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Issues: Whether the sales tax authorities could validly proceed with sale of immovable property for recovery of sales tax dues notwithstanding the secured creditor's claim under the Securitisation Act, and whether the statutory first charge under the Bombay Sales Tax Act prevails over the rights asserted under the Securitisation Act.
Analysis: The governing principle was settled by the Supreme Court that the Securitisation Act does not create a first charge in favour of banks or secured creditors on the borrower's property. A first charge created by state sales tax legislation, including Section 38C of the Bombay Sales Tax Act, operates on the entire property and has precedence even over an existing mortgage. The non obstante clause in Section 35 of the Securitisation Act does not override a state law that validly creates a first charge, and the recovery procedure under the revenue law does not displace that statutory priority. The later decision relied on by the petitioners was found not to deal with this specific conflict.
Conclusion: The sales tax department's first charge prevailed over the secured creditor's claim, and the auction sale for recovery of sales tax dues was upheld.
Ratio Decidendi: The Securitisation Act does not create a first charge in favour of secured creditors, whereas a statutory first charge under sales tax law prevails over an existing mortgage and is not displaced by Section 35 of the Securitisation Act.
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