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TMI Blog2022 (6) TMI 1471X X X X Extracts X X X X X X X X Extracts X X X X ..... rds undisputably the charge of respondent No.1 is at a later point of time i.e. 14.12.2015 and 7.6.2018 which is subsequent to the mortgage with the writ-applicant Bank i.e. 8.6.2012 and 26.10.2013, being the secured creditor. In view of above, as per the provisions of Section 26-E SARFEASI Act also, the balance tilts in favour of the writ-applicant Bank and then in favour of the present writ-applicant. Accordingly, there is no hesitation in holding and declaring that the respondent No.1 State authorities cannot claim first charge over the subject property. It is hereby directed that the writ-applicant shall have the first charge over the property mortgaged by the respondents No.4 to 7 under Section 26-E SARFEASI Act and the same would overwrite the charge of the respondent No.3 under Section 48 of the GVAT, 2003. The respondent authority is further directed to post and certify a mutation entry to record the certificate of sale dated 19.3.2021 for the subject land. The writ-application succeeds and is hereby allowed. - Honourable Ms. Justice Vaibhavi D. Nanavati For the Petitioner(s) No. 1 : Mr. Sandip C Bhat t(6324) For the Respondent(s) No. 1 : Mr. Ayaan Patel, AGP For the Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit facility to the respondent No.3 on 26.8.2010. The respondent No.3 defaulted in repayment of the credit facility and, therefore, writapplicant Bank classified the said account as NPA on 31.3.2015 The writ-applicant Bank issued notice under Section 13(2) of the SARFEASI Act, 2002 on 1.4.2016 to the respondent No.2. 3.2 On 23.1.2020, the writ-applicant Bank took actual possession of the secured assets. On 19.2.2020, the writapplicant Bank issued the sale notice for public auction, however, the same was failed due to want of bidder. On 15.10.2020, the writ-applicant Bank again issued notice for public auction, however, the same was failed due to want of bidder. On 6.2.2021, the writ-applicant Bank again issued notice for public auction on 25.2.2021. 3.3 On 8.2.2021, the writ-applicant Bank served sale notice to the respondents Nos.3 to 7 borrower/guarantors/mortgagors that the Bank proposed to sale the property for reserved price of Rs.3,41,00,000/- on 25.2.2021 for recovery of dues and also published the e-auction notice in daily newspaper as provided under the SARFEASI Act and rules made thereunder, whereby invited the bids for public in general. 3.4 On 25.2.2021, the writ-appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.2 has no authority for preferential charge over the claim of the writ-applicant Bank as secured creditor. 4.2 Mr. Bhatt, the learned advocate relied on Section 35 of the Act, 2002 and submitted that Section 35 overrides the provisions under other laws. 4.3 Mr. Bhatt, the learned advocate submitted that the respondent No.3 cannot march over the writ-applicant s case because in view of the fact that the Central Act, and the Act, 2002 provided special machinery by the Central Government for recovery of the Bank s dues and borrower s property is mortgaged with the writ-applicant Bank. Mr. Bhatt, the learned advocate submitted that the writ-applicant Bank has first and foremost charge over the said property. 4.4 Mr. Bhatt, the learned advocate relied on Section 26-E of the SARFEASI Act and submitted that Section 26-E shall be having overreaching rights over the said property. 5. Mr. Ayaan Patel, the learned AGP appearing for the respondent No.1 State opposed the present writ-application and submitted that the prayers as prayed for may not be granted. 5.1 Mr. Patel, the learned advocate relied on Section 48 of the Gujarat Value Added Tax Act, 2003 and submitted that Section 48 provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y when there is a specific provision in the statute claiming first charge over the property, the Crown's debt is entitled to have priority over the claim of others. (iii) Since there is no specific provision claiming first charge in the Central Excise Act and the Customs Act, the claim of the Central Excise Department cannot have precedence over the claim of secured creditor, viz., the petitioner Bank. (iv) In the absence of such specific provision in the Central Excise Act as well as in Customs Act, we hold that the claim of secured creditor will prevail over Crown's debts. In view of our above conclusion, the petitioner UTI Bank, being a secured creditor is entitled to have preference over the claim of the Deputy Commissioner of Central Excise, first respondent herein. (emphasis supplied) 42. This Court, while dismissing the Civil Appeal No.3627 of 2007 filed against the judgment of the Full Bench, vide order dated 12.09.2009 held as under: Having gone through the provisions of the Securitization Act, 2002, in light of the judgment of the Division Bench of this court in the case of Union of India vs Sicom Ltd. Anr., reported in 2009 (1) SCALE 10, we find that under the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods. (emphasis supplied) 46. The Bombay High Court in Krishna Lifestyle Technologies Ltd. Vs. Union of India Ors. [2008 SCC Online Bombay 137], wherein the issue for consideration was whether tax dues recoverable under the provisions of The Central Excise Act, 1944 have priority of claim over the claim of secured creditors under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 held that: Considering the language of Section 35 and the decided case law, in our opinion it would be of no effect, as the provisions of SARFAESI Act override the provisions of the Central Sales Tax Act and as such the priority given to a secured creditor would override Crown dues or the State dues. In so far as the SARFAESI Act is concerned a Full Bench of the Madras High Court in UTI Bank Ltd. v. Deputy Commissioner of C. Excise, Chennai-II has examined the issue in depth. The Court was pleased to hold that tax dues under the Customs Act and Central Excise Act, do not have priority of claim over the dues of a secured creditor as there is no specific provision either in the Central Excise Act or the Customs Act giving those dues first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving regard to the provisions contained in section 2(zc) to (zf) of SARFAESI Act, 2002, read with provisions contained in Section 13 of the SARFAESI Act, 2002, the Secured Creditor will have a First Charge on the Secured Assets. Moreover, section 35 of the SARFAESI Act, 2002 inter alia, provides that the provisions of the SARFAESI Act, shall have overriding effect on all other laws. It is further pertinent to note that even the provisions contained in Section 11E of the Central Excise Act, 1944 are subject to the provisions contained in the SARFAESI Act, 2002. 49. Thus, as has been authoritatively established by the aforementioned cases in general, and Union of India vs SICOM Ltd.(supra) in particular, the provisions contained in the SARFAESI Act, 2002, even after insertion of Section 11E in the Central Excise Act, 1944 w.e.f.08.04.2011, will have an overriding effect on the provisions of the Act of 1944. 50. Moreover, the submission that the validity of the confiscation order cannot be called into question merely on account of the Appellant being a secured creditor is misplaced and irrelevant to the issue at hand. The contention that a confiscation order cannot be quashed merely b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Mamlatdar, Vadodara (Rural) contained in the Letter dated 04.02.2022 at Annexure-H to this writ-application is hereby quashed and set aside. 6.1 The provisions of the SARFAESI Act also fortify the aforesaid legal position. Section 8(6) of the SARFAESI Act reads thus:- 8(6) The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5) : PROVIDED THAT if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include,- (a) The description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor (b) the secured debt for recovery of which the property is to be sold; (c) reserve price, below which the property may not be sold; (d) time and place of public auction or the time after which sale by any other mode shall be completed; (e) depositing earnest money as may be stipulated by the secured creditor ..... 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