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2023 (3) TMI 121 - HC - VAT and Sales TaxRecovery of dues - Attachment of property (secured asset) - absolute owner of the property - legal and valid title or not? (as once purchased under the public auction) - HELD THAT:- It is a settled position of law that the debts due to any secured creditor shall be paid in priority over all other debits and all revenues, taxes, cesses and other rates payable to the Central Government or state Government or local authority. Reference made to the case of KALUPUR COMMERCIAL CO-OPERATIVE BANK LTD. VERSUS STATE OF GUJARAT [2019 (9) TMI 1018 - GUJARAT HIGH COURT] where it was held that We have no hesitation in coming to the conclusion that the first priority over the secured assets shall be of the Bank and not of the State Government by virtue of Section 48 of the VAT Act, 2003. In the instant case, it is an undisputed fact that respondent No.2 – Bank of Baroda is a secured creditor. Therefore, the Bank has valid first charge over the property in question by way of mortgage and has first right to sell the same in view of priority under Section 31B of the RDDBI Act, so also Section 26E of the SARFAESI Act and recovered its dues from it. The petitioner is a bona fide purchaser, purchased the property in question from the public e-auction held by the Recovery Officer and paid full and total sale consideration and the Recovery Officer has issued sale certificate in favour of the petitioner. The debts due to Bank – a secured creditor shall be paid in priority over other debts/taxes payable to the State Government. The petitioner has no concern with the dues of the State Authorities - now it is well settled legal position that the mortgagor bank has priority to recover the dues against any charges of the State Government or Central Government, more particularly the mortgage is created prior to the registration of such charge by the Authority. Thus, it is held that the RDDBI Act is meant for enforcement of security interest which is created in favour of the secured creditor – financial institution, and provides specific mechanism / provision for the financial assets and security interest. Petition allowed.
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