Can Fin Homes Limited Vs State of AP and Others (Andhra Pradesh High Court)
The Andhra Pradesh High Court considered a writ petition filed by Can Fin Homes Limited, a company registered under the Companies Act and functioning under the regulatory supervision of the National Housing Bank, challenging a notice of attachment and sale of immovable property issued in Form GST DRC-16 dated 12.11.2025 under Section 79 of the GST Act.
The petitioner stated that respondents 5 and 6 had approached it for a housing loan to purchase a residential flat bearing Flat No. 202, Seedhi Vinayaka Residency, Gandhibomma Center, Vidhyadharapuram, Vijayawada. A housing loan of ₹20,00,000 was sanctioned, and respondents 5 and 6 executed a registered equitable mortgage in favour of the petitioner through document No.1723/2020 dated 27.02.2020 by deposit of title deeds.
Subsequently, the third respondent, by proceedings dated 21.05.2025, called upon the petitioner to furnish details of the borrowers’ loan accounts during recovery proceedings relating to tax dues against M/s. Shirdi Sai Enterprises. The petitioner informed the third respondent that the disputed property had already been mortgaged in its favour and that no amount was payable by the petitioner to respondents 5 and 6.
Despite this, the fourth respondent issued a notice of attachment and sale of the immovable property in Form GST DRC-16 dated 12.11.2025 by exercising powers under Section 79 of the GST Act. The petitioner challenged the notice contending that, under Section 26E of the SARFAESI Act, it had priority over all other debts, including revenues, taxes and cesses payable to the Central Government, State Government or local authority.
Counsel for the petitioner relied upon an earlier judgment of a coordinate Bench of the Andhra Pradesh High Court in W.P. No.23312 of 2020 (AIR 2021 AP 52). That judgment held that Section 26E of the SARFAESI Act, which came into force with effect from 24.01.2020, contains a non obstante clause providing that, after registration of the security interest, debts due to a secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central or State Governments or local authorities. The earlier judgment also referred to Section 31B of the Recovery of Debts and Bankruptcy Act and held that both provisions confer priority upon secured creditors. It further held that revenue authorities do not have priority over the mortgaged property and rejected the contention that the secured creditor’s claim should yield to crown debt.
The petitioner also relied upon another coordinate Bench decision in State Bank of India Vs. Deputy Commercial Tax Officer-II, Dwaraka Nagar Circle, Visakhapatnam Division and others (AIR 2021 AP 87), wherein the Court reiterated that secured creditors have priority under Section 26E of the SARFAESI Act over dues recoverable by the State Government or the Central Government.
The High Court observed that the issue involved in the present case was no longer res integra. Following the ratio laid down in the earlier coordinate Bench decisions, the Court held that the notice of attachment and sale of immovable property in Form GST DRC-16 dated 12.11.2025 was liable to be set aside.
During the hearing, the Government Pleader for Commercial Taxes did not dispute the legal position but submitted that if any balance sale consideration remained after satisfaction of the petitioner’s loan, together with interest and other specified charges, such remaining amount should be made available to the Commercial Tax Department.
Taking note of this submission, the Court directed that, after satisfaction of the petitioner’s dues, including interest and other applicable charges, any remaining amount from the sale consideration shall be made available to respondent authorities.
Accordingly, the High Court allowed the writ petition and set aside the impugned notice of attachment and sale of immovable property in Form GST DRC-16 dated 12.11.2025 in respect of the disputed property. No order as to costs was made, and all pending applications, if any, stood closed.
Cases Discussed
- State Bank of India Vs. Deputy Commercial Tax Officer-II, Dwaraka Nagar Circle, Visakhapatnam Division and others (Andhra Pradesh High Court), AIR 2021 AP87
- W.P. No.23312 of 2020 (Andhra Pradesh High Court), AIR2021 AP 52
FULL TEXT OF THE JUDGMENT/ORDER OF ANDHRA PRADESH HIGH COURT
1. The petitioner is a company registered under the Companies Act, functioning under the Regulatory Supervision of the National Housing Bank. The petitioner is engaged in providing housing loans and related financial services, having operation of its branch network across the state of Andhra Pradesh.
2. The respondent Nos.5 & 6 approached the petitioner seeking financial assistance, so as to purchase residential flat vide Flat No.202, Seedhi Vinayaka Residency, Gandhibomma Center, Vidhyadharapuram, Vijayawada. Accordingly, the petitioner sanctioned housing loan of Rs.20,00,000/- in favour of the respondent No.5 & 6. In furtherance thereto, the respondent Nos.5 & 6 executed a registered equitable mortgage in favour of the petitioner through document No.1723/2020, dt.27.02.2020 by deposit of title deeds.
3. It is further case of the petitioner that the 3rd respondent by proceedings dt.21.05.2025 called upon the petitioner to furnish the details of the borrower’s loan accounts in the process of recovering the tax dues against M/s. Shirdi Sai Enterprises. To which, the petitioner replied to the 3rd respondent stating that the property under dispute was mortgaged in its favour and no amount was payable by the petitioner to the respondent Nos.5 & 6. Subsequently, the 4th respondent issued notice of attachment and sale of immovable property in Form GST DRC-16, dt.12.11.2025 by exercising power under Section 79 of GST Act. Questioning the said notice, the present writ petition is filed, on the ground that as per Section 26 (E) of the SARFAESI Act, the petitioner has got priority over all other debts including revenues, taxes and cesses payable to the Central Government, State Government or local authority.
4. The counsel for the petitioner Smt.V. Dyumani would submit that in view of Section 26(E) of SARFAESI Act the petitioner has got priority over all other dues that are recoverable including the State Government or Central Government. In support of her contention she places reliance on judgment dated 08.12.2020 rendered by coordinate bench of this Court in WP No.23312 of 20201, wherein it was held as under:-
“10. A reading of the above provisions of law makes it abundantly clear that the said provisions are analogous though under two different legislations. Section 26E of the Act, which came into force w.e.f 24-01 – 2020 begins with ‘non obstante’ clause and stipulates that after registration of the security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central or State Governments or local authority. Section.31B of the Bankruptcy Act is also to the same effect. When the language of the provisions of law is very lucid and clear, no other interpretation is possible.
11. In the instant case, the 3rd respondent created mortgage over the subject property by way of a registered deed in favour of Andhra Bank as long back as on 16-03-2013 and as the account of the loanee became NPA on 31-07-2016, the Bank authorities initiated action under the provisions of the Act by issuing notices under Section 13(2) and (4) of the Act. It is absolutely not in controversy that the petitioner herein clearly falls under the definition of “secured creditor” as defined under Section 2(zd) of the Act, since the petitioner herein is an Asset Reconstruction Company in whose favour Andhra Bank assigned the debt by way of registered document on 26-09-2017. In fact, the material available on record further reveals that on 18-11-2020 i.e., immediately after the sale notice came to be issued by the 2nd respondent, the petitioner herein brought to the notice of the Office of the 2nd respondent about the existence of the security interest in favour of the petitioner herein. In fact, when the provisions of Section 26E of the Act and 31B of the Bankruptcy Act fell for consideration of this court in W.P.No.43841 of 2018, when the registering authority failed to register the sale certificate, a Division Bench of this court, while holding that the secured creditor would have the priority of the charge over the mortgaged property, allowed the said writ petition directing the registering authority to register the sale certificate. In the said judgment, the Division Bench also held that the revenue has no priority of charge over the mortgaged property in question. Having regard to the language employed in Section 26E of the Act and 31B of the Bankruptcy Act, the contention of the learned Government Pleader that mortgage in favour of the petitioner herein should yield to crown debt coupled with charge cannot be sustained in the eye of law.
12. Submission of the learned Government Pleader that since the petitioner-institution did not take any steps pursuant to the assignment of debt in its favour, it is liable to be non-suited, is also not tenable having regard to the above said provision of law. With regard to the contention of the learned Government Pleader on the prospective application of the provisions of Section 26E of the Act and Section 31B of the Bankruptcy Act, it is to be noted that the said provisions do not make any distinction to the said effect. Accordingly, the said contention is also rejected.”
5. Further, following the ratio laid down in the said judgment, another coordinate bench of this Court in the case of
“State Bank of India Vs. Deputy Commercial Tax Officer-II, Dwaraka Nagar Circle, Visakhapatnam Division and others2” had reiterated that the secured creditor will have the priority as per Section 26(E) of SARFAESI Act over the dues that are recoverable by the State Government or the Central Government as the case may be.
6. As the issue involved in the case on hand, is no more res- integra, the notice of attachment and sale of immovable property in Form GST DRC-16, dt.12.11.2025 is liable to be set aside.
7. During the course of hearing, the Government Pleader for Commercial Taxes, while not disputing the legal position, would submit that, if any balance of sale consideration amount is available after the loan of the petitioner with interest and other charges as specified, the same shall be made available to the Commercial Tax Department. Considering, the submission of the Government Pleader, it is directed that if any amount is available after exhausting the dues of the petitioner as mentioned above, the remaining amount shall be made available to the respondent Nos.1 to 4 authorities.
8. Accordingly, the writ petition is allowed and the impugned notice of attachment and sale of immovable property Form GST DRC-16, dt.12.11.2025 in respect of property in dispute is set aside.
There shall be no order as to costs. As a sequel, pending applications, if any shall stand closed.
Notes:
1 AIR2021 AP 52
2 AIR 2021 AP87
