In a significant ruling the Himachal Pradesh High Court observed that the departments of the State including Excise and Revenue do not have priority over secured creditors debt.
The question in the petition was to whether the different departments of the State including Excise and Revenue will have priority over the secured creditors’ debt. The loan account of the Unit came to be classified as Non-Performing Assets ( NPA ) and consequently recovery proceedings under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest 2002 ( SARFAESI Act ) came to be initiated against it.
The Respondents No. 1 and 2 i.e. State of Himachal Pradesh through Secretary State Taxes and Excise and Commissioner State Taxes & Excise Department have filed their joint reply, wherein it has been averred that the Unit was registered under the Himachal Pradesh Value Added Tax Act, 2005 and Central Sales Tax Act, 1956 and a sum of Rs.21,37,47,875/- is recoverable from the Unit by the replying respondents.
When the Unit failed to pay the amount, then vide order, the amount of an arrear was declared as arrear of land revenue to be recoverable under H.P. Land Revenue Act, 1954 by the Assistant Excise & Taxation Commissioner-cum-Collector ( LRA ), Una. Thereafter, the Red Entry to this effect was also made by the concerned Revenue Authorities over the aforesaid land.
Lastly, it is averred that the respondents-State is claiming first charge over the property by operation of law as provided under Section 26 of the HPVAT Act, whereas the petitioner-Bank is denying the claim in the property by virtue of mortgage. It is averred that the charge is wider than mortgage in as much as Section 100 of the Transfer of Property Act, deals with charges on an immovable property, which can be created by either of the parties or by operation of law over the property.
It would be evident from the replies filed by the respondents that they have nowhere disputed the lien of the State Bank of India as per Section 26 D noted and entered in the CERSAI, dated 06.03.2013, which clearly establishes the fact that the petitioner-Bank is not only a secured creditor but has created the first charge over the property in question as far as back in the year, 2013. Whereas the charge of respondents No. 1 and 2 had been created and reflected in revenue record vide Rapat No. 459, dated 09.07.2015 and that of respondent No. 3 only vide Rapat No. 173, dated 05.02.2018.
A Division Bench comprising Justices Tarlok Singh Chauhan and Satyen Vaidya observed that “Therefore, once the petitioner is a secured creditor and has moreover created the first charge over the property, then obviously, it has the first right to realise its dues and this question is no longer res integra in view of the authoritative pronouncement of the Hon’ble Supreme Court in Punjab National Bank Vs. Union of India & Ors.”
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