Canara Bank Vs Deputy Commissioner Sales Tax Office (Bombay High Court)
Bombay High Court held that secured creditors have a clear priority over the dues of the State as per Section 26E of the SARFAESI Act. Thus, clear title must pass to auction purchaser and State cannot be allowed to continue its encumbrance upon secured asset sold.
Facts- The Respondent No. 3-borrower company had availed credit facility from the Petitioner-bank and had executed documents creating security interest over the secured asset. On 09/07/2011, the Petitioner recorded its charge over the secured asset with CERSAI in compliance with provisions of the SARFAESI Act. On 02/02/2015, the order of attachment of the secured asset was passed attaching the same against sales tax/M-VAT dues and Central Sales Tax dues payable by the Respondent No. 3-borrower company for a period 2013-2014. The loan account became Non-Performing Asset. A Company Petition was filed by a 3rd person against the Respondent No. 3-borrower company, which was allowed and liquidation proceedings started.
The Petitioner Bank issued a demand notice u/s. 13(2) of the SARFAESI Act calling upon the Respondent No. 3 to discharge its liability to the tune of Rs.23,34,48,000/- as on 31/07/2016. On failure to comply with the demand notice, the Petitioner initiated measures u/s. 13(4) of the SARFAESI Act. The Petitioner was permitted to take possession of the secured asset.
