Rival claims over pledged vehicle sale proceeds were resolved by apportioning funds between the secured creditor and tax authority.

Where a secured creditor and the Sales Tax Department assert rival claims over sale proceeds of pledged vehicles, the Court recognised that entitlement may be determined by apportioning the realised amount between them. The vehicles had been pledged to the petitioner-bank against an overdraft facility, while the taxing authority also claimed sales tax dues from the same borrowers. The Court directed distribution of the sale proceeds in specified shares and ordered release of the fixed deposit amount after maturity with accrued interest until payment, thereby settling the competing claims by allocation of the available funds.

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Issues: Entitlement to the proceeds realised from the sale of vehicles as between the petitioner-bank and the Sales Tax Department.

Analysis: The vehicles had been pledged with the petitioner-bank as security for the overdraft facility, while the Sales Tax Department also had a substantial claim for sales tax dues against the same borrowers. The Court directed distribution of the realised sale proceeds between the two claimants in specified shares and further directed payment of the amount held in fixed deposit after maturity, along with accrued interest from the date of the order until actual payment.

Conclusion: The petitioner-bank was held entitled to Rs. 7,08,040.51 and the balance of Rs. 7,28,554.76 was directed to be paid to the Sales Tax Department.

Final Conclusion: The writ petition was finally disposed of by determining the respective shares of the rival claimants in the sale proceeds.

Ratio Decidendi: Where rival claims are made by a secured creditor and the taxing authority over realised sale proceeds, the Court may determine their entitlement by directing an apportionment of the available amount between them.

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