IMPORTANT POINTS
The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is the only other special law, apart from the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, dealing with recovery of debts due to banks and financial institutions. On this interpretation also, the Sick Industrial Companies (Special Provisions) Act, 1985 will not be included for the obvious reason that its primary objective is to rehabilitate sick industrial companies and not to deal with the securities market.

JUDGMENT :

DEVAN RAMACHANDRAN, J.

1. These writ petitions, save five, have been filed by various Banks and Financial Institutions challenging the action of the State's Revenue Machinery (the Revenue), in taking possession of and attempting to sell certain properties for alleged arrears of Sales Tax and Value Added Tax from its respective owners, which are claimed by them to be their secured assets, consequent to equitable mortgages having been created over them in their favour towards security for financial facilities/assistance availed of by its owners.

2. Four among the afore writ petitions, namely W.P. (C) Nos. 31945/2017, 37543/2017, 37552/2017 and 34002/2018 have been filed by the auction purchasers of secured assets sold by the Banks/Financial Institutions and they seek that the sale certificates in their favour be directed to be registered by the Revenue authorities, who appear to be refusing to do so citing arrears of sales tax left due by the original owners with consequential directions to effect the transfer of registry of the properties in their favour.

3. Finally, W.P. (C) No. 28962/2017 has been filed by the owner of a property challenging the action of the respondent-Bank against it for recovery of debts from him asserting that the Revenue has First Charge over it.

4. While the petitioner-Banks/Financial Institutions claim that they have the primary right, as secured creditors, to proceed against the properties in question under Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act ('the SARFAESI Act' for brevity) and Section 31B of the Recovery of Debts and Bankruptcy Act ('the RDB Act' for brevity), the Revenue claims First Charge over them under the provisions of Section 26B of the Kerala General Sales Tax (KGST) Act and Section 38 of the Kerala Value Added Tax (KVAT) Act.

5. It is this conflict of claims and interests which are at the core of these writ petitions and which call for resolution from this Court.

6. Obviously, therefore, before I can move ahead, an examination of these four provisions become imperative, for which purpose, they are drawn out and reproduced as under:

(a) Section 26E of the SARFAESI Act:

“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.”

(b) Section 31B of the RDB Act:

“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 loan authority.

Explanation - For the purpose 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 asserts of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code.”

(c) Section 26B of the KGST Act:

“Tax payable to be first charge on the property:-Notwithstanding anything to the contrary contained in any other law for the time being in force, any a