2021 (9) TMI 1388 - HC - VAT and Sales Tax

Court prioritizes bank over state in SARFAESI Act property dispute, granting sale certificate to petitioners.

The Court ruled in favor of the petitioners in a dispute over the first charge on a property auctioned under the SARFAESI Act. It held that the bank had ... Priority of charges over the property - Direction to clear the lien note given on the revenue Record of bid property and transfer the same in the name of the petitioners, within short stipulated time - seeking direction to pay 18% interest on the initial bid amount taken by them from petitioners - HELD THAT:- It is not been dispute by the State that the issue involved in this writ petition is, in fact, covered by the judgment in PUNJAB NATIONAL BANK AND ORS. VERSUS STATE OF HIMACHAL PRADESH AND ORS. [2021 (5) TMI 1026 - HIMACHAL PRADESH HIGH COURT], where it was held that this Court has no hesitation in holding that the petitioners being 'Secured Creditors' have preference over the respondent-State with regard to the debts due from respondent No. 4. - therefore, this writ petition is allowed by holding that the findings returned in the mentioned case shall mutatis mutandis apply to this petition. This writ petition is disposed of by holding that the findings in the case of PUNJAB NATIONAL BANK AND ORS. shall mutatis mutandis apply to this petition also and the Bank being “Secured Creditor”, has preference over the respondent- State with regard to the debts due from the private respondent(s) and the loanee cannot claim first charge over secured assets of the loanee, as the Bank has first charge over the secured assets, in view of the provisions of the SARFAESI Act, 2002 and Recover of Debts and Bankruptcy Act, 1993, as amended from time to time. It is further held that the provisions of Section 26 of the H.P. Vat Act, 2005 shall have to give way to the provisions of Section 26E of the SARFAESI Act, 2002 and Section 31B of the RDB Act, 1993. The respondent No.1 is directed to issue the Sale Certificate, in favour of the petitioners and respondents No.2 and 3 are directed to clear the lien note (Rapat No.628) given on the revenue record of bid property and transfer the same in the name of the petitioners, within short stipulated time - application disposed off. Issues:1. Dispute over first charge on property between bank and revenue department.2. Request for direction to clear lien note and transfer property in petitioner's name.3. Claim for interest payment on initial bid amount.4. Application of legal judgments to current petition.5. Dispute resolution regarding first charge over secured assets.6. Direction for issuance of Sale Certificate and lien note transfer.Analysis:1. The petitioners sought directions to clear a lien note on the revenue record of a property and transfer it in their name. The property was auctioned under the SARFAESI Act, and the petitioners were successful bidders. A dispute arose over the first charge on the property, with the revenue department claiming priority due to outstanding amounts owed by the loanee.2. The petitioners argued that a previous judgment established the bank's first charge over the property, as per statutory provisions. The respondents did not contest this interpretation but reserved their right to challenge the judgment. The petitioners had already deposited the auction amount with the bank, which was accepted.3. The Court considered the previous judgment's applicability to the current case and ruled in favor of the petitioners. It held that the bank, as a secured creditor, had precedence over the State in terms of debts owed by the private respondents. The judgment emphasized the priority of the bank's first charge over the secured assets, citing relevant legal acts.4. Consequently, the Court directed the issuance of a Sale Certificate in favor of the petitioners and instructed the respondents to clear the lien note on the property's revenue record promptly. The bank was given two weeks to issue the Sale Certificate, and the time spent in court proceedings was excluded from the sale proceedings' time limit.5. The judgment clarified that the SARFAESI Act and the Recovery of Debts and Bankruptcy Act took precedence over conflicting provisions of the H.P. Vat Act. The decision aimed to resolve the dispute over the first charge on the property and ensure the transfer of ownership to the petitioners without delay. Any pending applications related to the case were also disposed of by the Court.