Supreme Court of India
NATIONAL SPOT EXCHANGE LIMITEDversusUNION OF INDIA & ORS.
- Citation
- 2025 INSC 694
- Decided
- 14 May 2025
- Bench
- BELA M TRIVEDI
Holding
The MPID Act prevails over the SARFAESI, RDB, and PMLA statutes, precluding any priority claim by secured creditors, and its attached properties are available for execution notwithstanding the IBC moratorium.
Summary
The Supreme Court examined whether secured creditors could claim priority over assets attached under the Prevention of Money Laundering Act (PMLA) and the Maharashtra Protection of Investors and Depositors Act (MPID Act) by invoking the SARFAESI Act and the Recovery of Debts and Bankruptcy (RDB) Act. It also considered whether properties attached under the MPID Act could be used to execute decrees despite the moratorium imposed by Section 14 of the Insolvency and Bankruptcy Code (IBC). The Court held that the MPID Act, being a valid State law within the State List, overrides any claim of priority by secured creditors and that the attached properties remain available for execution. It further concluded that there is no repugnancy between the MPID Act and the IBC, so the moratorium does not bar execution of the decrees. Consequently, the orders of the Supreme Court Committee dated 10 August 2023 and 8 January 2024 were upheld. The writ petition was disposed with the two questions answered in the negative and affirmative respectively.
Issues considered
- Whether secured creditors have priority of interest over assets attached under PMLA and MPID Act by virtue of SARFAESI Act and RDB Act.
- Whether properties attached under MPID Act are available for execution of decrees against judgment debtors despite the moratorium under Section 14 of the IBC.
Legislation cited
- Constitution of Indias. Article 142, s. Article 245, s. Article 246, s. Article 246(3), s. Article 254
- Forward Contracts (Regulation) Act, 1952s. 27
- Insolvency and Bankruptcy Code, 2016s. 14, s. 238
- Maharashtra Protection of Investors and Depositors Act, 1999s. 14, s. 2(c), s. 2(d), s. 3, s. 4, s. 5, s. 7
- Prevention of Money Laundering Act, 2002s. 71
- Recovery of Debts and Bankruptcy Act, 1993s. 31B, s. 34
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002s. 26E, s. 35
Headnote
Issue for Consideration Whether the Secured creditors would have priority of interest over the assets attached under the Provisions of Prevention of Money Laundering Act, 2002, (PMLA) and Maharashtra Protection of Investors and Depositors Act, 1999 (MPID Act), by virtue of the provisions and RDB Act, 1993; whether the properties of the Judgment Debtors and Garnishees attached under the Provisions of MPID Act, 1999 would be available for the execution of the decrees against Judgment Debtors in view of the Provision of Moratorium under Section 14 of the IBC, 2016.
Subjects
Commodity Exchange PlatformNational Spot Exchange LimitedNSEL ScamPayment defaults and fraudSecured CreditorsPriority of interestPMLAMPID ActSARFAESI ActRDB ActIBCMoratoriumFederal Structure DoctrineArticle 246Article 254Article 142Pith and SubstanceConstitutional validityState legislation vs Union legislation
Judgment
[2025] 7 S.C.R. 252 : 2025 INSC 694
National Spot Exchange Limited
v.
Union of India & Ors.
(Writ Petition (Civil) No. 995 of 2019)
15 May 2025
[Bela M. Trivedi* and Satish Chandra Sharma, JJ.]
Issue for Consideration
Whether the Secured creditors would have priority of interest over
the assets attached under the Provisions of Prevention of Money
Laundering Act, 2002, (PMLA) and Maharashtra Protection of
Investors and Depositors Act, 1999 (MPID Act), by virtue of the
provisions of SARFAESI Act, 2002 and RDB Act, 1993; whether
the properties of the Judgment Debtors and Garnishees attached
under the Provisions of MPID Act, 1999 would be available
for the execution of the decrees against Judgment Debtors in
view of the Provision of Moratorium under Section 14 of the
IBC, 2016.
Headnotes†
Prevention of Money Laundering Act, 2002 (PMLA) –
Maharashtra Protection of Investors and Depositors Act,
1999 (MPID Act) – s.4 – Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest
Act, 2002 (SARFAESI Act) – s.26E – Recovery of Debts and
Bankruptcy Act, 1993 (RDB Act) – Constitution of India –
Article 246 – Commodity Exchange Platform of National
Spot Exchange Limited committed payment defaults and
fraud of about Rs.5,600 Crores – Secured creditors, if would
have priority of interest over the assets attached under the
PMLA and MPID Act, by virtue of the SARFAESI Act and RDB
Act:
Held: No priority of interest can be claimed by the Secured
Creditors against the properties attached under the MPID Act –
The provisions of MPID Act would override any claim for priority
of interest by the Secured Creditors in respect of the properties
* Author
[2025] 7 S.C.R. 253
National Spot Exchange Limited v. Union of India & Ors.
which have been attached under the MPID Act – Monies or
deposits of depositors/investors, who were allegedly defrauded
by the Financial Establishment, and for the recovery of which
the MPID Act has been enacted, could not be said to be a “debt”
contemplated in s.26E of the SARFAESI Act, and hence also the
provisions of s.26E are not attracted to the facts of the case – Order
passed by the Supreme Court Committee on 10.08.2023 upheld.
[Paras 43, 44, 53]
Maharashtra Protection of Investors and Depositors Act, 1999
(MPID Act) – ss.4, 4(2), 5, 7 – Insolvency and Bankruptcy Code,
2016 – s.14 – The properties of the Judgment Debtors and
Garnishees attached under the MPID Act, if would be available
for the execution of the decrees against Judgment Debtors in
view of the provision of moratorium u/s.14, IBC:
Held: Yes – Properties of the Judgment Debtors and Garnishees
attached under the provisions of the MPID Act, would be available
for the execution of the decrees against the Judgment Debtors by
the Supreme Court Committee, despite the provision of moratorium
u/s.14, IBC – Order passed by the Supreme Court Committee on
08.01.2024 upheld. [Paras 52, 53]
Constitution of India – Article 246, 254; Seventh Schedule –
Federal Structure Doctrine – Maharashtra Protection of
Investors and Depositors Act, 1999 (MPID Act) – Securitisation
and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (SARFAESI Act) – Recovery of
Debts and Bankruptcy Act, 1993 (RDB Act) – Prevention of
Money Laundering Act, 2002 (PMLA) – Conflict between the
laws made by the Parliament and the law made by the State
Legislature – Overlapping of legislative fields – Whether the
MPID Act covers or relates to the same subject matter as
covered under the Central Legislations i.e., SARFAESI Act
and RDB Act as also PMLA:
Held: State of Maharashtra was within its legislative competence
to enact the MPID Act, the subject matter of which in pith and
substance was relatable to Entries 1, 30 and 32 of the State List
(List II) of the Seventh Schedule of the Constitution of India – The
subject matter of PMLA is traceable to the Entry-13 of Union List
254 [2025] 7 S.C.R.
Supreme Court Reports
(List-I) of Seventh Schedule – Further, both SARFAESI and RDB
Act have been enacted with regard to the matter pertaining to
“Banking,” which subject matter is relatable to the Entry 45 “Banking”
falling in the Union List (List-I) of Seventh Schedule – Considering
the pith and substance of the State and the Central Legislations
in question, the Central Legislations i.e., SARFAESI Act or RDB
Act cannot be permitted to prevail over the State Legislation i.e.,
MPID Act, merely because the Central Legislations are enacted
by the Parliament – Since all these Acts have separate field of
operations, provisions of SARFAESI Act or RDB Act cannot be
permitted to override the provisions of MPID Act, a validly enacted
State Legislation for the subject matter falling in List-II- State List,
otherwise it would tantamount to violation of federal structure
doctrine envisaged in the Constitution – MPID Act would prevail in
the State of Maharashtra in respect of the specific subject matter
for which the said Act was enacted, in view of Clause (3) of Article
246. [Paras 34-37, 40, 41]
Maharashtra Protection of Investors and Depositors Act, 1999
(MPID Act) – s.4, 4(2), 5, 7 – Insolvency and Bankruptcy Code,
2016 – ss.14, 238 – If there is any inconsistency between the
MPID Act and the IBC:
Held: No – A conjoint reading of ss.4, 5 and 7, MPID Act makes it
clear that though s.4(2) states about the attached properties being
vested in the Competent Authority appointed by the Government,
such vesting would be subject to the orders passed by the Designated
Court – There is no inconsistency between the MPID Act and the
IBC – In absence of any inconsistency having been brought on
record, between the provisions contained in the MPID Act and in
the IBC, s.238 of IBC, which gives overriding effect to the IBC over
the other Acts for the time being in force, cannot be said to have
been attracted – Constitution of India – Article 254. [Paras 50, 51]
Constitution of India – Article 246(1), (2), (3); Seventh
Schedule-List-I, II and III – Distribution of legislative powers
between the Union and State Legislature – Principle of Federal
Supremacy:
Held: A three-fold distribution of legislative power between the Union
and the States made in the three Lists in the Seventh Schedule
r/w Article 246, exhibits the Principle of Federal supremacy – Thus,
in case of inevitable conflict between Union and State powers, the
[2025] 7 S.C.R. 255
National Spot Exchange Limited v. Union of India & Ors.
Union power as enumerated in List-I shall prevail over the State
power as enumerated in Lists-II and III, and in case of overlapping
between Lists II and III, the latter shall prevail. [Para 26]
Constitution of India – Article 142 – Powers under – Plea of
the intervenors that exercising powers u/Article 142, this Court
appointed the Supreme Court Committee conferring upon
the committee wide powers for the execution of the decrees/
orders/awards, which virtually superseded the statutory
provisions contained in the Acts like SARFAESI Act, RDB Act,
PMLA, IBC, etc. – Scope of powers u/Article 142, discussed.
[Paras 13, 14, 19]
Maharashtra Protection of Investors and Depositors Act,
1999 (MPID Act) – s.4 – Insolvency and Bankruptcy Code,
2016 – s.14 – Constitution of India – Article 254; Seventh
Schedule – List I-III:
Held: MPID Act has been validly enacted by the Government
of Maharashtra for the matters falling in List-II- State List, and
therefore would prevail in the State of Maharashtra – The MPID
Act having been enacted for the matters relatable to the Entries-1,
30 and 32 in List-II-State List, and the IBC having been enacted
for the matters relatable to the Entry-9 in List-III- Concurrent List,
the provisions of Article 254 would not be attracted – The issue of
repugnancy or conflict as contemplated in Article 254 would arise
only when the State Legislation and the Central Legislation, both,
are relatable to the Entries contained in List-III-Concurrent List of
Seventh Schedule – In the instant case, there is also no overlap
or inconsistency between the provisions contained in the IBC and
MPID Act – s.14 of IBC has the connotation which is very much
different from s.4 of MPID Act – s.14 of IBC is consequent upon the
order passed by the Adjudicating Authority declaring Moratorium –
However, so far as the attachment of properties u/s.4 of the MPID
Act is concerned, it is beyond the realm of the Debtor-Creditor
relationship as contemplated in the IBC. [Para 47, 48]
Maharashtra Protection of Investors and Depositors Act, 1999
(MPID Act) – Object:
Held: MPID Act was enacted by the State of Maharashtra to
protect the interest of depositors of the Financial Establishments –
256 [2025] 7 S.C.R.
Supreme Court Reports
It was enacted in the public interest to curb the unscrupulous
activities of the Financial Establishments, who had defaulted to
return the deposits of the public in the State of Maharashtra.
[Paras 24, 47]
Prevention of Money Laundering Act, 2002 – Securitisation
and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 – Recovery of Debts and Bankruptcy
Act, 1993 – Object – Discussed. [Paras 21-23]
Case Law Cited
Supreme Court Bar Association v. Union of India & Another
[1998] 2 SCR 795 : (1998) 4 SCC 409; Shilpa Sailesh v. Varun
Sreenivasan [2023] 5 SCR 165 : (2023) 14 SCC 231; State of
West Bengal and Ors. v. Committee for Protection of Democratic
Rights, West Bengal and Ors. [2010] 2 SCR 979 : (2010) 3
SCC 571; M/s Hoechst Pharmaceuticals Ltd. and Ors. v. State
of Bihar and Ors [1983] 3 SCR 130 : (1983) 4 SCC 45; Kartar
Singh v. State of Punjab [1994] 2 SCR 375 : (1994) 3 SCC 569;
Rajiv Sarin and Another v. State of Uttarakhand and Ors. [2011]
9 SCR 1012 : (2011) 8 SCC 708; Sonal Hemant Joshi and Ors.
v. State of Maharashtra and Ors. (2012) 10 SCC 601; State of
Maharashtra v. 63 Moons Technologies Ltd. [2022] 10 SCR 465 :
(2022) 9 SCC 457; K.K. Baskaran v. State [2011] 3 SCR 527 :
(2011) 3 SCC 793; Mardia Chemicals Ltd and Ors. v. Union of
India and Ors. [2004] 3 SCR 982 : (2004) 4 SCC 311; Union of
India and Another v. Delhi High Court Bar Association and Others
[2002] 2 SCR 450 : (2002) 4 SCC 275; ITC Limited v. Agricultural
Produce Market Committee and Others [2002] 1 SCR 441 : (2002)
9 SCC 232; State of West Bengal v. Kesoram Industries Limited
and Others [2004] 1 SCR 564 : (2004) 10 SCC 201; Innoventive
Industries Ltd. v. ICICI Bank and Another [2017] 8 SCR 33 : (2018)
1 SCC 407 – referred to.
List of Acts
Prevention of Money Laundering Act, 2002; Maharashtra Protection
of Investors and Depositors Act, 1999; Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002; Recovery of Debts and Bankruptcy Act, 1993;
Constitution of India; Forward Contracts (Regulation) Act, 1952.
[2025] 7 S.C.R. 257
National Spot Exchange Limited v. Union of India & Ors.
List of Keywords
Commodity Exchange Platform; National Spot Exchange Limited
(NSEL); NSEL Scam; Payment defaults and fraud; Secured
Creditors; Priority of interest over the assets attached under the
Provisions of Prevention of Money Laundering Act, 2002, (PMLA)
and Maharashtra Protection of Investors and Depositors Act, 1999;
Recovery of monies lost by the traders; Properties of the judgment
debtors and garnishees attached; Supreme Court committee;
Constitutional validity of the Maharashtra Protection of Investors and
Depositors Act, 1999; Debts due to the Secured Creditor have to
be paid in priority; Fraudulent Default by a Financial Establishment;
Security interest; Garnishee; Sale and purchase of commodities;
Traders duped; Priority of interest of the charge over the attached
properties; Speedy recovery of the outstanding amount; Doctrine
of pith and substance; Powers under Article 142 of Constitution
of India; Article 246 of Constitution of India; Federal Structure
Doctrine; Principle of Federal Supremacy; Seventh Schedule of
the Constitution of India; List-I, II and III.
Case Arising From
CIVIL ORIGINAL JURISDICTION: Writ Petition (Civil) No.
995 of 2019
(Under Article 32 of The Constitution of India)
Appearances for Parties
Advs. for the Petitioner:
Atul Nanda, Sr. Adv., Ms. Diksha Rai, Ms. Rameeza Hakeem.
Advs. for the Respondents:
Amit Sibal, Sr. Adv., Aditya Verma, Y Suryanarayana, Vijay Kumar
Singh, Ms. Shivani Tandon, Prem Prakash, Mukesh Kumar Maroria,
Arvind Kumar Sharma, Aaditya Aniruddha Pande, Sachin Patil,
Himanshu Chaubey, Vikalp Mudgal, Shashwat Anand, Ms. Abha
Jain, Ashok Kumar Gupta II, Bijoy Kumar Jain, Bhaskar Aditya,
Ankur Mittal, Ms. Sanjana Saddy, Mohd. Zahid Hussain, Y. Raja
Gopala Rao, Gopal Singh, Ms. Arti Singh, Chand Qureshi, Shashank
Singh, Sumit Sinha, Ratish Kumar Sharma, Ananta Prasad Mishra,
Sanyat Lodha, B. K. Satija, Nitesh Ranjan, Sanjay Kapur, Shiv
Sagar Tiwari, Ms. Anindita Mitra, Ajay Kumar, Satish Vig, Anand
Varma, Navneet R., Nikhil Jain, Ritwik Parikh, Rajat Sehgal, Ms.
Shisba Chawla.
258 [2025] 7 S.C.R.
Supreme Court Reports
Judgment / Order of the Supreme Court
Judgment
Bela M. Trivedi, J.
1. While considering the validity of the orders dated 10.08.2023 and
08.01.2024 passed by the Supreme Court Committee appointed by
this Court vide the order dated 04.05.2022, following two questions
were framed by this Court to be heard in priority on the basis of the
categorisation of the Applications filed in the captioned Writ Petition
vide the Order dated 02.04.2024.
“(i) whether the Secured creditors would have priority of
interest over the assets attached under the Provisions of
Prevention of Money Laundering Act, 2002, (PMLA) and
Maharashtra Protection of Investors and Depositors Act,
1999 (MPID Act), by virtue of the Provisions of SARFAESI
Act, 2002 and RDB Act, 1993; (In view of order dated
10.08.2023 passed by the Committee)
(ii) whether the properties of the Judgment Debtors and
Garnishees attached under the Provisions of MPID Act,
1999 would be available for the execution of the decrees
against Judgment Debtors in view of the Provision of
Moratorium under Section 14 of the IBC, 2016; (In
view of the Order dated 08.01.2024 passed by the
Committee)”
2. The genesis of the Writ proceedings, is the scam which took place
at the Commodity Exchange Platform of the Petitioner Company –
National Spot Exchange Limited (NSEL), a company registered
under the Companies Act, 1956, on 18.05.2005. It is promoted by 63
Moons Technologies Limited (Formerly Financial Technologies India
Limited), which holds 99.99% of total share capital of the company
and the National Agricultural Cooperative Marketing Federation of
India Limited (NAFED) holds 0.01% of total share capital of company.
The Exchange Platform of the NSEL committed payment defaults
and fraud aggregating to about Rs.5,600 Crores vis-à-vis their trading
counterparts numbering about 13,000 traders who traded through
its Members/ brokers.
[2025] 7 S.C.R. 259
National Spot Exchange Limited v. Union of India & Ors.
PRELUDE
3. Brief facts germane for deciding the above stated two priority questions
of law are as under: -
i. The Petitioner – National Spot Exchange Limited (hereinafter
referred to as the “NSEL”) provided an electronic platform
for trading of commodities between willing buyers and willing
sellers through NSEL’s Members/ brokers representing them.
On 05.06.2007, the Department of Consumer Affairs issued an
Exemption Notification to the NSEL under Section 27 of the
Forward Contracts (Regulation) Act, 1952 (hereinafter referred
to as “FCRA”), exempting forward contracts of one day duration
for sale and purchase of commodities traded on the NSEL from
operation of the provisions of the FCRA. The NSEL commenced
its operations in October, 2008.
ii. The trading on the Exchange Platform of the Petitioner could
be undertaken only by the registered Members of the exchange
either on their own behalf or on behalf of their clients. At the
request of their clients, the Members of NSEL would place
orders for buying/ selling commodities. When the orders placed
by willing buyers and willing sellers of a particular commodity
would get matched automatically on NSEL’s Exchange Platform,
based on the price and time priority, it would result in a trade.
iii. The NSEL launched contracts for buying and selling of
commodities with different settlement periods ranging from T+0,
T+1, T+2 days to T+36 days. In the said Contracts, ‘T’ meant
the Trade date, that is the date on which the trade is executed
on the exchange and ‘+ 2’ or ‘+ 25’ referred to the number of
business days, after which the delivery of the commodity and
payment of price (that is settlement of transaction) was to be
affected by the buying Member and the selling Member as
the case may be. At the end of the day all trades would get
clubbed and the obligation of respective Members of NSEL
would be generated.
iv. Thereafter, the funds “Pay – in” obligation would be intimated to
the Members of NSEL whose clients purchased the commodities,
and the funds “Pay – out” obligation would be intimated to the
260 [2025] 7 S.C.R.
Supreme Court Reports
Members of NSEL whose clients sold the commodities. Similarly,
the commodity “Pay-in” obligation would be intimated to the
Members of NSEL whose client sold the commodities and
the commodity “Pay-out” obligation would be intimated to the
Members of NSEL whose clients purchased the commodities.
Based on the intimation from the exchange, the clients would
have to fulfil their respective obligations through the Members
of the NSEL, through whom they had traded, on the Exchange
Platform.
v. On 27.04.2012, the Department of Consumer Affairs,
Government of India issued a Show Cause Notice to the NSEL
as to why action should not be initiated against it for permitting
transactions in alleged violation of exemption granted to it under
the FCRA, vide the notification dated 05.06.2007.
vi. On 12.07.2013, the Department of Consumer Affairs, directed
the NSEL to give an undertaking that no further contracts
shall be launched until further instructions, and that all existing
contracts shall be settled on due dates. Accordingly, the NSEL
gave an undertaking to the Department of Consumer Affairs
on 22.07.2013.
vii. On 31.07.2013, the NSEL suspended its Exchange operations
and called upon its Members to inter alia complete their
respective delivery and payment obligations for the outstanding
trades as on 31.07.2013. In July 2013, 13,000 persons who
traded on the platform of the NSEL claimed to have been duped
by about 24 trading Members, who defaulted in payment of
their obligations amounting to approximately Rs.5,600/- Crores.
viii. An FIR in this regard was registered by the M.R.A. Marg, Police
Station vide C.R. No.216 of 2013, which was transferred to
and lodged in the EOW Police on 30.09.2013 as C.R. No.89
of 2013. Several suits also came to be filed by the traders who
were allegedly duped on the trading platform. One Suit being
No.173 of 2014 came to be filed in the Bombay High Court,
as a representative suit under Order 1 Rule 8 of the Code of
Civil Procedure, 1908. The NSEL filed third party notices in
the said suit for recovery of Rs.5,600/- Crores against its 24
defaulter members.
[2025] 7 S.C.R. 261
National Spot Exchange Limited v. Union of India & Ors.
ix. According to the NSEL, in the process of recovery proceedings
filed by it, the decrees/ awards of about Rs.3,365 Crores
out of Rs.5,600 Crores were passed against the defaulters.
Additionally, the Enforcement Directorate also had attached
assets worth approximately Rs.1740.59 Crores of the defaulters
under the PMLA 2002. The provisions of the Maharashtra
Protection of Interest of Depositors (in Financial Establishments)
Act, 1999 (hereinafter referred to as the “MPID Act”) were also
added to the said F.I.R. in October 2013, as a result of which
the State of Maharashtra also attached movable and immovable
properties worth about Rs.8,548 Crores belonging to the 24
defaulters, the Directors and Sister concerns of the NSEL
and its Directors and Promoters, in order to ensure recovery
of the monies allegedly lost by the genuine trading clients on
the NSEL’s platform.
x. Since the NSEL had also filed various Proceedings and the
Suits, some of them having been decreed also, it was finding
it difficult to file execution proceedings at various Courts.
The NSEL, therefore filed the captioned Writ Petition seeking
directions for the Consolidation of the Proceedings before the
Committee appointed by the Bombay High Court vide the order
dated 02.09.2014 in Notice of Motion No.240 of 2014 in Suit
No.173 of 2014 and seeking other directions.
xi. This Court on 04.05.2022 for safeguarding of the interests of
the Investors / Claimants passed the following Order: -
“O R D E R
Writ Petition(s)(Civil) No(s). 995/2019
The limited contours of the controversy before
us emanating from the present proceedings is
the safeguarding of the interests of the investors/
claimants.
In respect of the aforesaid, learned counsel for the
petitioner had canvassed before us on 22.02.2022
that the way out would be that the properties attached
by the respondent(s) are sold and monies brought
into Court. This is in the context of decrees passed
262 [2025] 7 S.C.R.
Supreme Court Reports
for the benefit of the petitioner where the same very
properties which were attached were sought to be
utilized to satisfy the claims. He thus, suggested that
once the monies are brought in, even the claims of
the petitioners/investors can be satisfied and one
will know exactly what is the balance amount which
remains as otherwise both the processes are going
on at cross purposes even though the properties
from which recoveries can be made are attached.
We thus, called upon the respondents to look into
the aforesaid notwithstanding that the petitioner may
also be an organization which as been charged,
concerned as we were with the investors’ money and
properties remaining attached simplicitor could not be
the solution for investors’ money for which decrees
had been passed. It is only on liquidation of those
properties could the monies be distributed to satisfy
the claims of the investors.
We requested the parties to work out a scenario to
sub-serve the aforesaid objective and a synopsis
was filed on behalf of the petitioner setting out the
relevant dates and suggesting solution for speedy
recovery of victims annexing thereto the details of
decrees, arbitral awards obtained by the petitioner
and execution proceedings thereof.
The ground work has been done by the parties and
more or less they were in agreement on most issues.
The other remaining issues have also been ironed
out during the Court proceedings.
In view of the aforesaid, we are inclined to exercise
our powers under Article 142 of the Constitution of
India with the objective of attaining a holistic solution
for speedy recovery of the outstanding amounts to
be distributed to be investors.
The agreed terms have been placed before us which
are being incorporated in this order as under: -
[2025] 7 S.C.R. 263
National Spot Exchange Limited v. Union of India & Ors.
“(i) A high powered committee of a Hon’ble Mr.
Justice (Retd.) [ ], who has consented for the
same, is hereby constituted (hereinafter referred
to as the “Supreme Court Committee”). The
Supreme Court Committee may in its discretion,
hold meetings/hearings at Mumbai.
(ii) The proceedings for execution of all
the decrees/orders/arbitral awards listed in
Annexure-1, particular of which are set out in
Annexure-2, currently pending in various Courts
across the country, are hereby transferred to
the Supreme Court Committee, for speedy
execution thereof.
(iii) Against 5 additional Defaulters, the
Committee appointed by Bombay High Court
has crystallised the liability and the report of the
said Committee is pending acceptance before
Bombay High Court, details whereof are set
out in Annexure-3. In the event the petitioner is
granted decree/order by Bombay High Court in
any or all of these matters, then the petitioner
shall be at liberty to file the proceedings for
execution of such decrees/orders before the
Supreme Court Committee, and the Supreme
Court Committee shall have the power to
execute such decrees/orders.
(iv) In proceedings where the petitioner has
already obtained decrees/orders against the
Defaulters, the petitioner is seeking further
decrees/orders against other persons as well. In
the event the petitioner is granted decree/order
by the Bombay High Court in any or all of these
matters, then the petitioner shall be at liberty to
file the proceedings for execution of such decrees/
orders before the Supreme Court Committee,
and the Supreme Court Committee shall have
the power to execute such decrees/orders.
264 [2025] 7 S.C.R.
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(v) The petitioner shall be at liberty to apply
to this Hon’ble Court in case there are further
decrees/orders/arbitral awards obtained by it
against the Defaulters or any other person in
relation to the NSEL payment default for the
purposes of filing execution thereof directly
before the Supreme Court Committee.
(vi) The Supreme Court Committee shall have
all the powers of a civil court executing a decree
or an order or an arbitral award under the Code
of Civil Procedure, 1908 for speedy execution
of the above decrees/orders/abitral awards.
(vii) In execution of the above decrees/orders/
arbitral awards, 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.
(viii) For the purposes of executing decrees/
orders/awards to the extent they are not satisfied
by recovery from the properties attached by the
respondents or any of them as aforesaid, the
Supreme Court Committee shall be at liberty to
apply to this Hon’ble Court for suitable orders
for attaching and/or liquidating properties of
persons against whom decrees have been
passed or of persons against whom the decrees
can be executed as provided in the Code of
Civil Procedure, 1908 or properties of persons
to whom money trail from the judgment debtors
has been traced by the respondents or any of
them.
(ix) The Competent Authority appointed by
respondent No.3(State of Maharashtra) has
[2025] 7 S.C.R. 265
National Spot Exchange Limited v. Union of India & Ors.
already opened an account with (a) Bank of
India (for collection) and (b) AXIS Bank (for
distribution). The sale proceeds so realized shall
be deposited in either of these Bank Accounts at
the discretion of the Supreme Court Committee.
(x) The Competent Authority appointed by
respondent No.3 (State of Maharashtra) under
MPID Act has invited claims from the victims
and verified them to check genuineness and
entitlement thereof.
(xi) The Competent Authority appointed by
respondent No.3 (State of Maharashtra) under
MPID Act shall file a report with the Supreme
Court Committee setting out the names of
the claimants and the amount that is due and
payable to each of them, for passing necessary
orders/directions/reverification, if required for
equitable distribution of the sale proceeds to
the victims from the accounts mentioned in
Clause (ix) above.
(xii) The Supreme Court Committee shall be
entitled to co-opt the services of such experts
(such as Advocates, Chartered Accountants,
Valuers etc.) and support staff as it may consider
necessary for efficient and speedy execution of
task assigned to it.
(xiii) Hon’ble Mr. Justice [ ] shall be entitled
to fix such remuneration for himself and for
other persons co-opted by him as he deems fit
commensurate with the responsibilities assigned
to them.
(xiv) In the first instance, the Competent
Authority appointed by Respondent No.3(State
of Maharashtra) under MPID Act shall bear all
the expenses required to be incurred for the
functioning of the Supreme Court Committee,
266 [2025] 7 S.C.R.
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including but not limited to remuneration, fees,
physical infrastructure etc. and shall keep proper
accounts of the same.
(xv) As and when any monies are realised by
the Supreme Court Committee in accordance
with the process set out above, the Competent
Authority appointed by respondent No.3 (State of
Maharashtra) under MPID Act shall be reimbursed
by this Hon’ble Court for the expenses incurred
by it under paragraph (xiv) above on submission
of proper accounts for the same.
(xvi) The Supreme Court Committee shall
have liberty to apply to this Hon’ble Court for
any further orders and/or directions as it may
consider necessary for efficient and speedy
execution of the task assigned to it.
(xvii) Any person aggrieved by an order and/
or direction passed by the Supreme Court
Committee shall be entitled to move this Hon’ble
Court.
(xviii) All the parties and the authorities shall
render all necessary assistance and cooperation
to the Supreme Court Committee.
(xix) Needless to say that respondent No.2(ED)
and/or respondent No.3 (State of Maharashtra)
shall continue to attach further properties of the
defaulters as per the money trail found by them
during investigation and inform the Supreme
Court Committee of such further attachment.
Upon receipt of such intimation, the Supreme
Court Committee shall be entitled to liquidate
such further attached properties of the defaulters
after hearing them, but only to the extent
necessary for satisfaction of the decree/orders/
arbitral awards obtained by the petitioner against
such defaulters.”
[2025] 7 S.C.R. 267
National Spot Exchange Limited v. Union of India & Ors.
We may note that insofar as the list of decrees,
orders, awards and attachment against defaulters are
concerned, we are not setting them out as part of the
order though submitted as the annexure annexing
along with the details of the execution proceedings as
Annexure-2. The liability of the defaulters crystallized
by the High Court Committee is pending before the
Bombay High Court has been set out as Annexure-3.
This material can always be placed before the high-
powered committee of an Hon’ble Judge appointed
by this Court.
We may note that both the State of Maharashtra and
Enforcement Directorate would naturally like to assist
the Committee in all manners and the Committee will
have the power to seek information from any one and
run its affairs as expeditiously as possible.
On further discussion in the Court, it is agreed that
a single Member Committee may be appointed who
would have the assistance of all concerned.
With the consent of parties, Hon’ble Justice Pradeep
Nandrajog, retired Chief Justice of the Bombay High
Court, whose consent has been taken, is appointed
as the Single Member Committee for the said purpose
to carry out the task. The learned Judge will fix his
own fee. Insofar as the sitting of the Committee is
concerned, it has already been mentioned aforesaid
that it can be at the discretion of the Committee to
hold proceedings in Delhi or Mumbai or for that matter
anywhere else.
The arrangements for the sitting of the Committee
shall be made by the Competent Authority as also
the necessary arrangements for stay of the learned
Judge and all other expenses including travel.
We would like to keep the matter pending and request
the learned Judge to give a status report in about
six months.
List after the status report is received.”
268 [2025] 7 S.C.R.
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xii. In view of the afore stated Order dated 04.05.2022 passed by
this Court, the Supreme Court Committee comprising of Justice
(Retd.) Mr. Pradeep Nandrajog (hereinafter referred to as the
S.C. Committee) was constituted. The Proceedings for execution
of all decrees/ orders/ arbitral awards listed in Annexure-1 of the
said Order, the particulars of which were set out in Annexure-2
thereof, pending in various Courts across the country were
transferred to the S.C. Committee. The decrees/ orders already
obtained and in respect of which the decree holder had not yet
commenced the execution proceedings were also directed to
be executed by the S.C. Committee. In the proceedings where
decree holder had obtained decrees/ orders and was seeking
further decrees/ orders against other persons as well, and upon
being granted the same by the Bombay High Court, were also
to be executed by the S.C. Committee. The proceedings against
the parties, i.e., the defaulters, against whom the liability had
been crystallised by the Committee appointed by the Bombay
High Court, in the event, the decree holder was granted decrees/
orders by the Bombay High Court, such decrees for execution
were also permitted to be transferred to the S.C. Committee for
their execution. Qua future decrees/ awards or orders obtained
by the decree holder, a liberty was granted to the decree holder
to apply to the Supreme Court for execution of such decrees/
orders by the S.C. Committee.
xiii. As transpiring from the impugned Order dated 10.08.2023
passed by the S.C. Committee, one Modern India Limited,
Shree Rani Sati Investment and Finance Private Limited,
Modern Derivatives and Commodities Private Limited and
F. Pudumjee Investments Company Private Limited had filed
a Suit on the Original Side of Bombay High Court, impleading
Financial Technologies India Limited (now known as 63
Moons Technologies Limited) as the Defendant No.1 and the
NSEL as Defendant No.2, apart from 36 other Individuals and
Companies who were impleaded as the Defendant Nos. 3 to
38. The said Suit was registered as Suit no.173 of 2014. The
NSEL - Defendant No.2 took out third party notices in the said
Suit against its Trading Members who had defaulted in their
funds “Pay – in” obligations, resulting in decrees being passed
[2025] 7 S.C.R. 269
National Spot Exchange Limited v. Union of India & Ors.
against such Trading Members and their lands by the Bombay
High Court in favour of the NSEL. Additionally, in some cases
the Arbitral awards were obtained by the NSEL against some
of the defaulting Trading Members. Therefore, such defaulting
Trading Members of the NSEL were the Judgment Debtors,
on whom the liability was affixed in respect of the Third-party
proceedings in the Suit No. 173 of 2014. In separate actions,
the Enforcement Directorate under the provisions of the PMLA
and the Competent Authority under the provisions of MPID Act
had also attached the properties belonging to the Judgment
Debtors who were the defaulting Trading Members of the NSEL.
xiv. During the course of Execution Proceedings before the S.C.
Committee, a few Financial Creditors of some of the Judgment
Debtors (the Secured Creditors) had filed Applications seeking
intervention on the ground that in the capacity as Secured
Creditors they would have priority of interest of the charge over
the attached properties of the Judgment Debtors.
4. In view of the afore stated factual matrix, the S.C. Committee raised
an issue as to “Whether the Secured creditors would have priority of
interest over assets attached under the Provisions of PMLA, 2002,
and MPID Act, by virtue of the Provisions of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (hereinafter referred to as the “SARFAESI Act,
2002”) and the Recovery of Debts and Bankruptcy Act, 1993
(hereinafter referred to as the “RDP Act”)?”
5. The S.C. Committee addressing the said issue concluded vide
the Order dated 10.08.2023 that given the overriding effect, the
secured property being in the nature of proceeds of crime, as held
by the Attachment orders, no priority of interest can be claimed by
the Secured Creditors against such attached property. As regard
the properties attached under the MPID Act, on which the Secured
Creditors laid their claims, the S.C. Committee further concluded that
the provisions of the MPID Act, would override any claim for priority
of interest by the Secured creditors in respect of the property which
has been attached under the MPID Act.
6. It further appears that during the course of proceedings before the
S.C. Committee another issue that was raised for determination, was
270 [2025] 7 S.C.R.
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“whether properties of the Judgment Debtor and Garnishees attached
under the MPID Act would be available to the said Committee for
execution of decrees against the Judgment Debtor in terms of the
Order dated 04.05.2022 passed by the Supreme Court, in W.P. (C)
No. 995 of 2019, in view of the commencement of Moratorium under
Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC, for
short) , on account of the initiation of Insolvency Proceedings against
the Judgment Debtors.” A similar issue also arose with regard to the
commencement of the interim Moratorium under Section 96 of IBC in
respect of the Garnishees in their capacity as personal Guarantors
of a Corporate Debtor.
7. The S.C. Committee vide the Order dated 08.01.2024 concluded
inter alia that as regards the properties which were attached under
Section 4 of the MPID Act prior to imposition of the respective dates
of Moratorium of the Judgement Debtor or Garnishee under Section
14 or Section 96 of IBC, the property having been vested in the
Competent Authority appointed by the State of Maharashtra, such
properties were not liable to be made part of Insolvency Proceedings,
and could be available to the said Committee for realisation in terms
of the Order dated 04.05.2022 passed by the Supreme Court. It
further concluded that as regards the properties which were sought
to be attached after the date of commencement of Moratorium (if
any) or assets of Judgment Debtor/ Garnishee/ Corporate Debtor
which were not yet attached under the Provisions of the MPID Act,
the decree holder would be entitled to pursue its claim as a Financial
Creditor/ Secured Financial Creditor, as the case may be in such
individual cases under the Provisions of the IBC.
8. Being aggrieved by the aforestated two Orders dated 10.08.2023 &
08.01.2024 passed by the Supreme Court Committee, some SLPs
came to be filed before this Court. The said SLPs were permitted
to be converted into Interlocutory Applications (IAs) in the present
Writ Petition filed by the NSEL.
SCOPE OF ARTICLE 142
9. At the outset learned Counsels appearing for the Applicants/
Intervenors have raised the preliminary objections against the order
passed by this Court on 04.05.2022, by submitting that this Court
[2025] 7 S.C.R. 271
National Spot Exchange Limited v. Union of India & Ors.
while exercising powers under Article 142 of the Constitution of India,
had appointed the S.C. Committee and issued directions conferring
upon the said committee wide powers with regard to the execution
of the decrees/orders/awards, which had virtually superseded
the statutory provisions contained in the Acts like SARFAESI Act,
RDB Act, PMLA, IBC, etc. According to them, while exercising the
powers under Article 142, the express statutory provisions cannot
be circumvented or ignored, particularly when the exercise of such
powers comes directly in conflict with what has been expressly
provided in the statute.
10. Article 142(1) is reproduced hereunder for ready reference:
“142. Enforcement of decrees and orders of Supreme
Court and orders as to discovery, etc.-
(1) The Supreme Court in the exercise of its jurisdiction
may pass such decree or make such order as is necessary
for doing complete justice in any cause or matter pending
before it, and any decree so passed or order so made
shall be enforceable throughout the territory of India in
such manner as may be prescribed by or under any law
made by Parliament and, until provision in that behalf is
so made, in such manner as the President may by order
prescribe.
(2) …………..”
11. In our opinion, the law with regard to the scope of the exercise of
powers of under Article 142 of the Constitution of India is quite well
settled. In Supreme Court Bar Association Vs. Union of India &
Another1, a Constitution Bench elaborately discussed the plenary
powers of this Court under Article 142 and held as under:
“47. The plenary powers of this Court under Article
142 of the Constitution are inherent in the Court and
are complementary to those powers which are specifically
conferred on the Court by various statutes though are
not limited by those statutes. These powers also exist
1 (1998) 4 SCC 409
272 [2025] 7 S.C.R.
Supreme Court Reports
independent of the statutes with a view to do complete
justice between the parties. These powers are of very wide
amplitude and are in the nature of supplementary powers.
This power exists as a separate and independent basis
of jurisdiction apart from the statutes. It stands upon the
foundation and the basis for its exercise may be put on
a different and perhaps even wider footing, to prevent
injustice in the process of litigation and to do complete
justice between the parties. This plenary jurisdiction is,
thus, the residual source of power which this Court may
draw upon as necessary whenever it is just and equitable
to do so and in particular to ensure the observance of
the due process of law, to do complete justice between
the parties, while administering justice according to law.
There is no doubt that it is an indispensable adjunct to all
other powers and is free from the restraint of jurisdiction
and operates as a valuable weapon in the hands of the
Court to prevent “clogging or obstruction of the stream
of justice”. It, however, needs to be remembered that
the powers conferred on the Court by Article 142 being
curative in nature cannot be construed as powers which
authorise the Court to ignore the substantive rights of
a litigant while dealing with a cause pending before it.
This power cannot be used to “supplant” substantive law
applicable to the case or cause under consideration of the
Court. Article 142, even with the width of its amplitude,
cannot be used to build a new edifice where none existed
earlier, by ignoring express statutory provisions dealing
with a subject and thereby to achieve something indirectly
which cannot be achieved directly. Punishing a contemner
advocate, while dealing with a contempt of court case by
suspending his licence to practice, a power otherwise
statutorily available only to the Bar Council of India, on
the ground that the contemner is also an advocate, is,
therefore, not permissible in exercise of the jurisdiction
under Article 142. The construction of Article 142 must
be functionally informed by the salutary purposes of the
article, viz., to do complete justice between the parties.
[2025] 7 S.C.R. 273
National Spot Exchange Limited v. Union of India & Ors.
It cannot be otherwise. As already noticed in a case of
contempt of court, the contemner and the court cannot be
said to be litigating parties.
48. The Supreme Court in exercise of its jurisdiction
under Article 142 has the power to make such order as
is necessary for doing complete justice “between the
parties in any cause or matter pending before it”. The very
nature of the power must lead the Court to set limits for
itself within which to exercise those powers and ordinarily
it cannot disregard a statutory provision governing a
subject, except perhaps to balance the equities between
the conflicting claims of the litigating parties by “ironing
out the creases” in a cause or matter before it. Indeed
this Court is not a court of restricted jurisdiction of only
dispute-settling. It is well recognised and established that
this Court has always been a law-maker and its role travels
beyond merely dispute-settling. It is a “problem-solver
in the nebulous areas” (see K. Veeraswami v. Union of
India [(1991) 3 SCC 655 : 1991 SCC (Cri) 734] but the
substantive statutory provisions dealing with the subject-
matter of a given case cannot be altogether ignored
by this Court, while making an order under Article 142.
Indeed, these constitutional powers cannot, in any way,
be controlled by any statutory provisions but at the same
time these powers are not meant to be exercised when
their exercise may come directly in conflict with what has
been expressly provided for in a statute dealing expressly
with the subject.
49. In Bonkya v. State of Maharashtra [(1995) 6 SCC 447 :
1995 SCC (Cri) 1113] a Bench of this Court observed:
(SCC p. 458, para 23)
“23. The amplitude of powers available to this Court
under Article 142 of the Constitution of India is
normally speaking not conditioned by any statutory
provision but it cannot be lost sight of that this
Court exercises jurisdiction under Article 142 of the
Constitution with a view to do justice between the
274 [2025] 7 S.C.R.
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parties but not in disregard of the relevant statutory
provisions.”
50. Dealing with the powers of this Court under Article
142, in Prem Chand Garg v. Excise Commr., U.P. [AIR
1963 SC 996 : 1963 Supp (1) SCR 885] it was said by
the Constitution Bench:
“In this connection, it may be pertinent to point out that
the wide powers which are given to this Court for doing
complete justice between the parties, can be used by this
Court, for instance, in adding parties to the proceedings
pending before it, or in admitting additional evidence, or
in remanding the case, or in allowing a new point to be
taken for the first time. It is plain that in exercising these
and similar other powers, this Court would not be bound
by the relevant provisions of procedure if it is satisfied
that a departure from the said procedure is necessary to
do complete justice between the parties.
That takes us to the second argument urged by the
Solicitor General that Article 142 and Article 32 should
be reconciled by the adoption of the rule of harmonious
construction. In this connection, we ought to bear in mind
that though the powers conferred on this Court by Article
142(1) are very wide, and the same can be exercised for
doing complete justice in any case, as we have already
observed, this Court cannot even under Article 142(1) make
an order plainly inconsistent with the express statutory
provisions of substantive law, much less, inconsistent with
any constitutional provisions. There can, therefore be no
conflict between Article 142(1) and Article 32. In the case
of K.M. Nanavati v. State of Bombay [AIR 1961 SC 112 :
(1961) 1 SCR 497] on which the Solicitor General relies,
it was conceded, and rightly, that under Article 142(1) this
Court had the power to grant bail in cases brought before
it, and so, there was obviously a conflict between the
power vested in this Court under the said article and that
vested in the Governor of the State under Article 161. The
possibility of a conflict between these powers necessitated
[2025] 7 S.C.R. 275
National Spot Exchange Limited v. Union of India & Ors.
the application of the rule of harmonious construction.
The said rule can have no application to the present
case, because on a fair construction of Article 142(1), this
Court has no power to circumscribe the fundamental right
guaranteed under Article 32. The existence of the said
power is itself in dispute, and so, the present is clearly
distinguishable from the case of K.M. Nanavati [AIR 1961
SC 112 : (1961) 1 SCR 497] .”
51-54……………………
55. Thus, a careful reading of the judgments in Union
Carbide Corpn. v. Union of India [(1991) 4 SCC 584] ;
the Delhi Judicial Service Assn. case [(1991) 4 SCC 406 :
(1991) 3 SCR 936] and Mohd. Anis case [1994 Supp
(1) SCC 145 : 1994 SCC (Cri) 251] relied upon in V.C.
Mishra case [(1995) 2 SCC 584] show that the Court did
not actually doubt the correctness of the observations
in Prem Chand Garg case [AIR 1963 SC 996 : 1963 Supp
(1) SCR 885] . As a matter of fact, it was observed that
in the established facts of those cases, the observations
in Prem Chand Garg case [AIR 1963 SC 996 : 1963 Supp
(1) SCR 885] had “no relevance”. This Court did not say
in any of those cases that substantive statutory provisions
dealing expressly with the subject can be ignored by this
Court while exercising powers under Article 142.
56. As a matter of fact, the observations on which emphasis
has been placed by us from the Union Carbide case [(1991)
4 SCC 584] , A.R. Antulay case [(1988) 2 SCC 602 :
1988 SCC (Cri) 372] and Delhi Judicial Service Assn.
case [(1991) 4 SCC 406 : (1991) 3 SCR 936] go to show
that they do not strictly speaking come into any conflict
with the observations of the majority made in Prem Chand
Garg case [AIR 1963 SC 996 : 1963 Supp (1) SCR 885] .
It is one thing to say that “prohibitions or limitations in a
statute” cannot come in the way of exercise of jurisdiction
under Article 142to do complete justice between the
parties in the pending “cause or matter” arising out of
that statute, but quite a different thing to say that while
276 [2025] 7 S.C.R.
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exercising jurisdiction under Article 142, this Court can
altogether ignore the substantive provisions of a statute,
dealing with the subject and pass orders concerning an
issue which can be settled only through a mechanism
prescribed in another statute. This Court did not say
so in Union Carbide case [(1991) 4 SCC 584] either
expressly or by implication and on the contrary, it has
been held that the Apex Court will take note of the express
provisions of any substantive statutory law and regulate
the exercise of its power and discretion accordingly. We
are, therefore, unable to persuade ourselves to agree with
the observations of the Bench in V.C. Mishra case [(1995)
2 SCC 584] that the law laid down by the majority in Prem
Chand Garg case [AIR 1963 SC 996: 1963 Supp (1) SCR
885] is “no longer a good law”.
12. In Shilpa Sailesh Vs. Varun Sreenivasan2, another Constitution
Bench while considering the scope and ambit of power and jurisdiction
of this Court under Article 142(1) of the Constitution of India, after
due deliberations held as under: -
“19. Given the aforesaid background and judgments of
this Court, the plenary and conscientious power conferred
on this Court under Article 142(1) of the Constitution of
India, seemingly unhindered, is tempered or bounded by
restraint, which must be exercised based on fundamental
considerations of general and specific public policy.
Fundamental general conditions of public policy refer to
the fundamental rights, secularism, federalism, and other
basic features of the Constitution of India. Specific public
policy should be understood as some express pre-eminent
prohibition in any substantive law, and not stipulations
and requirements to a particular statutory scheme. It
should not contravene a fundamental and non-derogable
principle at the core of the statute. Even in the strictest
sense [ Some jurists have opined that the judgments
on the powers of this Court under Article 142(1) of the
2 (2023) 14 SCC 231
[2025] 7 S.C.R. 277
National Spot Exchange Limited v. Union of India & Ors.
Constitution of India can be divided into three phases.
The first phase till late 1980s is reflected in the judgments
of Prem Chand Garg v. Excise Commr., 1962 SCC OnLine
SC 10 : AIR 1963 SC 996 and A.R. Antulay v. R.S. Nayak,
(1988) 2 SCC 602 : 1988 SCC (Cri) 372, which inter alia
held that the directions should not be repugnant to and
in violation of specific statutory provision and is limited
to deviation from the rules of procedure. Further, the
direction must not infringe the Fundamental Rights of the
individual, which proposition has never been doubted and
holds good in phase two and three. The second phase
has its foundation in the ratio of the judgment of the
eleven-Judge Constitution Bench of this Court in Golak
Nath v. State of Punjab, 1967 SCC OnLine SC 14 : AIR
1967 SC 1643, dealing with the doctrine of prospective
overruling, which held that Articles 32, 141 and 142 are
couched in such wide and elastic terms as to enable this
Court to formulate legal doctrines to meet the ends of
justice, the only limitation thereon being reason, restraint
and injustice. In Delhi Judicial Service Assn. v. State of
Gujarat, (1991) 4 SCC 406, this Court observes that
any prohibition or restriction contained in ordinary laws
cannot act as a limitation on the constitutional power of
this Court to issue any order or direction to do “complete
justice” in any “cause” or “matter”. Finally, the moderated
approach has its origin in Union Carbide Corpn. v. Union
of India, (1991) 4 SCC 584, which holds that this Court, in
exercising powers under Article 142 and in assessing the
needs of “complete justice” of a “cause” or “matter”, will
take note of the express prohibitions in any substantive
statutory provision based on some fundamental principles
of public policy and regulate the exercise of its power and
discretion accordingly. The judgment of Supreme Court
Bar Assn. v. Union of India, (1998) 4 SCC 409, applies
cautious and balanced approach, to hold that Article 142
being curative in nature and a constitutional power cannot
be controlled by any statutory provision, but this power is
not meant to be exercised ignoring the statutory provisions
278 [2025] 7 S.C.R.
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or directly in conflict with what isexpressly provided in the
statute. At the same time, it observes that this Court will
not ordinarily discard a statutory provision governing the
subject, except perhaps to balance the equities between
the conflicting claims of the parties to “iron out the creases”
in a “cause or matter” before it. [See Rajat Pradhan,
“Ironing out the Creases : Re-examining the Contours
of Invoking Article 142(1) of the Constitution”, (2011) 6
NSLR 1; Ninad Laud, “Rationalising ‘Complete Justice’
under Article 142”, (2021) 1 SCC J-30; and Virendra
Kumar, “Notes and Comments : Judicial Legislation Under
Article 142 of the Constitution : A Pragmatic Prompt for
Proper Legislation by Parliament”, (2012) 54 JILI 364]. As
observed by us, the ratio as expounded in Union Carbide
Corpn. v. Union of India, (1991) 4 SCC 584 holds good
and applies.] , it was never doubted or debated that this
Court is empowered under Article 142(1) of the Constitution
of India to do “complete justice” without being bound by
the relevant provisions of procedure, if it is satisfied that
the departure from the said procedure is necessary to do
“complete justice” between the parties. [ See Prem Chand
Garg (Prem Chand Garg v. Excise Commr., 1962 SCC
OnLine SC 10 : AIR 1963 SC 996, para 13.]
20. Difference between procedural and substantive law in
jurisprudential terms is contentious, albeit not necessary to
be examined in depth in the present decision [ However,
this aspect has been, to some extent, examined in paras
24 to 37, 56 and 57 herein.] , as in terms of the dictum
enunciated by this Court in Union Carbide Corpn. [Union
Carbide Corpn. v. Union of India, (1991) 4 SCC 584]
and Supreme Court Bar Assn. [Supreme Court Bar
Assn. v. Union of India, (1998) 4 SCC 409] , exercise of
power under Article 142(1) of the Constitution of India to
do “complete justice” in a “cause or matter” is prohibited
only when the exercise is to pass an order which is plainly
and expressly barred by statutory provisions of substantive
law based on fundamental considerations of general or
specific public policy.
[2025] 7 S.C.R. 279
National Spot Exchange Limited v. Union of India & Ors.
21. As explained in Supreme Court Bar Assn. [Supreme
Court Bar Assn. v. Union of India, (1998) 4 SCC 409] , the
exercise of power under Article 142(1) of the Constitution
of India being curative in nature, this Court would not
ordinarily pass an order ignoring or disregarding a statutory
provision 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. In this sense, this Court is not a forum of restricted
jurisdiction when it decides and settles the dispute in a
“cause or matter”. While this Court cannot supplant the
substantive law by building a new edifice where none
existed earlier, or by ignoring express substantive statutory
law provisions, it is a problem-solver in the nebulous areas.
As long as “complete justice” required by the “cause or
matter” is achieved without violating fundamental principles
of general or specific public policy, the exercise of the
power and discretion under Article 142(1) is valid and as
per the Constitution of India. This is the reason why the
power under Article 142(1) of the Constitution of India is
undefined and uncatalogued, so as to ensure elasticity
to mould relief to suit a given situation. The fact that the
power is conferred only on this Court is an assurance
that it will be used with due restraint and circumspection.
[See DDA v. Skipper Construction Co. (P) Ltd., (1996) 4
SCC 622.]”
13. 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. Therefore, even while exercising the powers under Article
142, the Supreme Court has to take note of the express provisions
of any substantive statutory law and accordingly regulate the
exercise of its power and discretion to do complete justice between
the parties in the pending “cause or matter” arising out of such
280 [2025] 7 S.C.R.
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statutes. Though, the powers of this Court cannot be controlled by
any statutory provisions, when the exercise of powers under Article
142 comes directly in conflict with what has been expressly provided
in a statute, ordinarily, such power should not be exercised. Article
142 cannot be used to achieve something indirectly what cannot be
achieved directly.
14. In the light of the aforestated legal position with regard to the scope
and ambit of the powers under Article 142, if the facts of the present
case are appreciated particularly with regard to the circumstances
under which this Court had thought it proper to exercise the said
powers, it appears that the Court had passed the order on 04.05.2022
keeping in mind the interest of the investors/claimants and with the
objective of attaining a holistic solution for speedy recovery of the
outstanding amount to be distributed to the investors.
15. Since the money collected by NSEL from the investors fell under the
definition of “deposit” as per Section 2(c) of the MPID Act, the State
of Maharashtra invoking the provisions of Section 4(1)(ii) of MPID Act,
had attached the properties and monies of the defaulting promoters,
directors, managers and members of the NSEL by issuing various
notifications. However, the total value of the attached properties was
not sufficient for repayment to the depositors due to various reasons
such as some of the properties were taken on rent by the members
of NSEL from others, while some properties were mortgaged with
the banks, against which proceedings under the SARFAESI Act were
going on, and against some of the members of NSEL, insolvency
proceedings were initiated.
16. The Government of Maharashtra therefore having been satisfied
that the attached properties of the Financial Establishment–NSEL
were not sufficient for repayment, attached the properties of the
promoters of the NSEL i.e., M/s. 63 Moons Technologies Limited,
by issuing various Notifications under Section 4 of the MPID Act,
which were subsequently ratified by the Government of Maharashtra
in exercise of the powers conferred under Section 4(1) and Section
5 of the MPID Act, vide the Notification dated 19.09.2018, produced
on record along with the captioned writ petition.
17. From the submissions, it further appears that several other civil
and criminal proceedings were instituted by the claimants who lost
[2025] 7 S.C.R. 281
National Spot Exchange Limited v. Union of India & Ors.
their monies, against the NSEL, its parent company-63 Moons, 24
defaulters/ Members/brokers, etc. The traders who lost their monies
had also filed civil suits in Bombay High Court against the NSEL
and others. One of such suits was filed as a Representative suit,
being no. 173 of 2014 under Order 1, Rule 8 of C.P.C. in which the
Bombay High Court had appointed a three-member committee to
crystalise the liabilities of the defaulting members and to act as the
Receiver and Commissioner to deal with the assets of defaulting
members. In the said Representative suit, the NSEL took out third
party notices against its defaulters for recovery of monies lost by
the traders. The NSEL had also filed separate suits and arbitration
proceedings against other defaulters, and had obtained Decrees and
Arbitral awards of about Rs. 3,365 Crores against the defaulters.
Since, it was becoming very difficult for the NSEL to get such decrees
executed expeditiously because properties of the defaulters were
situated at multiple jurisdictions, the NSEL filed the captioned writ
petition before this Court seeking consolidation of the Decrees etc.
as prayed for therein.
18. In the backdrop of these proceedings, this Court had passed the
order on 04.05.2022 exercising the powers under Article 142(1) of the
Constitution of India with the objective of attaining a holistic solution
for the speedy recovery of the outstanding amounts to be distributed
to the investors. As stated earlier, this Court vide the said Order had
constituted the committee conferring upon it all the powers of civil
court for the speedy execution of the decrees/orders/arbitral awards,
and had further directed that the S.C. Committee shall be entitled
to sell the properties of the Judgment Debtors notwithstanding the
attachment thereof by the Enforcement Directorate under the PMLA
and/or by the State of Maharashtra under the MPID Act to the extent
of recovery the amount of the decree/order/arbitral award. This Court
vide the said order, thus had transferred the proceedings for execution
of all the decrees/orders/arbitral awards, which were pending in
various courts across the country, for speedy execution thereof. It
was also clarified therein that against five additional defaulters, the
committee appointed by the Bombay High Court had crystalised
the liability and the report was pending for acceptance before the
Bombay High Court. Therefore, if the NSEL was granted decree or
order by the Bombay High Court in any of these matters, then the
282 [2025] 7 S.C.R.
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NSEL shall be at liberty to file proceedings for execution of such
decrees/orders before the S.C. Committee. The petitioner NSEL was
also granted liberty in the said order to apply to this Court, in case
there were further decrees/orders/awards obtained by it against the
defaulters for the purpose of filing execution thereof before the S.C.
Committee.
19. It is true that while passing the said order on 04.05.2022 under
Article 142(1) of the Constitution of India, this Court probably would
not have contemplated the possibility of the legal issues, with regard
to the conflict of the provisions contained in the SARFAESI Act,
RDB Act, PMLA and MPID Act, which were subsequently raised
before the S.C. Committee. We do, therefore, find substance in
the submissions made by the learned counsel appearing for the
applicants-Secured Creditors that while exercising the powers under
Article 142, the express provisions in the other relevant Statutes
should not be ignored, particularly when the exercise of powers
under Article 142, would directly be in conflict with what has been
express provisions in such Statutes. It is also true that when this
Court passed the Order dated 04.05.2022, it had the potentiality of
being in conflict with other Statutes like SARFAESI Act, RDB Act,
IBC etc. as also the potentiality of adversely affecting the rights of
the Secured Creditors for enforcing the security interest created in
the properties of the borrowers (in the instant cases the defaulters
of NSEL) under the SARFAESI Act and RDB Act. However, the said
contentions raised by the Secured Creditors have lost its significance
at this stage, when the said Order dated 04.05.2022 has already
been implemented by constituting the S.C. Committee and all the
proceedings mentioned in the order have already stood transferred
to the said Committee for the execution of the decrees/orders/awards
as directed therein. Also, we cannot be oblivious to the fact that such
exercise of powers under Article 142 was for the speedy recovery
of monies lost by the defaulters and investors, and for doing the
complete justice to the aggrieved Traders. Nonetheless, the issues
with regard to the interplay and the alleged conflict of the provisions
of the said four statutes having been raised, and aptly decided by the
S.C. Committee, and now again raised before this Court, we shall
deal with those issues as elicited from the orders dated 10.08.2023
and 08.01.2024 passed by the S.C. Committee.
[2025] 7 S.C.R. 283
National Spot Exchange Limited v. Union of India & Ors.
QUESTION: (i)
20. So far as the question, as to “whether the Secured Creditors would
have priority of interest over the assets attached under the provisions
of PMLA and MPID Act, by virtue of the provisions of SARFAESI
Act and RDB Act,” is concerned, it would be beneficial to first refer
to the Objects and Reasons and the relevant provisions of the said
Statutes, as also of the Constitution of India.
21. The RDB Act was enacted to provide for establishment of Tribunals
for expeditious adjudication and recovery of debts due to Banks
and Financial Institutions, and for the matters connected therewith
and incidental thereto, as at the relevant time, the Banks and the
Financial Institutions were experiencing considerable difficulties in
recovering loans and enforcement of securities charged with them.
The said Act came into force on 24.06.1993. Relevant provisions
thereof read as under:-
“31B. Priority to secured creditors.—Notwithstanding
anything contained in any other law for the time being in
force, the rights of secured creditors to realise secured
debts due and payable to them by sale of assets over
which security interest is created, shall have priority
and shall be paid in priority over all other debts and
Government dues including revenues, taxes, cesses and
rates due to the Central Government, State Government
or local authority.
Explanation. —For the purposes of this section, it is
hereby clarified that on or after the commencement of the
Insolvency and Bankruptcy Code, 2016 (31 of 2016), in
cases where insolvency or bankruptcy proceedings are
pending in respect of secured assets of the borrower,
priority to secured creditors in payment of debt shall be
subject to the provisions of that Code.
32-33……………..
34. Act to have over-riding effect. - (1) Save as provided
under sub-section (2), the provisions of this Act shall have
effect notwithstanding anything inconsistent therewith
contained in any other law for the time being in force or
284 [2025] 7 S.C.R.
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in any instrument having effect by virtue of any law other
than this Act.
(2) The provisions of this Act or the rules made thereunder
shall be in addition to, and not in derogation of, the
Industrial Finance Corporation Act, 1948 (15 of 1948), the
State Financial Corporations Act, 1951 (63 of 1951), the
Unit Trust of India Act, 1963 (52 of 1963), the Industrial
Reconstruction Bank of India Act, 1984 (62 of 1984) The
Sick Industrial Companies (Special Provisions) Act, 1985
(1 of 1986) and the Small Industries Development Bank
of India Act, 1989 (39 of 1989).”
22. As the long title of the SARFAESI Act suggests, it was enacted to
regulate the securitisation and reconstruction of financial assets
and enforcement of security interest and to provide for a central
database of security interests created on property rights, and for
matters connected therewith or incidental thereto. SARFAESI Act
came into force w.e.f. 21.06.2002. Section 26E having been relied
upon by the learned counsels for the Secured Creditors, the same
is reproduced as under:
26E. Priority to secured creditors. --Notwithstanding
anything contained in any other law for the time being in
force, after the registration of security interest, the debts
due to any secured creditor shall be paid in priority over all
other debts and all revenues, taxes, cesses and other rates
payable to the Central Government or State Government
or local authority.
Explanation. --For the purposes of this section, it is
hereby clarified that on or after the commencement of the
Insolvency and Bankruptcy Code, 2016 (31 of 2016), in
cases where insolvency or bankruptcy proceedings are
pending in respect of secured assets of the borrower,
priority to secured creditors in payment of debt shall be
subject to the provisions of that Code.
Section 35 thereof providing an overriding effect, reads as under:
“35. The provisions of this Act to override other laws. -
The provisions of this Act shall have effect, notwithstanding
anything inconsistent therewith contained in any other law
[2025] 7 S.C.R. 285
National Spot Exchange Limited v. Union of India & Ors.
for the time being in force or any instrument having effect
by virtue of any such law.”
23. So far as PMLA is concerned, as transpiring from its objects and
reasons, since money laundering had posed a serious threat not only
to the financial systems of the countries but also to their integrity
and sovereignty, some of the international communities had taken
the initiatives to obviate such threats. The Parliament therefore
considering the resolutions and declarations passed by the General
Assembly of United Nations, and to prevent money laundering and
to provide for confiscation of property derived from, or involved in
money laundering and for the matters connected therewith and
incidental thereto, had passed the PMLA, which came into force
w.e.f. 01.07.2005. Section 71 thereof pertaining to the overriding
effect of the Act, reads as under: -
“71. Act to have overriding effect. - The provisions
of this Act shall have effect notwithstanding anything
inconsistent therewith contained in any other law for the
time being in force.”
24. The MPID Act was enacted by the State of Maharashtra to protect
the interest of depositors of the Financial Establishments and matters
relating thereto. Some of the provisions of the said Act being germane
for deciding the issues involved in the present proceedings, the same
are reproduced hereunder: -
Section 2(c) defines “‘deposit”’. The relevant part thereof reads as
under: -
“2. (c) “deposit” includes and shall be deemed always to
have included any receipt of money or acceptance of any
valuable commodity by any Financial Establishment to be
returned after a specified period or otherwise, either in
cash or in kind or in the form of a specified service with
or without any benefit in the form of interest, bonus, profit
or in any other form, but does not include-
Section 2(d) defines “Financial Establishments”, which reads as
under: -
“2(d) Financial Establishment means any person
accepting deposit under any scheme or arrangement or
286 [2025] 7 S.C.R.
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in any other manner but does not include a corporation or
a co-operative society owned or controlled by any State
Government or the Central Government or a banking
company defined under clause (c) of Section 5 of the
Banking Regulation Act, 1949 (10 of 1949);”
Section 3 of MPID Act pertains to the Fraudulent Default by a Financial
Establishment, which reads as under: -
“3. Fraudulent default by Financial Establishment.- Any
Financial Establishment, which fraudulently defaults any
repayment of deposit on maturity along with any benefit
in the form of interest, bonus, profit or in any other form
as promised or fraudulently fails to render service as
assured against the deposit, every person including the
promoter, partner, director, manager or any other person
or an employee responsible for the management of or
conducting of the business or affairs of such Financial
Establishment shall, on conviction, be punished with
imprisonment for a term which may extend to six years
and with fine which may extend to one lac of rupees and
such Financial Establishment also shall be liable for a fine
which may extend to one lac of rupees.
Explanation - For the purpose of this section, a Financial
Establishment, which commits defaults in repayment of
such deposit with such benefits in the form of interest,
bonus, profit or any other form as promised or fails to
render any specified service promised against such
deposit, or fails to render any specific service agreed
against the deposit with an intention of causing wrongful
gain to one person or wrongful loss to another person
or commits such default due to its inability arising out
of impracticable or commercially not viable promises
made while accepting such deposit or arising out of
deployment of money or assets acquired out of the
deposits in such a manner as it involves inherent risk in
recovering the same when needed shall, be deemed to
have committed a default or failed to render the specific
service, fraudulently.”
[2025] 7 S.C.R. 287
National Spot Exchange Limited v. Union of India & Ors.
Section 4 pertains to the attachment of properties on default of return
of deposits, which reads as under: -
“4. Attachment of properties on default of return of
deposits. - (1) Notwithstanding anything contained in any
other law for the time being in force-
(i) where upon complaints received from the depositors or
otherwise, the Government is satisfied that any Financial
Establishment has failed, -
(a) to return the deposit after maturity or on demand by
the depositor; or
(b) to pay interest or other assured benefit; or
(c) to provide the service promised against such deposit; or
(ii) where the Government has reason to believe that
any Financial Establishment is acting in the calculated
manner detrimental to the interests of the depositors with
an intention to defraud them;
and if the Government is satisfied that such Financial
Establishment is not likely to return the deposits or make
payment of interest or other benefits assured or to provide
the services against which the deposit is received, the
Government may, in order to protect the interest of the
depositors of such Financial Establishment, after recording
reasons in writing, issue an order by publishing it in the
Official Gazette, attaching the money or the property
believed to have been acquired by such Financial
Establishment, either in its own name or in the name of
any other person from out of the deposits, collected by
the Financial Establishment, or if it transpires that such
money or other property is not available for attachment
or not sufficient for repayment of the deposits, such other
property or the said Financial Establishment or the promoter,
director, partner or manager or member of the said Financial
Establishment as the Government may think fit.
(2) On the publication of the order under sub-section (1),
all the properties and assets of the Financial Establishment
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and the persons mentioned therein shall forthwith vest in
the Competent Authority appointed by the Government,
pending further orders from the Designated Court.
(3) The Collector of a District shall be competent to receive
the complaints from his District under sub-section (1)
and he shall forward the same together with his report
to the Government at the earliest and shall send a copy
of the complaint also to the concerned District Police
Superintendent or Commissioner of Police, as the case
may be, for investigation.”
Section 7 thereof pertains to the powers of Designated Court regarding
attachment. The same reads as under: -
“7. Powers of Designated Court regarding attachment.-
(1) Upon receipt of an application under Section 5, the
Designated Court shall issue to the Financial Establishment
or to any other person whose property is attached and
vested in the Competent Authority by the Government
under Section 4, a notice accompanied by the application
and affidavits evidence, if any, calling upon the said
Establishment or the said person to show cause on a date
to be specified in the notice, why the order of attachment
should not be made absolute.
(2) The Designated Court shall also issue such notice, to
all other persons represented to it as having or being likely
to claim, any interest or title in the property of the Financial
Establishment or the person to whom the notice is issued
under sub-section (1), calling upon all such persons to
appear on the same date as that specified in the notice
and make objection if they so desire to the attachment of
the property or any portion thereof, on the ground that they
have interest in such property or portion thereof.
(3) Any person claiming an interest in the property attached
or any portion thereof may, notwithstanding that no notice
has been served upon him under this section, make an
objection as aforesaid to the Designated Court at any
time before an order is passed under sub-section (4) or
sub-section (6).
[2025] 7 S.C.R. 289
National Spot Exchange Limited v. Union of India & Ors.
(4) The Designated Court shall, if no cause is shown and
no objections are made under sub-section (3), on or before
the specified date, forthwith pass an order making the order
of attachment absolute, and issue such direction as may
be necessary for realisation of the assets attached and
for the equitable distribution among the depositors of the
money realised from out of the property attached.
(5) If cause is shown or any objection is made as aforesaid,
the Designated Court shall proceed to investigate the same
and in so doing, as regards the examination of the parties
and in all other respects, the Designated Court shall,
subject to the provisions of this Act, follow the summary
procedure as contemplated under Order 37 of the Civil
Procedure Code, 5 of 1908 and exercise all the powers
of a court in hearing a suit under the said Code and any
person making an objection shall be required to adduce
evidence to show that on the date of the attachment he
had some interest in the property attached.
(6) After investigation under sub-section (5), the Designated
Court shall pass an order either making the order of
attachment passed under sub-section (1) of section 4
absolute or varying it by releasing a portion of the property
from attachment or cancelling the order of attachment:
Provided that the Designated Court shall not release
from attachment any interest, which it is satisfied that the
Financial Establishment or the person referred to in sub-
section (I) has in the property, unless it is also satisfied that
there will remain under attachment an amount or property of
value not less then the value that is required for repayment
to the depositors of such Financial Establishment.”
Section 14 of MPID Act provides for the overriding effect of the Act,
which reads as under: -
“14. Act to override other laws. - Save as otherwise
provided in this Act, the provisions of this Act shall have
effect notwithstanding anything inconsistent therewith
contained in any other law for the time being in force or
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any custom or usage or any instrument having effect by
virtue of any such law.”
25. So far as the relevant provisions of Constitution of India are concerned,
Article 246 which pertains to the subject matter of laws made by
the Parliament and the Legislatures of the States reads as under:
“246. Subject-matter of laws made by Parliament and
by the Legislatures of States
(1) Notwithstanding anything in clauses (2) and (3),
Parliament has exclusive power to make laws with respect
to any of the matters enumerated in List 1 in the Seventh
Schedule (in this Constitution referred to as the “Union
List”).
(2) Notwithstanding anything in clause (3), Parliament
and subject to clause (1), the Legislature of any State
also, have power to make laws with respect to any of the
matters enumerated in List III in the Seventh Schedule
(in this Constitution referred to as the “Concurrent List”).
(3) Subject to clauses (1) and (2), the Legislature of any
State has exclusive power to make laws for such State
or any part thereof with respect to any of the matters
enumerated in List II in the Seventh Schedule (in this
Constitution referred to as the ‘State List’).
(4) Parliament has power to make laws with respect to
any matter for any part of the territory of India not included
in a State notwithstanding that such matter is a matter
enumerated in the State List.”
Article 254 deals with the inconsistencies between laws made by
Parliament and laws made by the Legislatures of States, which
reads as under:
“254. Inconsistency between laws made by Parliament
and laws made by the Legislatures of States
(1) If any provision of a law made by the Legislature of
a State is repugnant to any provision of a law made by
Parliament which Parliament is competent to enact, or
[2025] 7 S.C.R. 291
National Spot Exchange Limited v. Union of India & Ors.
to any provision of an existing law with respect to one
of the matters enumerated in the Concurrent List, then,
subject to the provisions of clause (2), the law made
by Parliament, whether passed before or after the law
made by the Legislature of such State, or, as the case
may be, the existing law, shall prevail and the law made
by the Legislature of the State shall, to the extent of the
repugnancy, be void.
(2) Where a law made by the Legislature of a State with
respect to one of the matters enumerated in the Concurrent
List contains any provision repugnant to the provisions
of an earlier law made by Parliament or an existing law
with respect to that matter, then, the law so made by the
Legislature of such State shall, if it has been reserved for
the consideration of the President and has received his
assent, prevail in that State:
Provided that nothing in this clause shall prevent Parliament
from enacting at any time any law with respect to the same
matter including a law adding to, amending, varying or
repealing the law so made by the Legislature of the State.”
ANALYSIS:
26. It is trite that the Court, while interpreting the statutes which have
arguably the conflicting provisions, has to keep in mind the Federal
structure embedded in our Constitution, as a Basic Structure. As per
Article 246(1) of the Constitution, notwithstanding anything contained
in Clauses (2) and (3), the Parliament has exclusive power to make
laws with respect to any of the matters enumerated in the List-I in
the Seventh Schedule, referred to as “the Union List”. As per Article
246(2), notwithstanding anything in Clause (3), the Parliament and
subject to Clause (1), the State Legislature have power to make
laws on any of the matters enumerated in List-III in the Seventh
Schedule referred to as the “Concurrent List”. As per Article 246(3),
subject to Clauses (1) and (2) of Article 246, the Legislature of any
State has exclusive powers to make laws for such State, or any
part thereof, with respect to any of the matters enumerated in List-
II in the Seventh Schedule, referred to as the “State List”. Thus, a
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three-fold distribution of legislative power between the Union and
the States made in the three Lists in the Seventh Schedule of the
Constitution read with Article 246, exhibits the Principle of Federal
supremacy viz. that in case of inevitable conflict between Union and
State powers, the Union power as enumerated in List-I shall prevail
over the State power as enumerated in Lists-II and III, and in case of
overlapping between Lists II and III, the latter shall prevail. In view of
such distribution of Legislative powers, situations have arisen where
two legislative fields have apparently overlapped. In such situations,
this Court has held that it would be the duty of the courts to ascertain
as to what degree and to what extent, the authority to deal with the
matters falling within these classes of subjects exists in each of
such legislatures, and to define the limits of their respective powers.
27. A Constitution Bench in State of West Bengal and Ors. vs.
Committee for Protection of Democratic Rights, West Bengal
and Ors.3, has aptly clinched the issue of distribution of legislative
powers between the Union and the State Legislature, thus-
“25. The non obstante clause in Article 246(1) contemplates
the predominance or supremacy of the Union Legislature.
This power is not encumbered by anything contained in
clauses (2) and (3) for these clauses themselves are
expressly limited and made subject to the non obstante
clause in Article 246(1). The State Legislature has
exclusive power to make laws for such State or any part
thereof with respect to any of the matters enumerated in
List II in the Seventh Schedule and it also has the power
to make laws with respect to any matters enumerated
in List III (Concurrent List). The exclusive power of the
State Legislature to legislate with respect to any of the
matters enumerated in List II has to be exercised subject
to clause (1) i.e. the exclusive power of Parliament to
legislate with respect to matters enumerated in List I. As
a consequence, if there is a conflict between an entry
in List I and an entry in List II, which is not capable of
reconciliation, the power of Parliament to legislate with
3 (2010) 3 SCC 571
[2025] 7 S.C.R. 293
National Spot Exchange Limited v. Union of India & Ors.
respect to a matter enumerated in List II must supersede
pro tanto the exercise of power of the State Legislature.
26. Both Parliament and the State Legislature have
concurrent powers of legislation with respect to any of the
matters enumerated in List III. The words “notwithstanding
anything contained in clauses (2) and (3)” in Article 246(1)
and the words “subject to clauses (1) and (2)” in Article
246(3) lay down the principle of federal supremacy viz.
that in case of inevitable conflict between the Union and
State powers, the Union power as enumerated in List I
shall prevail over the State power as enumerated in Lists
II and III and in case of an overlapping between Lists II
and III, the latter shall prevail.
27. Though, undoubtedly, the Constitution exhibits
supremacy of Parliament over the State Legislatures, yet
the principle of federal supremacy laid down in Article 246
of the Constitution cannot be resorted to unless there is
an irreconcilable direct conflict between the entries in the
Union and the State Lists. Thus, there is no quarrel with
the broad proposition that under the Constitution there
is a clear demarcation of legislative powers between the
Union and the States and they have to confine themselves
within the field entrusted to them. It may also be borne in
mind that the function of the lists is not to confer powers;
they merely demarcate the legislative field. ….”
28. A Three-Judge Bench of this Court in the case of M/s Hoechst
Pharmaceuticals Ltd. and Ors. vs. State of Bihar and Ors4, has
succinctly dealt with the issue of repugnancy as contemplated in
Article 254 of the Constitution of India. Paragraph 67 thereof reads
as under: -
“67. Article 254 of the Constitution makes provision first,
as to what would happen in the case of conflict between
a Central and State law with regard to the subjects
enumerated in the Concurrent List, and secondly, for
4 (1983) 4 SCC 45
294 [2025] 7 S.C.R.
Supreme Court Reports
resolving such conflict. Article 254(1) enunciates the normal
rule that in the event of a conflict between a Union and a
State law in the concurrent field, the former prevails over
the latter. Clause (1) lays down that if a State law relating to
a concurrent subject is ‘repugnant’ to a Union law relating
to that subject, then, whether the Union law is prior or
later in time, the Union law will prevail and the State law
shall, to the extent of such repugnancy, be void. To the
general rule laid down in clause (1), clause (2) engrafts
an exception viz. that if the President assents to a State
law which has been reserved for his consideration, it will
prevail notwithstanding its repugnancy to an earlier law
of the Union, both laws dealing with a concurrent subject.
In such a case, the Central Act, will give way to the State
Act only to the extent of inconsistency between the two,
and no more. In short, the result of obtaining the assent
of the President to a State Act which is inconsistent with a
previous Union law relating to a concurrent subject would
be that the State Act will prevail in that State and override
the provisions of the Central Act in their applicability to that
State only. The predominance of the State law may however
be taken away if Parliament legislates under the proviso
to clause (2). The proviso to Article 254(2) empowers the
Union Parliament to repeal or amend a repugnant State
law, either directly, or by itself enacting a law repugnant
to the State law with respect to the ‘same matter’. Even
though the subsequent law made by Parliament does
not expressly repeal a State law, even then, the State
law will become void as soon as the subsequent law of
Parliament creating repugnancy is made. A State law
would be repugnant to the Union law when there is direct
conflict between the two laws. Such repugnancy may
also arise where both laws operate in the same field and
the two cannot possibly stand together: See Zaverbhai
Amaidas v. State of Bombay [(1954) 2 SCC 345 : AIR
1954 SC 752 : (1955) 1 SCR 799 : 1954 SCJ 851 : 1954
Cri LJ 1822]; M. Karunanidhi v. Union of India [(1979) 3
SCC 431 : 1979 SCC (Cri) 691 : AIR 1979 SC 898 : (1979)
[2025] 7 S.C.R. 295
National Spot Exchange Limited v. Union of India & Ors.
3 SCR 254 : 1979 Cri LJ 773] and T. Barai v. Henry Ah
Hoe [(1983) 1 SCC 177 : 1983 SCC (Cri) 143].”
29. Again, a Constitution Bench of this Court while discussing the doctrine
of pith and substance in the case of Kartar Singh vs. State of
Punjab5, observed thus: -
“60. This doctrine of ‘pith and substance’ is applied when
the legislative competence of a legislature with regard to
a particular enactment is challenged with reference to
the entries in the various lists i.e. a law dealing with the
subject in one list is also touching on a subject in another
list. In such a case, what has to be ascertained is the pith
and substance of the enactment. On a scrutiny of the Act
in question, if found, that the legislation is in substance
one on a matter assigned to the legislature enacting that
statute, then that Act as a whole must be held to be valid
notwithstanding any incidental trenching upon matters
beyond its competence i.e. on a matter included in the
list belonging to the other legislature. To say differently,
incidental encroachment is not altogether forbidden.”
30. Another Constitution Bench in Rajiv Sarin and Another vs. State
of Uttarakhand and Ors.6, has aptly dealt with the issue as to when
the repugnancy as contemplated in Article 254 would be attracted,
and it held thus: -
“33. It is trite law that the plea of repugnancy would
be attracted only if both the legislations fall under the
Concurrent List of the Seventh Schedule to the Constitution.
Under Article 254 of the Constitution, a State law passed
in respect of a subject-matter comprised in List III i.e. the
Concurrent List of the Seventh Schedule to the Constitution
would be invalid if its provisions are repugnant to a law
passed on the same subject by Parliament and that too only
in a situation if both the laws i.e. one made by the State
Legislature and another made by Parliament cannot exist
5 (1994) 3 SCC 569
6 (2011) 8 SCC 708
296 [2025] 7 S.C.R.
Supreme Court Reports
together. In other words, the question of repugnancy under
Article 254 of the Constitution arises when the provisions
of both laws are completely inconsistent with each other
or when the provisions of both laws are absolutely
irreconcilable with each other and it is impossible without
disturbing the other provision, or conflicting interpretations
resulted into, when both the statutes covering the same
field are applied to a given set of facts. That is to say,
in simple words, repugnancy between the two statutes
would arise if there is a direct conflict between the two
provisions and the law made by Parliament and the law
made by the State Legislature occupies the same field.
Hence, whenever the issue of repugnancy between the
law passed by Parliament and of State Legislature are
raised, it becomes quite necessary to examine as to
whether the two legislations cover or relate to the same
subject-matter or different.
34-44. ……..
45. For repugnancy under Article 254 of the Constitution,
there is a twin requirement, which is to be fulfilled: firstly,
there has to be a “repugnancy” between a Central and
State Act; and secondly, the Presidential assent has to be
held as being non-existent. The test for determining such
repugnancy is indeed to find out the dominant intention of
both the legislations and whether such dominant intentions
of both the legislations are alike or different. To put it
simply, a provision in one legislation in order to give effect
to its dominant purpose may incidentally be on the same
subject as covered by the provision of the other legislation,
but such partial or incidental coverage of the same area
in a different context and to achieve a different purpose
does not attract the doctrine of repugnancy. In a nutshell,
in order to attract the doctrine of repugnancy, both the
legislations must be substantially on the same subject.”
31. Since in the instant case, the issue with regard to the conflict
between the provisions of the laws made by the Parliament and the
law made by the State Legislature, has been raised, let us examine
[2025] 7 S.C.R. 297
National Spot Exchange Limited v. Union of India & Ors.
as to whether the said legislation i.e., MPID covers or relates to the
same subject matter as covered under the Central Legislations i.e.,
SARFAESI Act and RDB Act as also PMLA.
32. It may be noted that the constitutional validity of the MPID Act is no
longer res integra in view of the decisions in case of Sonal Hemant
Joshi and Ors. vs. State of Maharashtra and Ors.7 and in case
of State of Maharashtra vs. 63 Moons Technologies Ltd.8. This
Court in 63 Moons Technologies Ltd. (supra) relying upon the
earlier decision in case of Sonal Hemant Joshi and Ors. (supra),
after discussing the various provisions of MPID Act particularly with
regard to the definitions of “Deposit” and “Financial Establishment,”
held in paragraph 91 and 92 as under: -
“91. The validity of the MPID Act was specifically dealt
with in two decisions of this Court in State of Maharashtra
v. Vijay C. Puljal [State of Maharashtra v. Vijay C. Puljal,
(2012) 10 SCC 599 : (2013) 1 SCC (Civ) 541 : (2013)
1 SCC (Cri) 1082] and Sonal Hemant Joshi v. State of
Maharashtra [Sonal Hemant Joshi v. State of Maharashtra,
(2012) 10 SCC 601 : (2013) 1 SCC (Civ) 543 : (2013) 1
SCC (Cri) 1084] . In both the decisions, this Court upheld
the constitutional validity of the MPID Act in view of the
earlier decision in Baskaran [K.K. Baskaran v. State,
(2011) 3 SCC 793 : (2011) 2 SCC (Civ) 90] . In Soma
Suresh Kumar v. State of A.P. [Soma Suresh Kumar v.
State of A.P., (2013) 10 SCC 677 : (2014) 1 SCC (Civ)
90 : (2014) 1 SCC (Cri) 378] , a two-Judge Bench of
this Court upheld the provisions of the Andhra Pradesh
Protection of Depositors of Financial Establishments Act,
1999 following the earlier decisions in Baskaran [K.K.
Baskaran v. State, (2011) 3 SCC 793 : (2011) 2 SCC (Civ)
90] and New Horizon Sugar Mills [New Horizon Sugar Mills
Ltd. v. State of Pondicherry, (2012) 10 SCC 575 : (2013)
1 SCC (Civ) 516 : (2013) 1 SCC (Cri) 1061] .
7 2012 (10) SCC 601
8 2022 (9) SCC 457
298 [2025] 7 S.C.R.
Supreme Court Reports
92. Having discussed the judgments of this Court on the
constitutional validity of the State legislations governing
financial establishments offering deposit schemes,
including the MPID Act, there is no reason for us to
reopen the question. This Court has held that the MPID
Act is constitutionally valid on the grounds of legislative
competence and when tested against the provisions of
Part III of the Constitution.”
33. This Court in Sonal Hemant Joshi and Ors. (supra) had upheld the
constitutional validity of the MPID Act in view of the decision in case
of K.K. Baskaran vs. State9, in which the Court was dealing with
the identical legislation enacted by the State of Tamil Nadu, namely
T.N. Protection of Interest of Depositors (in Financial Establishments)
Act, 1997, enacted with the object to ameliorate the situation of the
depositors from the clutches of fraudulent Financial Establishments,
who had duped the investor/public by offering high rates of interest
on deposits, and committed deliberate fraud in repayment of the
principals and interests after maturity of such Deposits. In the said
decision, the Court had opined that the impugned Tamil Nadu Act
was in pith and substance relatable to the Entries 1, 30 and 32 of
the State List (List-II) of Seventh Schedule. It further held that the
Financial Institutions/Establishments as contemplated in the Tamil
Nadu Act did not come either under the Reserve Bank of India Act or
Banking Regulation Act. It further held that the Tamil Nadu Act was
not focussed on the transaction of banking or acceptance of deposit,
but was focussed on remedying the situation of the depositors who
were deceived by the fraudulent Financial Establishments. The
said Act was intended to deal with neither the Banks which did the
business of Banking and were governed by the Reserve Bank of
India Act and the Banking Regulation Act, nor the Non- Banking
Financial Companies enacted under the Companies Act. In the
case of Tamil Nadu Act, the attachment of properties was intended
to provide for an effective and speedy remedy to the aggrieved
depositors for the realisation of their dues. Hence, the Reserve Bank
of India Act, the Banking Regulation Act or the Companies Act did
9 (2011) 3 SCC 793
[2025] 7 S.C.R. 299
National Spot Exchange Limited v. Union of India & Ors.
not occupy the field which the impugned Tamil Nadu Act occupied,
though the latter might incidentally have trenched upon the former.
The Court in the said judgment specifically disagreed with the full-
Bench judgment of the Bombay High Court, whereby the MPID
Act was held unconstitutional. Subsequently, the Court in Sonal
Hemant Joshi and Ors. (supra), specifically relied upon the said
judgment in case of K.K. Baskaran and upheld the constitutional
validity of the MPID Act. The said judgment was also relied upon
by the three-Judge Bench in State of Maharashtra vs. 63 Moons
Technologies (supra).
34. In view of the above, there remains no shadow of doubt that the
State of Maharashtra was within its legislative competence to enact
the MPID Act, the subject matter of which in pith and substance
was relatable to Entries 1, 30 and 32 of the State List (List-II) of the
Seventh Schedule of the Constitution of India.
35. The PMLA was enacted to implement the international resolutions
and declarations made by the General Assembly of United Nations,
and prevent money laundering as also to provide for confiscation of
properties derived therefrom or involved in money laundering. The
subject matter of PMLA therefore is traceable or relatable to the
Entry-13 of Union List (List-I) of Seventh Schedule.
36. So far as the SARFAESI Act is concerned, the constitutional validity
of the said Act was upheld by a Three-Judge Bench in the case of
Mardia Chemicals Ltd and Ors. vs. Union of India and Ors.10. The
said Act was enacted by the Parliament to regulate securitization and
re-construction of financial assets and enforcement of security interest
and to provide for a central database of security interest created on
property rights. The RDB Act was enacted to provide establishment
of Tribunals for expeditious adjudication and recovery of debts due
to Banks and Financial Institutions and for the matters connected
therewith or incidental thereto. Therefore, both SARFAESI and
RDB Act have been enacted with regard to the matter pertaining to
“Banking,” which subject matter is relatable to the Entry 45 “Banking”
falling in the Union List (List-I) of Seventh Schedule.
10 (2004) 4 SCC 311
300 [2025] 7 S.C.R.
Supreme Court Reports
37. As held by the Constitution Bench in Union of India and Another
vs. Delhi High Court Bar Association and Others11, under Entry
45 of List-I, it is Parliament alone which can enact a law with
regard to the conduct of business by the Banks. Recovery of dues
is an essential function of any Banking Institution. In exercise of its
legislative power relating to Banking, the Parliament can provide
the mechanism by which monies due to the Banks and Financial
Institutions can be recovered.
38. However, merely because the SARFAESI Act and RDB Act which
are enacted in respect of the subject matter falling in List-I and
having been enacted by Parliament, they could not be permitted to
override the MPID Act, which is validly enacted for the subject matter
falling in List-II – State List. If such an interpretation is permitted to
be made, it would amount to denuding the State of its legislative
power to enact and enforce legislation, which is within the exclusive
domain of the State, and it would offend the very principle of Federal
Structure set out in Article 246 of the Constitution of India, held to
be a part of the basic structure of Constitution of India.
39. In this regard, a very pertinent observation made by the majority in
the Constitution Bench of five Judges in ITC Limited vs. Agricultural
Produce Market Committee and Others12 deserve to be referred to.
In the said case, the contention put forth by the Union of India was
that ‘tobacco’ was covered solely by a later Special Central Legislation
that is the Tobacco Boards Act, 1975 (List I- Entry 52 – Industries)
denuding the State legislation to levy market fee on such Tobacco
under the earlier enacted Bihar Agricultural Produce Markets Act,
1960 (List II – Entry 24 – Markets). In the said case, the majority
held the view that while maintaining Parliamentary Supremacy, one
cannot give a go-by to the Federalism which has been held to be
basic feature of the Constitution of India, and thereby whittling the
powers of the State Legislature. The precise observations made by
Sabharwal J., in this regard are reproduced: -
“58. True, the parliamentary legislation has supremacy as
provided under Articles 246(1) and (2). This is of relevance
11 (2002) 4 SCC 275
12 (2002) 9 SCC 232
[2025] 7 S.C.R. 301
National Spot Exchange Limited v. Union of India & Ors.
when the field of legislation is on the Concurrent List.
While maintaining parliamentary supremacy, one cannot
give a go-by to the federalism which has been held to be
a basic feature of the Constitution (see S.R. Bommai v.
Union of India [(1994) 3 SCC 1]).
59. The Constitution of India deserves to be interpreted,
language permitting, in a manner that it does not whittle
down the powers of the State Legislature and preserves
the federalism while also upholding the Central supremacy
as contemplated by some of its articles.”
In the said Judgment Ruma Pal J., in her concurring opinion observed
in Para 94 as under: -
“94. Although Parliament cannot legislate on any of the
entries in the State List, it may do so incidentally while
essentially legislating within the entries under the Union
List. Conversely, the State Legislatures may encroach
on the Union List, when such an encroachment is merely
ancillary to an exercise of power intrinsically under the
State List. The fact of encroachment does not affect the
vires of the law even as regards the area of encroachment.
[A.S. Krishna v. State of Madras, AIR 1957 SC 297 : 1957
SCR 399, Chaturbhai M. Patel v. Union of India, (1960)
2 SCR 362, 373, State of Rajasthan v. G. Chawla, AIR
1959 SC 544, Ishwari Khetan Sugar Mills (P) Ltd. v.
State of U.P., (1980) 4 SCC 136, 146-47] This principle
commonly known as the doctrine of pith and substance,
does not amount to an extension of the legislative fields.
Therefore, such incidental encroachment in either event
does not deprive the State Legislature in the first case or
Parliament in the second, of their exclusive powers under
the entry so encroached upon. In the event the incidental
encroachment conflicts with legislation actually enacted by
the dominant power, the dominant legislation will prevail.”
40. In view of the above position of law settled by the Constitution
Bench, it is held that considering the pith and substance of the State
and the Central Legislations in question, the Central Legislations
302 [2025] 7 S.C.R.
Supreme Court Reports
i.e., SARFAESI Act or RDB Act cannot be permitted to prevail over
the State Legislation i.e., MPID Act, merely because the Central
Legislations are enacted by the Parliament. Since all these Acts
have separate field of operations, provisions of SARFAESI Act or
RDB Act cannot be permitted to override the provisions of MPID
Act, which is a validly enacted State Legislation, otherwise it would
tantamount to violation of federal structure doctrine envisaged in the
Constitution. The respective legislative powers of the Union and the
States are traceable to Articles 245 to 254 of the Constitution. The
State qua the Constitution is Federal in structure, and independent
in its exercise of legislative and executive power. Therefore, if
provisions of SARFAESI Act or RDB Act are permitted to override
the provisions of MPID Act, then the legislative powers of the State
Legislature would be denuded which would tantamount to subverting
the law enacted by the State Legislature.
41. It is true that sometimes the overlapping of legislations enacted with
regard to the matters relatable to different Entries in List-I and List-II
in Seventh Schedule may occur, however in that case also as held
by the Constitution Bench in State of West Bengal vs. Kesoram
Industries Limited and Others13, though, the List-I has priority over
List-III and List-II, and List-III has priority over List-II, the predominance
of Union List would not prevent the State Legislature from dealing
with any matter within List-II, even if it may incidentally affect any
item in List-I. In the case at hand, the SARFAESI Act and RDB Act
having been enacted by the Parliament for the subject matter falling in
List-I and the MPID Act having been enacted by the State Legislature
for the subject matter falling in List-II in the Seventh Schedule, the
latter would prevail in the State of Maharashtra in respect of the
specific subject matter for which the said Act was enacted, in view
of Clause (3) of Article 246.
42. It was next sought to be submitted by learned counsels appearing for
the Secured Creditors that in view of Section 26E of the SARFAESI
Act, the debts due to the Secured Creditor have to be paid in priority
over all other debts and all revenues, taxes, cesses and other rates
payable to the Central Government or State Government or local
13 2004 (10) SCC 201
[2025] 7 S.C.R. 303
National Spot Exchange Limited v. Union of India & Ors.
authority, and therefore, the security interest of the Secured Creditors
in respect of the properties attached under MPID Act should be given
priority. We do not find any merit in the said submission. Apart from
the fact that Section 26E has come into force with effect from 1st
September, 2016, it gives right to the Secured Creditor, after the
registration of security interest, to be paid in priority over all other
debts and revenues, taxes etc. payable to the Central Government
or State Government or local authority.
43. In the instant case, the attachment of the properties over which the
Secured Creditors is said to have security interest, have been attached
under Section 4 of the MPID Act. Such properties are believed to
have been acquired by the Financial Establishment i.e. NSEL either
in its own name or in the name of other persons from out of deposits
collected by the Financial Establishment. All such properties and
assets of the Financial Establishment and the persons mentioned
in the said provision, vest in the Competent Authority appointed by
the Government, pending further orders from the Designated Court.
Such monies or deposits of depositors/ investors, who have been
allegedly defrauded by the Financial Establishment, and for the
recovery of which the MPID Act has been enacted, could not be
said to be a “debt” contemplated in Section 26E of the SARFAESI
Act, and hence also the provisions of Section 26E could not be said
to have been attracted to the facts of the case.
44. In that view of the matter, it is held that no priority of interest can be
claimed by the Secured Creditors against the properties attached
under the MPID Act and that the provisions of MPID Act would override
any claim for priority of interest by the Secured Creditors in respect
of the properties which have been attached under the MPID Act.
QUESTION (ii): -
45. This takes us to the Second question as to “Whether the properties
of Judgment Debtors and Garnishees attached under the MPID Act
would be available for the execution of decrees against the Judgment
Debtors in view of the provisions of Moratorium under Section 14
of the IBC, 2016?”
46. The bone of contention raised by the learned counsel appearing for
the NSEL and the State of Maharashtra is that the properties of the
304 [2025] 7 S.C.R.
Supreme Court Reports
Judgement debtor/Garnishees having already stood attached under
the provisions contained in Section 4 of the MPID Act, much prior to
coming into force of the IBC, 2016 and there being no retrospective
operation of Section 14 pertaining to Moratorium, such attached
properties under the MPID Act would no longer be available as the
properties of the Corporate Debtor to be considered for the purpose
of Resolution Plan under the IBC. According to them, on the issuance
of Notification under Section 4 of the MPID Act, the attached the
properties would vest in the Competent Authority appointed by the
State Government, and therefore such properties would no longer be
the properties of the judgment debtor or of the Garnishee, and therefore
would be outside the scope of operation and application of IBC. Per
contra the learned counsel for the Judgment Debtor/Garnishees have
contended that the IBC being a complete and exhaustive Code in
itself would override the provisions of the MPID Act.
47. As stated earlier, the MPID was enacted in the public interest to
curb the unscrupulous activities of the Financial Establishments,
who had defaulted to return the deposits of the public in the State
of Maharashtra. The constitutional validity of the said Act has been
upheld by this Court in Sonal Hemant Joshi and Ors. (supra) and
in State of Maharashtra vs. 63 Moons Technologies Ltd. (supra).
As discussed while answering the first question, it was held that the
MPID Act has been validly enacted by the Government of Maharashtra
for the matters falling in List-II- State List, and therefore it would
prevail in the State of Maharashtra. On the other hand, IBC has been
enacted to consolidate and amend the laws relating to re-organization
and insolvency resolution of corporate persons, partnership firms
and individuals in a time bound manner for maximisation of value of
assets of such persons, to promote entrepreneurship, availability of
credit and balance the interest of all the stakeholders. The subject
matter of IBC being “Bankruptcy and Insolvency”, is relatable to the
Entry 9 of List III-Concurrent List. The MPID Act having been enacted
for the matters relatable to the Entries-1, 30 and 32 in List-II-State
List, and the IBC having been enacted for the matters relatable to
the Entry-9 in List-III- Concurrent List, the provisions of Article 254
would not be attracted. As per the settled legal position discussed
earlier, the issue of repugnancy or conflict as contemplated in Article
254 would arise only when the State Legislation and the Central
[2025] 7 S.C.R. 305
National Spot Exchange Limited v. Union of India & Ors.
Legislation, both, are relatable to the Entries contained in List-III-
Concurrent List of Seventh Schedule. A beneficial reference of the
decision in case of Innoventive Industries Ltd. vs. ICICI Bank and
Another14 be made in this regard.
48. In the instant case, there is also no overlap or inconsistency between
the provisions contained in the IBC and MPID Act. As such, Section
14 of IBC has the connotation which is very much different from
Section 4 of MPID Act. The proceedings under the IBC arise out of
the Debtor-Creditor relationships of the parties. As per Section 14
of IBC, which pertains to the Moratorium, a declaration has to be
made to an order by the Adjudicating Authority prohibiting the acts
mentioned therein. Therefore, Section 14 of IBC is consequent upon
the order passed by the Adjudicating Authority declaring Moratorium.
49. However, so far as the attachment of properties under Section 4 of
the MPID Act is concerned, it is beyond the realm of the Debtor-
Creditor relationship as contemplated in the IBC. On the publication
of the Order of Attachment of Properties by the Government to protect
the interest of the Depositors of the Financial Establishment, such
properties and assets of the Financial Establishment and the persons
mentioned in sub-section (1) of Section 4, would forthwith vest in
the Competent Authority appointed by the Government, pending
further orders from the Designated Court. The procedure and powers
required to be followed by the Designated Court after the receipt
of the application from the Competent Authority under Section 5,
have been prescribed in Section 7 of the MPID Act. As per the said
procedure contained in Section 7, the Designated Court is required
to issue a notice calling upon the Financial Establishments or to any
other person whose property is attached and vested in the Competent
Authority, to show cause as to why the Order of Attachment should
not be made absolute. If no cause is shown or no objections have
been raised before the Designated Court, the Designated Court can
pass the order making the Order of Attachment absolute and issue
such direction as may be necessary for realisation of the assets
attached and for the equitable distribution among the depositors of
the money realised from out of the properties attached.
14 (2018) 1 SCC 407
306 [2025] 7 S.C.R.
Supreme Court Reports
50. Thus, a conjoint reading of Section 4, 5 and 7 of the MPID Act,
makes it clear that though Section 4(2) states about the attached
properties being vested in the Competent Authority appointed by the
Government, such vesting would be subject to the orders passed by
the Designated Court. We therefore see no inconsistency between
the provisions contained in the MPID Act and the IBC.
51. In absence of any inconsistency having been brought on record,
between the provisions contained in the MPID Act and in the IBC,
Section 238 of IBC, which gives overriding effect to the IBC over
the other Acts for the time being in force, cannot be said to have
been attracted.
52. In that view of the matter, it is held that the properties of the Judgment
Debtors and Garnishees attached under the provisions of the MPID
Act, would be available for the execution of the decrees against the
Judgment Debtors by the S.C. Committee, despite the provision of
Moratorium under Section 14 of the IBC.
53. For the reasons stated above, the Question No. (i) is answered in
the negative and the Question No.(ii) is answered in the affirmative.
As a consequence, thereof, both the Orders passed by the Supreme
Court Committee on 10.08.2023 and 08.01.2024 stand vindicated
and upheld.
54. Let the IAs challenging the orders dated 10.08.2023 and 08.01.2024
passed by the S.C. Committee, be dealt with and decided, in the
light of the findings recorded in this judgment.
Result of the case: Questions answered.
†
Headnotes prepared by: Divya Pandey
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