TaxTMI 
TaxTMI 
2024 (2) TMI 295
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....and representatives from taking any action/steps in furtherance of the said order dated 20th February 2019. (c) ad-interim reliefs in terms of prayer clause (c) above. (d) For Cost of this Petition. (e) For such and other further reliefs as the nature and circumstances of this case." 3. Briefly the facts are :- Respondent No. 3 Mr. Vinod Kainya had availed loan / credit facilities from the petitioner as proprietor of M/s Kainya Steel Corporation. To secure such credit facilities, Respondent No. 4 Mrs. Sunita Kainya had stood as a guarantor. They also created mortgage of the said secured assets on 2 December 2008, 20 January 2009, 18 April 2009 and 4 February 2011 in favour of the petitioner. 4. It is the case of the petitioner that on 1 October 2012 proprietorship of Mr. Vinod Kainya/respondent No. 3, was taken over by M/s. Tarachand International Pvt. Ltd./respondent No. 2 under an agreement to take over of business entered on the even date between the respondent Nos. 2 and 3. Thereafter on 28 December 2012 and 18 January 2013, the petitioner had issued further sanction letters in regard to the import letters of Credit Facilities of Rs. 50 crores, ....
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....achieved by the petitioner towards recovery of the debts payable by respondent Nos. 2 to 4, on 20 February 2019, the petitioner received from respondent No. 1/Deputy Commissioner of Sales Tax, an order of the even date attaching the secured assets for recovery of sales tax dues payable by respondent No. 2. 8. On 19 May 2019, 23 June 2019 and 17 November 2019, the petitioner published e-auction notices under Rule 8(6) of Security Enforcement Rules, 2002 for sale of the said secured assets so as to recover the outstanding dues payable by the respondent Nos. 2, 3 & 4. The auction of the secured assets was accordingly conducted on 14 June 2019, 26 July 2019 and 10 December 2019. 9. In order to take further steps to materialise the sale, by removal of the attachment of the sales tax department, the petitioner addressed letters dated 24 October 2019, 16 November 2019 & 19 November 2019 to the Deputy Commissioner of Sales Tax requesting him to remove the attachment order issued qua the secured assets inter alia contending that as the petitioner was a secured creditor the petitioner had priority over the secured assets in the recovery of its dues from respondent Nos. 2 to 4. However ....
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....4859113 Plot ID:03, Locality: Thane Nhave, Dist: Raigad - 410203 2 29-04-2013 200017572105 400004865134 200004859057 Plot ID:96, Locality: JB Nagar, Distt.: Mumbai - 400059 3 29-04-2013 200017568747 400004865021 200004858944 Plot ID:34, Locality: Santacruz, Dist.: Mumbai - 400054 4 29-04-2013 200017572521 400004865245 200004859167 Plot ID:201, Locality: Fort, Dist.: Mumbai - 400032 5 14-05-2013 200017640231 400004892528 200004886417 Plot ID:57, Locality: Thane Nhave, Distt.: Raigad - 410203 6 14-05-2013 200017636953 400004891854 200004885750 Plot ID:34, Locality: Santacruz, Dist.: Mumbai - 400054 7 14-05-2013 200017640563 400004892634 200004886523 Plot ID: 12, Locality: Fort, Distt.: Mumbai - 400023 8 25-05-2013 200017640961 400004892763 200004886652 Plot ID:96, Locality: Andheri East, Distt.: Mumbai - 400059 The copies of the CERSAI certificate are annexed herewith and marked as Exhibit D1 to D8." 13. The certificates as issued by the CERSAI is also annexed to the petition as Exhibit-D1 to D8. 14. We may observe that the full bench of this Court....
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....ncy and Bankruptcy Code would rank superior to the dues of the relevant department to the State Government. The following are the relevant observations of the Full Bench :- "84. ..............The next query that would obviously follow is: whether the word 'priority' appearing in section 26E of the SARFAESI Act, i.e., "...paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority", was used without a purpose? This reply has to be in the negative. 85. Priority means precedence or going before (Black's Law Dictionary). In the present context, it would mean the right to enforce a claim in preference to others. In view of the splurge of 'first charge' used in multiple legislation, the Parliament advisedly used the word 'priority over all other dues' in the SARFAESI Act to obviate any confusion as to inter-se distribution of proceeds received from sale of properties of the borrower/dealer. If a secured asset has been disposed of by sale by taking recourse to the Security Interest (Enforcement) Rules, 2002 it would appear to be reasonable to hold, particularly having regar....
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....ty. Right to property is a constitutional right. Right to recover the money lent by enforcing a mortgage would also be a right to enforce an interest in the property. The provisions of the Transfer of Property Act provide for different types of charges. In terms of Section 48 of the Transfer of Property Act claim of the first charge-holder shall prevail over the claim of the second charge-holder and in a given case where the debts due to both, the first charge-holder and the second charge-holder, are to be ealized from the property belonging to the mortgagor, the first charge-holder will have to be repaid first. There is no dispute as regards the said legal position. 42. Such a valuable right, having regard to the legal position as obtaining in common law as also under the provisions of the Transfer of Property Act, must be deemed to have been known to Parliament. Thus, while enacting the Companies Act, Parliament cannot be held to have intended to deprive the first charge-holder of the said right. Such a valuable right, therefore, must be held to have been kept preserved. [See Workmen v. Firestone Tyre and Rubber Co. of India (P) Ltd., (1973) 1 SCC 813]. 43. If P....
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....ffect of using the word 'priority' in section 26E of the SARFAESI Act, according to us, is this. The rights accorded to 'first charge' holders by Central as well as State legislation having been known to the Parliament, in such a situation, what the Parliament intended by exercising its legislative power by introducing amendments in the SARFAESI Act, more particularly by incorporating section 26E therein, was to explicitly make the valuable right of the 'first charge' holder, subordinate to the dues of a second creditor. The rights of such of the first charge holders accorded by several legislations enacted by the State, having regard to the language in which section 26E is couched, would rank subordinate to the right of the secured creditor as defined in section 2(1)(zd) subject, of course, to compliance with the other provisions of the statute. Acceptance of the contra-arguments of learned counsel for the State/respondents would undo what the Parliament has chosen to do. ************************ 92. In view of the foregoing discussion, we have no hesitation to hold that the dues of a secured creditor (subject of course to CERSAI registration) and subject to proc....