The Gujarat High Court observed that the charge of secured creditor precedes over charge on dues of sales tax under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act).
It is the case of the petitioner that both the parcels of land were owned by M/s. Dolplast Machinery and the same had never belonged to Helios. However, considering the prayer made in the petition, which is in respect of a revenue entry with respect to sub-plot Nos.5 and 6 and in this petition, there is no prayer against Dolplast, which is not even party.
In the year 2002 – 03, upon Helios having defaulted on repayment of loan and was declared a non-performing asset, the respondent No.4 Bank initiated the proceedings under SARFAESI Act by filing Original Application No.264 of 2003 before the Debts Recovery Tribunal, Ahmedabad.
Special Civil Application No.10059 of 2023 was preferred seeking a declaration that the respondent No.4 Bank in that petition being Canara Bank is having the first charge over the property in question as the charge of respondent No.4 Bank would override the charge of respondent No.2 as per Section 26 (e) of SARFAESI Act over charge in favour of respondent No.2 under Section 48 of VAT Act.
Similarly, in Special Civil Application No.13188 of 2023, the petitioner has prayed to quash and set aside the attachment of property and has prayed for a direction that the charge recorded in the revenue record in favour of Sales Tax department Khambhat be quashed.
In In case of Odhavjibhai Mohanbhai Gadhiya v. State of Gujarat, the Gujarat High Court observed that “In other words, the charge in respect of the property in question created for sales tax dues is of no avail and has no efficacy in law.”
A Single Bench of Justice Nirzar S Desai observed that “The Banks issued Sale Certificate and, therefore, the present set of petitions are required to be decided on the basis of decisions cited by the petitioners wherein the bonafide purchaser had preferred petitions seeking direction to mutate their names in the revenue records or to quash the charge or to declare that the Secured Creditor will have first charge over the property as against State Government (Crowns Date) and, therefore, decision of the Hon’ble Supreme Court in the case of Kotak Mahindra Bank is in different context and, therefore, the same would not be applicable in the facts of the case.”
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