M/S. Indian Overseas Bank vs. The Commissioner GST And Central Excise

Held

The Court held that the attachment order by the first respondent, along with any attachment under an Arbitration Award, would only stand valid if there was money left over after satisfying the entire loan due to the petitioner. The Court relied on Section 26E of the SARFAESI Act, 2002, which provides priority to secured creditors over all other debts, revenues, taxes, cesses, and other rates payable to the Central or State Government or local authority, provided the security interest is registered. The Court found that the petitioner's mortgage was registered with CERSAI, and this registration grants them priority. Therefore, the second respondent ought to have registered the sale certificate. The Court directed the petitioner to present the sale certificate again to the second respondent, who was then directed to register it and make necessary entries in the encumbrance register forthwith.

Facts

The petitioner, Indian Overseas Bank, initiated proceedings under the SARFAESI Act after a borrower defaulted on a loan of ₹2.5 Crores, secured by mortgaging property. The property was taken into symbolic possession and subsequently e-auctioned for ₹4,23,30,000/- to respondents 3 to 6. When the sale certificate was presented to the second respondent (Sub Registrar), registration was refused due to an attachment order dated 23.04.2003 by the first respondent (Commissioner GST and Central Excise). The petitioner argued that their mortgage, registered with CERSAI, predates and has priority over the un-registered attachment order from 2003, citing provisions of the SARFAESI Act.

Key Issues

1. Whether the attachment order dated 23.04.2003 by the first respondent, which was not registered with CERSAI, has priority over the security interest registered by the petitioner under Section 26E of the SARFAESI Act, 2002? Petitioner's arguments: The petitioner contended that their mortgage was registered with CERSAI. They argued that Section 26C(2) of the SARFAESI Act mandates registration of attachment orders with the Central Registry, and such registration constitutes public notice. Furthermore, Section 26E of the SARFAESI Act clearly states that debts due to a secured creditor, after registration of security interest, shall be paid in priority over all other debts, revenues, taxes, cesses, and other rates payable to the Central or State Government or local authority. They relied on the Division Bench judgment of this Court in W.P.(MD)No.674 of 2023 and the Supreme Court judgment in Kotak Mahindra Bank Limited vs. Girnar Corrugators Private Limited and others. Revenue/State's arguments: The judgment records no specific arguments from the first respondent.