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2017 (3) TMI 487 - HC - VAT and Sales TaxRecovery of tax dues under MVAT - priority of banks over statutory dues - The petitioner bank extended the financial assistance to the respondent No.2 - Company and in order to secure the finances the Company mortgaged its immovable property as well as hypothecated its assets in favour of petitioner-bank - default in repayment of loan - auction sale - The petitioner contends that the petitioner bank being a secured creditor has preferential claim over the secured assets and is entitled to take appropriate steps for realization of the amount due and recoverable from Respondent No.2 Company - Held that: - in view of provisions of Section 529A of the Companies Act, priority is given to the dues of the secured creditor and the workers over the statutory charge claimed by the State - the secured creditors fall under two categories; those who desire to go before the Company Court and those who like to stand outside the winding up. It is open for the petitioner to stand outside the winding up proceedings and claim enforcement of its Security Interest. If the petitioner instead of deciding to stand outside preferred to go before the Company Court for decision, it would become necessary to relinquish its security in accordance with Insolvency Rules mentioned in Section 529. The petitioner is a Secured Creditor in accordance with IInd clause u/s 529-A(i) (b) read with proviso (c) to Section 529 (I) having overriding preferential claim and opts to stand outside winding up to realize its security. In view of clause (c) to the proviso to Section 529 (I) the priority of the Secured Creditor who stand outside the winding up is confined to workmens portion as defined in Section 529 (iii) (c). The petitioner who stands outside the winding up proceedings in view of provisions of Section 529-A can surely have priority over the claim of the State in respect of statutory dues. The petitioner bank has a priority claim over the statutory dues claimed by respondent no.1. - petition allowed - decided in favor of petitioner.
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