SARFAESI Act has an Overriding Effect on the provisions of VAT Act: Himachal Pradesh HC [Read Order]

The Himachal Pradesh Court has held that SARFAESI Act and RDB Act have an overriding effect on the provisions of HPVAT.

The Petitioners were purchasers of property for consideration of Rs.3,71,50,000/- in an E-auction conducted by respondent No.5-Bank in proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short SARFAESI Act) for default in payment of Loan Cash Credit etc. by the previous owner of property M/s Dev Bhumi Ispat. Respondent No.5-Bank has issued a Sale Certificate in favour of the petitioner.

The court observed that one M/s Dev Bhumi Ispact had availed financial assistance Cash Credit and Term Loan from respondent No.5 by keeping the property as a secured asset creating a lien/charge over the property. For non-payment/re-payment of cash credit and term loans by M/s Dev Bhumi Ispat, respondent No.5-Bank had invoked provisions of SARFAESI Act and Security Interest (Enforcement) Rules, 2002 and had advertised public notice for E-auction of the suit property in newspaper dated 12.7.2019 proposing E-auction on 30.7.2019. The petitioners were confirmed as the highest bidders and the respondent had issued a Certificate of Confirmation of Sale of property under the SARFAESI Act,2002.

It was observed that the security assets under Sections 26-E and 35 of SARFAESI Act and Section 31-B of Recovery of Debts Due to Banks, Financial Institutions Act, 1993 (RDB Act) declare priority of secured creditors upon secured assets overall revenues, taxes, cesses and other rates payable to Central Government or State Government or local authorities. Section 26 of HPVAT creates the first charge on the property of the dealer or such other person from whom any amount of tax or penalty including interest is recoverable.

Justice Vivek Singh Thakur concluded that SARFAESI Act and RDB Act shall have an overriding effect on provisions of the HPVAT Act and permitted to transfer of the property in favour of the petitioner with confirmation of sale dated 2.8.2019 and Sale Certificate dated 4.11.2019. Ms Ambika Kotwal appeared on behalf of the petitioner and Shri Arwind Sharma appeared on behalf of the respondent.

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