The Madras High Court while giving relief to the SBI ruled that the rights of a secured creditor to realize secured debts due and payable by the sale of assets over which security interest is created would have priority over all debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or Local Authority.
This petitioner, State Bank of India requested to register the Sale Certificate issued in respect of the property by the petitioner Bank and for a consequential direction to efface / delete the encumbrance attachment entry, on the file of the Joint IV Sub-Registrar, Madurai South, Madurai as against the property.
The petitioner bank contended that the sale certificate is required to be registered by the respondent authority. However, the encumbrance in favor of the commercial Tax Department will remain and may affect the right of the auction purchaser. The right of the Commercial Tax Department qua the secured creditor was a subject matter of consideration by the Full Bench in the case of Assistant Commissioner (CT), Anna Salai-III Assessment Circle Vs. Indian Overseas Bank and it was held that the secured creditor namely the Bank will have precedence over the dues payable to the Commercial Tax Department.
The division bench of Justices T.S.Sivanganam and S.Ananthi while allowing the petition directed the Sub Registrar to necessarily delete the property attachment reflected in the encumbrance certificate at the instance of the commercial tax department.
“It is made clear that though the attachment at the instance of the first respondent Commercial Tax Department has been directed to be deleted, it will not in any manner affect the department’s right to collect the dues from the defaulting assessee by proceeding in accordance with the law,” the High Court said.
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