2021 (6) TMI 150 - HC - VAT and Sales Tax

Seeking registration of Sale Certificate in respect of the schedule mentioned property by the petitioner Bank - HELD THAT - The legal issue involved in this writ petition is no longer res integra and has been considered in several decisions of this Court and the latest of which being in the case of TAMILNAD MERCANTILE BANK LIMITED VERSUS THE JOINT I SUB REGISTRAR, M/S. TOUGH BAGS, LALITHA RAMALINGAM, R. PALANIAPPAN, R. THIRUMALAIAPPAN, SAKTHIMALA, M. UDAYARAJAN, HEMALATHA, SHRIRAM TRANSPORT FINANCE COMPANY LTD. 2021 (1) TMI 1118 - MADRAS HIGH COURT where it was held that the petitioner Bank cannot be denied the relief as sought for. In such view of the matter, both the writ petitions stand allowed. The first respondent in both the writ petitions are directed to register the sale certificates issued by the petitioner Bank in favour of the respondents. The right of the Commercial Tax Department qua the secured creditor was subject matter of consideration by the Full Bench in the case of Assistant Commissioner (CT), Anna Salai-III Assessment Circle Vs. Indian Overseas Bank 2016 (12) TMI 373 - MADRAS HIGH COURT and it was held that the secured creditor namely the Bank will have precedence over the dues payable to the Commercial Tax Department. The Sub Registrar has to necessarily delete the schedule mentioned property attachment reflected in the encumbrance certificate at the instance of the commercial tax department. In the result, the writ petition is allowed. It is made clear that though the attachment at the instance of the first respondent Commercial Tax Department has been directed to be deleted, it will not in any manner affect the department's right to collect the dues from the default assessee by proceeding in accordance with law - Petition allowed.

Summary

Issues:
Registration of Sale Certificate, Deletion of Encumbrance Attachment Entry

Analysis:
The writ petition filed by the State Bank of India sought to register a Sale Certificate and delete an encumbrance attachment entry on the schedule mentioned property. The legal issue involved had been considered in previous decisions of the court, including the case of Tamil Nadu Mercantile Bank Limited. The judgment cited various cases to support the petitioner's position, emphasizing the primacy of proceedings under the SARFAESI Act when a mortgage in favor of the bank predates other claims. The court highlighted that a mortgage deed creates rights in favor of the mortgagee, which should be upheld.

The court rejected arguments challenging the maintainability of the writ petitions, emphasizing the importance of upholding existing rights, especially when a mortgage predates other claims. The judgment underscored that the petitioner bank could not be denied relief, directing the first respondent to register the sale certificates and delete the encumbrance/attachment entries within a specified timeframe. The court also noted that procedural violations raised by the borrower were irrelevant to the case at hand.

In a related matter, the court referenced a Full Bench judgment regarding the priority of secured creditors over government dues, emphasizing the rights of secured creditors to realize debts through the sale of assets. The court clarified that the rights of secured creditors would take precedence over all other debts and government dues. Consequently, the court directed the Sub Registrar to delete the property attachment reflected in the encumbrance certificate, ensuring that the commercial tax department's right to collect dues remained unaffected.

Overall, the judgment upheld the rights of the petitioner bank as a secured creditor, emphasizing the precedence of mortgage rights and the enforcement of security interests. The court's decision provided clarity on the legal principles governing the registration of sale certificates and the deletion of encumbrance entries, ensuring the protection of secured creditors' interests while upholding the rule of law.