Section 26-E of the SARFAESI Act prioritizes secured creditors over tax dues, establishing that tax attachments are subordinate to secured interests.

ORDER :

(N. ANAND VENKATESH, J.)

This writ petition has been filed challenging the impugned communication dated 29.11.2024 of the 1st respondent and for a consequential direction to the 1st respondent to register the Sale Certificate dated 27.09.2024 issued by the petitioner in favour of the 3rd respondent without putting against the petitioner the endorsement made towards the attachment of the property by the Sales Tax Department.

2.Heard Ms.M.Akshayaa, learned counsel appearing on behalf of the petitioner and Mr.B.Vijay, learned Additional Government Pleader appearing on behalf of respondents 1 and 2.

3.The case of the petitioner is that the petitioner Bank had advanced certain credit facilities in favour of Sri Trirumurugan Agencies. Towards the said loan, a mortage by deposit of title deeds was created in favour of bank. The borrower failed to service the loan and hence, was classified as a non- performing assets. Proceedings were imitated under the SARFAESI Act and the property which was mortgaged was brought for auction sale. The 3rd respondent was the highest bidder and the Sale Certificate dated 27.09.2024 was issued in his favour. When this Sale Certificate was presented for registration before the 1st respondent, the 1st respondent refused to register the Sale Certificate by issuing the impugned communication dated 29.11.2024 by stating that there are some tax arrears payable to the Commercial Sales Tax Department and an attachment order has been passed in this regard on 25.10.2019 and therefore, till this attachment is in force, the Sale Certificate cannot be entertained and it cannot be registered. Aggrieved by the same, the present writ petition has been filed before this Court.

4.In the considered view of this Court, the issue involved in the present writ petition is squarely covered by the judgment of the Apex Court in Kotak Mahindra Bank Ltd., v. Girnar Corrugators Private Limited and Others reported in 2023 3 SCC 210 . The relevant portions are extracted hereunder:

29. In sharp contrast to this, Section 26-E of the SARFAESI Act which has been inserted vide Amendment in 2016, it provides that notwithstanding anything inconsistent therewith 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 revenue taxes and cesses and other rates payable to the Central Government or the State Government or local authority. However, the priority to secured creditors in payment of debt as per Section 26-E of the SARFAESI Act shall be subject to theprovisions of IBC. Therefore, such dues vis-à-vis dues under the MSMED Act, as per the decree or order passed by the Facilitation Council, debts due to the secured creditor shall have a priority in view of Section 26-E of the SARFAESI Act which is later enactment in point of time than the MSMED Act.

30. At this stage, it is required to be noted that Section 26- E of the SARFAESI Act which is inserted in 2016 is also having a non obstante clause. Even as per the submission on behalf of Respondent 1, two enactments have competing non obstante provision and nothing repugnant, then the non obstante clause of the subsequent statute would prevail over the earlier enactments. As per the settled position of law, if the legislature confers the later enactment with a non obstante clause, it means the legislature wanted the subsequent/later enactment to prevail. Thus, a "priority" conferred/provided under Section 26-E of the SARFAESI Act would prevail over the recovery mechanism of the MSMED Act. The aforesaid is to be considered along with the fact that under the provisions of the MSMED Act, more particularly Sections 15 to 23, no "priority" is provided with respect to the dues under the MSMED Act, like Section 26-E of the SARFAESI Act .

31. As observed hereinabove, Sections 15 to 23 of the MSMED Act are providing a special mechanism for adjudication of the disp