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TMI Blog2019 (12) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... spect to the secured assets. 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 High Courts in their opinions above noted, is that Chapter IVA which was inserted in SARFAESI 2002 comprising Sections 26B to 26E warrants a record to be made in the Central Register by the Central Registry creating a security interest - The argument is without any substance because the law declared in the four opinions above referred to is that if any Central Statute creates priority of a charge in favour of a secured creditor, the same will rank above the charge in favour of a State for a tax due under the Value Added Tax of the State. The sale proceeds realized are directed to be released to the petitioners by the Prothonotary Senior Master of this Court together with such interest which has accrued thereon - Petition allowed. - Writ Petition No. 1039 of 2017 with Notice of Motion No. 323 of 2017 Notice of Motion No. 342 of 2017 with Chamber Summons No. 80 of 2018 In Writ Petition No. 1039 of 2017 - - - Dated:- 13-12-2019 - PRADEEP NANDRAJOG, C.J. SMT. BHARATI DANGRE, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court. The Petitioner therefore prays the amounts be released to it because outstanding dues of Crystal Mirage Pvt. Ltd. are in excess of 50 crores. 9. Since the respondents Nos. 1 2 rely upon the statutory charge created in favour of the Sales Tax Department under Section 37 of the Maharashtra Value Added Tax, it is the case of the petitioner that the said Section itself records that it would be subject to a Central Legislation and thus highlight that the Recovery of Debt and Bankruptcy Act 1993 ( RDB Act ) is the Central Legislation and as per Section 31(B) whereof the first priority created is in favour of the secured creditor; above Government dues including revenues, taxes. It is the case of the petitioner that Section 31B of RDB Act is not restricted to the sale conducted under the provisions of RDB Act only. It will also operate in respect of the sale conducted under any other mechanism including provisions of SARFAESI 2002. Since the provision creates statutory charge in favour of a 'secured creditor', which admittedly the Petitioner is, therefore, it is immaterial whether Section 26E of SARFAESI 2002 has not been brought into force. In support of its con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority. 14. Section 31B in RDB Act 1993 was introduced by an Amendment in the year 2016 and was brought into force on 2nd September 2016. The non-obstante clause in the Section thus overrides any other law for the time being in force. The Section accords priority No.1 to secured creditors with respect to the secured assets. 15. This issue came up before the Rajasthan High Court in the matter of G.M.G Engineers Contractor Pvt. Ltd.. The Court, after taking into consideration, the provisions of Section 47 of VAT Act in Rajasthan as well as Section 31B of RDB Act, held as follow: We are yet considering the effect of the amended provision. The Apex Court has made analysis of a provision of first charge vis a vis secured creditor in the case of Central Bank of India (supra). The first charge was given supremacy than rights under mortgagee or to a secured creditor. The distinction between f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contrary, contained in any law for the time being in force and subject to the provisions of section 350 of the Companies Act, 1956 (No.1 of 1956), any amount of tax and/ or penalty or interest, if any, payable by a dealer or other person under this Act shall be first charge on the property of the dealer or such person. (2) Notwithstanding anything contained in this Act, where a dealer or person is in default or is deemed to be in default under clause (a) of subsection (11) of section 24 and whose property is being sold by a bank or financial institution for recovery of its loan, the Commissioner may forgo the right of first charge as mentioned in subsection (1) against the property sold on the following conditions: - (a) if the arrears of tax, penalty, interest or part thereof or any other amounts is up to 25 percent of the total auction value, the arrears shall be paid in full by the bank of financial institution; (b) if the arrears of tax, penalty, interest or part thereof or any other amounts is more than 15 percent of the total auction value, the 25 percent of the total auction value and the amount value as the remaining arrears bear to the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 secured creditors will have priority in case they proceed under the RDB Act they will not have such priority if 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. 36. The insertion of Section 31B of the RDB Act will give priority to the secured creditors even over the subsisting charges under the other laws on the date of the implementation of the new provision i.e. 1.9.2016 .The Supreme Court ,in the cases of State of Madhya Pradesh v. State Bank of Indore ,(2001) 126 STC 1(SC), has held that a provision creating fir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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