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TMI Blog2025 (1) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... present case, the order of attachment issued by the State Tax Department is dated 11th December, 2018. It is thereafter that steps have been taken to attach the immovable property. As noted above, the registration of the Bank Security Interest with CERSAI is dated 18th December, 2014 which is much prior to the order of attachment issued by the State Tax Department. Conclusion - The claim of secured creditor that is the Petitioner Bank, will have preference over the claim of Respondents (State Tax Department). Petition disposed off. - A.S. CHANDURKAR RAJESH S. PATIL, JJ For the Petitioner: Mr. Rajesh Dubey, Advocate. For the Respondent-State of Maharashtra: Smt. S.D. Vyas, Additional Government Pleader with Smt. Reena A. Salunkhe, Assistant Government Pleader. For the Respondent No. 7: Mr. Siddarth Seshadri, Advocate, i/by Pan India Legal Services LLP,. JUDGMENT (PER RAJESH S. PATIL, J.) : 1. This Writ Petition is filed under Article 226 and 227 of the Constitution of India by the Petitioner-Bank, seeking a relief of issuance of Writ of Mandamus directing the respondent No. 2- (Talathi, Nehroli Village) to delete/cancel the impugned mutation entry No. 1087 recorded in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gether with interest thereon within 60 days. As the borrower did not comply with the demand as made in the notice under Section 13 (2) of the SARFAESI Act, the Petitioner bank through its authorized officer took a symbolic possession of the secured assets on 26th November, 2014 and further, issued a Possession Notice under Section 13 (4) of the SARFAESI Act, which was published in newspapers. 5. The petitioner-Bank registered the mortgage charge of the petitioner-Bank in respect of the secured assets with Central Registry of Securitisation Asset Reconstruction and Security Interest of India (for short CERSAI ) on 18th November 2014. 6. The Petitioner Bank thereafter filed a Securitisation Application No. 84/2015 before the District Magistrate, Palghar under Section 14 of the SARFAESI Act for seeking assistance for taking physical possession of the secured assets. Consequently, by an order dated 18th September, 2015, the District Magistrate, Palghar, was pleased to allow the Securitization Application No. 84/2015, with direction to Tahsildar to take physical possession with police assistance and hand over the same to the authorized officer of Petitioner Bank. 7. In the meanwhile, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P in a matter against the defaulter (Respondent No. 6). On date 26th August, 2022 for amount of Rs.11,44,80,714/- including interest including interest and vide order dated 18th July, 2023, the Sale Tax Department accordingly lodged a claim with IRP on 29th August, 2023 for Rs.2.80 Crores. It is submitted that the E-auction for the said property was conducted by the petitioner on 27th April, 2022, but on the said date, the charge of the respondent No. 5 over the secured assets for the tax dues was already recorded in the 7/12 extract of the said property. It is submitted that conjoint reading of the Security Interest Enforcement Rules, 2002 mandates that the Authorized Officer while putting up a secured asset for sale is under a duty to notify inter-alia, the details of encumbrances. Hence, it is submitted that to discharge the encumbrances, the secured creditors as well as auction purchaser should deposit money to the Tax Authorities. It is submitted that the first charge claim of State Tax Authority was communicated to the petitioner-Bank before the E-auction was conducted. It is further submitted that it was the duty of the petitioner-Bank to indicate in the sale advertisement i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the petitioner- Bank by way of an E-auction of the secured assets, the petitioner- Bank should be directed to bring back that in the Court and the respondent No. 5 be allowed to withdraw that amount, which was adjusted as tax dues of the respondent No. 6. The respondent Nos. 2 and 4 to be directed to enter encumbrances by way of mutation entry of the secured assets. 16. We have heard learned counsel for both sides and we have also considered the documents on record. 17. The issue to be answered in the present matter is ; Whether the Respondent No. 5 (The Deputy Commissioner of State Tax) will have priority charge over the secured assets sold by Petitioner bank (secured creditor) under the SARFAESI Act. 18. The borrower or guarantor have not challenged the impugned orders of Attachment. 19. In the present proceedings, it is a matter of record that on 18th November 2014, the Petitioner bank registered the secured assets under the Central Registry of CERSAI. 20. There is no dispute that Respondent No. 5 (The Deputy Commissioner of State Tax) has not registered its claim of arrears of sales tax with regard to Respondent No. 6 (Texplast Industries Ltd.) The amended Section 26D, makes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocal authority (italics for emphasis by us), was used without a purpose? This reply has to be in the negative. 85. Priority means precedence or going before (Black's Law Dictionary). In the present context, it would mean the right to enforce a claim in preference to others. In view of the splurge of first charge used in multiple legislation, the Parliament advisedly used the word priority over all other dues in the SARFAESI Act to obviate any confusion as to inter-se distribution of proceeds received from sale of properties of the borrower/dealer. If a secured asset has been disposed of by sale by taking recourse to the Security Interest (Enforcement) Rules, 2002 it would appear to be reasonable to hold, particularly having regard to the non-obstante clauses in sections 31 B and section 26E, that the dues of the secured creditor shall have priority over all other including all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority. 88. Bare per confined only to the secured asset but could well spill over and any other asset of the defaulter in payment of State's dues could be put up for sale to realize such dues in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with. Simply ordering an attachment is not enough; a proclamation has to be issued in the prescribed form and such proclamation must be made public by beating of drum and such other mode as specified in section 192 of the MLR Code and rule 11(2) of the 1967 Rules before the property attached is sold. 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 with reference to evidence that the transferee had actual or constructive notice of such charge. If there has been an attachment and a proclamation thereof has been made according to law prior to 24 th January 2020 or 1st September 2016, i.e., the dates on which Chapter IV-A of the SARFAESI Act and section 31B of the RDDB Act, respectively, were enforced, the department may claim that its dues be paid first notwithstanding the secured dues of the secured creditors; but in the absence of an order of attachmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Government. 25. We have in our earlier order, passed in Indian Bank thr. Chief Manager vs. State of Maharashtra ors. relying on Jalgaon Janta Sahakari Bank Ltd. and another (supra) also held that once the secured creditors have registered their Secured Interest prior to the Sale Tax Department registering their Secured Interest for its claim, Section 26-E comes into play. Paragraph 21 reads as under:- 21. Section 26E of the SARFAESI Act, start with Notwithstanding anything contained in any other law . Section 26E of the SARFAESI Act very clearly mentions that the secured creditors shall be paid in priority over all other debts and taxes. In the present proceedings it is Petitioner Bank who has registered its claim against the secured assets with CERSAI earlier i.e. 4/10/2022, in view of the law as laid down by the Full Bench of this Court, in Jalgaon Janta Sahakari Bank Ltd. (supra) and as per Section 26E of the SARFAESI Act, the Petitioner Bank (secured creditor) will have priority over the revenues and taxes of the State Government. 26. In the present case, the order of attachment issued by the State Tax Department is dated 11th December, 2018. It is thereafter that steps have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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