Case Note & Summary
The High Court of Judicature at Bombay allowed a batch of six writ petitions filed by a secured creditor and auction purchasers, quashing various attachment orders, intimations and encumbrance entries made by State tax departments on properties over which the creditor held security interests. The dispute centered on the priority of dues of a secured creditor under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) vis-à-vis statutory dues claimed under the Maharashtra Goods and Services Tax Act, 2017 (MGST Act) and the Maharashtra Value Added Tax Act (MVAT Act). The petitioners relied on a Full Bench decision of this Court in Jalgaon Janta Sahakari Bank Ltd. v. Joint Commissioner of Sales Tax which had settled the law in their favour after the 2020 amendment to Section 26E of the SARFAESI Act. The State authorities resisted the petitions, arguing that Section 82 of the MGST Act and Section 37 of the MVAT Act contained non-obstante clauses creating a 'first charge' in favour of the State, and that many attachment orders had been issued before the amendment date of 24 January 2020 and thus could not be affected retrospectively. The Court, after referring extensively to paragraphs 82 to 85 of the Full Bench judgment, rejected all contentions of the State. It held that the word 'priority' in Section 26E was deliberately chosen by Parliament to ensure that dues of secured creditors rank ahead of all other debts, revenues, taxes, cesses and rates payable to the Union or State Governments, irrespective of any non-obstante or first charge provisions in other laws. Regarding pre-amendment attachments, the Court ruled that the State must show it had taken all necessary steps under the Maharashtra Land Revenue Code, such as issuance of proclamation, and that mere prior attachment is insufficient to defeat the secured creditor's priority. Consequently, the Court quashed the impugned orders and encumbrance entries, affirming the paramountcy of the secured creditor’s claim over the state's tax dues.
Headnote
A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 26E - Priority of Secured Creditor - The dues of a secured creditor under the SARFAESI Act have priority over all other debts, including revenues, taxes, cesses and other rates payable to the Central Government or State Government. This priority overrides any 'first charge' or non-obstante clauses in State legislations such as the Maharashtra Goods and Services Tax Act, 2017. (Paras 6-11)
B) Maharashtra Goods and Services Tax Act, 2017 - Section 82 - Non-obstante clause - The expression 'notwithstanding anything to the contrary contained in any law' in the MGST Act does not defeat the priority granted to secured creditors under Section 26E of the SARFAESI Act. The Full Bench in Jalgaon Janta Sahakari Bank Ltd. v. Joint Commissioner of Sales Tax held that the word 'priority' in Section 26E was intentionally used by Parliament to ensure precedence over all other dues. (Paras 9-11)
C) Attachment orders prior to 24/01/2020 - Timeliness of State's objection - If an attachment order is issued before the 24/01/2020 amendment to the SARFAESI Act, the State must demonstrate that it took all necessary steps under the Maharashtra Land Revenue Code, such as issuance of proclamation, to enforce its charge. The mere issuance of a prior attachment order does not by itself defeat the secured creditor's priority. (Para 12)
Issue of Consideration
Whether the dues of a secured creditor under the SARFAESI Act have priority over statutory dues claimed by various state tax departments under the MGST Act, MVAT Act, etc., especially in light of the non-obstante clauses and prior attachment orders.
Final Decision
The Court allowed the writ petitions. It quashed the attachment orders, intimations, and encumbrance entries. It held that the dues of the secured creditor have priority over the state's tax dues in light of Section 26E of the SARFAESI Act as interpreted by the Full Bench in Jalgaon Janta. The objections based on non-obstante clauses and prior attachments were rejected. The Court directed that the petitions stand disposed of accordingly.
Law Points
- Dues of secured creditor under SARFAESI Act have priority over all other debts including state taxes
- non-obstante clause in MGST Act does not override SARFAESI Section 26E
- prior attachment orders do not defeat secured creditor's priority unless state has taken all steps under Maharashtra Land Revenue Code
Case Details
2026 LawText (BOM) (07) 57
Writ Petition (L) No. 15997 of 2024 with WP(L) No. 21078 of 2024, WP(L) No. 31148 of 2024, WP(L) No. 31453 of 2024, WP No. 8103 of 2025, WP No. 3350 of 2026
Manish Pitale, Shreeram V. Shirsat
For Petitioners: Mr. Malhar Zatakia with Mr. Deepak Saxena, Mr. Shyam Sarangi, Mr. Ayman Khan, Ms. Roshni Dumpala; For Respondent/State: Ms. Anjali Helekar, G.P. with various Additional Government Pleaders and AGPs; Others: Mr. Nikhil Rajani, Mr. Sarthak Diwan, Mr. Anshul Anjarekar
Union Bank of India & Ors.
The Deputy Commissioner of State Tax & Ors.
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Nature of Litigation
Writ petitions under Articles 226 and 227 of the Constitution of India challenging attachment orders and encumbrances created by state tax authorities over properties where the secured creditor held security interest, claiming priority of secured debt under the SARFAESI Act.
Remedy Sought
Quashing of attachment orders, intimations, and encumbrance entries; declaration that secured creditor's dues have priority over state tax dues.
Filing Reason
State tax authorities attached the properties or recorded encumbrances despite the secured creditor's rights, ignoring the priority assigned to secured creditors under Section 26E of the SARFAESI Act post amendment.
Previous Decisions
Prior to the present batch, a Full Bench of this Court in Jalgaon Janta Sahakari Bank Ltd. v. Joint Commissioner of Sales Tax (2022 SCC OnLine Bom 1767) had settled the issue of priority in favour of secured creditors.
Issues
Whether the dues of a secured creditor under the SARFAESI Act have priority over statutory dues under the MGST Act and MVAT Act, particularly in light of non-obstante clauses in those statutes.
Whether attachment orders issued before the 24/01/2020 amendment to the SARFAESI Act can defeat the secured creditor's priority.
Submissions/Arguments
Petitioners: Relied on Full Bench judgment of Bombay HC in Jalgaon Janta Sahakari Bank Ltd. v. Joint Commissioner of Sales Tax, which held that Section 26E of the SARFAESI Act gives priority to secured creditor over all other debts including state taxes, and that non-obstante clauses in MGST Act cannot override this. They also argued that prior attachments are ineffective if no further steps were taken under the MLR Code.
Respondent State: Argued that the MGST Act and MVAT Act contain non-obstante clauses and create a 'first charge' on property, which overrides the general priority in the SARFAESI Act. Also contended that attachment orders were issued prior to the amendment date (24/01/2020) and thus the amendment should not apply retrospectively.
Ratio Decidendi
The ratio decided in Jalgaon Janta Sahakari Bank Ltd. v. Joint Commissioner of Sales Tax (2022 SCC OnLine Bom 1767) that Section 26E of the SARFAESI Act grants priority to the dues of secured creditors over all other debts, including state taxes, regardless of 'first charge' or non-obstante clauses in State legislation. Prior attachment orders do not defeat this priority unless the State has taken all necessary steps under the Maharashtra Land Revenue Code to enforce its charge.
Judgment Excerpts
The Full Bench of this Court in ... Jalgaon Janta ... came to the conclusion that the dues of secured creditors under the provisions of the SARFAESI Act would have priority. (Para 6)
In the above quoted paragraph 85 of the Full Bench Judgment, it is categorically laid down that the dues of the secured creditor shall have priority over all others, including all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority. (Para 11)
As regards the objection ... that the attachment orders were issued prior to the amendment dated 24/01/2020 ... the Respondent State would have to demonstrate on facts that after issuing the attachment order, it had taken all necessary steps under the Maharashtra Land Revenue Code, including issuance of proclamation and other steps contemplated. (Para 12)
Procedural History
Multiple writ petitions were filed by the Union Bank of India (secured creditor) and auction purchasers challenging various attachment orders, intimations, and encumbrance entries made by State tax authorities. The petitions were clubbed together for hearing on the common issue of priority. During hearing, Writ Petition No. 13658 of 2024 was de-tagged to be heard separately. The remaining six petitions were heard together and decided by this common judgment.
Acts & Sections
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: Section 26E
- Maharashtra Goods and Services Tax Act, 2017: Section 82
- Maharashtra Value Added Tax Act, 2002: Section 37
- Maharashtra Land Revenue Code, 1966: Section 169(1)
- Recovery of Debts Due to Banks and Financial Institutions Act, 1993: Section 31B
