TaxTMI 
TaxTMI 
2022 (6) TMI 202
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....or direction and hold and declare that the claim made by the respondents under section 48 of the VAT Act is illegal and ultra vires in view of the provisions contained in section 26E of the SARFEASI Act and therefore, the demand made by the respondents in the charge recorded in the revenue records in relation to block no. 873B of village Por, Taluka and District Vadodara be quashed and set aside. (B) Be pleased to issue a writ of mandamus or any other appropriate writ, order or direction in the nature of mandamus, or any other appropriate writ, order or direction and quash and set aside the charge recorded in form Nos. 6, 7 and 12 of the land bearing block no. 873B of Village Por, Taluka and District Vadodara and direct that no charge shall be recorded in relation to land bearing block no. 873B of village Por, Taluka and District Vadodara in pursuance of any proceedings or orders recorded under section 48 of the VAT Act. (B-1) Be pleased to issue a writ of mandamus and/or a writ in the nature of mandamus and/or any other appropriate writ, order or direction to quash and set aside the decision of the Mamlatdar, Vadodara (Rural) contained in the letter dated 04.02.2....
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....Recovery Tribunal by its judgment and order dated 31.03.2017 directed the company to make payment of Rs. 55,48,75,761.79/-. 4.5 The Bank of Baroda, thereafter, initiated proceedings under the SARFEASI Act by issuing a notice under Sub-section (2) of Section-13 on 08.06.2013. 4.6 The bank ultimately took over the possession of the secured assets of the defaulting company. The bank issued a public notice for E-auction of the secured assets dated 22.01.2021. The auction proceedings were undertaken on 12.02.2021. The writ-applicant herein participated in the auction proceedings and was declared as the highest bidder in relation to the land bearing Block No. 873B situated at Village - Por, Taluka and District Vadodara. The offer of the writ-applicant was accepted. The writ-applicant paid the full amount to the bank towards the sale consideration. The bank issued sale certificate in favour of the writ-applicant on 24.08.2021. In the sale certificate issued by the bank, it has been stated that the sale of the scheduled property was made free from all encumbrances known to the secured creditor. In the column of the list of encumbrances, it has been stated 'NIL' in accordance ....
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....he respondent No. 2 is hereby quashed and set aside. It is hereby declared that the Bank has the first charge over the properties mortgaged from M/s. M.M. Traders by virtue of Section 26E of the SARFAESI Act. 56. It is further clarified that the excess, if any, shall be adjusted towards the dues of the State under the VAT Act. It is further declared that the respondents cannot proceed against the purchasers of the properties sold under the SARFAESI Act." 9. What came to be purchased by the writ-applicant in the auction proceedings conducted by the Bank of Baroda was a secured asset under the provisions of the SARFAESI Act. In such circumstances, the State cannot claim preference over the subject property for the purpose of recovery of the dues towards tax. It is not in dispute that the first charge was created in favour of the bank and the bank in exercise of its powers under the SARFAESI Act, put the subject property to auction. 10. The view taken by this High Court in the above referred two decisions now stands fortified by a recent pronouncement of the Supreme Court in the case of Punjab National Bank Vs. Union of India and Others reported in We quote the relevant....
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....t of the Full Bench, vide order dated 12.09.2009 held as under: "Having gone through the provisions of the Securitization Act, 2002, in light of the judgment of the Division Bench of this court in the case of Union of India vs Sicom Ltd. & Anr., reported in 2009 (1) SCALE 10, we find that under the provisions of the said 2002 Act, the appellants did not have any statutory first charge over the property secured by the respondent bank. In the circumstances, the Civil Appeal is dismissed with no order as to costs" (emphasis supplied) 43. Hence the reasoning given by the High Court stands strong and has been affirmed by this Court. 44. This Court, in Dena Bank vs Bhikhabhai Prabhu Dass Parikh & Anr. [ (2000) 5 SCC 694], wherein the question raised was whether the recovery of sales tax dues (amounting to Crown debt) shall have precedence over the right of the bank to proceed against the property of the borrowers mortgaged in favour of the bank, observed as under: "10. However, the Crowns preferential right of recovery of debts over other creditors is confined to ordinary or unsecured creditors. The common law of England or the principles of e....
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.... of the Madras High Court in UTI Bank Ltd. v. Deputy Commissioner of C. Excise, Chennai-II has examined the issue in depth. The Court was pleased to hold that tax dues under the Customs Act and Central Excise Act, do not have priority of claim over the dues of a secured creditor as there is no specific provision either in the Central Excise Act or the Customs Act giving those dues first charge, and that the claims of the secured creditors will prevail over the claims of the State. Considering the law declared by the Apex Court in the matter of priority of state debts as already discussed and the provision of Section-35 of SARFAESI Act we are in respectful agreement with the view taken by the Madras High Court." (emphasis supplied) 47. An SLP (No. 12462/2008) against the above judgement of the Bombay High Court stands dismissed by this Court on 17.07.2009 by relying upon the judgement in the matter of Union of India vs SICOM Ltd. & Anr. Reported in [ (2009) 2 SCC 121], wherein the question involved was "Whether realization of the duty under the Central Excise Act will have priority over the secured debts in terms of the State Financial Corporation Act, 1951" and th....
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....AESI Act, 2002, even after insertion of Section 11E in the Central Excise Act, 1944 w.e.f. 08.04.2011, will have an overriding effect on the provisions of the Act of 1944. 50. Moreover, the submission that the validity of the confiscation order cannot be called into question merely on account of the Appellant being a secured creditor is misplaced and irrelevant to the issue at hand. The contention that a confiscation order cannot be quashed merely because a security interest is created in respect of the very same property is not worthy of acceptance. However, what is required to be appreciated is that, in the present case, the confiscation order is not being quashed merely because a security interest is created in respect of the very same property. On the contrary, the confiscation orders, in the present case, deserve to be quashed because the confiscation orders themselves lack any statutory backing, as they were rooted in a provision that stood omitted on the day of the passing of the orders. Hence, it is this inherent defect in the confiscation orders that paves way for its quashing and not merely the fact that a security interest is created in respect of the very same ....