2025 (12) TMI 1606 - HC - VAT / Sales Tax

Bank's registered mortgage versus later State tax lien on same property; earlier security upheld, lien removed from records.

The dominant issue was whether a State tax department's lien in revenue records could override a bank's prior registered security interest over the same ... Recovery of dues - priority to secured creditors - Seeking writ of mandamus directing respondent No. 2 to remove the lien over the property which is a secured asset in the hands of the petitioner Bank - HELD THAT:- In the present case it is not disputed that the charge vide equitable mortgage in favour of the petitioner Bank was created on 18.04.2014, which was duly registered in the Central Registry CERSAI registration on 03.05.2014 (Annexure P-1) whereas respondent No. 3 had created lien over the property vide rapat No. 251 dated 17.03.2025 (Annexure P-8), therefore, it transpires that the charge created in favour of the petitioner bank is much prior in time being duly registered in the Central Registry on 03.05.2014 whereas the charge in favour of the respondent No. 3 was created on 17.03.2025 which is much later. Thus, by applying the ratio laid down in the decisions rendered by this Court in STATE BANK OF INDIA VERSUS SUB REGISTRAR, SUB TEHSIL NIGHDU KARNAL AND OTHERS [2025 (12) TMI 1375 - PUNJAB AND HARYANA HIGH COURT], on the subject is concerned, this Court has no manner of doubt that the petitioner Bank has a prior charge over the secured assets as reflected in the record, vis a vis the tax dues claimed by respondent No. 3 department. A Writ of Mandamus is issued to respondent No. 1 and 2 to remove the lien dated 17.03.2025 in the revenue record entered at the behest of the respondent No. 3 over the secured asset and file compliance report within a period of 02 months, before the Registry of this Court, failing which the Registry is directed to list the case as IOIN before appropriate Bench - The charge created in the Revenue records vide rapat No. 251 dated 17.03.2025 (Annexure P-8) in favour of respondent No. 3/The State Tax Officer, (Ward No. 32) Ist Floor, Treasury Office, Diet Building, Jagraon, District Ludhiana, Punjab is quashed by a Writ of Certiorari. This petition preferred by the petitioner-Bank is hereby allowed. Issues: Whether the charge/security interest created in favour of the petitioner bank and registered in the Central Registry (CERSAI) on 03.05.2014 has priority over the lien entered in the revenue records by the State vide rapat dated 17.03.2025, and whether the later-created lien should be removed/quashed and the State restrained from interfering with the petitioners enforcement under the SARFAESI Act.Analysis: The petitioner bank established an equitable mortgage dated 18.04.2014 and effected registration of the security interest in the Central Registry (CERSAI) on 03.05.2014. The States lien in revenue records was created much later on 17.03.2025. Section 26E of the SARFAESI Act, 2002 and Section 31-B of the Recovery of Debts and Bankruptcy Act, 1993 provide that after registration of security interest debts due to a secured creditor are to be paid in priority over government dues. Applying those statutory provisions to the factual chronology, the earlier-registered secured creditors charge takes precedence over subsequently created government liens. The statutory priority is consistent with the settled principles applied in prior decisions dealing with conflict between secured creditors and government revenue claims, and there is no competing insolvency regime in play altering priority in this record.Conclusion: The earlier-registered security interest in favour of the petitioner bank has priority over the States lien; the lien dated 17.03.2025 is quashed and the State is directed to remove it from the revenue records, with liberty to recover its dues only after the banks dues are satisfied or by other lawful means.