Secured creditors' rights under Section 26E of the SARFAESI Act take precedence over state tax claims, confirming the principle of priority for registered interests.

JUDGMENT

(Vaibhavi D. Nanavati, J.) :

1. Issue Rule, returnable forthwith. Ms. Nidhi Vyas, learned AGP waives service of notice of rule for and on behalf of the respondent Nos.1 to 4 and Ms. Himani Kini, learned advocate waives service of notice of rule for and on behalf of the respondent No.5.

2. Heard Mr. Neel Vasant, learned advocate with Mr. Kurven Desai, learned advocate for Mr. Tirth Nayak, learned advocate appearing for the petitioner, Ms. Nidhi Vyas, learned AGP appearing for the respondent Nos.1 to 4 and Ms. Himani Kini, learned advocate appearing for the respondent No.5.

3. The petitioner herein is an auction purchaser; having purchased the property situated at Block No.30, Bardoli- Palsana Road, Nadida Bardoli and factory shed/office building constructed there to the extent of 26932 sq. ft., by way of E- Auction conducted by the respondent No.5 – Bank under the provisions of the SARFAESI Act, 2002. The petitioner herein is aggrieved by the Entry No.2063 undertaken by the respondent Nos.1 and 2 whereby, the charge of the respondent Nos.1 and 2– State is mutated in the revenue record. Being aggrieved by the said entry, the petitioner herein has filed the present petition and has prayed for the following reliefs:

“7. The Petitioner therefore prays that this Hon’ble Court may be pleased to:-

(A1) Issue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ directing the Respondent No.1 and 2 to quash and set aside the Entry No.2063 whereby a lien/charge is marked in their favour on the said Property purchased by the Petitioner being “On equitable mortgage of land to the extent of 5750 sq. mtr situated at Block No.30, Bardoli – Palsana Road, Nadida – Bardoli and factory shed/office building constructed there at to the extent of 26932 sq. ft.;

(A2) This Hon’ble High Court be pleased to direct the Respondent Nos.1 and 2 to remove the entry of charge i.e. Entry No.2063 from the records of the said Property; at Annexure ‘A’,

(B) Pending notice, admission and final hearing of this petition, this Hon’ble Court may be pleased to restrain the Respondents to take any steps in respect of the said Property pursuant to the Entry No.2063 and hold that the same will not come in way of the Petitioner to take further steps for completion of the sale conducted under the provisions of SARFAESI Act of the said Property including but not limited to the registration of the sale deed in favour of the Petitioner;

(C) Pending notice, admission and final hearing of this petition, this Hon’ble Court may be pleased to prohibit the learned Respondents from taking any further steps in relation to the said Properties.

(C) Award the cost of this petition.

(D) Pass such other and further orders as may be deemed just and expedient.”

4. Mr. Neel Vasant, learned advocate appearing for the petitioner, submitted that the petitioner herein has purchased the property-in-question through E-auction from the respondent No.5 – Bank. It is submitted that the charge of the Bank came to be registered with the Central Registry of Securitization Asset Reconstruction and Security Interest of India on 30.01.2016. The Bank being the secured creditor has priority over the charge of State.

4.1 Reliance is placed on Section 26E of the SARFAESI Act, 2002 and it is submitted that Section 26E provides that notwithstanding anything contained in any other law for the time being in force, after the 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 Government or the State Government