SARFAESI Act & MVAT Act – Ranking of priority and first charge on secured – Conflict of Section 37 of MVAT Act with Section 26E of SARFAESI Act.
Judgment dated 21.3.2024 in W.P.No.11733 of 2023 of Indian Overseas Bank Vs. Deputy Commissioner of State Tax and others
Attachment of assets under Maharashtra Value Added Tax Act, 2002 in conflict with Section 26E of SARFAESI Act read with Section 37 of the MVAT Act.
On 8.11.2014, the mortgage over the secured assets was registered with the Central Registry under Section 26B of the SARFAESI Act and evident from the charge registration Certificate dated 3.11.2014 registered with the Registrar of Companies.
On 31.3.2018, the borrower’s account was classified as NPA.
On 14.6.2019, a demand notice under Section 13(2) of the Act for Rs.35.31 crores was issued. On 16.9.2019, symbolic possession of the secured assets was taken.
On 7.6.2022, the District Magistrate, Thane, passed an order for physical possession and same was taken on 30.8.2022.
In the auction, A-564 property was sold on 19.6.2023 but N-3 property remained unsold.
Attachment of immovable property by Respondent no.1 and mortgaged in 2014 by respondent no.3 in favour of consortium of banks led by the Petitioner.
On 7.4.2022, the Respondent no.2 issued an attachment order for Rs.47.01 lakhs and asserted statutory first charge of MVAT over N3 property under Section 37 of the MVAT Act. The petitioner was called upon not to auction the secured assets.
HELD that the registration of attachment with CERSAI is constructive public notice of the charge over the property. The ranking of priority of competing charges so registered would be in the sequential order of registration. Without such registration, the secured creditor shall not have the right to take enforcement action under the SARFAESI Act. Moreover, charge under SARFAESI Act being the Central Act will override the charge under Section 37(1) of the MVAT Act – State Act. The petitioner has, therefore, ranking of priority over the secured assets
