Secured creditors have priority over government dues only after tax assessments are finalized, reaffirming the principle of secured interests in property.

JUDGMENT :

D.N.RAY, J.

1. Heard learned advocate Ms.Harshada K. Darji for the Petitioner, learned advocate Mr. Biju A. Nair for the Respondent No.1, and learned Assistant Government Pleader Ms. Shrunjal Shah for the Respondent No.2.

2. Rule returnable forthwith. Learned advocate Mr.Biju A.Nair waives service of notice of rule for the Respondent No.1 and learned Assistant Government Pleader Ms. Shrunjal Shah waives service of notice of rule for the Respondent No.2. With the consent of learned advocates for the respective parties, the matter is taken up for hearing, as the issue involved is very short.

3. The petition has been filed under Article 226 of the Constitution of India with the following prayers :-

“A. Your Lordship be pleased to issue a writ of mandamus or a writ in the nature of prohibition or certiorari or mandamus or any reference to the encumbrances, if any, which are contradictory to the provisions of section 26E of the SARFAESI Act.

B. The Respondent No. 1 has no power such conditional sale certificate, when there is no rule of law which empowers the Respondent No. 1 to issue the Sale Certificate by mentioning the encumbrances of any Government authorities.

B (1). Your lordship be pleased to issue a writ of mandamus or a writ in the nature of prohibition or certiorari or mandamus or any other appropriate writ, order or direction be given to the Respondent No. 2 to remove the provisional attachment order dated 18.05.2015 as well as the final attachment order dated 09.08.2016, whereby the charge was created on the property being Commercial property at survey no. 316/8p, Sr. No. 294, Opp. Rajdhani Hotel, Mahuva Road, Badhada, Ta. Savarkundla, Dist. Amreli, as the said property is not of the main borrower, the Respondent No. 3 herein and also that the so-called charge of the Respondent No. 2 was subsequent and subservient to the charge of the Respondent No. 1 Bank.

C. No basis has been given in the impugned order which can justify the issuance of the conditional sale certificate by the Respondent No.1. The impugned action is totally fallacious and unsustainable in the eyes of law.

D. The action of the Respondent No. 1 is even otherwise contrary to law and suffers from the vice of complete non-application of mind.

E. The Petitioner submits that the action of the Respondent no. 1, which is completely illegal and unconstitutional, has caused huge prejudice and immeasurable consequences, pecuniary and otherwise, to the Petitioner.

F. The action of the Respondent No. 1 is even otherwise contrary to law and suffers from the vice of complete non-application of mind.”

4. The brief facts of the case are as follows:

4.1 The Respondent No. 1 granted financial assistance to the Respondent No. 3 who failed to repay the same within the prescribed time, as a result of which, the account of the Respondent No. 3 was classified as a Non Performing Asset (NPA). The Respondent No. 1 initiated steps for recovery of its outstanding amount under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFAESI Act ).

4.2 The Respondent No.1 published an auction notice on 20.06.2022 for holding the e-auction on 25.07.2022 of the subject property. Accordingly to the Petitioner, sale certificate dated 24.08.2022 the auction took place on 25.07.2022, and the Petitioner was declared the highest bidder.

4.3 The Petitioner, pursuant to such auction, deposited the entire sale consideration of Rs.23,10,000/-, and the Sale Certificate was issued by the Respondent No. 2. According to the Petitioner the sale certificate dated 24.08.2022 reflects the encumbrances of Commercial Tax Office on TIN No.24132000144 of the Respondent No. 3 for Rs.34,02,518/-.

4.4 The Petitioner sent a letter to the Respondent No. 1, requesting the removal of the said encumbrance. As the Respondent No. 1 did not respond to the said letter, the Petitioner has filed the present petition, challenging the conditional share certificate dated 24.08