Statutory first charge under VAT law prevails over bank security interest in mortgage recovery disputes.

A statutory first charge created under the VAT Act for recovery of tax dues prevails over a bank's claim to enforce its security interest under the SARFAESI framework. The bank had initiated proceedings under section 13(2), but the tax authorities had already pursued assessment and recovery for VAT and CST dues and registered a first charge on the mortgaged property under section 48. On these facts, the State's charge attached to the property and the bank's plea for priority was rejected.

---

---

Issues: Whether the petitioner-bank's claim to enforce its security interest over the mortgaged property had priority over the State's dues and first charge under the Value Added Tax Act.

Analysis: The petitioner had initiated recovery proceedings under the SARFAESI regime after issuing notice under section 13(2). The authorities, however, had initiated assessment and recovery proceedings for VAT and CST dues, passed an ex parte demand order, and thereafter registered a first charge on the property under section 48 of the Value Added Tax Act. In the facts found, the State's statutory charge attached to the property for recovery of tax dues.

Conclusion: The petitioner-bank's claim to priority was rejected. The first charge was held to be of the State Department, and the petition failed.

Ratio Decidendi: Where the tax statute creates a first charge on the property for recovery of dues, that statutory charge prevails over the bank's claim under the SARFAESI framework.

---