The statutory charge created for the sales tax dues will have priority over the debt payable to a bank.

Petitioner-Bank has filed this Writ Petition to issue Certiorarified Mandamus to quash Tamil Nadu Govt. Gazette No.01 dated 01. 2007 (Vellore District) and consequential order bearing No.NK A3/2310/2002 dated 13. 2007 and quash the same in so far as it relates to the property situate at Plot No.97, SIDCO Industrial Estate, SIPCOT, Ranipet and to direct the 1st Respondent to stop further proceedings from recovery of any arrears of sales tax payable by Tajura Leathers – 2nd Respondent from out of the sale proceeds which have been appropriated by the Petitioner-bank.

2. Facts in nutshell are as follows:-

.(i) Second Respondent - a partnership concern has availed various credit facilities from the Petitioner-bank. As a security for the due repayment of the loan, 2nd Respondent offered its immovable properties – [1] (i) Plot No.97, SIDCO Industrial Estate, (ii) Mukuntharayapuram-2548 sq.ft. S.No.476/5B and [2] S.Nos.114/4 and 114/5 situated at Manthangal village, Ranipet Town as its security by availing Equitable Mortgage apart from the hypothecation of Plant and Machinery. In addition to the above, three immovable properties of the guarantors were also mortgaged with the Bank. As the company and its guarantors/mortgagors failed to repay the dues and committed default, Petitioner filed O.A.No.1275/99 before D.R.T. Chennai for recovery of Rs.43,20,860/- as on 12. 1999. The said O.A. Is said to be still pending before DRT, Chennai.

.(ii) As there was enormous delay in recovery of the dues, even through DRT, after the implementation of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short SARFAESI Act), bank issued a notice dated 01.08.2005 u/s.13(2) of the said Act to the 2nd Respondent, its guarantors/mortgagors for the recovery of Rs.89,36,269.25 together with interest from 33. 2005 till payment in full.

(iii) Since there was a default inspite of the said notice, bank invoked the provisions of Sec.13(4) of the Act and took possession of the properties on 21. 2007 mortgaged to them and publication was effected. Possession was taken under due process of law.

.(iv) Second Respondent/guarantors/mortgagors did not take any steps to settle the dues of the bank, bank had issued sale notice and published the same in the newspaper on 12. 2007. Sale took place on 03. 2007. All the immovable properties mortgaged to the bank were sold in the public auction for a total sum of Rs.62.91 lakhs. Bank had also issued Sale Certificate in favour of the auction purchaser. Similarly, 2nd Respondents property comprised in S.No.476/5B was also sold and registered in favour of third party purchaser.

(v) Property purchased by the 3rd Respondent comprised in Plot No.97, SIDCO Industrial Estate, SIPCOT, Ranipet measuring an extent of 19520 sq.ft. together with shed was sold on 03. 2007 for Rs.19.23 lakhs and the auction purchaser-3rd Respondent remitted the money within the stipulated period and the sale certificate has been issued in its name.

.(vi) By the impugned order bearing No.NK.A3.2310/2002 dated 13. 2007, 1st Respondent informed the Petitioner that 2nd Respondent company has committed default in payment of sales tax of a sum of Rs.37,09,966/-and therefore, they are invoking the provisions of Sec.34(2) of Tamil Nadu General Sales Tax Act (for short TNGST Act) and as the company had committed default, a sum of Rs.37,09,966/-from and out of the sale proceeds should be remitted to the 1st Respondent as contemplated u/s.24(3) of TNGST Act.

(vii) On 01. 2007 in the Vellore District Gazette, Government had gazetted a notification about the attachment of the properties. By the impugned proceedings dated 13. 2007, 1st Respondent informed the Petitioner that 2nd Respondent has committed default in payment of sales tax of a sum of Rs.37,09,966/-and therefore, they are invoking the provisions u/s.34 of TNGST Act and as the company had committed default, a sum of Rs.37,09,966/-should be remit