TMI Blog2021 (11) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... OPERATIVE BANK LTD. VERSUS STATE OF GUJARAT [ 2019 (9) TMI 1018 - GUJARAT HIGH COURT] the issue was with regard to the first priority of the Bank over the dues vis- -vis the sales tax dues which the State Government intended to recover from the assets of the defaulter. This Court examined this and to hold it in favour of the Bank that it would have the first charge over the properties mortgaged by virtue of Section 26 E. In the present case, the petitioner Bank had already registered all the mortgaged documents in the Central Registry as per Section 20 of the SARFAESI Act, 2002 and by virtue of provision of Section 26 E it is rightly held that the Bank being a secured creditor after registration of the security interest would enjoy priority over all other debts and all revenues, taxes, cesses and other rates. The petitioner appears to have registered all the mortgaged documents with the Central Registry as per the procedure prescribed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Central Registry) Rules, 2011 - petitioner-Bank not only had registered the charge over the property in question, but it had also issued a public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of 25% of the sale amount, it was declared as successful bidder and further terms and conditions had been stipulated in accordance with law. 2.6 On 13.11.2020 the bidder M/s. Khusbu Metal Industries and Minerals approached the Sub-Registrar office for execution of the sale deed, when the Registrar denied the registration as there was a lien of ₹ 41,00,000/- over the property by the Sales Tax Department. 2.7 On 11.12.2020 the petitioner Bank requested the respondent No.2 to remove its charge recorded in the revenue record, however, the respondent No.2 did not do that. 2.8 On 13.12.2020 the Bank once again requested the respondent No.2 to remove its charge recorded in the revenue record, however, since he has failed to so do it and the petitioner was constrained to approach this Court and has sought the following prayers: 34 (A) This Hon'ble Court be pleased to issue a writ of mandamus or a writ in the nature of mandamus. or any other appropriate writ, order or direction by quashing and setting aside the impugned attachment order dated 21/09/2019 and charge recorded in the revenue record by the respondent no.2 at ANNEXURE- E , for the reasons stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is further contended that in the instant case the assessment years are of the year 2012-2013, 2013-2014, 2014-2015 and 2015-2016 for which the assessments have been concluded. Section 48 of the Gujarat Value Added Tax Act, 2003 ( the VAT Act hereinafter) and Section 35 of the the SARFAESI Act,2002 make it very clear that the VAT Act would prevail over the provisions and proceedings of the SARFAESI Act, 2002 and Section 26 (A) of the Amendment to the SARFAESI Act,2002 shall not have an applicability in the present scenario. 5. This Court has heard the learned advocate, Mr. Virendra. M. Gohil appearing for the petitioner-Bank. According to him, respondent No.2 does not have any authority for preferential charge over the claim of the petitioner-Bank as secured creditor under the provision of Section 35 of the SARFAESI Act, 2002 would have an overriding effect. The action of the respondent No.2 is under the Sales Tax Act in view of the provision of Section 46 of the VAT Act. 5.1 He has further urged that Section 46 of the VAT Act which bestows the special powers to the tax authorities for recovery of tax as arrears of land revenue. The respondent No.2 cannot march over the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insed principle that the State is entitled to raise money by taxation because unless etiquette revenue is received by the State, it would not be able to function as a sovereign Government. 7.2 In case of Commissioner of Employee Provident Fund vs. Official Liquidator of Esskey Ltd, reported in (2011) 10 SCC 727 as Section 11(2) of the Employees Provident Funds Act starts with a Non-obstante clause. The Apex court held that any amount due from an employer shall be deemed to have the first charge on the asset of the establishment and is payable in priority to all other debts including the dues to a Bank which falls in the category of secured creditor. 7.3 This is in relation to the amount due from the employer to have the first charge on the assets of the establishment in as much as this concerns the employees provident fund, the State cannot acquit itself with the employee provident fund commissioner as the beneficiaries differ. 7.4 So far as the case of State of Maharashtra vs. Bharat Shantilal Shah, reported in (2008) 13 SCC 5 is concerned, it was held that Article 254 of the Constitution of India succinctly deals with the law relating to inconsistency between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision has been incorporated in either DRT Act or the Securitisation Act. 8.2 In absence of any specific provision to that effect, overlapping between the provisions of the DRT Act and Securitisation Act on one hand and Section 38 C of the Bombay Sales Tax Act and Section 26 B of the Kerala General Sales Tax Act and the Non-obstante clauses contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act cannot be invoked for declaring that the first charge created under the State legislation would not operate qua the proceedings initiated by Banks, Financial Institutions and other secured creditors for recovery of their dues or enforcement of security interest. 9. With this pronouncement, the Central Government amended SARFAESI Act, 2002 by introducing Chapter IV A by Amending Act, 44 of 2016 dated 01.01.2016 and the Central Government introduced the concept of registration by secured creditors and other creditors. Section 26 E was inserted which speaks of the priority to the secured creditors, which provides that Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les, 2011. 12. It appears that the petitioner-Bank also had given the public advertisement for nearly five times. After the Amendment in the Act in the year 2016 and the registration of the security interest as the petitioner has the first and the foremost charge over the property in question, the question arises as to whether the respondent No.2 could claim the primacy over the dues of the Bank. 13. The petitioner-Bank not only had registered the charge over the property in question, but it had also issued a public notice and deployed the security for protecting the property. 14. What has been claimed by the respondents is the position prior to the amendment of the SARFAESI Act,2002 in the year 2016 w.e.f. 01.01.2016, whereby this concept of registration has been introduced of the secured creditors and the other creditors as the debts due are to be paid to the secured creditor in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority, we could notice that the Bank has registered with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CER ..... X X X X Extracts X X X X X X X X Extracts X X X X
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