2026-VIL-746-BOM
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VAT High Court Cases

Maharashtra Value Added Tax Act, 2002 - Priority of Dues - Secured Creditors v/s State Revenue Authorities - Whether secured creditors registered under the SARFAESI Act and RDDB Act have statutory priority in realization of dues from sale of secured assets over and above State revenue dues including tax, penalty, interest and other statutory dues – Whether State tax authorities can record charges or seek recovery from secured assets already subject to prior security interests - HELD - The secured creditors registered under Section 26E of the SARFAESI Act and Section 31B of the RDDB Act have statutory priority in realization of dues from the sale of secured assets over and above all other debts including government revenues, taxes, cesses and rates payable to the Central Government or State Government or local authority - The term priority means the right to enforce a claim in preference to others and shall override any charge created under State laws creating first charge, in view of the express subordination of State enactments to Central legislation. For dues arising prior to the amendment to the SARFAESI Act dated 24.01.2020, the State must demonstrate compliance with all statutory procedures including attachment in accordance with law and due proclamation thereof before the property is sold - Merely issuing an attachment order without following prescribed procedures is insufficient to create any charge or priority over secured assets. The mere recording of boja or encumbrance in revenue records against secured assets after enforcement of security interests is not justified and such encumbrances must be removed. Auction purchasers who have purchased secured assets in auction sales conducted by secured creditors and paid full consideration and obtained sale certificates are entitled to enjoy the fruits of the purchase and are not liable to be burdened with charges or encumbrances recorded by State tax authorities - The State cannot chase the same asset in the hands of purchaser to realise its dues after the secured creditor has already enforced its security interest and sold the asset. The attachment orders and intimation notices issued by the State tax authorities are quashed and set aside - The petitioners are allowed
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