Secured Creditors have Priority Charge Over Sales, Commercial & Income Tax Claims

ICICI Bank Ltd. Vs ACIT (Madras High Court)

Introduction: In a recent legal battle between ICICI Bank Ltd. and ACIT, the Madras High Court delivered a crucial judgment granting priority charge to secured creditors over tax claims. This article delves into the details of the case, the court’s ruling, and its implications.

Detailed Analysis: The case revolved around ICICI Bank seeking directions to remove an attachment order dated 21.04.2021 over a mortgaged property, asserting its status as a secured creditor. Despite the tax claims by the first respondent, the court recognized ICICI Bank’s priority charge under Section 26E of the SARFAESI Act, 2002. Citing precedent cases and the Act’s provisions, the court emphasized the supremacy of secured creditors’ rights in such scenarios.

The judgment highlighted the precedence set by the Full Bench of the Madras High Court in similar cases, affirming secured creditors’ priority over government dues. Notably, the court reiterated that even in auction proceedings, secured creditors retain priority, with excess amounts subject to appropriate remittance.

Furthermore, the judgment underscored the implications for auction proceeds, clarifying the obligations of secured creditors regarding excess amounts and their liability vis-à-vis government departments. This ruling provides clarity and legal certainty for secured creditors, reinforcing their position in debt recovery proceedings.

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