TMI Blog2022 (9) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... a) giving such dues precedence over the dues of a secured creditor? - HELD THAT:- Bare perusal of the 2016 Amending Act would show that the dues of the Central/State Governments were in the specific contemplation of the Parliament while it amended the RDDB Act and the SARFAESI Act, both of which make specific reference to debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority and ordains that the dues of a secured creditor will have priority , i.e., take precedence - The rights of such of the first charge holders accorded by several legislations enacted by the State, having regard to the language in which section 26E is couched, would rank subordinate to the right of the secured creditor as defined in section 2(1)(zd) subject, of course, to compliance with the other provisions of the statute. Acceptance of the contra-arguments of learned counsel for the State/respondents would undo what the Parliament has chosen to do. The RDDB Act and the SARFAESI Act are Central Acts. If any provision therein is discerned to be seemingly inconsistent with any provision in a State legislation, reconciliation of the same o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isages is for a secured creditor who institutes proceedings under the RDDB Act and is successful in having an interim or final determination in its favour that a sum is due and payable (in section 31B) as distinguished from the debts due (in section 26E). Section 31B of the RDDB Act being a substantive provision, it cannot be invoked by a secured creditor faced with the disability posed by section 26E of the SARFAESI Act - without recourse having been taken to the procedure envisaged in the RDDB Act for recovery of its dues and without there being a determination of its claim by the DRT to the effect that any sum due from the borrower is payable to it, a secured creditor is not entitled to invoke the provisions of section 31B. Whether the priority of interest contemplated by section 26E of the SARFAESI Act could be claimed by a secured creditor without registration of the security interest with the Central Registry? - HELD THAT:- On the face of the express provisions in sections 26D and 26E of the SARFAESI Act and in the absence of any discussion on the object of introduction of Chapter IV-A of the SARFAESI Act by the Division Bench in ASREC (India) Ltd. [ 2019 (12) TMI 633 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with law prior to Chapter IVA of the SARFAESI Act, or for that matter section 31B of the RDDB Act, being enforced, and such attachment is followed by a proclamation according to law, the priority accorded by section 26E of the former and section 31B of the latter would not get attracted. Whether an auction purchaser of a secured asset would be liable to pay the dues of the department in order to obtain a clear and marketable title to the property having purchased the same on as is where is and whatever there is basis ? - HELD THAT:- Notwithstanding the duty of the authorized officer to indicate in the sale advertisement inviting bids the encumbrance(s) attached to the immovable property, i.e., the secured asset, as known to the secured creditor, if at all any detail in regard to such encumbrance(s) is not indicated but the sale is expressly made on as is where is, whatever there is basis , the transferee shall be duty bound to deposit money for discharge of the encumbrance(s) provided, of course, that such liability may be overcome if he is in a position to disprove the claim of the department that he had no constructive notice of the charge, far less actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . V. Kini and Co. for R.No.7 in W.P.No.2336/2021. Mr P. P. Kakade, GP a/w Mr. B.V. Samant AGP for State in W.P.No.2720/2021, W.P.No.2336/2021, W.P.No.6297/ 2021 and W.P.No.3120/ 2021. Mr. P. P. Kakade, GP a/w Mr. M. M. Pable AGP for State in WP/2251/2021. Mr. P. P. Kakade, GP a/w Mrs. R. A. Salunkhe AGP for State in WP/2248/2021. JUDGMENT: INTRODUCTION 1. A Division Bench of this Court (cor. Chief Justice and M.S. Karnik, J.) while considering this batch of writ petitions was of the view that the issues emerging for decision therein can be advantageously heard and disposed of by a larger Bench. In deference to the order dated 25th November 2021 passed by such Bench and in exercise of power conferred on the Chief Justice by rule 8 of Chapter I of the Bombay High Court Appellate Side Rules, 1960, this larger Bench was constituted. The parties were put on notice and heard at length on multiple legal and factual issues. 2. The controversy lies in a narrow compass, with the Securitisation and Reconstruction of Financial Assets and Enforcement of Security interest Act, 2002 (hereafter SARFAESI Act , for short) and the Recovery of Debts and Bankr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titions was reserved. We propose to notice all such decisions separately at a later part of this opinion. BACKGROUND FEATURES 5. It would be appropriate to preface our opinion by briefly tracing the developments in the field of law relating to recovery of dues of banks and financial institutions (hereafter lenders , for short, when referred to collectively) relevant for the purpose of answering the questions of law formulated infra. 6. Prior to 1993, for effecting recovery of debts, the lenders were required to institute suits regulated by the provisions of the Code of Civil Procedure (hereafter CPC , for short). However, the normal time-consuming process of recovery through suits did not suit the recovery of dues. Multifarious problems surfaced. Drying up of financial liquidity, thereby retarding economic progress, emerged as the prime problem. Without recovery of the dues, the lenders found it difficult to lend further financial assistance. It is at this stage that the Parliament enacted the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereafter RDBFI Act , for short) making provisions for establishment of Tribunals for expeditious adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the decision in Mardia Chemicals Ltd. (supra). In the decision reported in AIR 2007 SC 712 (Transcore vs Union of India), the Court was, inter alia, seized of the question as to whether withdrawal of an original application instituted in terms of the first proviso to section 19(1) of the RDBFI Act (inserted by Amending Act 30 of 2004) is a condition precedent for taking recourse to the SARFAESI Act. The Court noticed the reasons for enactment of the SARFAESI Act and made a deep analysis of both the Acts. Upon hearing learned counsel for the parties and on consideration of Order XXIII, CPC and the relevant two enactments, the Court answered this question in the negative. 11. Within a couple of years therefrom came the decision reported in (2009) 4 SCC 94 (Central Bank of India vs. State of Kerala). The questions arising out of the several civil appeals for decision were, whether section 38C of the BST Act, 1959 and section 26B of the Kerala General Sales Tax Act, 1963 and similar provisions contained in other State legislations by which first charge was created on the property of the dealer or such other person, who is liable to pay sales tax, etc., are inconsistent w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under Section 13(1) of the Securitisation Act, limited primacy has been given to the right of a secured creditor to enforce security interest vis- -vis Section 69 or Section 69-A of the Transfer of Property Act. In terms of that subsection, a secured creditor can enforce security interest without intervention of the court or tribunal and if the borrower has created any mortgage of the secured asset, the mortgagee or any person acting on his behalf cannot sell the mortgaged property or appoint a Receiver of the income of the mortgaged property or any part thereof in a manner which may defeat the right of the secured creditor to enforce security interest. This provision was enacted in the backdrop of Chapter VIII of the Narasimham Committee s Second Report in which specific reference was made to the provisions relating to mortgages under the Transfer of Property Act. 113. In an apparent bid to overcome the likely difficulty faced by the secured creditor which may include a bank or a financial institution, Parliament incorporated the non obstante clause in Section 13 and gave primacy to the right of secured creditor vis- -vis other mortgagees who could exercise rights under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Securitisation Act, the provisions contained in those Acts cannot override other legislations. Section 38-C of the Bombay Act and Section 26-B of the Kerala Act also contain non obstante clauses and give statutory recognition to the priority of the State s charge over other debts, which was recognised by Indian High Courts even before 1950. In other words, these sections and similar provisions contained in other State legislations not only create first charge on the property of the dealer or any other person liable to pay sales tax, etc. but also give them overriding effect over other laws. *** 126. While enacting the DRT Act and the Securitisation Act, Parliament was aware of the law laid down by this Court wherein priority of the State dues was recognised. If Parliament intended to create first charge in favour of banks, financial institutions or other secured creditors on the property of the borrower, then it would have incorporated a provision like Section 529-A of the Companies Act or Section 11(2) of the EPF Act and ensured that notwithstanding series of judicial pronouncements, dues of banks, financial institutions and other secured creditors should have pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain provision similar to the Workmen s Compensation Act, etc. In the absence of any specific provision to that effect, it is not possible to read any conflict or inconsistency or overlapping between the provisions of the DRT Act and the Securitisation Act on the one hand and Section 38-C of the Bombay Act and Section 26-B of the Kerala Act on the other 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 will not operate qua or affect the proceedings initiated by banks, financial institutions and other secured creditors for recovery of their dues or enforcement of security interest, as the case may be. 131. The Court could have given effect to the non obstante clauses contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act vis- -vis Section 38-C of the Bombay Act and Section 26-B of the Kerala Act and similar other State legislations only if there was a specific provision in the two enactments creating first charge in favour of the banks, financial institutions and other secured creditors but as Parliam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urs) 13. A few years after the aforesaid decision, the title of the RDBFI Act underwent an amendment. By Act XXXI of 2016, the word Bankruptcy replaced the words Due to Banks and Financial Institutions , resulting in the rechristening of the RDBFI Act as the RDDB Act. 14. The decision in Central Bank of India (supra) [holding, inter alia, that the RDBFI Act and the SARFAESI Act do not contain provisions giving priority to the dues of banks, financial institutions and other secured creditors over the first charge created under State legislations because Parliament did not intend to give priority to the dues of private creditors over sovereign debt of the State (paragraph 126) and also that if Parliament intended to give such priority then provisions similar to those contained in the referred Central legislations would have been incorporated in the RDBFI Act and the SARFAESI Act (paragraph 129)] is presumed to have acted as a catalyst leading to the enactment of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, being Amendment Act No. XLIV of 2016 (hereafter 2016 Amending Act , for short). The Statement of O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in repayment of debts; (iv) debenture trustees as financial institutions; (v) empowering the Central Government to provide for uniform procedural rules for conduct of proceedings in the Debts Recovery Tribunals and Appellate Tribunals. 4. The Bill also seeks to amend the Indian Stamp Act, 1899, so as to exempt assignment of loans in favour of asset reconstruction companies from stamp duty and the Depositories Act, 1996 for facilitating transfer of shares held in pledge or on conversion of debt into shares in favour of banks and financial institutions. 5. The Bill aims to improve ease of doing business and facilitate investment leading to higher economic growth and development. 6. The Bill seeks to achieve the above objectives. 15. Section 31B incorporated in the RDDB Act by the 2016 Amending Act and introduced with effect from 1st September 2016, reads as follows: 31-B. Priority to secured creditors.- Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realise secured debts due and payable to them by sale of assets over which security interest is created, shall have priorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned or financial asset before the transaction is actually registered. 26-B. Registration by secured creditors and other creditors.- (1) The Central Government may by notification, extend the provisions of Chapter IV relating to Central Registry to all creditors other than secured creditors as defined in clause (zd) of sub-section (1) of Section 2, for creation, modification or satisfaction of any security interest over any property of the borrower for the purpose of securing due repayment of any financial assistance granted by such creditor to the borrower. (2) From the date of notification under sub-section (1), any creditor including the secured creditor may file particulars of transactions of creation, modification or satisfaction of any security interest with the Central Registry in such form and manner as may be prescribed. (3) A creditor other than the secured creditor filing particulars of transactions of creation, modification and satisfaction of security interest over properties created in its favour shall not be entitled to exercise any right of enforcement of securities under this Act. (4) Every authority or officer of the Central Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter III unless the security interest created in its favour by the borrower has been registered with the Central Registry. 26-E. Priority to secured creditors.- Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid 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. Explanation.- For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code. 17. A reference was pending before the Full Bench of the Madras High Court prior to Chapter IV-A of the SARFAESI Act being enforced. The said Full Bench by a short order reported in AIR 2017 Madras 67 [Asst. Commissioner (CT) vs. Indian Overseas Bank] disposed of the reference holding, inter alia, that: 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to hold that the secured creditors would not have first charge or priority in the matter of recovery of their dues. SUBMISSIONS OF THE PARTIES 19. Having taken note of the background features, let us now briefly notice the broad submissions advanced on behalf of the contesting parties. 20. It has been contended on behalf of the secured creditors that the priority created by section 31B is not restricted to enforcement under the RDDB Act; section 31B recognizes priority generally. Referring to section 26E, it has further been contended that priority is also recognized by the SARFAESI Act. The secured creditors have, thus, contended that in view of amendments brought about by the 2016 Amending Act in both the Central enactments, i.e., the RDDB Act and the SARFAESI Act, they are entitled to assert priority over claims of the State sales tax department under the MVAT Act, both or either under section 31B of the RDDB Act and/or section 26E of the SARFAESI Act. 21. The secured creditors have further contended that there is no dispute that the Central Acts and the State legislations operate in different fields and there is no apparent repugnancy; on the contrary, the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r attention has also been invited to sections 82 and 142 of the MGST Act, providing as follows: 82. Tax to be first charge on property Notwithstanding anything to the contrary contained in any law for the time being in force, save as otherwise provided in the Insolvency and Bankruptcy Code, 2016, any amount payable by a taxable person or any other person on account of tax, interest or penalty which he is liable to pay to the Government shall be a first charge on the property of such taxable person or such person. 142. Miscellaneous Transitional Provisions (8)(a) where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day under the existing law, any amount of tax, interest, fine or penalty becomes recoverable from the person, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act; *** 26. It has also been contended that in the event this Court holds that section 26E of the SARFAESI Act is not applicable without registration of the security interest, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arent statutes by the same amending act, i.e., the 2016 Amending Act. A perusal of the statement of objects and reasons with respect to the said Act would demonstrate that the objects and reasons of the said amendments to the SARFAESI Act as well as the RDDB Act, was the same, i.e. to give priority to secured creditors in repayment of debts . However, section 31B was brought into effect on 1st September 2016, whereas section 26E was brought into effect on 24th January 2020. In the above stated background of facts and circumstances and especially in the light of the manner, object and purpose with which the said sections were introduced into the statute books, it could never have been the intention of the legislature that if a secured creditor resorted to the provisions of the RDDB Act for realisation of debts due to it, they would have the benefit of priority in repayment of debts while, if they resorted to the provisions of the SARFAESI Act, they would not. Such an interpretation would lead to arbitrariness and would fall foul of Article 14 of the Constitution of India. (iv) A bare perusal of the other sections contained in the said Chapter VI (viz. sections 34, 35, 36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the amendments, according to him, is that priority as inserted by the 2016 Amending Act shall not displace the first charge of the State wherever the respective enactments provide so and the secured creditors shall be having priority over Government dues only in cases where dues arising out of an enactment did not provide for the first charge . Since section 26E does not provide for first charge , hence the first charge of the State under section 37 of the MVAT Act survives. 32. Mr. Sonpal continued by contending that there is no conflict between section 26E of the SARFAESI Act and section 37 of the MVAT Act, and the non-obstante clauses in section 37 of MVAT Act and section 26E in SARFAESI Act operate in altogether different fields. A non-obstante clause in a section, according to him, only overrides a contrary provision in any other law if it is in the same field. Since the sphere and field of operations of section 26E of the SARFAESI Act and section 37 of the MVAT Act are different, in absence or presence of conflict, both survive in their respective fields. Viewed from a different angle, if the dues of the Central Government or the State Government or a local ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and not right to distribution; consequently, first charge under section 37 shall survive with all consequential rights. No judgment of any High Court, he also contended, has held that first charge has been diluted by section 26E. 35. The next contention advanced by Mr. Sonpal has been that the MGST Act was enacted w.e.f. 1st July, 2017. Not only does section 82 of the MGST Act start with a non-obstante clause, any amount payable by a taxable person on account of tax, interest or penalty which he is liable to pay to the Government shall be a first charge on the property of such taxable person. Under section 142(8), dues under any existing law is recoverable as dues under the MGST Act. According to him, if the first charge is applicable to dues under the MGST Act and also the existing law on the appointed day, the non-obstante clause in the MGST Act shall override section 26E of the SARFAESI Act. 36. Finally, Mr. Sonpal contended that the pre-requisite of claiming benefit of section 26E of the SARFAESI Act is that the secured creditor has to register the security interest as provided in section 26B. In the absence of registration, section 26E does not come into operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owers to pass interim protective orders which could adequately safeguard the interests of the lenders. (vi) Chapter IV-A of the SARFAESI Act, appearing as it does after Chapter IV titled CENTRAL REGISTRY , has to be given full effect. Section 26E cannot be considered in a vacuum. It has to be seen in the context of the other provisions of the SARFAESI Act and the applicable law. Notably, section 26E gives priority in payment over other debts without negating the effect of other charges/interest in the property including statutory first charges. Further, it has to be read harmoniously with the other provisions of the SARFAESI Act, including section 26C under which any sale of the property has to be subject to the claims of registered creditors including the Government. (vii) Having regard to the provision in section 13(2), except sections 69 and 69A of the Transfer of Property Act, 1882 (hereafter ToP Act , for short) all other provisions thereof would be applicable. In Transcore (supra), the Supreme Court has even clarified that the RDBFI Act does not rule out the applicability of the ToP Act. Section 100 of the ToP Act explains when a person is said to have charge on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective of the procedure through which the recovery is sought to be made by the secured creditor. 39. Next, on the question as to whether the words first charge and in priority are synonymous or one and the same, Mr. Samant contended that the said words are not the same. According to him, the words first charge show superiority of the charge of the concerned party whereas the words in priority only indicate hierarchy of payment without disturbing the superiority of charge attached to any specific property. This would further mean that even if the property is sold in disregard of the first charge applicable to it, the mortgagee of the property may claim the entire sale price but the first charge on such property will not be wiped out. The person dealing with such property having first charge will be bound by it. 40. It was further contended that had the Parliament intended to give equality to mortgage dues of bankers to first charge holder of tax dues, it would have done so specifically and would not have used the words in priority . Regarding the aspect of reading the intention of the Parliament, the observations in Central Bank of India (supra) in par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of the property of the dealer in case of default. The intending purchaser is expected to make enquiry with the tax department before dealing in the said property. Such intending purchaser must find out the nature of business and the tax records of the defaulter. The department can share all the information through the Right to Information Act, 2005 and such intending purchaser has every access to the records of the department. An intending purchaser can, thus, by following due diligence easily come to know the tax liability of the defaulting dealer . The bank/secured creditor can also come to know by using the same method. In fact, the bank and the third-party purchaser are deemed to have notice of such charge if they try to find out information about the title of the property. In this behalf, the meaning of a person is said to have notice is given in section 3 of the ToP Act. The said definition shows that a person should blame himself for his negligence for not making necessary enquiry with the Tax Department before entering into any kind of transaction about the property of the defaulter. 43. Ms. Jyoti Chavan, learned Addl. Govt. Pleader adopted the submissions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to pay the dues of the department in order to obtain a clear and marketable title to the property having purchased the same on as is where is and whatever there is basis ? CONSIDERATION OF DECISIONS: 45. Before we answer the questions formulated above, we consider it appropriate to note the law laid down in various decisions of the High Courts to which our attention was drawn by the parties. 46. A learned Single Judge of the Jaipur Bench of the Rajasthan High Court in the decision reported in 2017 SCC OnLine Raj 4319 (G. M. G. Engineers and Contractor Pvt. Ltd. and Anr. vs. State of Rajasthan and Ors.) was called upon to decide a challenge made to an attachment order dated 19th April 2017 by the Sales Tax Officer, respondent no. 3. The attached property was auctioned by ICICI Bank, respondent no. 5, though in view of section 47 of the Rajasthan Value Added Tax Act, 2003, the department had first charge on the property. The learned Judge was called upon to consider as the first issue whether the amended provisions of section 26E of the SARFAESI Act and section 31B of the RDDB Act would apply to the present case having regard to the fact that such provisions wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 1993 thus those amendments would not apply even if subsequently auction of the property was made. It is nothing but auction of the property already attached by the Government, that too, after initiation of proceedings under the Act of 1956. ***** 47. In G. M. G. Engineers and Contractor Pvt. Ltd. (supra), the property was attached before the 2016 Amending Act was enacted and the learned Judge held the provisions of the 2016 Amending Act as prospective in its application. The learned Judge also proceeded on the basis that the first charge on the property creates right even as per the ToP Act and if intention of the Parliament was to nullify first charge, the amended provisions of the RDDB Act and the SARFAESI Act would have been couched in language as indicated in Central Bank of India (supra). Interestingly, when G. M. G. Engineers and Contractor Pvt. Ltd. (supra) was decided, neither had section 26E been brought on the statute book nor does it appear that any proceedings under the RDDB Act had been initiated. 48. Having noted what was laid down in G. M. G. Engineers and Contractor Pvt. Ltd. (supra), we move on to notice the decision reported in 2018 (55) GSTR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk. Since the judgment also does not refer to any proceedings having been initiated under the RDDB Act by the petitioning bank, we are constrained to observe that such decision must be held to be one rendered on its own facts and may not be of any assistance for us to decide the questions that we have formulated. 50. A learned Judge of the Kerala High Court, in the decision reported in (2019) SCC OnLine Ker 2890 (State Bank of India vs. State of Kerala), was seized of writ petitions instituted by various banks and financial institutions challenging the action of the State s revenue machinery in taking possession of and attempting to sell certain properties for alleged arrears of sales tax and value added tax from its respective owners which the bank/financial institutions claimed to be their secured assets consequent to equitable mortgages having been created over them in their favour towards security for financial facilities/assistance availed of by its owners. 51. While the petitioning banks/financial institutions claimed primary rights as secured creditors to proceed against the properties in question under section 26E of the SARFAESI Act and section 31B of the RDDB Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ues of Sales Tax/Value Added Tax. *****. 38. When one reads the afore opinion of the Hon ble Supreme Court, it is left without any doubt that, but for Section 26E of the SARFAESI Act and Section 31B of the RDB Act, such Statutes do not, in any manner, operate to create a better right for recovery in favour of the Banks/Financial Institutions over that of the Revenue. However, these provisions were brought in and incorporated in the respective Statutes after this judgment, clearly with the intend (sic, intent) to override this lacuna. Therefore, the resultant question is whether these provisions would create a better right in favour of the Banks/Financial Institutions, which is superior to that enjoyed by the Revenue under the KGST Act/KVAT Act. 41. As has been extracted above, Section 26E of the SARFAESI Act provides that the debts due to any secured creditor shall be paid in priority over all other debts and all revenue, taxes, cesses and other rates payable to the Central Government or State Government or Local Authority. Section 31B of the RDB Act takes this one step forward and elevates the right of the secured creditors to realise their debts, by sale of the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arat) considered an issue with regard to the priority of the petitioning cooperative bank over the dues vis- -vis the sales tax dues which the State Government intended to recover from the assets of the defaulter. In other words, the question was whether by virtue of section 26E of the SARFAESI Act the same would override the charge of the State Government under section 48 of the Gujarat Value Added Tax Act, 2003. The Division Bench was of the view that section 48 of the relevant VAT Act would come into play only when the liability is finally assessed and the amount becomes due and payable. It is only thereafter, if there is any charge, the same would operate. 54. Giving due regard to a decision rendered previously by the presiding Judge of the Division Bench, it was held in Kalupur Commercial Co-operative Bank Ltd. (supra) by the Division Bench that it had no hesitation in arriving at the conclusion that the first priority over the secured asset shall be of the petitioning cooperative bank and not of the State Government by virtue of section 48 of the relevant VAT Act. This resulted in setting aside of the impugned attachment dated 22nd January 2018 and the communication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals that though it commences with a non-obstante clause, but it recognises that the same shall be subject to any provision regarding creation of the first charge in any Central Act. Therefore, if, by virtue of any provision under a Central Act any priority or charge is created in favour of any party the same shall prevail. 60. Thereafter, the Division Bench referred to section 31B of the RDDB Act, the decision in G. M. G. Engineers and Contractor (supra), Assistant Commissioner (CT) (supra), Bank of Baroda (supra) and and Kalupur Commercial Cooperative Bank Ltd. (supra), while recording its concurrence in paragraph 19 with the consistent view taken by 3 (three) Division Benches of 3 (three) High Courts and the view taken by the Full Bench of the fourth High Court. Prior to allowing the writ petition and quashing the impugned notice dated 13th November 2016 issued by the respondent no. 2 initiating a process for auction under the MLR Code, the Division Bench recorded in paragraphs 20 and 21 as follows: 20. The only contention which needs to be noted which was made by learned counsel for Respondent Nos.1 and 2 which was not made before the four learned Benches of the four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SARFAESI Act, whereafter, physical possession was taken on 29th May 2019. In terms of e-auction conducted by the petitioning bank on 17th July 2019, the said plot being the secured asset was sold for Rs. 89.25 lakh. On behalf of the petitioner, strong reliance was placed on ASREC (India) Ltd. (supra), while the respondents 1 and 2 contended that the decision in ASREC (India) Ltd. (supra) had been challenged before the Supreme Court and a decision thereon was pending. A prayer was made that till such time hearing of the case before the Supreme Court is concluded, hearing of the writ petition may be deferred. On merits, it was contended that the petitioning bank had not registered the security interest with the Central registry as required under section 26D of the SARFAESI Act and, as such, the debts due to the petitioning bank cannot be paid in priority over the tax dues of the respondent no. 2. It was further contended that section 26E of the SARFAESI Act having been notified on 24th January 2020, the same is effective prospectively. Also, it was contended that there being an assertion of claim by the respondents 1 and 2 for recovery of tax dues and an attachment having been initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of this Court at its Bench at Nagpur, while rendering its decision reported in AIR 2021 BOMBAY 135 (Medineutrina Pvt. Ltd. (Company) vs. District Industries Centre and Ors.) had the occasion to consider several issues. The first issue was as to who between the respondent no. 2 (Assistant Commissioner, Sales Tax) and the respondent no. 3 (Punjab National Bank) would have priority. Such issue was answered in favour of the respondent no. 3 having regard to the provisions contained in section 26E of the SARFAESI Act as well as the decisions in Assistant Commissioner (CT) (supra), State Bank of India vs. State of Maharashtra (supra) and the decision reported in 2019 SCC OnLine Bom 9527 (Cosmos Co-operative Bank Ltd. vs. State of Maharashtra and Ors.). The Division Bench consequently held that the provisions of section 26E of the SARFAESI Act would prevail over those contained in section 37(1) of the MVAT Act. While the Division Bench proceeded to add a few more reasons why section 26E would prevail over section 37(1) of the MVAT Act, it considered charge as defined in section 100 of the ToP Act and held that for such charge to become effective, it is necessary that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge has been created, subject to such charge and the property would thus continue to be liable for any statutory charges created upon it, even in the hands of such auction purchaser, though for non disclosure of such charge by the secured creditor, the auction purchaser may sue the secured creditor and have such redress, as may be permissible in law. This is more so for the reason that the priority given in Section 26-E of the SARFAESI Act, to the Banks, which is a secured creditor, would only mean that it is first in que for recovery of its debts by sale of the property, which is a security interest, the other creditors being relegated to second place and so on, in the order of their preference as per law and contract, if any, as the case may be. Thus the dues under Section 37(1) of the MVAT Act, 2002, being a statutory charge on the property, would also be recoverable by sale of the property, and that puts a liability upon the auction purchaser, who, in case he wants an encumbrance free title, will have to clear such dues. Insofar as purchase of a property on as is where is and what is there is basis is concerned, the following observations were made: - 36. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HE RELEVANT LAW AND ANSWERS TO THE QUESTIONS 68. Having noted the submissions of the parties and bearing in mind the rulings in the various decisions referred to above, we would now advert to the questions that have been formulated and answer the same. ANSWER TO QUESTIONS (a) AND (b): 69. The questions being related are answered together. 70. Chapter IV of the SARFAESI Act, in its original avatar, comprised of 6 (six) sections, i.e., 20 to 26 which, inter alia, provided for: i. Setting up a Central Registry , mainly to facilitate registration of transaction of securitisation and reconstruction of financial assets and creation of security interests under the SARFAESI Act; ii. Appointing a Central Registrar and appointing other officers for discharging the Registrar s functions under his superintendence and direction; iii. Maintenance of a Central Register of transactions relating to securitization of financial assets, reconstruction of financial assets and creation of security interest; iv. Requirement of filing of transactions relating to securitisation, reconstruction and creation of security interest; v. Reporting by asset reconstruct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur, shall have priority of claims over subsequent security interest created over the property in question, any transfer by way of sale, lease, assignment or licence of such property or attachment order subsequent to such registration. The legislative intent of requirement and benefits flowing from such a registration with the CERSAI can hardly be overlooked. 76. It is now time to consider sections 26D and 26E. Public sector banks proceeding for creation of equitable mortgage, i.e., mortgage by deposit of title deeds, at the time of providing financial assistance has been a common practice over the years. However, the economy and simplicity of this process was not without its complex problems. Since equitable mortgage could be created without registration, the transaction between the lender and the borrower largely remained secret. There was no way anyone else could get an inkling thereof, until the provisions for CERSAI registration were enacted. It was wellnigh possible for a dishonest borrower to conceal the transaction of mortgage and sell the mortgaged property to an innocent third party by creating document of title leading to the purchaser unknowingly incurring a liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing provision in section 26E, both begin with non-obstante clauses, as noticed above. The scheme of Parts III and IV-A of the SARFAESI Act envisages benefits to a secured creditor who is diligent and obtains CERSAI registration while depriving a secured creditor of even taking recourse to Chapter III without the requisite registration. 80. The aforesaid provisions of Chapter IVA of the SARFAESI Act in mind, we would now turn our attention and take a look at the relevant State legislations. 81. In Maharashtra, there are multiple legislation providing, by express statutory intendment, for first charge on property of a person who defaults in payment of Government dues, by whatever name the dues are called. Such statutory intendment, apart from the BST Act, the MVAT Act and the MGST Act, is traceable in at least 4 (four) other legislations in the State of Maharashtra. Section 212 of the Mumbai Municipal Corporation Act, 1888, section 141 of the Maharashtra Municipal Corporations Act, 1949, section 109 of the Maharashtra Town and Country Planning Act, 1966 and section 331(1)(iii)(b) of the MLR Code, 1966, are the various sources of creation of first charge on property/plot. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge, including the costs of the suit and the cost of bringing premises or movable property in question to sale under the decree, shall, subject as aforesaid, be a fresh charge on such premises and movable property along with the amount found to be due, and the Court may direct payment thereof to be made to the Corporation out of the sale proceeds. Section 109 of the Maharashtra Regional and Town Planning Act, 1996: 109. Recovery of arrears (1) Any sum due to a Planning Authority under this Act, rule or any regulation made thereunder shall be a first charge or the plot on which it is due, subject to the prior payment of land revenue, if any, due to the Government thereon. (2) Any sum due to the Planning Authority under this Act, rule or any regulation made thereunder which is not paid on demand on the day on which it becomes due or on the day fixed by the Planning Authority, shall be recoverable by the Planning Authority from the defaulter as if they were arrears of land revenue. (3) If any question arises whether a sum is due to the Planning Authority within the meaning of sub-section (2), it shall be referred to a tribunal constituted by the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her legislation, it has expressed such an intention in no uncertain terms. Section 169(1) of the MLR Code is the dominant legislation providing that the arrears of land revenue due on account of land shall be a paramount charge on the land and on every part thereof and shall have precedence over any other debt, demand or claim whatsoever, whether in respect of mortgage, judgment-decree, execution or attachment, or otherwise howsoever, against any land for the holder thereof. The municipal laws and the MRTP Act, however, despite creation of first charge on property taxes due to the Corporations and sums due to a planning authority, respectively, are expressly made subordinate to the paramount charge on a land if in respect of such land, land revenue is in arrears. Viewed from this angle, there is no magic in the words first charge . Even a first charge , by express statutory intendment, can be made subordinate or subservient to a paramount charge such as arrears of land revenue. We, therefore, are unable to accept the argument of the State/respondents that since neither the SARFAESI Act nor the RDDB Act uses the words first charge but the word priority , such priority cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002 it would appear to be reasonable to hold, particularly having regard to the non-obstante clauses in sections 31 B and section 26E, that the dues of the secured creditor shall have priority over all other including all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority. 86. A debt that is secured or which, by reason of the provisions of a statute, becomes a first charge on the property, in view of the plain language of Article 372 of the Constitution, must be held to prevail over a Crown debt, which is an unsecured one. The law, as it stands even today, is that a Crown debt enjoys no priority over secured debts. This principle has been repeatedly reaffirmed including, inter alia, in the decision of the Supreme Court reported in (2000) 5 SCC 694 (Dena Bank vs. Bhikhabhai Prabhudas Parekh Co.) where the Court observed: 10. However, the Crown's preferential right to recovery of debts over other creditors is confined to ordinary or unsecured creditors. The common law of England or the principles of equity and good conscience (as applicable to India) do not accord the Crown a preferential right for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arliament cannot be held to have intended to deprive the first charge-holder of the said right. Such a valuable right, therefore, must be held to have been kept preserved. [ See Workmen v. Firestone Tyre and Rubber Co. of India (P) Ltd., (1973) 1 SCC 813]. 43. If Parliament while amending the provisions of the Companies Act intended to take away such a valuable right of the first charge-holder, we see no reason why it could not have stated so explicitly. Deprivation of legal right existing in favour of a person cannot be presumed in construing the statute. It is in fact the other way round and thus, a contrary presumption shall have to be raised. 44. Section 529(1)(c) of the Companies Act speaks about the respective rights of the secured creditors which would mean the respective rights of secured creditors vis- -vis unsecured creditors. It does not envisage respective rights amongst the secured creditors. Merely because Section 529 does not specifically provide for the rights of priorities over the mortgaged assets, that, in our opinion, would not mean that the provisions of Section 48 of the Transfer of Property Act in relation to a company, which has undergone liquidat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what the Parliament has chosen to do. 90. We may answer the question from a different angle. The RDDB Act and the SARFAESI Act are Central Acts. If any provision therein is discerned to be seemingly inconsistent with any provision in a State legislation, reconciliation of the same ought to be attempted failing which the Central Acts will prevail over the State legislations, in view of the principle of repugnancy that Article 254 of the Constitution contemplates. Further, section 37 of the MGST Act and section 38C of the BST Act expressly make it subject to the provisions of any Central Act creating first charge . Also, section 26E of the SARFAESI is a subsequent legislation, as it was notified on 24th January 2020. Subject to compliance of the terms of Chapter IV-A, section 26E of the SARFAESI Act would, thus, override any provision in the MGST Act and the BST Act in case of a conflict with the SARFAESI Act. 91. The further contention of learned counsel for the State/respondents that enforcement of first charge and shall be paid in priority over all other debts are not synonymous and that the latter is subordinate to the former, in our view, is misconceived. If enforced, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted above. A reading thereof leads to the inference that the amendment was proposed to bring about a substantive change in the law, inter alia, by (i) denuding secured creditors of their rights of enforcement of securities under Chapter III of the SARFAESI Act if security interest created in their favour had not been registered with the CERSAI; and (ii) granting priority to the secured creditors over all other dues and taxes, after registration with the CERSAI except in cases where proceedings under the provisions of the I B Code are pending. These changes were introduced for the first time to suit changing credit landscape and augment ease of doing business , as appears from the Statement for the amendment. These substantial changes, remedial in nature, having been brought in force for the first time amount to substantive law and cannot, therefore, be given retrospective effect. 97. We may profitably refer to the decision of the Supreme Court reported in (1969) 1 SCC 609 (Sukhram Singh vs. Harbheji). There, in paragraph 12, law is laid down in the following words: 12. Now a law is undoubtedly retrospective if the law says so expressly but it is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in terms of section 26E only after the security interest is registered and other provisions of the SARFAESI Act are complied with. Provisions in Chapter IV-A cannot be construed in a manner so as to disturb, impair or divest the State of its accrued rights. Sections 26D and 26E of the SARFAESI Act no doubt begin with non-obstante clauses. However, such non-obstante clauses would override any law for the time being in force evincing a result contrary to or inconsistent with sections 26D and section 26E but may not be so read so as to override and nullify an exercise of right by the relevant department of the State under any other law for the time being in force, and action taken in pursuance thereof, leading to accrual of some legal interest or benefit. 101. On the flip side, if the newly incorporated provisions casting a mandatory obligation on a secured creditor to register the security interest created in its favour to claim priority in payment is read to apply with retrospective effect, it could bring about at least one perceivable disastrous consequence. Actions taken under Chapter III of the SARFAESI Act including measures to take over possession of the secured asset pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that every word has a place and everything is in its place. *** In the light of the above, a statute has to be construed after ascertaining the legislative intent and in the context and scheme of the enactment. 105. We have noticed the legislative intent behind enactment of both the SARFAESI Act and the RDDB Act hereinbefore. We, however, consider a recapitulation of the same. 106. First, although the end result of both the statutes, i.e., the RDDB Act and the SARFAESI Act is recovery of money, yet, while the process of recovery under the former enactment is entirely through the procedure laid down therein and is largely court driven, the process of recovery under the latter is essentially without court intervention. Nature of the two proceedings is, therefore, completely different. 107. In view of Reserve Bank of India (supra), any provision of a statute cannot be interpreted in a manner wholly unrelated to the scheme of the statute in which it appears. 108. Much has been argued on behalf of the secured creditors by referring to the non-obstante clause in section 31B of the RDDB Act. Before adverting our attention to such section, it would not be inapposite to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to the measure (see Law Lexicon words notwithstanding anything in this Act to the contrary ). Use of such expression is another way of saying that the provision in which the non obstante clause occurs usually would prevail over other provisions in the Act. Thus, non obstante clauses are not always to be regarded as repealing clauses nor as clauses which expressly or completely supersede any other provision of the law, but merely as clauses which remove all obstructions which might arise out of the provisions of any other law in the way of the operation of the principal enacting provision to which the non obstante clause is attached.*** 112. The decision in Sidco Leathers Limited (supra), however, reveals a little shift in approach. The Supreme Court held that the impact of a non-obstante clause must be kept measured by the legislative policy and it has to be limited to the extent it is intended by Parliament and not beyond that. In other words, the non-obstante clause must be given effect to, to the extent Parliament intended and not beyond the same. 113. Back home, there is this decision of the Full Bench of this Court reported (2008) 6 Mah LJ 941 (FB) (Mohd. Riyazu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw useful guidance from the relevant passage in the decision reported in (2014) 2 SCC 401 (J. Jayalalithaa v. State of Karnataka) where the Court applied the maxim expressio unius est exclusio alterius and held: 34. There is yet an uncontroverted legal principle that when the statute provides for a particular procedure, the authority has to follow the same and cannot be permitted to act in contravention of the same. In other words, where a statute requires to do a certain thing in a certain way, the thing must be done in that way and not contrary to it at all. Other methods or mode of performance are impliedly and necessarily forbidden. The aforesaid settled legal proposition is based on a legal maxim expressio unius est exclusio alterius, meaning thereby that if a statute provides for a thing to be done in a particular way, then it has to be done in that manner and in no other manner and following any other course is not permissible. 116. Sections 26D and 26E of the SARFAESI Act, read together, in effect provide a special manner in which a secured creditor may enforce its security interest in supersession of others, without the intervention of courts. That special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 26D, or for that matter, the entirety of Chapter IV-A, we repeat, was introduced in the SARFAESI Act with a purpose. The said chapter was introduced to address the myriad problems that arose post equitable mortgage that tricked and troubled both general people and the bankers alike (as exemplified hereinabove). Such purpose cannot be lost sight of and should not be rendered insignificant. The need of purposive interpretation has always been stressed by the Supreme Court and all the High Courts across the country. Placing reliance on section 31B of the RDDB Act and drawing conclusions in favour of the secured creditors in respect of security interest sought to be enforced under the SARFAESI Act would be against the very grain of sections 26D and 26E and as such, such an interpretation should be avoided. 120. The final aspect, which needs to be adverted to, is with regard to a comparative study of the words used in sections 31B and 26E. While section 26E, inter alia, ordains that the debts due to any secured creditor shall be paid in priority over all other debts , the words used in section 31B though resemble section 26E are not a mirror image of the latter. Section 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause Section 2(la) of the RDB Act defines the phrase secured creditors to have the same meaning as assigned to it under the SARFAESI Act. Moreover, Section 37 of the SARFAESI Act clearly provides that the provisions of the SARFAESI Act shall be in addition to, and not in derogation of inter-alia the RDB Act. As such, the SARFAESI Act was enacted only with the intention of allowing faster recovery of debts to the secured credits (sic, creditors) without intervention of the court. This is apparent from the Statement of Objects and Reasons of the SARFAESI Act. Thus, an interpretation that, while the secured creditors will have priority in case they proceed under the SARFAESI Act, will lead to an absurd situation and, in fact, would frustrate the object of the SARFAESI Act which is to enable fast recovery to the secured creditors. 124. It is settled law, as it appears from Reserve Bank of India (supra), that interpretation of any provision must depend on its text as well as the context. 125. While interpreting provisions of the SARFAESI Act, the context in which such provisions were enacted must be unfailingly noticed. While placing reliance on similar provisions of a diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmand of law and applies for registration of the secured asset. Adherence to and obedience of the law should be obvious and necessary in a system governed by the rule of law. 127. These important aspects do not appear to have been brought to the attention of the Bench deciding Kalupur Commercial Cooperative Bank (supra) and, therefore, we express our doubt with what has been laid down in paragraph 57 thereof. 128. In view of the foregoing discussions, we agree with learned counsel for the State/respondents and answer the question by holding that (a) a secured creditor, finding that it is disabled from obtaining the benefit of priority in terms of section 26E of the SARFAESI Act for want of CERSAI registration, cannot fall back on section 31B of the RDDB Act to claim priority ; (b) the overwhelming factor of determination of a lis by the DRT has to be given its due worth and hence, the benefit of priority that section 31B envisages is for a secured creditor who institutes proceedings under the RDDB Act and is successful in having an interim or final determination in its favour that a sum is due and payable (in section 31B) as distinguished from the debts due (in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention that section 26E of the SARFAESI Act cannot be invoked unless the security interest were registered with the CERSAI. The Division Bench, in the process of rejecting the said contention, referred to what according to it were previous decisions rendered by 3 (three) Division Benches of various High Courts and a decision of the Full Bench of the Madras High Court, and observed that its rejection of such a contention followed from all such decisions. Although the decisions in G. M. G. Engineers and Contractor Pvt. Ltd. (supra) and Bank of Baroda (supra) are not opinions of Division Benches, nothing really turns on the bench strength. We have failed to find any discussion in any of such 4 (four) decisions rejecting a contention like the one under consideration in ASREC (India) Ltd. (supra). The Full Bench of the Madras High Court in Assistant Commissioner (CT) (supra) did not have the occasion to consider the point. Even the Division Bench decision of the Gujarat High Court in Kalupur Commercial Cooperative Bank (supra) did not strictly dwell on such point. Also, the point under consideration did not arise in G. M. G. Engineers and Contractor Pvt. Ltd. (supra) and in Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usions. 135. A decision necessarily has to be rendered by us bearing in mind the State legislations under consideration vis- -vis the RDDB Act and the SARFAESI Act for the same to be applicable in this State; hence, it would be appropriate to decide when exercise of the right by the department of the State can be said to be complete so as to avoid the rigours of section 31B and section 26E, as the case may be. 136. We have noted what section 37 of the MVAT Act is all about. Section 37 in sub-section (1) provides for the creation of first charge on the property with respect to a tax or sum payable thereunder. Sub-section (2) provides that the said first charge shall be deemed to have been created upon the expiry of the period specified in sub-section (4) of section 32. Therefore, the charge attaches to the property of the dealer from the time it comes into effect, i.e., from the time the tax becomes payable under section 32(4) of the Act. 137. Let us now take a look at sub-section (4) of section 32 of the MVAT Act. It reads: 32 : (4) (a) (i) The amount of tax due where the return or revised return has been furnished without full payment thereof shall be paid for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge. Nothing in this section applies to the charge of a trustee on the trust property for expenses properly incurred in the execution of his trust, and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge. (emphasis ours) 140. The section itself in unambiguous terms indicates that a charge may not be enforced against a transferee if he did not have any notice of the same, unless by law the requirement of such notice has been waived. This position seems to be the accepted position in law. 141. We have not been shown any law that exempts the requirement of notice of the charge for its enforcement against a transferee who had no notice of the same. 142. It would also be necessary to keep in mind what section 3 of the ToP Act, which is the interpretation clause, says as to when a person can be said to have notice. It is provided therein as follows: 3. *** a person is sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (5), any amount of money which a person is liable to pay to the Commissioner, shall, under sub-section (1) read with subsection (4), if it remains unpaid, be recoverable as if it is a sum demanded under section 32 and accordingly any notice served under this section shall be deemed for the purposes of this Act to be a notice served under section 32 and the unpaid amounts shall be recoverable as arrears of land revenue. Therefore, a notice under section 32 to the person from whom tax is due would be the first step towards recovery of unpaid amounts as arrears of land revenue. 144. It is further noticed that section 34 of the MVAT Act confers powers under the MLR Code on the Sales Tax Authorities. It reads: 34. Special powers of Sales Tax authorities for recovery of tax as arrears of land revenue: - (1) For the purpose of effecting recovery of the amount of tax, penalty, interest, amount forfeited or any other sum, due and recoverable from any dealer or other person by or under the provisions of this Act, as arrears of land revenue, - (i) the Commissioner of Sales Tax shall have and exercise all the powers and perform all the duties of the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt and the defaulter does not pay what he owes to the relevant department of the Government, power is available under rule 17 of the Maharashtra Realization of Land Revenue Rules, 1967 (hereafter MRLR Rules , for short), framed under section 328 read with Chapter XI of the MLR Code, for the Tehsildar, on receipt of a requisition from such department, to proceed in accordance with the MLR Code and the 1967 Rules and cause the defaulter s immovable property to be attached and sold. Necessarily, prior to effecting a sale, a proclamation has to be made in the manner ordained. 148. Sub-section (4) of section 20B of the SARFAESI Act, which we have noticed above, ordains that every authority or officer of the Central Government or any State Government or local authority, entrusted with the function of recovery of tax or other Government dues and for issuing any order for attachment of any property of any person liable to pay the tax or Government dues, shall file with the Central Registry such attachment order with particulars of the assessee and details of tax or other Government dues from such date as may be notified by the Central Government, in such form and manner as may be presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular decree: (a) attachment of the immovable property; (b) proclamation of sale by public auction; (c) sale by public auction. At each stage of the execution of the decree, when a property is sold, it is mandatory that notice shall be served upon the person whose property is being sold in execution of the decree, and any property which is sold, without notice to the person whose property is being sold, is a nullity and all actions pursuant thereto are liable to be struck down/quashed. However, the proceedings before us do not concern execution of any decree. 153. In these proceedings we are as much concerned with proclamation itself as much with attachment. Insofar as recovery pursuant to the MLR Code is concerned, not only the provisions contained therein but also the provisions contained in the 1967 Rules are to be complied with. Simply ordering an attachment is not enough; a proclamation has to be issued in the prescribed form and such proclamation must be made public by beating of drum and such other mode as specified in section 192 of the MLR Code and rule 11(2) of the 1967 Rules before the property attached is sold. 154. We are of the considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid down in rules 8 and 9, respectively, of the 2002 Rules. 157. Provisions contained in sub-rule (7) of rule 8 of the 2002 Rules read thus: (7) Every notice of sale shall be affixed on the conspicuous part of the immovable property and the authorized officer shall upload the detailed terms and conditions of the sale, on the web-site of the secured creditor, which shall include, - (a) the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor; (b) the secured debt for recovery of which the property is to be sold; (c) reserved price of the immovable secured assets below which the property may not be sold; (d) time and place of public auction or the time after which sale by any other mode shall be completed; (e) deposit of earnest money as may be stipulated by the secured creditor; (f) any other terms and conditions, which the authorized officer considers it necessary for a purchaser to know the nature and value of the property. Sub-rules (7), (8) and (9) of rule 9 of the 2002 Rules lay down that: (7) Where the immovable property sold is subject to any encumbrances, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected to know some of such encumbrances if at all compliance of section 26B is resorted to by the Central Government, any State Government or a local authority, to whom money is owed by the defaulter being an owner of the property. Such a statutory mechanism for knowing the encumbrances in respect of the immovable property being put up for sale by auction not being available before 24th January 2020, the authorized officers were found to play it safe by inserting the as is where is, whatever there is basis clause in the sale advertisement. Once such clause is inserted in the advertisement and the prospective purchaser upon bidding in the auction emerges as the highest bidder, normally such purchaser cannot insist upon issuance of sale certificate without clearing the liability of meeting other dues in relation to such property. This is because he participates in the auction and bids, with his eyes open, that the sale would be on as is where is, whatever there is basis . Having so participated, the prospective purchaser cannot wriggle out of the consequences and claim that the other dues are not payable by him if he cannot disprove constructive notice of the charge created on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f possession of the secured asset to the petitioner by the Court Receiver, who had been put in possession of the secured asset in the said execution proceedings. On 15th December 2018 after recording that the Court Receiver had delivered possession of the secured asset to the petitioner, the Chamber Summons came to be disposed of. 166. Petitioner published an e-auction notice dated 28th February 2018 to sell the secured asset. On 9th March 2018, the respondent no.6 addressed a communication to the respondent no.5 Society contending inter alia that M/s. Tornado Motors Private Limited, respondent no.1, was in arrears of Rs.5,49,68,048/- to the Sales Tax Department for the period 1st April 2011 to 31st December 2014 and thus, the respondent no.5 shall not permit the transfer of the secured asset without no objection certificate of the Sales Tax Department. 167. Petitioner has invoked the writ jurisdiction as the said communication operates as a clog on the rights of the secured creditor to enforce the security interest. 168. In the affidavit in reply on behalf of the respondents 6 to 9, the action is sought to be justified on the ground that the secured asset stands in the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directors to show that the non-recovery is not attributable to their acts or conduct. 172. In the case at hand, the material shows that the respondent no.6 initially gave a notice on 15th January 2019 calling upon the respondents 2 and 3 to show cause and, thereafter, by an order dated 30th January 2019 held the respondents 2 and 3 jointly and severally liable to pay the dues. Interestingly, even before such determination, the respondent no.6 had addressed the impugned communication dated 9th March 2018 to the respondent no.5 prohibiting the transfer of the secured asset without permission of the Sales Tax Department. 173. If the law which we have declared in answer to question no.(f) (supra) is applied to the aforesaid facts, it becomes abundantly clear that consequent to the registration of the security interest on 17th February, 2015, the right of the petitioner as a secured creditor to be paid in priority crystalized on 24th January 2020, the day Chapter IV-A of the SARFAESI Act was brought into force. 174. Conversely, there is no material to show that the secured asset was attached in accordance with law and the said attachment was followed by proclamation, prior to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... An affidavit in reply is filed by the Tahasildar, Tal. Wada, respondent no.4. The action of the respondents 4 and 5 was stated to be in conformity with the order passed by the Income Tax authority prohibiting transfer of the secured asset. 181. It would be necessary to note that the petitioner s assertion that he had addressed a letter to the Principal Commissioner, Income Tax (15), requesting the withdrawal of the recovery certificate No. ITCP-1 dated 11th January 2016 for AY 2012-13 enforced through Form No. ITCP-16 dated 24th December 2018 and there was no response thereto, is uncontroverted. 182. Consistent with the view which we have recorded, the primary question would be whether the security interest has been duly registered with CERSAI to reap the benefit of priority in payment envisaged by section 26E of the SARFAESI Act. 183. Petitioner has filed an additional Affidavit dated 24th November 2021. A copy of the search report annexed thereto indicates that the security interest was registered with CERSAI on 25th October 2017. The said registration would enure to the benefit of the secured creditor the moment Chapter IV-A of the SARFAESI Act was brought into force w. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax or other Government dues, is enjoined to register such claim with CERSAI. 190. It does not appear that the respondent no.1 registered its claim or attachment over the secured asset with CERSAI, post enforcement of Chapter IV-A of the SARFAESI Act. Sub-section (2) of section 26C provides that any attachment order subsequent to the registration of the security interest with CERSAI, shall be subject to such prior registered claim. 191. In our view, in the instant case, with the enforcement of Chapter IV-A of the SARFAESI Act, the claim of the respondent no.7 Bank, the secured creditor, was extolled to a higher pedestal and the subsequent act of recording a charge in the record of right of the secured asset cannot dilute the right of priority in payment, under sections 26C(2) and 26E of the SARFAESI Act. As a necessary corollary, the non-registration of the claim and/or attachment order by the respondent no.1 under section 26B(4) of the SARFAESI Act, can only be at the peril of the department. Mere recording of the purported charge in the record of right of the secured asset, in the absence of the registration with CERSAI, in our considered view, cannot be to the detriment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... os.1002, 1003 and 1004, Prasad Chambers, Opera House, Mumbai 400 004 (secured assets) by way of an equitable mortgage. In the wake of default on the part of the borrower, the State Bank of India had instituted O.A.No.205 of 2013 and Indusind Bank had instituted O.A.No.198 of 2012 in the DRT, Mumbai, for grant of recovery certificates. 196. Under the Deeds of Assignment dated 19th March 2014 executed by the State Bank of India and 29th March 2014 executed by Indusind Bank in favour of the petitioner, it acquired all the right, title and interest in the facilities granted and security interest created by the assignors. Armed with those rights, the petitioner issued a notice under section 13(2) of the SARFAESI Act, on 25th May 2017. 197. In the meanwhile, by an order dated 20th September 2017 passed in Company Petition No.317 of 2012, M/s. Classic Diamonds Ltd. was ordered to be wound up. Eventually, the petitioner took possession of the secured assets on 9th November 2017 under section 13(4) of the SARFAESI Act. At that stage, the petitioner found the attachment order dated 19th August 2017 pasted on the concerned premises. Upon inquiry, it transpired that the respondent no.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . WRIT PETITION No.3197 of 2019 202. Petitioner, a banking company, had sanctioned a home loan of Rs.1.52 crore and mortgage insurance loan of Rs.3.88 crore to the respondent no.5. The home loan was sanctioned to finance the acquisition of a commercial premises, i.e., Office No.101, 1st Floor, Swastik High Point, Gloria, Devchand Housing Compound, next to Arihant Plaza, Ghodbunder Road, Ovale, Thane 400 615 (the secured asset). 203. To secure the repayment of the loan, the said property was mortgaged in favour of the petitioner by depositing the title deeds. Respondent No.5 committed default in repayment of the installments. Consequently, the account was declared NPA on 30th April, 2017. A notice under section 13(2) of the SARFAESI Act, was issued on 5th September 2017. The District Magistrate passed an order directing delivery of possession to the petitioner under section 14 of the SARFAESI Act, on 16th March 2019. 204. On 11th April 2019, when the officers of the petitioner visited the secured asset, a notice for purported recovery of the sales tax dues of Rs.2,75,70,303/- was found pasted thereon. Respondents 3 and 4, directors of M/s. Global Gallarie Agencies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation notice seems to be preceded by the action envisaged by the MLR Code and the MRLR Rules. 209. We are, therefore, of the view that the respondents 1 to 3 deserve an opportunity to meet the case sought to be urged by the petitioners lest the interest of the public exchequer may be prejudicially affected. 210. We deem it, in the fitness of things, to direct that this writ petition be re-notified for hearing before the appropriate Division Bench for decision in the light of determination of the questions of law in this judgment. 211. Ordered accordingly. WRIT PETITION NO.2720 OF 2021 212. Petitioner, a co-operative society, registered under the Multi-State Co-operative Societies Act, 2002 had advanced a loan of Rs.5 crore each to the respondents 4 and 5 in the month of May 2016. Respondents 4 to 6 had executed registered mortgage of immovable properties including the land situated at Gut No.247, Tal. Baramati, Pune, admeasuring 5H (the secured asset) and thereby created a valid security interest therein, in favour of the petitioner. 213. As the respondents 4 and 5 as borrowers committed default in repayment of the installments, the accounts were declared NPA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 5 by addressing communication to the revenue authorities on 18th November 2017 to enter encumbrance on the secured asset. Since the petitioner has assailed the said order dated 18th November 2017 and the resultant mutation recording the sales tax encumbrance, before the Sub-Divisional Officer, Baramati in RTS Appeal No.118 of 2019, this Court may not entertain the writ petition as the petitioner has an efficacious alternative remedy. 217. Respondents 1 and 2 have further contended that the underlying transaction of advancement of loan is fraudulent. Personal loans were advanced despite the fact that respondents 4 and 5 and Hi-Tech Engineering Corporation India Pvt. Ltd., were heavily indebted. Respondents 1 and 2 alleged collusion between the petitioner and the respondents 4 and 5 to defraud the revenue. 218. We have perused the Assessment Order dated 26th December 2014 for the period 1st April, 2010 to 31st March 2011 leading to the demand notice for a sum of Rs.1,70,75,972/-; the order dated 2nd December 2015 granting installments for payment for the tax then due for the period 1st April 2013 to 31st March 2014, and the Assessment Order dated 31st March 2018 for 1st Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including Flat Nos.501 and 503 (the secured assets) owned by Mr. Uday Shetty and Mr. Gangadhar Shetty were mortgaged in favour of the petitioner no.1 to secure the said loan. 225. On account of default in repayment of the loan amount, the Deputy Registrar, Co-operative Societies, on 1st April 2013 issued a recovery certificate under section 101 of the Cooperative Societies Act. On 9th July 2013, the learned Chief Metropolitan Magistrate passed an order under section 14 of the SARFAESI Act, directing taking over of the possession of the secured assets and its delivery to the petitioner no.1. 226. In the meanwhile, the respondent no.2 passed orders prohibiting transfer of the secured assets and other flats owned by Mr. Uday Shetty and Mr. Gangadhar Shetty. On 26th May 2013 the respondent no.1 issued a public notice for auction of Flat Nos.601 and 602 for purported recovery of the arrears of the sales tax dues. 227. Petitioners instituted Writ Petition No.1878 of 2013. However, since the auction notice dated 26th May 2013 was not acted upon, the petitioners were allowed to withdraw the said writ petition. Petitioners claimed to have taken possession of all the five flats on 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssession of Flat No.501 on 15 th March 2013, evidenced by the Panchanama dated 15th March 2013. An order of attachment was thereafter passed on 16th March 2013 in respect of the said flat. Respondents claimed to have, likewise, taken possession of Flat No.503 on 14th June 2013 and issued an order of attachment of even date. Petitioners claim, if any, according to the respondents, was subservient to the first charge of the State under section 37 of the MVAT Act. Since the provisions contained in Section 26E of the SARFAESI Act were not brought into force earlier than 24th January 2022, the petitioners claim for priority in payment was also misconceived. 232. Respondents have further contended that the petitioners conduct disentitles them from claiming any relief. Petitioners have suppressed material facts. As against the distress value of Rs.97,94,400/- and Rs.1,01,20,000/- for Flat No.501 and for Flat No.503, respectively, the petitioners have self-purchased the subject flat for an amount of Rs.92,09,814/- which appears to be the reserve price for one flat only. 233. We deem it superfluous to delve into the thickets of facts. In the order dated 7th August 2019 the Division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context of the statutory regime before the enforcement of Chapter IV-A of the SARFAESI Act, in our view, the dicta of the Supreme Court in the case of Central Bank of India (supra) that the RDDB Act and the SARFAESI Act do not contain provisions giving priority to the secured creditors over the first charge created under the State legislations, would govern the field. It would be contextually relevant to note that the petitioners cannot take refuge under the provisions of section 31B of the RDDB Act, for the reasons recorded above in answering question no.(d) in the negative. 237. In our view, even otherwise, the situation would be governed by the determination in paragraph 154 above as there is material to indicate that the action of sale proclamation initiated by the respondents was preceded by notice under section 178 of the MLR Code, warrant of attachment under section 267(3), order of attachment in Form 4 and auction proclamation notice in Form 7 under the MRLR Rules. 238. In the backdrop of the materials brought on record by the respondents, especially in the form of the valuation reports issued by Archimage Designers (Annexures A and B to the affidavit in reply), whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay with a request to take note of the said Government dues while carrying out auction sale of the secured assets. In another communication dated 30th September 2020, the Assistant Commissioner of Sales Tax apprised the petitioner that the dealer, respondent no.2, was liable to pay VAT to the tune of Rs.1,60,80,806/- for the period 2009-10 to 2011-12 and the petitioner was called upon to remit the said amount. 245. It further appears that on 5th October 2020, a demand notice was addressed to the respondent no.2 by the Assistant Commissioner of Sales Tax under section 178 read with section 267 of the MLR Code. Simultaneously, a warrant of attachment and an order of attachment in Form 4 under the MRLR Rules were issued on the very day. Hence, this writ petition. 246. In an additional affidavit filed on 24th January 2021, it is affirmed that the security interest was registered with CERSAI on 2nd March 2012. A copy of the search report is annexed to the said affidavit. 247. At the outset, we may note that the averments in the writ petition remained uncontroverted. Facts seem to be rather incontrovertible. 248. In view of the registration of the security interest with CERSAI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SI Act on 13th December 2013. In the meanwhile, by an order dated 10th November 2014 in Company Petition No.593 of 2012, M/s. Shree Ambe Metsteel Pvt. Ltd. was ordered to be wound up and the Official Liquidator came to be appointed to take charge thereof. Pursuant to an order passed by the District Magistrate, the petitioner took possession of the secured asset on 29th September 2015. O.A. No.1237 of 2016 was also instituted to recover the secured debt before the DRT II, Mumbai, which awaits adjudication. 253. On 19th May 2021, the petitioner published e-auction notice. One of the prospective bidders brought to the notice of the petitioner that the respondents 2 and 3, State Tax authorities, have got entered encumbrance in the record of right of the secured asset vide Mutation Entry No.1153. Hence, this writ petition. 254. Petitioner has filed an additional affidavit on 24th November 2021 and affirmed that the security interest came to be registered with CERSAI on 30th May 2014. A copy of the security interest acknowledgment registration report is annexed to the said affidavit. 255. The averments in the writ petition are untraversed. The only document which appears to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the I B Code, the petitioner was permitted to exercise its option under clause (b) of sub-section (1) of section 52 thereof and realize its security interest in accordance with the provisions of the I B Code. 260. In deference to the said order, the Official Liquidator delivered possession of the secured asset to the petitioner on 24th July 2019. While in the process of selling the secured asset, the petitioner learnt that the State Tax department has marked an encumbrance in the record of right of the secured asset vide Mutation Entry No.1132. Assailing the aforesaid action, the petitioner has invoked the writ jurisdiction of this Court. 261. Along with the affidavit filed on 10th March 2022, the petitioner has annexed a copy of the CERSAI search report, which indicates that the security interest over the secured asset was created on 2nd May 2017. 262. Respondents have not filed an affidavit in reply to controvert the averments in the writ petition. 263. Perusal of the record of right of the secured asset reveals that an encumbrance to the tune of Rs.3,62,33,272/- towards sales tax dues was entered in the other rights column at the instance of the Assistant Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrears of the sales tax for the respondents. The said communication was accompanied by an order of attachment in Form 4. 268. Upon enquiry, it transpired that the respondents 1 and 2 had also marked an encumbrance in the record of right of the secured asset. Mutation Entry No.1455 was certified by the respondent no.3 on the basis of a communication from the State Tax department on 22nd September 2019 for an amount of Rs.96,32,005/- as on 31st March 2019. It was noticed that on the basis of the communication dated 7th January 2015 addressed by the Sales Tax Officer, vide Mutation Entry No.1207, an encumbrance to the tune of Rs.33,76,440/- towards the arrears of sales tax had also been recorded in the record of right of the secured asset. As the communication to the respondents did not yield the desired result, this writ petition has been instituted. 269. In an additional affidavit filed on behalf of the petitioner on 22nd November 2021, it is averred that the security interest was duly registered with CERSAI on 12th March 2007. Copies of the general details of the security interest are annexed to the said affidavit. 270. The sales tax authority, respondent no.2, seems to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is writ petition be re-notified for hearing before the appropriate Division Bench for decision in the light of what has been recorded above in this judgment while answering the questions formulated. 276. Petitioner is granted liberty, within three weeks from date, to file a supplementary affidavit bringing on record the date of the CERSAI registration with supporting documentary proof. The respondents may file reply affidavit within two weeks thereafter. Liberty is given to the parties to seek circulation of the writ petition after six weeks. WRIT PETITION NO.2251 OF 2021 277. Petitioner No.1 is a Scheduled Bank registered under the Multi-State Co-operative Societies Act, 2002. In the month of March 2009, the petitioner had extended financial facilities to M/s. Delta Automobiles Pvt. Ltd., respondent no.4. In order to secure the credit facilities, Ms. Maya Arvind Toley, respondent no.5, the then director of the respondent no.4, had mortgaged an immovable property, i.e., Amit Bungalow, situated at 2019, E-2, Ward K-37, 6th Lane, Rajarampuri, Kolhapur 416 008 (the secured asset) by depositing the title deed under letter dated 20th April 2009. 278. In view of the defau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to have learnt about the claim staked by the Sales Tax authority in the month of March 2020, upon receipt of the communications dated 11th March 2020 and 18th March 2020. However, the fact that the petitioner has known about the said fact, much prior in point of time, is betrayed by prayer clause (a), whereby the petitioner seeks to quash and set aside the impugned demand notice and attachment order dated 30th January 2018 informed to the petitioner by the respondent no.2 along with the letter dated 16th October 2018, a copy of which is annexed to the writ petition at Exhibit A. 284. A perusal of the aforesaid letter dated 16th October 2018 indicates that the respondent No.2 had specifically brought to the notice of the petitioner that the respondent no.4 was in arrears of the sales tax and was served with a demand notice on 22nd August 2017; the attachment order in respect of immovable properties including the secured asset was passed on 30th January 2018 and that the possession notice was also published in the daily Pudhari, Kolhapur on 28th March 2018. Petitioner was further informed that a charge was noted in the record of right of the secured asset as well. Copies of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) NO.939 OF 2020 291. This writ petition happens to be a second round of litigation between the parties before this Court, and obviously presents a different twist of facts when compared with the other writ petitions. 292. Aggrieved by the action of the Sales Tax authorities in laying attachment over Flat No.903, A and B, 9th Floor, Heritage Co-op. Housing Soc. Ltd., High Street, Hiranandani Garden, Powai, Mumbai 400 076 (the secured asset), the petitioner had instituted Writ Petition (L) No.3041 of 2019. 293. The said writ petition came to be disposed of on 15th November 2019, with the following order: 2. Whether the State of Maharashtra would have a first charge on the subject property in terms of Section 37 of the Maharashtra Value Added Tax Act, 2002 or the Petitioner would be the first charge holder in terms of Section 26E of the SARFAESI Act, 2002 is the issue which needs to be decided with respect to disbursement of the amount received by sale of the secured asset. But as regards the buyer, the price paid would entitle the buyer to transfer of title in the secured asset free from any kind of lien either of the Bank or the State of Maharashtra. 3. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment on account of the measures initiated by the respondents before the registration of the security interest with the CERSAI? 298. Two affidavits in reply are filed on behalf of the respondents. In the first affidavit filed by Mr. Pradeep G. Kadu, Joint Commissioner of State Tax, the claim of the petitioner is resisted on the ground that the department had lodged its claim with the petitioner bank before the 2016 Amending Act. In the affidavit in reply filed by Mr. Prasad Joshi, Joint Commissioner of State Tax, it is contended that a demand notice was issued to K.K. Steel on 29th February 2016, levying a demand of Rs.1,08,91746/- for the period 1st April 2010 to 31st March 2011. When it was noticed that the auction sale notice was published by the petitioner on 6th June, 2016, the department apprised the petitioner by a letter dated 7th July 2016 that K.K. Steel owed sales tax dues to the tune of Rs.1,62,58,945/- plus interest thereon. Petitioner was directed to take note of the first charge and make a full disclosure to the prospective purchasers. It was further affirmed that on 30th June 2016, the department had informed the Chairman of the Heritage Co-op. Housing Society ..... 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