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2024 (11) TMI 116 - HC - VAT / Sales TaxSeeking to withdraw charges and raise attachment levied by their office over the mortgaged property exclusively charged in favour of this Petitioner - Section 48 of the SARFAESI Act - HELD THAT - It would be germane to refer to the decision of this Court in case of PARTNERS OF SIDDHESHWAR TAX FAB ORS. VERSUS STATE OF GUJARAT ORS. 2024 (7) TMI 1547 - GUJARAT HIGH COURT wherein, it is held ' the charge in respect of the property in question created for sales tax dues or VAT dues is of no availand has no efficacy in law in view of the provisions of SARFAESI Act and the RDB Act. The property in question was sold by respondent no.6-Bank under the provisions of SARFAESI Act and the petitioners were successful purchasers and the sale certificate is issued and sale deed is also executed by which the petitioners have become absolute owners of the property and therefore considering the existing position of law, the charge created by the respondent State over the property in question in the year 2018, cannot be sustained and is accordingly quashed and set aside and as a consequence the mutation entries in revenue records also stands deleted.' In view of the above settled legal position, the attachment order of the respondent-State would not survive and is accordingly ordered to be quashed and set aside and consequently, the mutation entries in the revenue record also stand cancelled. Petition disposed off.
Issues:
Challenge to attachment order by petitioner over mortgaged property under SARFAESI Act. Analysis: The petitioner, an Asset Reconstruction Company, sought relief through a writ petition under Article 226 of the Constitution of India to set aside an order passed by the Commercial Tax Officer and withdraw charges and attachment over a mortgaged property. The petitioner claimed to have registered a charge on the property in 1998 due to default by M/s. Samay Electronics Pvt. Ltd., leading to initiation of recovery proceedings under the SARFAESI Act. The petitioner argued that as a secured creditor, they had priority over the state's dues. The respondent did not dispute the charge creation date but failed to counter the petitioner's legal position. The Court referred to previous judgments emphasizing the priority of secured creditors over state dues and concluded that the attachment order by the respondent-State was quashed and mutation entries in revenue records were canceled based on settled legal principles. The Court considered the provisions of the SARFAESI Act and previous judgments to establish the petitioner's priority as a secured creditor over the state's dues. The respondent's failure to challenge the petitioner's legal position regarding the charge created in 1998 weakened their case. The Court emphasized the settled legal position that VAT and Sales Tax dues do not take precedence over secured creditors' dues under the SARFAESI Act. Referring to previous cases, the Court highlighted that preferential rights of the state to recover debts are limited to unsecured creditors, not secured creditors. Consequently, the Court quashed the attachment order and canceled mutation entries in revenue records, ruling in favor of the petitioner. The judgment relied on the SARFAESI Act and established legal principles to determine the petitioner's priority as a secured creditor over the state's dues. The Court's analysis of previous cases reinforced the principle that state debts do not have precedence over secured creditors' dues. By quashing the attachment order and canceling mutation entries, the Court upheld the petitioner's rights as a secured creditor. The judgment serves as a precedent for cases involving the priority of charges on mortgaged properties under the SARFAESI Act, emphasizing the protection of secured creditors' interests in such matters.
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