Nationalized Bank Wins Priority Over Crown Debt in Property Sale Under SARFAESI Act; Sale Certificate to be Registered.

The HC ruled in favor of the petitioner, a Nationalized Bank, affirming its priority over crown debt regarding the realization of dues from a mortgaged property's sale. Citing the SARFAESI Act, the Court emphasized that secured creditors have precedence over tax liabilities. The HC ordered the registration of the Sale Certificate, quashing previous actions and revenue entries that obstructed this process. The respondents were directed to register the Sale Certificate and complete the mutation within six weeks. The petition was allowed without costs, and all pending applications were disposed of.

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Issues Involved:
1. Priority of bank dues over crown debt.
2. Registration of Sale Certificate.
3. Quashing of impugned actions and revenue entries.

Summary:

Issue 1: Priority of Bank Dues Over Crown Debt
The petitioner, a Nationalized Bank, sought a declaration that it has priority, preferential right, and first charge/lien for realizing bank dues from the sale of a mortgaged property over the crown debt in the form of outstanding tax liability claimed by the HP Excise and Taxation Department. The Court referred to Section 26E and Section 35 of the SARFAESI Act, which give priority to secured creditors over all other debts, including taxes payable to the government. The Court cited the Supreme Court's judgment in Punjab National Bank vs. Union of India & Ors (2022) and other relevant cases, affirming that the rights of secured creditors prevail over unsecured crown debts.

Issue 2: Registration of Sale Certificate
The petitioner also sought an order directing the respondents to register the Sale Certificate dated 15.01.2021 for the auctioned property. The Sub-Registrar (Rural) Shimla had refused registration, citing an attachment in favor of the HP State Excise and Taxation Department. The Court held that the refusal was unjustified, as the secured creditor (the bank) has first charge over the property, and the attachment by the Excise and Taxation Department was not supported by any assessment or determination of liability. The Court emphasized that the SARFAESI Act's provisions override other laws, including tax liabilities.

Issue 3: Quashing of Impugned Actions and Revenue Entries
The petitioner sought to quash the impugned actions and revenue entries that obstructed the registration of the Sale Certificate. The Court quashed the order-report dated 2.11.2020 and the corresponding revenue entry in the Jamabandi, which denied the registration of the Sale Certificate. The Court directed the respondents to register the Sale Certificate in favor of the auction purchaser and extend all benefits accruing therefrom, including mutation, within six weeks.

Conclusion and Directions:
The Court allowed the writ petition, quashing the impugned actions and revenue entries, and directed the respondents to register the Sale Certificate and complete the mutation process within six weeks. The petition was allowed with no order as to costs. Pending applications, if any, were also disposed of.

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