in its reasoning, observed: “In view of the above proposition of law laid down by the Constitution Benches of this Court, there remains no shadow of doubt that the exercise of power under Article 142(1) of the Constitution of India being curative in nature, the Supreme Court would not ordinarily pass an order ignoring or disregarding a statutory provisions governing the subject, except to balance the equities between conflicting claims of the litigating parties by ironing out creases in a ‘cause or matter’ before it. ... Article 142 cannot be used to achieve something indirectly what cannot be achieved directly.” The Court also noted the earlier supervisory direction that “the Supreme Court Committee shall be entitled to sell the properties of the judgment-debtors notwithstanding the attachment thereof by respondent No.2 (ED) under the PMLA and/or by respondent No.3 (State of Maharashtra) under the MPID Act, to the extent of recovering the amount of the decree/order/arbitral award.”

Background The proceedings originated from the NSEL payment default and alleged fraud involving roughly Rs.5,600 crores and some 13,000 trading clients. Following suspension of NSEL operations in July 2013, criminal investigations, attachment orders under the PMLA by the Enforcement Directorate and attachment orders under the MPID Act by the State of Maharashtra were issued against defaulters, promoters and related entities (including 63 Moons). NSEL obtained numerous decrees and arbitral awards against defaulting trading members, but execution was fragmented across jurisdictions.

To secure a holistic remedy, this Court on 04.05.2022 exercised Article 142 powers and constituted a Single-Member Supreme Court Committee to consolidate execution of decrees, awards and orders, and to realise attached assets for distribution to investors. The order contemplated that the Committee could execute decrees and, “in execution of the above decrees… be entitled to sell the properties of the judgment-debtors notwithstanding the attachment thereof by respondent No.2 (ED) under the PMLA and/or by respondent No.3 (State of Maharashtra) under the MPID Act.” The S.C. Committee, in orders dated 10.08.2023 and 08.01.2024, held that secured creditors could not assert SARFAESI/RDB priority over MPID- or PMLA-attached properties, and that MPID-attached properties vested in the Competent Authority and were not to be treated as assets for IBC resolution where attachment preceded moratorium. Aggrieved parties filed Special Leave Petitions which the Court treated as interlocutory applications in the writ petition.

The Supreme Court analysed legislative competence, pith-and-substance, Article 246/254 repugnancy principles, and precedents on the scope of Article 142 (including Supreme Court Bar Assn., Shilpa Sailesh and earlier MPID/63 Moons decisions). It found the MPID Act constitutionally valid as State legislation addressing protection of depositors, and held that SARFAESI/RDB (Union enactments dealing with banking and secured creditors) could not be read to deprive the State Act of its effect in Maharashtra. It concluded there was no repugnancy attracting Article 254, and that Section 14 IBC moratorium did not operate to render MPID-attached properties part of corporate insolvency assets where attachment preceded imposition of moratorium. The Court answered Question (i) in the negative and Question (ii) in the affirmative, and upheld the Committee’s orders of 10.08.2023 and 08.01.2024.

Case Details: Case No.: 2025 INSC 694; Writ Petition (C) No.995 of 2019 Case Title: National Spot Exchange Limited v. Union of India & Ors. Appearances: For the Petitioner(s): Not indicated in the judgment excerpt provided For the Respondent(s): Not indicated in the judgment excerpt provided