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2023 (1) TMI 1369 - HC - VAT and Sales TaxRecovery of dues - priority of dues - whether the dues of secured financial institution will have priority over State tax dues or not? - HELD THAT:- In the instant case, it is an undisputed fact that respondent No.1 – Bank of Baroda is a secured creditor. Therefore, the Bank has valid first charge over the properties in question by way of mortgage and has first right to sell the same in view of priority under Section 26E of the Act and recovered its dues from it. The petitioners are the bona fide purchasers, purchased the properties in question from the public e-auction held by the bank and paid full and total sale consideration to the bank and the bank has issued sale certificate in favour of the petitioners and also handed over the peaceful and vacant possession to the petitioners. Indisputably, the charge created by respondent No.3 – State Authority is later point of time. Therefore, the debts due to Bank of Baroda – a secured creditor shall be paid in priority over other debts/taxes payable to the State Government. The petitioners have no concern with the dues of the State Authorities. Moreover, 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. It is held that the SARFAESI 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. Any other provision(s) would not defeat the provision of Section 26E of the SARFAESI Act and also the object and purpose of the SARFAESI Act. This Court holds that the petitioners are the bona fide purchasers and are the absolute owners of the properties in question with legal and valid title. Consequently, the sale deed registered by the Authority concerned is legal and valid document - the present petition is partly allowed.
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