North Eastern Development Finance Corporation Ltd. v. L. Doulo Builders and Suppliers Co. Pvt. Ltd., 2025 INSC 1446 - SARFAESI Act vs Constitutional Provisions

Constitution of India - Article 371A ; SARFAESI Act - Section 35 - Section 35 of the SARFAESI Act, though gives overriding effect to the provisions thereof notwithstanding anything to the contrary contained in any other enactment for the time being in force or any instrument having effect by virtue of any such law, the same cannot and does not override any provision of the Constitution, to wit, Article 371A thereof which contains special provisions for the State of Nagaland- Notification dated 10th December, 2021 - provisions of the SARFAESI Act could be implemented in the State of Nagaland with effect from 10th December, 2021. (Para 20)

SARFAESI Act 2002 - Recovery of Debts and Bankruptcy Act, 1993- For invocation of the provisions of the SARFAESI Act, mortgage is a must which, however, is not so for filing an original application under the Recovery of Debts and Bankruptcy Act, 1993 An original application under the RDB Act can be filed for recovery of both secured as well as unsecured loans. Under the SARFAESI Act, however, security interest can be enforced without intervention of Court while the procedure under the RDB Act is for execution of the decree passed by the jurisdictional Debts Recovery Tribunal upon reaching a satisfaction of there being outstanding dues of the lender which need to be recovered from the borrower. (Para 25) [Context: In this case, no property was mortgaged by the Company in favour of the Corporation - SC held: No security interest in respect of any property (secured asset) was created in favour of the Corporation within the meaning of the SARFAESI Act and, therefore, the Corporation is not a secured creditor.]

Practice and Procedure -A pure question of law can be raised even at the appellate stage before Supreme Court. (Para 17)

Banking Practices - Security Agreement - A security agreement may not be contained in a single document. Typically, it is a collection of agreements including loan, hypothecation, guarantee and mortgage agreements. All of these are aimed at securing the loan. When a business or project loan is granted, the borrower utilises the funds to create business property, which becomes the primary security. This can include assets like stock, plant and machinery, and raw materials. A separate agreement may be entered into, offering land or other property as collateral security. The key difference is that primary security involves creating a security interest, while collateral security involves transferring an interest in the property by the borrower to the lender.(Para 24)