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TMI Blog2024 (4) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the batch of petitions was considered by the Full Bench on the substantial questions of law which came to be noted in paragraph "(a) Having regard to the statutory provisions under consideration, does a secured creditor (as defined in the SARFAESI Act and the RDDB Act) have a prior right over the relevant Department of the Government (under the BST Act/MVAT Act/MGST Act) to appropriate the amount realized by the sale of a secured asset ? (b) Whether, despite section 26E in the SARFAESI Act or section 31B of the RDDB Act being attracted in a given case, dues accruing to a Department of the Government ought to be repaid first by reason of "first charge" created over any property by operation of law (viz., the legislation in force in Maharashtra) giving such dues precedence over the dues of a secured creditor ? (c) Are the provisions, inter alia, according "priority" in payment of dues to a secured creditor for enforcing its security interest under the provisions of the SARFAESI Act prospective ? (d) Whether section 31B of the RDDB Act can be pressed into service for overcoming the disability that visits a secured creditor in enforcing its security interest under the SA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t April 2013 issued a recovery certificate under section 101 of the Cooperative Societies Act. On 9th July 2013, the learned Chief Metropolitan Magistrate passed an order under section 14 of the SARFAESI Act, directing taking over of the possession of the secured assets and its delivery to the petitioner no. 1. 226. In the meanwhile, the respondent no.2 passed orders prohibiting transfer of the secured assets and other flats owned by Mr. Uday Shetty and Mr. Gangadhar Shetty. On 26th May 2013 the respondent no. 1 issued a public notice for auction of Flat Nos.601 and 602 for purported recovery of the arrears of the sales tax dues. 227. Petitioners instituted Writ Petition No. 1878 of 2013. However, since the auction notice dated 26th May 2013 was not acted upon, the petitioners were allowed to withdraw the said writ petition. Petitioners claimed to have taken possession of all the five flats on 10th February, 2015. In response to a public possession notice issued by the petitioner no. 1, the respondent no. 1 raised objection to the action of taking over possession of the immovable property of Om Sai Auto World claiming the State had first charge thereon for recovery of sales t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and issued an order of attachment of even date. Petitioners' claim, if any, according to the respondents, was subservient to the first charge of the State under section 37 of the MVAT Act. Since the provisions contained in Section 26E of the SARFAESI Act were not brought into force earlier than 24th January 2022, the petitioners claim for priority in payment was also misconceived. 232. Respondents have further contended that the petitioners' conduct disentitles them from claiming any relief. Petitioners have suppressed material facts. As against the distress value of Rs. 97,94,400/- and Rs. 1,01,20,000/- for Flat No. 501 and for Flat No. 503, respectively, the petitioners have self-purchased the subject flat for an amount of Rs. 92,09,814/- which appears to be the reserve price for one flat only. 233. We deem it superfluous to delve into the thickets of facts. In the order dated 7th August 2019 the Division Bench recorded that the sale of the subject assets took place during the pendency of this writ petition, without taking prior permission of this Court. In that context, the Court declined to accept the prayer of the petitioners to retain the amount of Rs. 92,09,814/- subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cured creditors over the first charge created under the State legislations, would govern the field. It would be contextually relevant to note that the petitioners cannot take refuge under the provisions of section 31B of the RDDB Act, for the reasons recorded above in answering question no.(d) in the negative. 237. In our view, even otherwise, the situation would be governed by the determination in paragraph 154 above as there is material to indicate that the action of sale proclamation initiated by the respondents was preceded by notice under section 178 of the MLR Code, warrant of attachment under section 267(3), order of attachment in Form 4 and auction proclamation notice in Form 7 under the MRLR Rules. 238. In the backdrop of the materials brought on record by the respondents, especially in the form of the valuation reports issued by Archimage Designers (Annexures A and B to the affidavit in reply), which indicate that the distress sale value of Flat No. 501 was shown at Rs. 97,94,400/- and that of Flat No. 503 at Rs. 1,01,20,000/-, the sale of the secured assets for the purported reserve price of Rs. 92,09,814/-, which in a sense, amounts to transfer by the right hand t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the petitioner. It is on such contention, review of the judgment is prayed for. In support of his contentions, Mr. Narula placed reliance on the decision of the Supreme Court in the case of Shivaji Balaram Haibatti Vs. Avinash Maruthi Pawar 2018 11 Supreme Court Cases 652 to contend that the observation of the Court in paragraph No. 234 when it records that the petitioner does not have the registration of the security interest with the CERSAI, would be required to be considered to be without jurisdiction. 5. On the other hand, Ms. Jeejeebhoy, learned special counsel for the respondents has opposed the Review Petition. She has drawn our attention to the various findings in the judgment under review as recorded by this Court, while deciding the Writ Petition and more particularly the observations made in paragraph No. 237, which we have noted hereinabove, which are required to be read along with observations made in paragraph No. 154 of the judgment on the legal position. Her contention is that in the facts of the present case, merely because the petitioner had failed to place on record the certification of the security interest by CERSAI, would not entitle the petitioner to see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded by the Court in paragraph No. 237 as noted hereinabove, in which the Court has clearly observed that the situation would be governed by the determination in paragraph 154 therein as there is material to indicate that the action of sale proclamation initiated by the respondents was preceded by notice under Section 178 of the MLR Code, warrant of attachment under Section 267(3), order of attachment in Form 4 and auction proclamation notice in Form 7 under the MRLR Rules. 7. Further what is significant is that the petitioner cannot get over the observations of the Court rendered by the Court in paragraph No. 154 of the judgment under review, as specifically applicable to the petitioner's case as noted in paragraph No. 237. We extract the observations of the Court in paragraph 154, which reads thus: "154. We are of the considered opinion, on facts and in the circumstances, that unless attachment of the defaulter's immovable property is ordered in the manner ordained by the MLR Code and as prescribed by the MRLR Rules and due proclamation thereof is made, even the creation of charge on such immovable property may not be of any real significance, not to speak of demonstrating wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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