2021 (7) TMI 1353 - HC - VAT and Sales Tax

Recovery of dues - whether it is the Secured Creditor or the Revenue which has preference over the debts due to the Banks and Financial Institutions and this Court has not adjudicated any rights or disputes intra the petitioner Bank and the private respondent(s)? - HELD THAT - This writ petition is disposed of by holding that the findings returned in PUNJAB NATIONAL BANK AND ORS. VERSUS STATE OF HIMACHAL PRADESH AND ORS. 2021 (5) TMI 1026 - HIMACHAL PRADESH HIGH COURT shall mutatis mutandis apply to this petition also and the petitioner being Secured Creditor has preference over the respondent State with regard to the debts due from the private respondent(s) and the respondent Department cannot claim first charge over secured assets of the petitioner belonging to the private respondents as the petitioner has first charge over the secured assets in view of the provisions of the SARFAESI Act 2002 and Recovery of Debts and Bankruptcy Act 1993 as amended from time to time. It is further held that the provisions of Section 26 of the H.P. VAT Act 2005 shall have to give way to the provisions of Section 26E of the SARFAESI Act 2002 and Section 31B of the RDB Act 1993. Application disposed off.

Summary

Issues:
1. Priority of secured creditor over government department in debt recovery.

Analysis:
The petitioner, a bank, filed a writ petition seeking relief to remove a note by the Excise and Taxation Department, asserting its secured asset status under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The petitioner argued that it holds priority over debts due from private respondents, citing provisions of the SARFAESI Act 2002 and the Recovery of Debts and Bankruptcy Act 1993. The court noted similarities with a previous judgment and disposed of the petition based on the findings of the earlier case.

The respondent State did not contest the applicability of the earlier judgment to the present case but indicated an intention to challenge it through a Letters Patent Appeal. The court, after reviewing the records and the previous judgment, found that the issue raised in the current petition aligns with the earlier decision in Punjab National Bank v. State of Himachal Pradesh. Consequently, the court allowed the writ petition, affirming that the petitioner, as a secured creditor, takes precedence over the State in recovering debts from private respondents.

The court clarified that its decision was limited to determining the priority between the secured creditor and the revenue department, without delving into specific disputes between the bank and private respondents. The judgment emphasized the supremacy of the SARFAESI Act 2002 and the Recovery of Debts and Bankruptcy Act 1993 over conflicting provisions of the H.P. VAT Act 2005. The court directed that the findings from the earlier case apply mutatis mutandis to the current petition, settling the issue of creditor preference over government departments in debt recovery matters. Any miscellaneous applications were also disposed of in the judgment.