Court prioritizes registered mortgage over unregistered claims, invalidates attachment order, affirms secured creditor status.

The court ruled in favor of the Petitioner Bank, holding that their registered mortgage with CERSAI granted priority over the Sales Tax Department's unregistered claims. The attachment order by the Sales Tax Department was deemed invalid due to lack of CERSAI registration, and the auction purchasers were not obligated to pay tax dues. The court quashed the attachment order, directed issuance of a NOC to the auction purchasers, and affirmed the Petitioner Bank's priority as a secured creditor.

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Issues Involved:
1. Priority of claims between secured creditors and state tax authorities.
2. Validity of attachment orders by state tax authorities.
3. Rights and obligations of auction purchasers in property transactions involving secured assets.

Summary:

Priority of Claims:
The primary issue was whether the Petitioner Bank, having registered its mortgage with the Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI), had priority over the claims of the Sales Tax Department for dues under the Maharashtra Value Added Tax Act, 2002 (MVAT). The court held that the Petitioner Bank's registration of the mortgage with CERSAI in 2012 gave it priority over the Sales Tax Department's claims, which were not registered with CERSAI. The court referenced the Full Bench decision in Jalgaon Janta Sahakari Bank Ltd. & Anr., which established that a secured creditor with CERSAI registration has priority over state tax claims.

Validity of Attachment Orders:
The court examined the attachment order dated 22nd April 2022 issued by the Sales Tax Department. It was determined that the attachment order was invalid because the Sales Tax Department had not registered its claim with CERSAI, whereas the Petitioner Bank had done so in 2012. The court emphasized that the provisions of the SARFAESI Act, being a Central Act, would prevail over the MVAT Act in case of any inconsistency, as per Article 254 of the Constitution of India.

Rights and Obligations of Auction Purchasers:
The auction purchasers had participated in the e-auction conducted by the Petitioner Bank and were declared the highest bidders. They faced issues in obtaining a No Objection Certificate (NOC) from the society due to the Sales Tax Department's attachment order. The court held that the auction purchasers were not liable to pay the Sales Tax Department's dues since the Petitioner Bank had priority over the secured asset. The court also noted that the auction purchasers had not received any actual or constructive notice of the tax lien from the Sales Tax Department.

Conclusion:
The court quashed the attachment order dated 22nd April 2022 and directed the society to issue the NOC to the auction purchasers without insisting on payment of the Sales Tax dues. The court affirmed that the Petitioner Bank's rights as a secured creditor, registered with CERSAI, had priority over the state tax claims. The rule was made absolute in favor of the Petitioner Bank and the auction purchasers, with no order as to costs.

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