TaxTMI 
TaxTMI 
2026 (7) TMI 449
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....u And Kashmir Bank Bengaluru, Sicom Limited, Ksiidc Limited Karnataka State Industrial And Infrastructure Development Corporation Limited, Bank Of Bahrain And Kuwait Mumbai, Canara Bank Arm I Branch State Bank Of India Bengaluru, Central Bank Of India, Mumbai, IFCI Limited, ICICI Bank Mumbai (Vice Versa). For the Applicant: (By Sri. K G Raghavan, Senior Counsel for Sri. Vignesh Shetty, Advocate). For the Respondents: (By Sri. Shrishail Raghavan For OL - R1, Sri. Manu Prabhakar Kulkarni, Advocate For R2), Sri. K.G. Raghavan, Senior Counsel For Sri. Vignesh S. Shetty, Adv. For R2). CAV JUDGMENT These three Company Applications are heard together as the order in one will have a bearing on the other two. 2. C.A. No. 49/2025 is filed by Omkara Assets Reconstruction Private Limited ("Omkara Assets"). The said application is filed to recall the attachment notices dated 25.10.2007 and 24.11.2011 issued by the Commercial Tax Department of Andhra Pradesh, now the State of Telangana ("CTD"). The CTD is arrayed as respondent No. 2 in C.A. No. 49/2025. 3. C.A. No. 86/2025 is filed by the CTD seeking recall of the order dated 12.09.2024 passed by this Court in C.A. Nos.33/2024,....
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....tory first charge under the relevant enactments. 5.7. SASF challenged the aforesaid sale notice by filing a writ petition before the High Court of Andhra Pradesh. The High Court of Andhra Pradesh granted an interim stay in favour of SASF. During the pendency of the said writ petition, this Court, by order dated 19.11.2012 passed in C.O.P. No. 160/2005, ordered the winding up of BPL. 5.8. On 05.05.2021 the security interest was registered under Chapter IVA of the SARFAESI Act, by SASF. 5.9. In view of the winding-up order dated 19.11.2012 passed by this Court, the High Court of Andhra Pradesh, by order dated 23.09.2023, disposed of the writ petition filed by SASF as having become infructuous, while reserving liberty to SASF to approach the Official Liquidator appointed by this Court and seek such relief as may be available in law. 5.10. On 31.08.2024, SASF assigned its rights to recover the loan dues from BPL to the present applicant, Omkara Assets. Thereafter, by order dated 12.12.2024 passed in C.A. No.33/2024, Omkara Assets was substituted in place of SASF. 6. By order dated 12.09.2024, Omkara Assets was permitted to sell the property outside the liquidation procee....
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....secured debts and, therefore, the CTD cannot assert a first charge in derogation of the rights of Omkara Assets, which has stepped into the shoes of the secured creditor. 14. Attention of the Court is also invited to the judgment of the Co-ordinate Bench in Canara Bank v. State of Karnataka and Others W.P No. 103730/2025 decided on 23.09.2025 to contend that the charge in favour of a secured creditor under the SARFAESI Act would prevail over the claim under the Goods and Services Tax Act, 2017 ("GST Act"). Applying the same principle, it is urged that the claim of the CTD of a Statutory first charge over the secured asset is liable to be rejected. 15. The learned Senior Counsel further submitted that, the security interest in favour of IDBI was created on 01.12.1997 and 22.06.1998. The CTD issued the first attachment order on 25.10.2007 for recovery of tax dues amounting to Rs.1.81 crore and the second attachment order on 24.11.2011 for recovery of Rs.72.21 crores, both orders long after the creation of the security interest in favour of the lending bank. It is, therefore, contended that the applicant, having acquired the rights of the lending bank, is entitled to enforce the....
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....o-ordinate Bench in Canara Bank (supra), was concerned with the interplay between the SARFAESI Act and the GST Act and was not dealing with competing claims arising under the SARFAESI Act on one hand and the APVAT Act, the APGST Act and the CST Act on the other, as in the present case and the binding decision of the Apex Court in Punjab and Sind Bank (supra), was not brought to the notice. 21. Referring to Article 254 of the Constitution of India, learned counsel further submitted that there is no repugnancy between the State enactments conferring a Statutory first charge in favour of the State and the provisions of the SARFAESI Act. It was further contended that, even assuming there is any repugnancy, the relevant State enactments have received the assent of the President and, therefore, the statutory first charge created thereunder in respect of the tax dues would prevail over all other claims, including those arising under the SARFAESI Act. 22. Urging that the right is vested in the State to enforce the statutory charge, it is submitted that the dues payable to the State are arrears of tax and that neither the liability nor the statutory first charge arises by virtue of th....
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.... of the mortgages created on 01.12.1997 and 22.06.1998 can affect the attachment orders issued in the years 2007 and 2011 pursuant to the Statutory first charge? (c) Whether the statutory first charge is available in respect of the Tax dues under the Central Sales Tax Act, 1956? ("CST Act"). 27. The relevant dates and events are extracted below for ready reference: Sl.No. Date Event 1 01.12.1997 and 22.06.1998 BPL mortgaged its immovable property as security for the loan. 2 30.12.2001 The loan account was classified as a Non-Performing Asset. 3 30.09.2004 IDBI Bank assigned its debt to SASF. 4 25.10.2007 The CTD issued an attachment order for recovery of Rs.1.81 crores towards tax arrears. 5 18.04.2011 SASF, as assignee of the lending bank, took physical possession of the property under Section 13(4) of the SARFAESI Act. 6 24.11.2011 The CTD issued another attachment order for recovery of Rs.72.21 crores towards commercial tax arrears. 7 19.11.2012 This Court passed an order winding up BPL in C.O.P. No. 160/2005. 8 05.05.2021 The security interest was registered with CERSAI under Chapter IV....
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.... obstante clause conferring priority over other debts, the statutory charge would prevail. With these principles in mind, when we look at the provisions under the SARFAESI Act and the EPF&MP Act, the former with the incorporation of Section 26-E, we are of the opinion that there has to be found a first charge to the EPF&MP Act dues, under Section 11(2) of that Act. 26. We extract Section 11(2) of the EPF Act and Section 26-E of the SARFAESI Act hereunder. "Sec. 11(2): Without prejudice to the provisions of sub-section (1), if any amount is due from an employer, whether in respect of the employee's contribution (deducted from the wages of the employee) or the employer's contribution, the amount so due shall be deemed to be the first charge on the assets of the establishment, and shall, notwithstanding anything contained in any other law for the time being in force, be paid in priority to all other debts. Sec. 26-E: Priority to secured creditors-Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other de....
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....re not paid by a dealer within the time specified thereof, the whole of the amount then remaining unpaid may be recovered from him as if it were an arrear of land revenue. 16C. Liability under this Act to be the first charge. -Notwithstanding anything to the contrary contained in any law for the time being in force, any amount of tax, Government loan extended to the dealer due to treating deferred tax as deemed to have been paid, penalty, interest and any other sum if any, payable by a dealer or any other person under this Act, shall be the first charge on the property of dealer, or such person." (emphasis supplied) 34. Section 16C of the APGST Act, was introduced with effect from 06.04.1999 by way of amendment. Thus the said provision creates the first charge, over the tax dues. 35. Section 16(4) of the APGST Act creates a first charge over the tax dues, as it provides for recovery of tax dues as if they were arrears of land revenue. The reason is under the Andhra Pradesh Revenue Recovery Act, 1864 or the applicable Land Revenue Act, arrears of land revenue constitute a first charge over the property of the defaulter. 36. Thus, what emerges is S....
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....easons. The primary reason for interpretation is found in paragraphs No. 25 to 27 of the said judgment extracted above. 41. One may also contend that in Punjab and Sind Bank (supra), the Apex Court referred to Full Bench judgment in Jalgaon Janata Sahakari Bank Ltd. (supra) and held that Section 26E is prospective, and as a corollary the view of the Full Bench of the Bombay High Court which held that priority payment conferred under Section 26E of the SARFAESI Act overrides statutory first charge stands affirmed. 42. In Punjab and Sind Bank (supra), the Apex Court did not deal with the question whether the priority conferred in Section 26E of the SARFAESI Act supersedes statutory first charge. Though, a reference is made to the Full Bench judgment of the Bombay High Court, to hold that Section 26E of the SARFAESI Act is prospective, one cannot conclude that the Apex Court has endorsed the view of the Bombay High Court on priority payment under Section 26E. Said question was not raised before the Apex Court in Punjab & Sind Bank (supra). 43. In Punjab and Sind Bank (supra), the secured creditor had issued a notice under Section 13(2) of the SARFAESI Act on 06.09.2013. The S....
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....s under "CHAPTER IV A REGISTRATION BY SECURED CREDITORS AND OTHER CREDITORS XXXX 26C. Effect of the registration of transactions, etc.-(1) Without prejudice to the provisions contained in any other law, for the time being in force, any registration of transactions of creation, modification or satisfaction of security interest by a secured creditor or other creditor or filing of attachment orders under this Chapter shall be deemed to constitute a public notice from the date and time of filing of particulars of such transaction with the Central Registry for creation, modification or satisfaction of such security interest or attachment order, as the case may be. (2) Where security interest or attachment order upon any property in favour of the secured creditor or any other creditor are filed for the purpose of registration under the provisions of Chapter IV and this Chapter, the claim of such secured creditor or other creditor holding attachment order shall have priority over any subsequent security interest created upon such property and any transfer by way of sale, lease or assignment or licence of such property or attachment order subsequent to such....
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....creditor, as defined under Section 2(1)(zd), to invoke the remedies under the SARFAESI Act. 52. Section 26E of the SARFAESI Act recognises the priority of payment in favour of a secured creditor in respect of dues secured by a security interest that has been duly registered with the Central Registry. 53. A plain reading of Section 26E suggests that once the secured creditor has registered its security interest with the Central Registry, the debts due to such secured creditor are to be paid in priority over all other debts, including: (i) debts owed to the Central Government; (ii) debts owed to the State Government; (iii) debts owed to local authorities; and (iv) all other unsecured debts. 54. Section 26C(2) of the SARFAESI Act, contains the following expression; "where security interest or attachment order upon any property in favour of the secured creditor or any other creditor are filed for the purpose of registration under the provisions of Chapter IV and this Chapter, the claim of such secured creditor or other creditor holding attachment order shall have priority over any subsequent security interest created upon such prope....
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.... Bank Ltd (supra). Discussion on question (b) 59. In view of the finding of the Apex Court in Jalgaon District Central Co-operative Bank Ltd (supra), the question whether the Section 26E of the SARFAESI Act, is prospective or retrospective in operation does not survive at all insofar as the claim for priority payment over statutory first charge. The said question may arise in case of conflicting claims among secured creditors or holders of attachment orders. However, the question raised is of seminal importance and as arguments, have been addressed extensively, the Court would endeavour to answer the question. 60. More important, the "prospective", "retrospective" or "retroactive" applications of a provision of a law or more particularly, the applications of said doctrines on the amended provision of law give rise to many disputes. Hence, it would be appropriate to endeavour to answer the question. 61. The Full Bench of the Bombay High Court in Jalgaon Janata Sahakari Bank Ltd. (supra), exhaustively examined the operation of Chapter IVA of the SARFAESI Act. One of the questions framed for consideration therein, namely Question (c), reads as under: "44. xxxx ....
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....d in the past or requisites which had been drawn from antecedent events. xxxx" 66. Paragraphs No. 20 and 21 in State Bank's Staff Union (Madras Circle) v. Union of India and others (2005) 7 SCC 584 read as under: "20. Judicial Dictionary (13th Edn.) by K.J. Aiyar, Butterworth, p. 857, states that the word "retrospective" when used with reference to an enactment may mean (i) affecting an existing contract; or (ii) reopening up of past, closed and completed transaction; or (iii) affecting accrued rights and remedies; or (iv) affecting procedure. Words and Phrases, Permanent Edn., Vol. 37-A, pp. 224-25, defines a "retrospective or retroactive law" as one which takes away or impairs vested or accrued rights acquired under existing laws. A retroactive law takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past. 21. In Advanced Law Lexicon by P. Ramanath Aiyar (3rd Edn., 2005) the expressions "retroactive" and "retrospective" have been defined as follows at p. 4124, Vol. 4: ....
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....vely when it governs rights, liabilities and consequences arising from acts, transactions or events occurring after its commencement, without disturbing accrued or vested rights. (c) Retroactive operation occupies an intermediate position. A statute may be regarded as retroactive where it applies to existing or pending situations by taking into account antecedent facts or events, without disturbing rights that have already vested or finally accrued. (d) As a general rule, substantive provisions are presumed to operate prospectively unless a contrary legislative intention is evident, whereas procedural provisions ordinarily apply to pending proceedings. (e) Declaratory or clarificatory amendments are generally regarded as retrospective. (f) The above principles are not absolute. Whether a provision operates prospectively, retrospectively or retroactively depends upon the language employed, the legislative intent and the object sought to be achieved. (g) Judicial decisions have also recognised sub-categories such as true retroactivity and quasi-retroactivity. (h) Even where a statute expressly declares its operation to be prospect....
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....gislative object, it may legitimately take into account acts and events that occurred before its commencement. In such a situation, whether the statute is described as prospective, retroactive, truly prospective or quasi-retroactive may not assume significance, since these expressions are only broad indicators and not sure-fire formulas for determining the application of the law. 73. In some cases such labelling may give a complete picture as to how the law operates eliminating any doubt as to the applicability of other doctrines. In some other case such labelling may not give a clear picture. These concepts provide broad guidance as to the manner in which an amended provision may operate, but they may or may not invariably fit every legislative situation into a single doctrine. If a Court, while declaring the operation of a statute, expressly or by necessary implication excludes the application of the other doctrines, the matter stands concluded accordingly. However, where the Court has not expressly or impliedly considered the applicability of the remaining doctrines, it may still be open to a subsequent Court to examine whether the provision admits of such application. The ac....
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....y exercise all or any of the powers they have under the general sales tax law of the State." 79. These expressions clearly indicate that the provisions of the State enactments, including the statutory incidents attached to recovery proceedings, stand incorporated into the CST Act for the purpose of recovery of dues, unless expressly excluded by the CST Act. 80. Since Section 9(2) incorporates, by reference, the recovery machinery contained in the State enactments, and there is no provision in the CST Act excluding the operation of the statutory first charge available under the State laws, the powers available under the State enactments must necessarily be read into the CST Act for the limited purpose of recovery. 81. Accordingly, this Court is of the considered view that the statutory first charge available under the State enactments is equally available for recovery of the dues payable under the CST Act. 82. Before concluding, this Court considers it appropriate to make certain observations regarding statutory provisions introduced by way of amendment. 83. Whenever a statute is amended, disputes frequently arise regarding the manner in which the amendment applies to....
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....the Transfer of Property Act, 1882 the Specific Relief Act, 1963 the Bharatiya Nyaya Sanhita, 2023 and the Bharatiya Sakshya Adhiniyam, 2023 and the like, in capturing the true import of a provision is well known. However, perhaps unknowingly or unintentionally such a worthy practice is forgotten. It is high time it should be revived. Wherever needed and appropriate, the incorporation of illustrations while enacting or amending a legislation may greatly assist all stakeholders in the justice delivery system. After all the law is meant for the common man and should be drafted in the simplest possible way. It should never be a puzzle. 89. These observations should not be understood as an attempt by this Court either to legislate or to issue directions regarding legislative policy. This Court is conscious that such power does not vest in it. The Court is also conscious that legislation is a task by itself. The endeavour is only to draw attention on the issue which may result in different legislative practices which, if adopted, may reduce uncertainty and avoid unnecessary litigation. 90. CONCLUSIONS. (a) The statutory first charge under Andhra Pradesh General Sales Tax ....