Axis Bank LTD vs. State Of Maharashtra Thru. G P And Anr

Facts

Axis Bank Limited, the petitioner and a secured creditor, approached the Bombay High Court challenging a letter issued by the Deputy Commissioner of CGST & Central Excise (Respondent No. 1) to the society where the bank's secured flats are located. The letter directed the society not to issue a No Objection Certificate (NOC) for these flats. The petitioner's security interest was registered with CERSAI on December 20, 2020. Respondent No. 1 contended that the property was provisionally attached under Section 83 of the CGST Act, 2017, on February 15, 2022, after the impugned letter was issued.

Held

The Court held that the dues of the petitioner bank, as a secured creditor, have priority over any statutory dues claimed by Respondent No. 1. This was based on the amendment to the Securitisation Act, specifically Section 26E, which grants priority to registered security interests. The Court relied on the Full Bench judgment in Jalgaon Janta Sahakari Bank Limited Vs. Joint Commissioner of Sales Tax, which interpreted Section 26E and held that the dues of a secured creditor have priority over all other dues, including government revenues and taxes. Since the petitioner's security interest was registered with CERSAI and Respondent No. 1 failed to demonstrate registration of its charge, the petitioner's claim for priority was upheld. The Court found no legal basis for Respondent No. 1 to issue the impugned letter to the society, directing it not to issue an NOC for the secured flats. Consequently, the impugned letter was quashed, and the writ petition was allowed.

Key Issues

1. Whether the dues of a secured creditor, whose security interest is registered with CERSAI, have priority over statutory dues claimed by the revenue, specifically under Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Securitisation Act)? Petitioner's arguments: The petitioner argued that its registered security interest with CERSAI, coupled with the amendments to the Securitisation Act effective January 24, 2020, grants its dues first priority. They relied on the Full Bench judgment of the Bombay High Court in Jalgaon Janta Sahakari Bank Limited Vs. Joint Commissioner of Sales Tax, which affirmed the priority of secured creditors. The petitioner also noted that Respondent No. 1's charge was not registered with CERSAI. Respondent's arguments: Respondent No. 1 argued that the subject property was provisionally attached under Section 83 of the CGST Act, 2017, after the impugned letter was issued, and submitted that the Court should consider passing appropriate orders in light of this situation.