TaxTMI 
TaxTMI 
2026 (7) TMI 715
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....er relied upon judgment of full Bench of this Court in the case of Jalgaon Janta Sahakari Bank Ltd. & Anr. vs. Joint Commissioner of Sales Tax & Anr., 2022 SCC OnLine Bom 1767, to contend that the question regarding priority of the secured creditor, in this case respondent No. 5-bank, over the dues of the respondent No. 1 towards Sales Tax has been answered conclusively to hold that the dues of the secured creditor under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Securitisation Act) shall have priority. It is submitted that since the petitioner has come into the picture as an auction purchaser in pursuance of steps taken by the respondent No. 5-bank under the provisions of the Securitisation Act and sale certificate has been duly issued in its favour, there ought to be no impediment in registration of the sale certificate and further, that the encumbrance shown in the revenue record pertaining to the aforesaid tax dues, needs to be deleted as the attachment order dated 10th January 2019 can be of no effect in the light of the law laid down by this Court in the aforesaid full Bench judgment. 4. In a ....
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.... the tune of about Rs. 2.69 crores plus interest. It is a matter of record that respondent No. 5-bank was constrained to take further steps under the Securitisation Act and eventually, the physical possession of the secured asset was obtained on 21st July 2017. The auction sale was conducted on 17th February 2019, wherein the petitioner was the successful bidder and sale certificate dated 14th March 2019 was issued in favour of the petitioner. But, the registration of the said sale certificate remained stalled due to the attachment order dated 10th January 2019 issued by respondent No. 1 in respect of its dues. An encumbrance in the revenue record was also recorded on the basis of the said attachment order. It is because of these reasons that the petitioner was constrained to approach this Court by filing the present writ petition. 8. The respondent No. 1 filed its reply affidavit along with documents to oppose the present writ petition. The respondent No. 5-bank filed its reply affidavit, supporting the contentions raised on behalf of the petitioner. Thereafter, recently, the respondent No. 1 filed a further affidavit dated 22nd June 2026, specifically relying upon the amendmen....
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....ws and the MRTP Act, however, despite creation of first charge on property taxes due to the Corporations and sums due to a planning authority, respectively, are expressly made subordinate to the paramount charge on a land if in respect of such land, land revenue is in arrears. Viewed from this angle, there is no magic in the words "first charge". Even a "first charge", by express statutory intendment, can be made subordinate or subservient to a paramount charge such as arrears of land revenue. We, therefore, are unable to accept the argument of the State/respondents that since neither the SARFAESI Act nor the RDDB Act uses the words "first charge" but the word "priority", such "priority" cannot have precedence over "first charge" created by the State legislations. 83. However, notwithstanding that section 169(1) of the MLR Code is the dominant legislation and does not expressly say that it would be subordinate or subservient to any Central Act creating "first charge", nothing really turns on it. The express language of section 26E of the SARFAESI Act and section 31B of the RDDB Act, wherever applicable, is sufficient to off-set the "paramount charge" created by sub-section....
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....the following observations were made in the said judgment : "151. However, there could be attachments orders which might have been issued much prior to giving effect to the 2011 Rules, as amended. In respect of such orders of attachment, we consider it appropriate to express our views. 152. The procedure to be followed in terms of the CPC when an immovable property is put up for auction sale to satisfy a decree of the court is to be found in Order 21, rules 54 and 66 of the CPC. It is mandatory for the court executing the decree, to comply with the following stages before such property is sold in execution of a particular decree : (a) attachment of the immovable property; (b) proclamation of sale by public auction; (c) sale by public auction. At each stage of the execution of the decree, when a property is sold, it is mandatory that notice shall be served upon the person whose property is being sold in execution of the decree, and any property which is sold, without notice to the person whose property is being sold, is a nullity and all actions pursuant thereto are liable to be struck down/quashed. However, the proceedings befor....
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....As noted hereinabove, the respondent No. 5-bank had registration of its security interest with the CERSAI dating back to 8th December 2011. Admittedly, the charge of the respondent No. 1 is not registered with the CERSAI. Even if the email placed on record showing the exchange of correspondence between respondent No. 1 and the concerned department, is taken into consideration, the attempts on the part of respondent No. 1 to have its charge registered with CERSAI, were initiated in the year 2018, much after the security interest of the respondent No. 5-bank was duly registered with CERSAI on 8th December 2011. 14. The reply affidavits placed on record on behalf of respondent-State Authorities are bereft of any details about steps that could have been taken by and on behalf of said Authorities to satisfy the procedural requirements under the MLRC and the Rules framed thereunder. In the absence of such procedure being complied with, in terms of the observations made in the above quoted paragraphs of full Bench judgment, the respondent-State Authorities cannot resist the priority of the dues of the respondent No. 5-bank over the dues towards sales tax. Hence, the position of law is ....
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....statutory priority in realization of dues from the sale of secured assets, over and above all other debts including government revenues, taxes, cesses and rates, subject only to compliance with the statutory conditions, such as registration under the SARFAESI Act. 15. The Full Bench rejected the contention that the phrase "priority in payment" under Section 26E falls short of creating a first charge. It ruled that, "Statutory priority given to secured creditors under the SARFAESI and RDDB Acts shall override any charge created under State laws, including Sections 37 and 38C of the MVAT Act and Bombay Sales Tax Act ("BST Act", for short) respectively, in view of their express subordination to Central enactments. 16. The Bank has registered its security interest with CERSAI on 30th June 2012, which is very much prior to the attachment order dated 18th March 2020 of the department. Therefore, in view of the legal position settled by the Full Bench, the Bank has priority to realize its dues. 17. The unamended Section 37 of the MVAT Act made the MVAT Act expressly subordinate or subservient to any central legislation creating first charge and by way of amendme....
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....t such provisions would be subordinate to any Central Act creating 'first charge', the same would obviously have to be read, invoked and exercised subject to section 26E of the SARFAESI Act and section 31B of the RDDB Act, wherever applicable." 18. We are therefore in agreement with the contention of learned counsel for the Petitioner that where a secured creditor has registered its security interest under the SARFAESI Act, the claim of such secured creditor must prevail. We have no hesitation in holding that the Bank has priority in realization of dues over the dues of the department. The department having even failed to register its charge with CERSAI cannot claim any first charge over the said secured asset." 16. We find that since an identical contention raised on behalf of the respondent-State Authorities was considered and rejected by a co-ordinate Bench of this Court, the said contention cannot be accepted. 17. Once the contentions raised on behalf of the respondent-State Authorities are rejected, we find that the reliefs claimed in the present writ petition deserve to be granted. 18. In view of the above, the writ petition is allowed in terms of prayer cla....