Bombay High Court allows SBI to claim priority of charge on Property as Secured Creditor [Read Order]

The Bombay High Court allowed the State Bank of India to claim priority of charge on property as secured creditor.

The Petitioner,  SBI Bank as secured creditor is challenging the attachment of the Plot under the provisions of Section 32 of the Maharashtra Value Added Tax Act, 2002 and proceedings under the Maharashtra Land Revenue Code initiated by the Respondent, Krishna Industries for recovery of VAT dues of Respondent as detailed in the communication dated 28th March 2018 from Respondent even though the said property has been mortgaged by Respondent in favour of the Petitioner.

In short, Petitioner is claiming priority of charge on the said property as secured creditor in respect of secured debt owed by Respondent to Petitioner over the sales tax dues payable by Respondent to authorities.

The court observed that if the State Act creates first charge on the property, then the secured creditor cannot claim against the statutory provision.

It was further observed that considering the provisions of Section 38-C of the Bombay Sales Tax Act 1959 and Section 26-B of the Kerala General Sales Tax Act 1963, vis-a-vis the provisions of Section 34(1) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 and Section 35 of the SARFAESI Act.

The division bench of Justice Ujjal Bhuyan and Justice Abhay Ahuja held that the mortgage of the secured creditor viz. the Petitioner Bank gets prior charge over the charge of the Respondents for tax/VAT dues.

“We therefore quash and set aside the attachment /charge on the said Plot No. W-7 under Section 32 of the MVAT Act as well as notices issued in relation thereto by Respondent authority,” the court said.

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