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2022 (1) TMI 57 - GUJARAT HIGH COURTRecovery of dues - priority of charge over the subject properties in terms of Section 48 of the VAT Act as against the provisions of Section 26E of the SARFAESI Act - whether the petitioner who is a secured creditor will have first priority to recover its dues in view of Section 26E of the SARFAESI Act or the State will have first priority by virtue of Section 48 of the VAT Act? - HELD THAT:- The undisputed facts which have transpired from the record are that the petitioner is a secured creditor, who has derived his right, title and interest and all other ancillary benefits in terms of registered deed of assignment executed by Dena Bank vide registered deed dated 07.02.2017. Admittedly, the physical possession of the subject property was taken over by the Dena Bank on 04.02.2014 after following due procedure of law under Section 13(4) of the SARFAESI Act read with Rule 9 of the Security Interest (Enforcement) Rules, 2002. The record reveals that an attempt was made by the erstwhile borrower to challenged the order dated 19.02.2015 passed by the learned District Magistrate, Sabarkantha, under Section 14 of the SARFAESI Act by filing writ petition being Special Civil Application No.13879 of 2015 - As on date, no material is placed on record by the respondent state authorities to remotely suggest that any challenge has been made by the State to the proceedings of SARFAESI Act which has finally culminated into the execution of deed of assignment in favour of the petitioner holding him as a secured creditor. Issue of priority of charge over the subject properties in terms of Section 48 of the VAT Act as against the provisions of Section 26E of the SARFAESI Act - HELD THAT:- This Hon’ble Court in Kalupur Commercial Cooperative Bank [2019 (9) TMI 1018 - GUJARAT HIGH COURT] has extensively deal with the provisions of both enactment and following the ration laid down by the Hon’ble Apex Court has held that section 48 of the VAT act would come into operate only when the liability is finally assessed and the amount becomes due and payable. This Court finds that the State cannot have prior charge over the secured assets, more particularly, as it transpires from the records that the mortgage deed was executed much prior in point of time before the outstanding dues of the Sales Tax had become due in favour of erstwhile borrower of the bank. Even otherwise assuming for a moment, that Section 26E of the SARFAESI Act had come on Statute Book in the 24.01.2020 or Section 31B of RDB Act - the mortgage deed was executed by the erstwhile borrower on 20.03.2010, proceedings under Section 14 of the SARFAESI Act had got concluded pursuant to the order darted 19.02.2015 passed by the learned District Magistrate, Sabarkantha at Himmatnagar and the registered deed of assignment came to be executed in favour of petitioner company on 07.02.2017. There are no hesitation in coming to the conclusion that first priority of charge over the secured assets shall be of the bank and not of the State Government as contended by referring to Section 48 of the VAT Act, 2003. It is hereby declared that the petitioner being secured creditor has first charge over the suit properties by virtue of Section 26E of the SARFAESI Act, 2002, which overrides the charge of the respondent Authorities as contended in terms of Section 48 of the Gujarat Sales Tax Act. Petition allowed.
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