TaxTMI 
TaxTMI 
2025 (5) TMI 1816
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....i Raw and Boiled Rice Mill - respondent No. 3 herein, which is a firm in which respondent Nos.4 to 6 are the partners. Loan was advanced to the aforementioned respondents for which certain security documents as also mortgage deeds were executed in favour of the Bank mortgaging certain properties in the year 2014. 3. Upon failure on the part of the partnership firm and the partners to repay the loan amount, proceedings for recovery of the said amount were initiated before the Debts Recovery Tribunal, Hyderabad, under the Recovery of Debts and Bankruptcy Act, 1993 (hereinafter, referred to as "the RDB Act"). A decree was passed in favour of the petitioner Bank on 22.07.2022 and a recovery certificate, dated 06.09.2022, issued for recovery ....
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....d have overriding effect over any other law for the time being in force. For facility of reference, Section 31 (b) which was incorporated in the RDB Act with effect from 01.09.2016 vide Act No.44 of 2016 is reproduced hereunder: "31B. Priority to secured creditors.-Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realise secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority." It would also be pertinent to reproduce Section....
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....e." 7. The issue that falls for our consideration is whether, in the instant case, is it the Bank that has the priority over the secured asset, in terms of Section 31-B r/w Section 34 of the RDB Act or the respondent No. 2, who in terms of Section 26 of the Value Added Tax Act claims a first charge over the property of the unofficial respondent Nos. 3 to 6. 8. Counsel for the petitioner has placed reliance upon Central Bank of India vs. State of Kerala and others (2009) 4 SCC 94, to state that the issues which arose in the above case and the ratio of the decision so rendered would govern the present case as well. 9. The issue that was being considered by the Apex Court in the case of Central Bank of India(supra) was whether the pro....
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....med that by virtue of Section 26-B of the Kerala Act, 1963 as amended by Act No. 23 of 1999, the State Government had got a first charge over the attached properties. The bank challenged the Notice of the Tahsildar by way of petition under Article 226, which was dismissed by the learned single Judge which order was upheld also by a Division Bench. The Apex Court dealing with the issue, in particular reference to Section 34 of the DRT Act and Section 26-B of the Kerala General Sales Tax Act, 1963, held that there was no provision in either DRT Act or SARFAESI Act created a first charge in favour of the banks, financial institutions or secured creditors for the properties of the borrower. The Apex Court held: "116. The non obstante c....
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....hat effect, it is not possible to read any conflict or inconsistency or overlapping between the provisions of the DRT Act and Securitisation Act on the one hand and Section 38C of the Bombay Act and Section 26B of the Kerala Act on the other and the non obstante clauses contained in Section 34 (1) of the DRT Act and Section 35 of the Securitisation Act cannot be invoked for declaring that the first charge created under the State legislation will not operate qua or affect the proceedings initiated by banks, financial institutions and other secured creditors for recovery of their dues or enforcement of security interest, as the case may be. 131. The Court could have given effect to the non obstante clauses contained in Section 34 (1)....