Andhra Pradesh High Court - Amravati
Axis Bank Ltd vs The State Of Ap on 6 November, 2024
Author: R. Raghunandan Rao
Bench: R Raghunandan Rao
APHC010442342023
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3508]
(Special Original Jurisdiction)
WEDNESDAY, THE SIXTH DAY OF NOVEMBER
TWO THOUSAND AND TWENTY FOUR
PRESENT
THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO
THE HONOURABLE SRI JUSTICE MAHESWARA RAO KUNCHEAM
WRIT PETITION NO: 23099/2023
Between:
Axis Bank Ltd ...PETITIONER
AND
The State Of Ap and Others ...RESPONDENT(S)
Counsel for the Petitioner:
1. SAI KRISHNA SRINIVAS G
Counsel for the Respondent(S):
1. GP FOR COMMERCIAL TAX
The Court made the following Order: (per Hon'ble Sri Justice R. Raghunandan Rao)
The petitioner is a scheduled commercial bank which had
advanced certain financial assistance to the 4th respondent. The respondents
5 to 9, had given security for repayment of the amounts advanced by the
petitioner under the said financial assistance.
2. As the 3rd respondent defaulted in payment of its dues, the
petitioner is said to have initiated action under the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002 [for short "the SARFESI Act"], for recovery of its dues. Apart from this,
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the petitioner is also said to have approached the Debts Recovery Tribunal,
Visakhapatnam, by way of O.A.No.1062 of 2019 and the same is still pending.
3. In a parallel proceeding, the 3rd respondent is said to have issued
a notice, dated 03.07.2023, for auction of certain properties, admeasuring
Ac.2.00 cents of land in Sy.Nos.270, 284-A and 287-B of Alipuram Village,
Nellore Rural Mandal, Nellore District, for recovery of the commercial taxes
due from the 4th respondent.
4. The petitioner being aggrieved by the issuance of such an auction
notice dated 03.07.2023, has approached this Court by way of the present
Writ Petition.
5. It is the contention of the petitioner that the property mentioned
above had also been mortgaged with the petitioner as security for repayment
of the loan due to the petitioner. The petitioner contends that by virtue of
Section-26E of the SARFESI Act, the dues of the petitioner, which is the
financial institution, has precedence over the State dues including the Sales
Tax, Value Added Tax or the Goods & Services Tax. The petitioner contends
that in such a situation, the 3rd respondent cannot sell away the property in
question as the petitioner has a higher claim over the property.
6. Learned Government Pleader for Commercial Tax would contend
that though Section-26E of the SARFESI Act gives precedence to the dues of
the petitioner over the dues of the State, it cannot mean that the petitioner can
sit over the property and stop the State from auctioning the property.
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7. The question of the precedence of dues and the rights of a
financial institution is vis-a-vis State dues, in view of Section-26E of the
SARFESI Act had been considered by a Division Bench of this Court in the
Case of State Bank of India & Ors Vs. Deputy Commercial Tax Officer-II,
Visakhapatnam Division & Ors1. In this case, a Division Bench of this Court
after reviewing the law and the various Judgments on this issue had held that
the claim of the financial institution would have precedence over the claim of
the State.
8. Another Division Bench of this Court in the case of the Andhra
Pradesh State Financial Corporation Vs. The State of Andhra Pradesh in
W.P.No.5335 of 2019 dated 30.08.2024, in similar circumstances had held
that the claim of Andhra Pradesh State Financial Corporation would have
precedence over the dues of the State, if such a security had been registered
with the Central Registry, as required under the provisions of the SARFESI
Act.
9. In the present case, the petitioner had filed a memo appending
the extract of the registration done with the Central Registry.
10. However, the question of whether such precedence over the
claims of the State would mean that the State cannot auction the property for
recovery of its dues remains open.
11. It must be held that a financial institution which has precedence
over the claim of the State cannot sit over the property and contend that no
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AIR 2021 AP 87: 2021(2) ALD 631 : 2021(2) ALT 390
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other person or authority can sell the property because it has a superior claim
over the said property. Such a course of action would stymie all recovery
efforts by the State Authorities. The financial institution would at best be
entitled to contend that the proceeds in such sale should first be utilized to
satisfy the demand raised by the financial institution and the surplus would
have to be made over to the State for satisfying its claim.
12. In the circumstances, this Writ Petition is disposed of leaving it
open to the 3rd respondent to go ahead with the auction, proposed by the 3rd
respondent. However, the proceeds of any such auction would have to be
paid over to the petitioner, to the extent of satisfying the claim of the petitioner.
Any surplus left after such appropriation can be utilized to satisfy the claims of
the State.
13. It is also open to the petitioner-bank to initiate auction
proceedings. In such a situation, the auction proceedings initiated by the State
would have to be kept on hold, till the proceedings initiated by the petitioner-
bank are completed. There shall be no order as to costs.
As a sequel, pending miscellaneous petitions, if any, shall stand
closed.
________________________
R. RAGHUNANDAN RAO, J.
______________________________
MAHESWARA RAO KUNCHEAM, J
BSM
HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO
AND
THE HONOURABLE SRI JUSTICE MAHESWARA RAO KUNCHEAM
W.P No.23099 OF 2023
(per Hon'ble Sri Justice R. Raghunandan Rao)
Date: 06.11.2024
BSM
