TAHSILDAR, KOLLAM Vs. NIZAMUDEEN S.

JUDGEMENT

(1.) The captioned writ appeals are filed by the State and its officials challenging the common judgment of the learned Single Judge in W. P. (C) Nos. 28316 of 2016 and other connected matters dtd. 30/7/2019, whereby the writ petitions filed by the financial institutions guided by the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) are allowed; and held that a secured creditor under Sec. 26E of the SARFAESI Act and Sec. 31B of the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act, 1993) obtains priority over the right claimed by the Revenue, both in proceeding against the properties in question, or in recovering the secured debt, and accordingly quashed the proceedings initiated by the sales tax authorities and the registration authorities.

(2.) Admittedly, amounts are due from various registered dealers, under the state laws, who have availed loans from various financial institutions. Proceedings were initiated as per the provisions of the Kerala General Sales Tax Act, 1963 (KGST Act, 1963) and the Kerala Value Added Tax Act, 2003 (KVAT Act, 2003) to recover the amounts due to the Government. Therefore when steps were taken to register the documents pertaining to the properties sold by the Banks under the provisions of the SARFAESI Act, 2002 / the RDB Act, 1993, the Registration department raised objections and issued proceedings conveying that, since amounts are due to the State Government, as per the provisions of the statutes referred to above first charge is created over the properties and therefore documents cannot be registered, as per the provisions of the Registration Act, 1908.

(3.) In some of the cases, the auction purchasers have sought direction to the registrars to register the sale certificates in favour of the purchasers. In some of the cases, the State Government has proceeded against the properties which are mortgaged to the financial institutions to recover the arrears of sales tax and value added tax invoking the provisions of the Kerala Revenue Recovery Act, 1968. The Banks / financial institutions are claiming that they have the right as secured creditors to proceed against the properties in question in terms of the provisions of Sec. 26E of the SARFAESI Act, 2002 and Sec. 31B of the RDB Act, 1993, and the statutory charges as per the state acts no longer survive.