In a significant ruling, the Allahabad High Court dismissed a petition by Canfin Homes Ltd. and another party challenging the attachment of a property under the U.P. Gangsters and Anti-Social Activities (Prevention) Act, 1986 (“Gangster Act”). The petitioners, a housing finance company and its subsidiary, sought to overturn the attachment order on a house mortgaged to them, arguing that they held a secured interest in the property. However, the court upheld the attachment, directing the petitioners to seek redress before the Special Court under the Gangster Act.
Case Background
The case, titled Canfin Homes Ltd. and Another vs. State of U.P. and 2 Others (Criminal Misc. Writ Petition No. 11443 of 2024), revolved around a property located at House No. 78, Sector Delta-3, Greater Noida, Gautam Budh Nagar, Uttar Pradesh. The property was mortgaged to Canfin Homes Ltd., a housing finance company sponsored by Canara Bank, as security against a loan extended to one Rakesh Sharma.
Sharma, the borrower, was implicated under the U.P. Gangsters and Anti-Social Activities (Prevention) Act, 1986, leading to an FIR registered against him (Case Crime No. 466 of 2022). Subsequently, the Police Commissioner of Ghaziabad ordered the attachment of the mortgaged property on May 4, 2023, under Section 14(1) of the Gangster Act.
Petitioners’ Arguments
Represented by advocate Amrendra Singh, Canfin Homes Ltd. contended that they were a secured creditor with a first right over the property due to the loan extended to Sharma. They argued that the attachment order violated their rights under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), a Central Act that they claimed should prevail over the state legislation, in light of Article 254 of the Constitution of India.
The petitioners had previously filed a writ petition (No. 3720 of 2024) following the attachment order, which was disposed of with a direction to the Police Commissioner to consider their representation against the attachment. Despite this, the Police Commissioner communicated that the final order regarding the property had been passed on August 4, 2023, and the matter was referred to the Special Court under the Gangster Act.
Respondents’ Counterarguments
The State of Uttar Pradesh, represented by Advocate General Ratan Singh, countered that the petitioners did not inform the court of the order passed under Section 16 of the Gangster Act, by which the representation of the accused, Rakesh Sharma, was rejected. Since the matter was already referred to the Special Court (Gangster Act), the Police Commissioner had no authority to release the property. The petitioners were advised to pursue their case before the Special Court.
Court’s Observations and Decision
The division bench comprising Justice Vivek Kumar Birla and Justice Arun Kumar Singh Deshwal noted that the attachment order was passed under Section 14(1) of the Gangster Act. As the matter had already been referred to the Special Court under Section 16 of the Gangster Act, any further claims regarding the property must be resolved through that court.
The court observed:
“If a person interested in a property could not file a representation before the District Magistrate/Commissioner of Police under Section 15(1) of the Gangster Act for want of knowledge, he can file his objection before the Special Court even after the reference of the attachment order.”
The court further held that:
“The Special Court, after completion of the inquiry under Section 17 of the Gangster Act, may deliver the attached property to the interested person if he is found entitled to possession thereof.”
The bench also addressed the petitioners’ contention regarding the overriding effect of the SARFAESI Act over the Gangster Act. The court clarified that Article 254 of the Constitution, which deals with the inconsistency between Central and State laws, would only apply where both laws relate to a subject in the Concurrent List. Since the SARFAESI Act pertains to Entry 45 and Entry 95 of the Union List, while the Gangster Act is concerned with criminal law and procedure (Entries I and II of the Concurrent List), there was no conflict between the two legislations.
The court concluded:
“There is no inconsistency between the SARFAESI Act and the Gangster Act as the objects of both Acts are different, and both operate in separate fields.”
The High Court dismissed the writ petition but granted liberty to the petitioners to file their objections or claims before the Special Court (Gangster Act), Ghaziabad, regarding the attached property. The Special Court will then consider these claims in accordance with the law.
Case Details:
– Case Number: Criminal Misc. Writ Petition No. 11443 of 2024
– Petitioners: Canfin Homes Ltd. and Another
– Respondents: State of Uttar Pradesh and 2 Others
– Bench: Justice Vivek Kumar Birla and Justice Arun Kumar Singh Deshwal
– Counsel for Petitioners: Amrendra Singh
– Counsel for Respondents: Ratan Singh, Advocate General
