31B

Section 31B of Recovery of Debts and Bankruptcy Act, 1993 (RDB Act, 1993) would override the Section 88 of Finance Act, 1994 – The Pr. Commissioner of CGST & CX Vs. State Bank of India and Ors. – DRAT Chennai

Hon’ble DRAT Chennai has upheld the decision of DRT where it was held that Section 31B of RDB Act, 1993, makes it very clear that rights of Secured Creditors over the secured assets will have precedence over all Government dues including taxes. This provision has come into force in 2016, and the provision under which Appellant relies on, is of the year, 1994, therefore, Section 31B of RDB Act, 1993, would override the provision relied on by Appellant. In other words, Section 31B of RDB Act, 1993, clarifies that the rights of Secured Creditors will have precedence over all Government dues including taxes, and it prevails over Section 88 of Finance Act, 1994.

Section 31B of Recovery of Debts and Bankruptcy Act, 1993 (RDB Act, 1993) would override the Section 88 of Finance Act, 1994 – The Pr. Commissioner of CGST & CX Vs. State Bank of India and Ors. – DRAT Chennai Read Post »

Whether Auction Purchasers in a securitization auction are liable to discharge the sales tax dues since the property as auctioned was attached by Sales Tax Department prior to the auction – Shailesh K. Bothra Vs. State of Maharashtra – Bombay High Court

Login with GoogleOR Username Password Remember Me     Forgot Password In case you’ve already logged in, click here to

Whether Auction Purchasers in a securitization auction are liable to discharge the sales tax dues since the property as auctioned was attached by Sales Tax Department prior to the auction – Shailesh K. Bothra Vs. State of Maharashtra – Bombay High Court Read Post »

Whether the dues of secured financial institution will have priority over State tax dues or not – Kotak Mahindra Bank Vs. M/s Kailash Oil Cake Industries – Gujarat High Court

In the instant case, the Bank is a secured creditor under the SARFAESI Act. Therefore, the Bank has first valid charge over the property in question by way of mortgage and has first priority under Section 26E of the Act to recover its dues from it. In the present case, respondent No.11 has sent a communication dated 27.04.2022 to respondent No.12 – Revenue Authority concerned and thereby tried to affect the title of the property in question, which cannot be permitted. The debts due to Bank / Financial Institution – a secured creditor shall be paid in priority over other debts/taxes payable to the State Government is the law laid down by the various provisions of the Act as well as by the various decisions of this Court and of the Hon’ble Apex Court as noted above. The petitioner has no concern with the dues of the State Authorities. If the State Authorities have dispute qua their dues, they can avail appropriate legal remedy before appropriate forum against the appropriate person/s in accordance with law. Under these circumstances, the petitioner cannot be left in lurch.

Whether the dues of secured financial institution will have priority over State tax dues or not – Kotak Mahindra Bank Vs. M/s Kailash Oil Cake Industries – Gujarat High Court Read Post »

Bombay High Court Larger Bench decision on priority in payment of dues to a secured creditor for enforcing its security interest under the provisions of the SARFAESI Act and Section 26E in the SARFAESI Act or section 31B of the RDDB Act – Jalgaon Janta Sahakari Bank Ltd. & Anr. Vs. Joint Commissioner of Sales Tax Nodal 9, Mumbai, & Anr. – Bombay High Court

Following substantial questions of law for answers:

a. Having regard to the statutory provisions under consideration, does a secured creditor (as defined in the SARFAESI Act and the RDDB Act) have a prior right over the relevant department of the Government [under the BST Act/MVAT Act/MGST Act] to appropriate the amount realized by the sale of a secured asset?

b. Whether, despite section 26E in the SARFAESI Act or section 31B of the RDDB Act being attracted in a given case, dues accruing to a department of the Government ought to be repaid first by reason of ‘first charge’ created over any property by operation of law (viz. the legislation in force in Maharashtra) giving such dues precedence over the dues of a secured creditor?

c. Are the provisions, inter alia, according ‘priority’ in payment of dues to a secured creditor for enforcing its security interest under the provisions of the SARFAESI Act prospective?

d. Whether section 31B of the RDDB Act can be pressed into service for overcoming the disability that visits a secured creditor in enforcing its security interest under the SARFAESI Act upon such creditor’s failure to register the security interest in terms of the amendments introduced in the SARFAESI Act?

e. Whether the priority of interest contemplated by section 26E of the SARFAESI Act could be claimed by a secured creditor without registration of the security interest with the Central Registry? Depending on the answer to this question, whether correct proposition of law has been laid down (extracted infra) in paragraph 21 of the Division Bench decision reported in ASREC (India) Limited vs. State of Maharashtra and Ors. (2021) ibclaw.in 117 HC and in paragraph 35 of the Division Bench decision, reported in 2021 (2) Mh. LJ 721 (State Bank of India vs. the State of Maharashtra and Ors.)?

f. When, and if at all, can it be said that the statutory first charge under the State legislation, viz. the BST Act, the MVAT Act and the MGST Act, as the case may be, stands displaced having regard to introduction of Chapter IV-A in the SARFAESI Act from 24th January 2020? and

g. Whether an auction purchaser of a secured asset would be liable to pay the dues of the department in order to obtain a clear and marketable title to the property having purchased the same on “as is where is and whatever there is basis”?

Bombay High Court Larger Bench decision on priority in payment of dues to a secured creditor for enforcing its security interest under the provisions of the SARFAESI Act and Section 26E in the SARFAESI Act or section 31B of the RDDB Act – Jalgaon Janta Sahakari Bank Ltd. & Anr. Vs. Joint Commissioner of Sales Tax Nodal 9, Mumbai, & Anr. – Bombay High Court Read Post »

SARFAESI Act and RDB Act shall have overriding effect to provisions of H.P. Value Added Tax Act 2005 (HPVAT) – Bhagwan Singh Vs. State of Himachal Pradesh- Himachal Pradesh High Court

Hon’ble High Court held that SARFAESI Act as well as RDB Act are Central Legislations whereas HPVAT is a State Legislation. SARFAESI Act and RDB Act declare priority of secured creditors upon secured assets over all revenues, taxes, cesses and other rates payable to Central Government or State Government or local authorities. Provisions of Section 31-B of RDB Act are also the same. Section 26 of HPVAT creates first charge on property of dealer or such other person from whom any amount of tax or penalty including interest is recoverable.

SARFAESI Act and RDB Act shall have overriding effect to provisions of H.P. Value Added Tax Act 2005 (HPVAT) – Bhagwan Singh Vs. State of Himachal Pradesh- Himachal Pradesh High Court Read Post »

A secured creditor will be having first charge of a property if the order of attachment is subsequent to the date of mortgage – Bank of India Vs. The State of Andhra Pradesh – Andhra Pradesh High Court

In this case, after issuance of sale certificate in auction u/s 13 of the SARFAESI Act, S.R.O. refused to register the same on the ground that the subject properties are placed in prohibited list due to attachment orders received.
Hon’ble High Court held that on a conjoint reading of Section 26E of the SARFAESI Act, 2002 and Section 31B of RDB Act, 1993, there cannot be any doubt that the rights of a secured creditor to realize the debts due and payable by sale of assets over which security interest is created, would have priority over all the debts. The petitioner will be having first charge of the property if the order of attachment is subsequent to the date of mortgage. In the instant case, admittedly, the mortgage of the documents was in the year 2015 and 2017 and the attachment orders came to be passed in the year 2018 i.e., long after the property was mortgaged to the secured creditor. Hence, the rights of the petitioner bank/secured creditor to realize secured debts due and payable to it by sale of assets over which security interest is created shall have priority and, hence, the point is answered in favour of the petitioner bank.

A secured creditor will be having first charge of a property if the order of attachment is subsequent to the date of mortgage – Bank of India Vs. The State of Andhra Pradesh – Andhra Pradesh High Court Read Post »

In the event of establishing that the mortgage was prior to the initiation of action by the Income Tax Department, prior to the default of the Assessee under the Income Tax Act, then the Bank may claim right over mortgage property – State Bank of India Vs. The Tax Recovery Officer Income Tax Department – Madras High Court

Hon’ble High Court holds that in the event of establishing that the mortgage was prior to the initiation of action by the Income Tax Department, prior to the default of the Assessee under the Income Tax Department, then the Bank may claim right over such mortgages. However, in order to ascertain the clear facts and circumstances, an enquiry is to be conducted by the Tax Recovery Officer. Therefore under Rule 11 of Schedule II of the Income Tax Act, the petitioner-Bank has to approach the Tax Recovery Officer for adjudication of the facts, so as to form an opinion whether the petitioner-Bank is entitled to enforce their rights or not.

In the event of establishing that the mortgage was prior to the initiation of action by the Income Tax Department, prior to the default of the Assessee under the Income Tax Act, then the Bank may claim right over mortgage property – State Bank of India Vs. The Tax Recovery Officer Income Tax Department – Madras High Court Read Post »

Scroll to Top