2026-VIL-1180-GUJ
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SGST High Court Cases

GST/SARFAESI - Priority of secured creditor over State GST dues under Section 26E of the SARFAESI Act, 2002 - Petitioner, a banking corporation, had granted credit facilities secured by registered mortgage of immovable properties. The borrower's account was classified as a Non-Performing Asset, and a notice under Section 13(2) was issued. On the borrower's failure to pay within sixty days, Petitioner took possession of the secured assets under Section 13(4) read with Rule 8(1) of the Security Interest (Enforcement) Rules, 2002. Respondent got a charge entered in the record of rights of the properties for a demand outstanding against the borrower under the CGST Act, 2017 - Whether the Petitioner bank, as a secured creditor, has first priority over the secured properties under Section 26E of the SARFAESI Act, 2002 as against the charge created by the State for GST dues - HELD - The issue is no more res integra in view of the decision of this Court. Section 31B of the Recovery of Debts and Bankruptcy Act, 1993, inserted by the 2016 Amendment Act, contains a non-obstante clause and expressly provides that secured debts shall be paid in priority over all other debts and Government dues, including State taxes. Section 26E of the SARFAESI Act similarly gives priority to secured creditors over Government dues - The language of these provisions indicates the intention of Parliament to give precedence over Government dues notwithstanding anything contrary in any other law, and there is no repugnancy with the State enactment providing a first charge. The first priority over the secured assets is therefore of the Bank and not of the State Government by virtue of the charge provision under the State law - The entry mutated in the record of rights is quashed and set aside. It is declared that the Bank has first charge over the mortgaged properties by virtue of Section 26E of the SARFAESI Act - The writ petition is allowed
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