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of <h1>Secured creditors prevail over statutory charge holders in property sales post-2016 amendments</h1> <h3>Travancore Devaswom Board Versus Local Fund Audit</h3> Travancore Devaswom Board Versus Local Fund Audit - AIR 2020 Ker 115, 2020 (3) KLT 296 Issues Involved:1. Whether a secured creditor can claim priority for sale and payment over statutory charge holders under State enactments.2. The impact of the non-notification of certain provisions of the SARFAESI Act.3. The effect of inconsistency between Central and State enactments.Detailed Analysis:1. Priority of Secured Creditors over Statutory Charge Holders:The primary issue addressed is whether a secured creditor under the SARFAESI Act can claim priority over statutory charges due to the Government under State enactments like the Kerala Value Added Tax Act (KVAT Act). The court noted that the SARFAESI Act and the Recovery of Debts and Bankruptcy Act (RDB Act) were amended in 2016 to include Sections 26E and 31B respectively, which explicitly grant priority to secured creditors over all other debts and government dues, including taxes. The court emphasized that these provisions contain non-obstante clauses, indicating the legislature's intent to give these provisions overriding effect over other laws.2. Non-notification of Provisions of the SARFAESI Act:Although Chapter IV-A of the Amendment Act, 2016, which includes Section 26E of the SARFAESI Act, has not been notified, the court held that the mere enactment of the law creates repugnancy with State laws that create first charges for statutory dues. The court cited precedents to assert that repugnancy arises at the time of the law's making, not its commencement. Thus, the priority given to secured creditors by the amended provisions stands, even without formal notification.3. Inconsistency Between Central and State Enactments:The court discussed the constitutional principles governing the inconsistency between Central and State laws, particularly Articles 254(1) and 246 of the Constitution of India. It highlighted that in cases of direct conflict, Central laws prevail over State laws. The court referred to multiple precedents to underline that the non-obstante clauses in Sections 26E and 31B of the SARFAESI Act and RDB Act, respectively, ensure that these Central laws take precedence over conflicting State laws like the KVAT Act.Conclusion:The court concluded that the sale conducted under the SARFAESI Act or RDB Act takes precedence over statutory charges due to the Government under State enactments post the 2016 amendments. Consequently, the secured creditor has priority in sale and payment over all other statutory charge holders.Order:The court directed the Sub Registrar, Kottarakkara, to register the sale certificate and the Village Officer to effect the mutation of the property. Additionally, the validity of the e-stamp used for the sale certificate was extended due to delays caused by the pandemic.Final Judgment:The application was allowed, affirming the precedence of secured creditors' rights over statutory charges under State enactments.
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