Gujarat High Court
Indian Overseas Bank vs State Of Gujarat on 4 August, 2025
NEUTRAL CITATION
C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 12196 of 2024
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE ANIRUDDHA P. MAYEE Sd/-
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Approved for Reporting Yes No
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INDIAN OVERSEAS BANK
Versus
STATE OF GUJARAT & ORS.
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Appearance:
MR AAYAN PATEL WITH MR DHANESH DESAI FOR SINGHI & CO.(2725)
for the Petitioner(s) No. 1
MS NIDHI VYAS AGP for the Respondent(s) No. 1
MR RASHESH SANJANWALA, SR. COUNSEL, WITH MR NIHAR THAKKAR
WITH MR DIGANT M POPAT(5385) for the Respondent(s) No. 7
NOTICE SERVED BY DS for the Respondent(s) No. 1,2,3,4,5,6,8
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CORAM:HONOURABLE MR. JUSTICE ANIRUDDHA P. MAYEE
Date : 04/08/2025
ORAL JUDGMENT
1. The present writ petition has been filed praying for the following reliefs:-
"26.A. This Hon'ble Court be pleased to issue a writ of mandamus and/or certiorari or a writ, order or direction in the nature of mandamus and/or certiorari or any other appropriate writ, order or direction to quash and set aside the Revenue Entry No. 8058 dated 02.03.2024, in respect of the said Property recording the purported charge of Respondent No. 4 over the said Property on the basis of Respondent No.4's application dated 02.03.2024;
B. This Hon'ble Court be pleased to issue a writ of mandamus or a writ, order or direction in the nature of mandamus or any other appropriate writ, order or direction to:
(a) the Respondent No. 3 to forthwith and without any demur accept the sale certificate dated 02.05.2024 annexed at Annexure G" hereto for the purpose of registration and issue a Page 1 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined certificate under Section 60 of the Registration Act, 1908 in respect of the sale certificate dated 02.05.2024;
(b) the Respondent No.5 to mutate necessary entries in the relevant revenue records, recording the sale of the said Property in favour of the Respondent No.7;
C. This Hon'ble Court be pleased to issue a writ of mandamus or a writ, order or direction in the nature of mandamus or any other appropriate writ, order or direction, granting a mandatory injunction against the Respondent Nos.1 to 6, their men, agents, staffs, subordinates, employees, officers and associates, restraining them from dealing with, creating any charge and/or attempting to do any of the foregoing in respect of the said Property or any portion thereof in any manner whatsoever;
D. Pending hearing and final disposal of this Petition, this Hon'ble Court by way of ad-interim/interim relief be pleased to direct the Respondent No. 3 to accept and lodge the application for registration of the Sale Certificate dated 02.05.2024;
E. Pending hearing and final disposal of this Petition, this Hon'ble Court may be pleased to restrain the Respondent Nos.1 to 6, their men, agents, staffs, subordinates, employees, officers and associates from dealing with, creating any charge and/or attempting to do any of the foregoing in respect of the said Property or any portion thereof in any manner whatsoever;
F. Ex-parte ad interim and/or interim relief in terms of Prayers D and E be granted;
G. For Costs; and
H. Such other and further relief as may be considered fit and
expedient in the facts of the present case be granted."
2. The brief facts of the case are that, the petitioner is a Bank duly constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. A piece and parcel of land being Survey No.556, Village Mithirohar, Taluka Gandhidham, Kutch admeasuring 52,913 sq. mts. came to be mortgaged in favour of the petitioner as a security for a credit facility extended Page 2 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined to the respondent No.8 i.e. Patel Woods Products Limited by way of equitable mortgage on deposit of title deeds. That accordingly a charge on the said property came to be registered under the provisions of the Companies Act, 1956 with the Registrar of Companies. That the respondent No.8 company defaulted in repayment of its loan and therefore, the account of the respondent No.8 came to be declared as Non Performing Asset ('NPA' for short) on 27.02.2012 in accordance with the applicable directives and guidelines of the Reserve Bank of India. That pursuant to the declaration of the account of the respondent No.8 as NPA, the petitioner Bank issued a notice dated 03.12.2012 under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act" for short) to the respondent No.8 to repay its liability aggregating to Rs.79,40,71,061.66 as on 26.11.2012. Since the respondent No.8 failed to make the payment, the petitioner invoked its statutory right under Section 13(4) of the SARFAESI Act and took symbolic possession of the property on 04.06.2013. Thereafter, the petitioner made attempts to sell the said mortgaged property for realizing its outstanding dues. In the public e-auction conducted on 22.02.2024, the respondent No.7 participated in the said e- Page 3 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025
NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined auction and gave a highest bid and was consequently declared successful auction purchaser in respect of the sale of the said mortgaged property. That thereafter the petitioner received full bid amount and accordingly issued a sale certificate dated 02.05.2024 in respect of respondent No.7 in accordance with Rule 9(6) of the SARFAESI Rules. In the meantime, it has come to the knowledge of the petitioner that the respondent No.4 i.e. the Assistant State Tax Commissioner, Gandhidham had created a charge on the said mortgaged property which came to be recorded in the revenue record vide entry No.8058. The said charge came to be created in the revenue record pursuant to an application dated 02.03.2024 by the respondent No.4 in respect of recovery of outstanding dues amounting to Rs.67,35,38,675/-. Upon coming to know of such entry creating charge in favour of the respondent No.4, the petitioner addressed a letter dated 21.03.2024 to the respondent No.4 to withdraw its charge on the said mortgaged property as the petitioner Bank had first and prior right to recover its dues from the said property. That when the petitioner Bank and the respondent No.7 proceeded for the registration of the sale certificate dated 02.05.2024 in favour of the respondent No.7, the respondent No.3 Sub-Registrar, Gandhidham refused to register the said sale certificate and the Page 4 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined mutation in the name of the respondent No.7 in the revenue record in furtherance of such sale certificate due to the charge of respondent No.4 registered over the said property. Aggrieved by the action of the respondent No.3 in not registering the said sale certificate issued in favour of the respondent No.7 and further denying the mutation of the name of the respondent No.7 of the mortgaged property, the petitioner has filed the present writ petition.
3. Mr. Aayan Patel, learned counsel for the petitioner Bank submits that the action of the respondent No.4 in denying the registration of the sale certificate and mutation of the name of the respondent No.7 in the revenue record in view of entry No.8058 at the instance of the respondent No.4 creating a charge on the mortgaged property is contrary to law. He submits that the petitioner Bank is a secured creditor under the SARFAESI Act in whose favour the borrower had created a security interest by way of mortgage on 30.03.2005. He submits that the petitioner was the first charge holder and has a prior and superior share over the mortgaged property. He submits that under the provisions of the SARFAESI Act, statutory priority has been created in favour of the secured creditor over all other Page 5 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined debts including tax, interests, penalty, etc. payable to the Central or the State Government. He submits that the Section 31B of the Recovery of Debt and Bankruptcy Act, 1993 ["Act of 1993" for short] notified w.e.f. 01.09.2016 contains a clear right in favour of the secured creditor to realize debts due and payable to the secured creditor in priority over all other debts including tax dues. He submits that the said provision is clear and unambiguous. He submits that Section 35 of the SARFAESI Act provides an overriding effect to the provisions contained therein notwithstanding with any inconsistency contained in any other law. He, therefore, submits that the provisions of the SARFAESI Act will prevail over the provisions of Gujarat Value Added Tax Act, 2003 ["VAT Act" for short] since the SARFAESI Act is a Central statute and would prevail over the VAT Act which is a State legislation. He has further submitted that the mortgage in favour of the petitioner Bank and the charge on the property was created and registered prior in point of time then the charge registered by the respondent No.4. He submits that the purported charge created by the respondent No.4 over the said mortgaged property cannot prevent the petitioner from enforcing its right and realizing its dues by way of sale of the said property. He further submits that the respondent No.4 has Page 6 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined created a charge over the said property pursuant to the recovery proceedings initiated by the petitioner Bank. The substantive right of the petitioner cannot be defeated by the respondent No.4 for realizing its tax dues. He submits that further the petitioner Bank is also duty bound to protect its interest and to ensure that there is a conclusion of the sale of the property in favour of the respondent No.7 since the respondent No.7 had paid the complete sale consideration and is entitled for mutation of its name in the revenue record. He submits that if the purported charge of the respondent No.4 is not quashed, the consideration amount deposited by the respondent No.7 will have to be refunded which would nullify the e-auction sale conducted by the petitioner and thereby the recovery of its legitimate claim. He submits that it is open for the respondent No.4 to recover its dues by creating charge over the unencumbered properties of the respondent No.8. He submits that the action of the respondent No.4 by creating a charge on the mortgaged property renders the provisions of the SARFAESI Act nugatory. He, therefore, submits that the subsequent charge created by the respondent No.4 on the mortgaged property is null and void and the prayers prayed for in the present writ petition be allowed.
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NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined 3.1 In support of his contention, learned counsel for the petitioner has relied upon the following judgments:-
1. In case of Bank of Baroda through its Asst. General Manager Prem Narayan Sharma v. State of Gujarat - Special Civil Application No.12995 of 2018 dated 16.09.2019.
2. In case of Kalupur commercial Cooperative Bank Ltd.
v. State of Gujarat - Special Civil Application No.17891 of 2018 dated 23.09.2019.
3. In case of Madhaviben Jitendrabhai Rupareliya v. State of Gujarat - Special Civil Application No.9565 of 2023 and allied matters dated 04.01.2024.
4. In case of Punjab National Bank v. Union of India & Ors. - (2022) 7 SCC 260.
4. Mr. R.S. Sanjanwala, learned Senior Counsel appearing on behalf of the respondent No.7 while supporting the case of the petitioner Bank has submitted that the law in respect of the priority on the charge created over the property by various authorities is now well settled. He submits that after the amendment in the SARFAESI Act, the intention of the legislature is clear. The Central Act stipulates that the mortgagor under the SARFAESI Act shall have first charge over the mortgaged property and other Government agencies shall have a secondary charge which can be satisfied only after the primary charge of the mortgagor under the SARFAESI Act. He submits that in the present case, the subject property has been sold to realize the Page 8 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined outstanding dues of the petitioner Bank. The answering respondent is successful bidder and has paid the full bid amount to the petitioner Bank and in lieu thereof the sale certificate dated 02.05.2025 has also been issued to the answering respondent in accordance with Rule 9(6) of the SARFAESI Rules evidencing the sale of the said property to the respondent No.7. He submits that in view of the settled legal position, the prayers prayed for in the present writ petition be allowed.
5. Per Contra, Ms. Nidhi Vyas, learned AGP appearing for the respondent No.4 Assistant State Tax Commissioner, Gandhidham submits that since the financial year 2006-2007 till the financial year 2017-2018, the respondent No.8 has completely failed to make the payment of dues under Section 42 of the VAT Act and Section 9 of the Central Service Tax Act, 1956 and there are dues amounting to Rs.67,33,22,207.62 ps. She submits that for the assessment order dated 28.03.2017, the respondent No.8 company had filed appeal before the learned Dy. Sales Tax Officer, Rajkot which came to be rejected vide order dated 10.11.2020. Thus, the respondent No.8 was liable to make the payment of the outstanding dues of the State Tax Page 9 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined Department. It is submitted that after issuing various reminders to the respondent No.8 over a period of years since the payment remained outstanding, accordingly, an order under Section 154 of the Bombay Land Revenue Code, 1879 came to be passed on 25.08.2018 against the respondent No.8. Learned AGP further submits that pursuant thereto, the respondent authorities had issued letter dated 24.08.2018 to the Talati, village Mitihirohar to record charge in the mutation entry for land bearing Survey Nos.556/557. It is submitted that the said letter was not complied with and thereafter again letters were issued to the Mamlatdar to record the charge of the VAT Authority, however, the same were also not complied with. That upon a reminder letter issued on 16.02.2024, the charge came to be recorded in favour of the respondent No.4 vide mutation entry No.8058 on 02.03.2024. It is submitted that notices have been issued under Section 44 of the VAT Act to various banks regarding outstanding dues of the respondent No.8. She submits that such notices were issued to the ICICI Bank, AXIS Bank, HDFC Bank and State Bank of India. She submits that the respondents have been extremely vigilant to take steps in respect of the outstanding dues. She submits that the petitioner Bank was also very well aware of the outstanding dues of the respondent No.8 Page 10 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined as series of communications were addressed to the petitioner Bank regarding the same. She submits that though the petitioner Bank was very well aware about the outstanding dues of the state authorities, yet it did not adopt any such procedure as per Rule 9 of the SARFAESI Rules. She submits that the sale certificate dated 02.05.2024 issued in favour of the respondent No.7 auction purchaser states as "ENCUMBRANCE NOT KNOWN". She submits that such an action of the petitioner Bank in issuing the said sale certificate is dehors the Rules and illegal. She submits that the auction purchaser is also duty bound to comply with the payment of the liability of the pending dues and to ensure that all encumbrances are discharged. She submits that no relief can be granted to the petitioner Bank since the property in dispute has been sold on "AS IS WHERE IS BASIS"
and therefore, the liability of the State Tax Authority will still subsist over the subject property. She submits that even if as per the provision of Section 26 of the SARFAESI Act, the Bank's charge will have priority over other charges, the charge which are over due shall still subsist. The petitioner Bank cannot take benefit of such provision and seek deletion of said entry as the deletion of the said entry will render the authorities remedy less and there would be no recovery of outstanding dues. She Page 11 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined submits that if the writ petition is allowed, the final liability of the respondent No.8 would be a bad debt and result in financial loss to the public exchequer. She submits that the present writ petition be dismissed.
6. Heard learned counsels for the parties and perused the documents on record.
7. By the present writ petition, the petitioner Bank is seeking a direction to quash and set aside the revenue entry No.8058 dated 02.03.2024 which has recorded the charge of the State Tax Authorities towards the outstanding tax dues of the respondent No.8 who was the erstwhile owner. The subject property has been sold in auction under the SARFAESI proceedings by the petitioner Bank to recover its dues since the respondent No.8 borrower had defaulted in repayment of the loan availed. The questions which arise for consideration are whether Section 26E of the SARFAESI Act would prevail over Section 48 of the VAT Act and whether the petitioner Bank has first priority to recover its dues being a secured creditor under the SARFAESI Act.
8. The relevant Sections under the SARFAESI Act read as Page 12 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined under:-
"26E. Priority to secured creditors. --Notwithstanding anything contained in any other law for the time being in force, after the registration of 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 Government or State Government or local authority.
Explanation.--For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code.]
35. The provisions of this Act to override other laws. --The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.
37. Application of other laws not barred.--The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force."
8.1 The relevant provisions of Recovery of Debts and Bankrupcy Act, 1993 are as under:-
"31B. Priority to secured creditors.--Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realise secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority. Explanation.--For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code.
34. Act to have overriding effect. --
(1) Save as provided under sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.
(2) The provisions of this Act or the rules made thereunder shall be in Page 13 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984), [, the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and the Small Industries Development Bank of India Act, 1989 (39 of 1989)]."
8.2 The relevant Sections of the Gujarat Value Added Tax Act, 2003 read as under:-
"46. Special powers of tax authorities for recovery of tax as arrears of land revenue.
(1) For the purpose of effecting recovery of the amount of tax, penalty or interest due from any dealer or other person by or under the provisions of this Act or under any earlier law, as arrears of land revenue -
(i) the Commissioner, the Special Commissioner, Additional Commissioner and the Joint Commissioners shall have and exercise all the powers and perform all the duties of the Collector under the Bombay Land Revenue Code, 1879.
(ii) the Deputy Commissioners and Assistant Commissioners shall have and exercise all the powers (except the powers of arrest and confinement of a defaulter in a civil jail) and perform all the duties of the Assistant Collector or Deputy Collector under the said Code.
(iii) the Commercial Tax Officers shall have and exercise all the powers (except the powers of arrest and confinement of a defaulter in a civil jail) and perform all the duties of the Mamlatdar under the said Code.
(2) Every order passed in exercise of the powers conferred by sub- section (1) shall, for the purpose of sections 73, 75, 78, 79 or 94, be deemed to be an order passed under this Act.
48. Tax to be first charge on property. Notwithstanding anything to the contrary contained in any law for the time being in force, any amount payable by a dealer or any other person on account of tax, interest or penalty for which he is liable to pay to the Government shall be a first charge on the property of such dealer, or as the case may be, such person."
9. It would be pertinent to observe that all the relevant clauses i.e. Section 26E of the SARFAESI Act, Section 31(B) of the RDB Act and Section 46 of the VAT Act start with a non- obstante clause. It is well settled that a non-obstante clause is usually inserted in the provision so as to give an overriding effect Page 14 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined to certain provisions over some contrary provisions that may be existing either in the same enactment or in some other enactment. It is inserted to avoid the operation and effect of all contrary provisions and to give it a fully operational effect. Such a provision cannot be an impediment for the operation of the enactment. It is trite law that the non-obstante nature of a provision being of wide amplitude, the interpretative process thereof has to be confined to the legislative policy and the intention of the legislature and not beyond the same. The scope of the said provision has to be determined strictly.
10. A plain reading of the provisions enumerated hereinabove would show that there is no repugnancy in the two legislations i.e. the SARFAESI Act and the Gujarat Value Added Tax Act. The SARFAESI Act is a Central Act and the VAT Act is a State Act. Both the legislations have been enacted by the Central Government as well as the State Government respectively under the Entries 1 and 2 of the Schedule and not under the concurrent list. The amendment made by the Parliament in enacting Section 26E of the SARFAESI Act is to give priority to the secured creditor vis-a-vis the State dues. The object of the SARFAESI Act is to give priority to the secured creditors with the Page 15 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined intention to allow faster recovery of the debts of the secured creditors. Thus, the rights of a secured creditor to realize secured debts due and payable by sale of assets over which a secured interest has been created will have priority over all the debts and Government dues to Central Government, State Government or any local authority. It is well settled law by a catena of decisions of the Apex Court as well as this Court that the charge in favour of a secured creditor will precede over the charge of an unsecured creditor.
11. A Division Bench of this Court in KALUPUR COMMERCIAL CO-OPEARATIVE BANK LTD. Versus STATE OF GUJARAT vide order dated 23.09.2019 in Special Civil Application No. 17891 of 2018 has held that: -
"27. The principles discernible from the decision of the Supreme Court in the case of Kumaon Motor Owners' Union Ltd. (supra) are that, if there is a conflict between the provisions of the two Acts and if there is nothing repugnant, the provisions in the later Act would prevail. The second principle discernible is that, while resolving the conflict, the court must look into the object behind the two statutes. To put it in other words, what necessitated the legislature to enact a particular provision, later in point of time, which may be in conflict with the provisions of the other Acts. The third principle discernible is that the court must look into the language of the provisions. If the language of a particular provision is found to be more emphatic, the same would be indicative of the intention of the legislature that the Act shall prevail over the other statutes.
29. The principles of law discernible from the decision of the Supreme Page 16 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined Court in the case of Solidaire India Ltd. (supra) are that, if there is a conflict between the two special Acts, the later Act must prevail. To put it in other words, when there are two special statutes which contain the non-obstante clauses, the later statute must prevail. This is because at the time of enactment of the later statute, the legislature could be said to be aware of the earlier legislation and its non-obstante clause. If the legislature still confers the later enactment with a non obstante clause, it means that the legislature wanted that enactment to prevail.
37. The Rajasthan High Court, in the case of G.M.G. Engineers & Contractor Pvt. Ltd. (supra), has taken the view as under :
"The first issue for my consideration is as to whether amended provisions of Section 26E of the Act of 2002 and Section 31B of the Act of 1993 would apply to the present case. It is for the reason that both the provisions were inserted in the year 2016, whereas, attachment of the property in question to recover the dues was made by the respondent-department in the year 2014 itself. It is not the case of either of the parties that amended provision is retrospective and otherwise perusal of amended provision does not show it thus would apply prospectively. The property already attached towards recovery of State dues cannot be nullified by the subsequent legislation when it has not been given retrospective effect. If argument of the learned counsel for petitioner about priority rights of the secured creditors vis a vis Government dues is accepted, it would apply from the date of amendment, whereas, attachment of the property was made in the year 2014, thus it was not free for auction. The enforcement of statutory first charge by attachment cannot be nullified by subsequent auction when no priority right was existing in favour of the secured creditors at the relevant time. Section 47 of the Act of 2003 is relevant for it, thus quoted hereunder for ready reference:
"47. Liability under this Act to be the first charge- Notwithstanding anything to the contrary contained in any law for the time being in force, any amount of tax and any other sum payable by a dealer or any other person under this Act, shall be the first charge on the property of such dealer or person."Page 17 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025
NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined Section 47 of the Act of 2003 starts with non-obstante clause and creates first charge on the property. The issue about priority claim of the secured creditor vis a vis first charge on the property under the State legislation was considered by the Supreme Court in the case of Central Bank of India (supra). If State Act creates first charge on the property then secured creditors cannot have claim against the statutory provision. Therein, consideration was also made even in reference to Section 100 of the Act of 1882. It is submitted that judgment of the Apex Court in the case of Central Bank of India (supra) was prior to the amendment in the Act of 2002 and 1993 thus would not apply to the cases governed by the amended provisions. In the case in hand, the attachment of property by the State is prior to the amendment thus amended provision would not apply. Section 47 of the Act of 2003 was invoked prior to the amendment. We are yet considering the effect of the amended provision. The Apex Court has made analysis of a provision of first charge vis a vis secured creditor in the case of Central Bank of India (supra). The first charge was given supremacy than rights under mortgagee or to a secured creditor. The distinction between "first charge and secured creditor" is necessary to analyse scope of Section 26E of the Act of 2002 and Section 31B of the Act of 1993. The amended provisions are having overriding effect and give priority to the secured creditors vis a vis State dues. It does not, however, nullify the effect of first charge created on the property under the State Act. If intention of Parliament would have been to nullify the effect of first charge, the language of Section 26E of the Act of 2002 and Section 31B of the Act of 1993 would have been different as indicated by the Apex Court in the case of Central Bank of India (supra). It should have been with non- obstante clause and that secured creditors would have priority over the first charge created under a State legislation. The amendment made by Parliament is to give priority to the secured creditors vis a vis State dues without speaking about the first charge.""]
12. The Hon'ble Apex court in PUNJAB NATIONAL BANK Versus UNION OF INDIA AND OTHERS in (2022) 7 SCC 260 has Page 18 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined observed that:
"43. A Full Bench of the Madras High Court in UTI Bank Ltd. v. CCE10, while dealing with a similar issue, has held that: (SCC OnLine Mad paras 25-26) "25. In the case on hand, the petitioner Bank which took possession of the property under Section 13 of the SARFAFSI Act, being a special enactment, undoubtedly is a secured creditor. We have already referred to the provisions of the Central Excise Act and the Customs Act. They envisage procedures to be followed and how the amounts due to the Departments are to be recovered. There is no specific provision either in the Central Excise Act or the Customs Act, claiming "first charge" as provided in other enactments, which we have pointed out in earlier paragraphs.
26. In the light of the above discussion, we conclude,
(i) Generally, the dues to Government ie, tax, duties, etc. (Crown's debts) get priority over ordinary debts.
(ii) Only when there is a specific provision in the statute claiming "first charge" over the property, the Crown's debt is entitled to have priority over the claim of others.
(ii) Since there is no specific provision claiming "first charge" in the Central Excise Act and the Customs Act, the claim of the Central Excise Department cannot have precedence over the claim of secured creditor viz, the petitioner Bank.
(iv) In the absence of such specific provision in the Central Excise Act as well as in Customs Act, we hold that the claim of secured creditor will prevail over Crown's debts.' In view of our above conclusion, the petitioner UTI Bank, being a secured creditor is entitled to have preference over the claim of the Deputy Commissioner of Central Excise, first respondent herein."
(emphasis in original and supplied)"
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NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined
13. Thus, Section 26E of the SARFAESI Act provides for priority of secured creditor notwithstanding anything contained in any other law and 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 Government or State Government or local authority. The Securitisation Act is meant for enforcement of security interest, which is created in favour of the secured creditor and provides for special and specific mechanism/provision for the financial assets and security interest. Any other provisions in other Acts would not defeat the provision of Section 26E of the Securitisation Act and the object and purpose of Securitisation Act.
14. In the present case, the dues, which are in the nature of sales tax payable by the original owner/ borrower, cannot claim priority over the dues of the secured creditor. The charge, sought to be created by the Sales Tax Authority, can no way override the right of the Bank to recover its dues as a secured creditor of the subject property. The subject property was sold by the Bank to the respondent No. 7 to enforce its secured debts under the SARFAESI Act, in which, the respondent No. 7 was the successful auction purchaser. The sale certificate issued to the Page 20 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined respondent No. 7 entitles it to become an absolute owner of the property. The subject property has come in favour of the respondent No. 7 free from all encumbrances.
15. Thus, the charge in respect of the property in question created for the sales tax dues will have no efficacy in law and the order of the State Tax Authority registering the charge over the subject property in relation to the sales tax dues payable by the original owner of the property will not have any preference over the dues of the petitioner bank. The State Tax Department shall have its remedy to recover the dues from the original borrower.
16. In view of the aforesaid discussion and reasons, the revenue entry No.8085 dated 02.03.2024 is hereby quashed and set aside. It is further clarified that the excess amount, if any, remaining after satisfying the dues of petitioner Bank shall be adjusted towards the dues of the State Tax Department. Considering the facts of the present case and the well settled legal position, the action of the respondent No.3 Sub-Registrar, Gandhidham in refusing to accept and register sale certificate in the name of the respondent No.7 in the revenue record pursuant to an application dated 02.03.2024 by the respondent No.4 the Assistant State Tax Commissioner, Gandhidham cannot be Page 21 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025 NEUTRAL CITATION C/SCA/12196/2024 JUDGMENT DATED: 04/08/2025 undefined sustained in law. As a result, the respondent No.3 Sub- Registrar, Gandhidham is directed to accept and register the sale certificate and mutation in favour of the respondent No. 7 based on the Sale Certificate so issued by the petitioner Bank.
With the aforesaid observations and directions, the present Special Civil Application is allowed. No order as to the costs.
Sd/-
(ANIRUDDHA P. MAYEE, J.) KAUSHIK D. CHAUHAN Page 22 of 22 Uploaded by KAUSHIK D. CHAUHAN(HC00197) on Mon Aug 04 2025 Downloaded on : Mon Aug 04 22:55:28 IST 2025