TaxTMI 
TaxTMI 
2024 (5) TMI 61
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....or final disposal. 2. This Writ Petition is essentially a challenge to the continued assertion of rights by the State of Maharashtra against the purchaser of two properties auctioned by Respondent No. 2, State Bank of India ("SBI"), in enforcement of a mortgage created by an erstwhile owner of the properties. 3. For the reasons set out in this judgement, we allow the Writ Petition with appropriate directions, by reason of the entitlements conferred by Section 26-C read with Section 26-E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act"). Factual Matrix: 4. The Petitioner is a purchaser of two properties ("Secured Assets") sold in auction by SBI. The detail....
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....ant Commissioner, Sales Tax, Nashik has claims of sales tax dues owed by the Borrower, and towards this end, on 12th December, 2020, has caused mutation entries in the land records relating to the Secured Assets in the "Tenancy, Rent and Other Rights" column of the "7/12 extract" relating to the Secured Assets; and e) When the Petitioner approached the Deputy Sub-Registrar, Nashik for registration of the Secured Assets in his name, he was informed about the aforesaid assertion of rights by the State's tax authorities, and therefore, till date, the Petitioner's ownership interests have not been recorded in the land records, free and clear of all encumbrances, leading to this Writ Petition being filed. Priority of Security Interes....
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....e registration with CERSAI would act as a public notice. Pursuant to Section 26-C(2) of the SARFAESI Act, the claim of the creditor who registers prior in time would have priority over any subsequent security interest registered over the same asset. The enforcement of the security interest registered subsequently, would be subject to the claim of the creditor whose security interest is registered prior in time. 9. This scheme of the law is very simple and clear, and when applied to the facts of the case, it is apparent that the claim of SBI would have priority over the claim of the State's tax authorities. The mortgage over the Secured Assets in favour of SBI was created in 2010 and was registered in CERSAI in 2012. 10. The provisions....
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....om Jalgaon Janta that even where there is an attachment order of the Sales Tax authorities prior to 24th January, 2020 (when Section 26-E of the SARFAESI Act was brought into effect), but no further steps were taken before the said date towards issuing a proclamation of sale, the Sales Tax Department cannot claim priority over the dues payable to the Secured Creditor, who enjoys the entitlement to priority under Section 26-E read with Section 26-C(2) of the SARFAESI Act. 12. Likewise, in Indian Overseas Bank, this very Bench, also relying on Jalgaon Janta (Paragraphs 82 to 85; and Paragraphs 88 to 92 thereof) returned a similar finding. In the interest of brevity, all the extracts from Jalgaon Janta cited in Union Bank and in Indian Over....
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....ority would get to continue enforcement against the same asset, each time in the hands of the next purchaser. Such a construction would turn the very concept of priority in enforcement on its head. In Indian Overseas Bank, the same argument was dealt with in the following words:- 35. As a last ditch-effort, Mrs. Vyas presented us with a unique proposition. It was her contention that notwithstanding the fact that the secured creditor has the first charge and priority for recovery of dues from the sale of the secured asset, the MVAT Authorities can once again chase the very same asset in the hands of the purchaser and put it up for sale towards recovery of their dues. 36. Such a proposition has only to be stated to be reject....
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....rores for the property worth Rs. 5 Crores. This would indeed be absurd to say the least. We therefore have no hesitation in rejecting this argument canvassed by Mrs. Vyas. [Emphasis Supplied] Directions and Declarations: 15. In the result, the Writ Petition deserves to be allowed. We, therefore, issue the following directions and declarations:- a) SBI enjoys priority of security interest and its enforcement over the Secured Assets, as compared with the interests of the State; b) SBI having sold the Secured Assets pursuant to the enforcement measures under the SARFAESI Act (not only by reason of the priority under Section 26-C(2) but also by reason of Section 26-E of the SARFAESI Act), was entitled to be paid in pr....