Authority: High Court of Judicature at Bombay

Order Date: 14th October 2026

Case Overview

  • Petitioner: Sharad Ashok Agarwal, auction purchaser of a secured asset.
  • Respondents: State of Maharashtra, Department of Goods and Services Tax (GST), other tax authorities, Union Bank of India (respondent No. 4), borrower Union Bank of India Ltd (respondent No. 5), and Indrayani Industrial Cooperative Estate Limited (respondent No. 6).
  • Background: Respondent No. 5 defaulted on a loan from Union Bank of India. The bank invoked the SARFAESI Act, obtained a court order on 13 Feb 2020 for possession, declared the mortgaged land‑building (1683 sq m, Plot Nos. 95, 103, 104, Gat No. 452, Village Takwe Bk., Indrayani Industrial Estate, Pune) as a free‑hold secured asset, and conducted a public e‑auction on 29 Jan 2025.
  • The petitioner was the highest bidder, paid full consideration, received a sale certificate on 10 Feb 2025, and the asset was handed over free of encumbrances.
  • The petitioner sought transfer of lease rights from respondent No. 6 on 12 Feb 2025. Respondent No. 6 refused, citing GST department notices dated 13 Jan 2017 (Rs 9,15,86,419) and 10 Jan 2023 (Rs 12,17,02,580) asserting a first charge in favour of the tax authorities.
  • The petitioner argued that under Section 26E of the SARFAESI Act, the secured creditor’s charge (registered with CERSAI on 22 Jun 2012) has statutory priority over any government dues.
  • The tax department relied on MVAT Act Sections 32 and 37, claiming a first charge created in 2015 and that the bank was aware of the dues.
  • Both sides cited multiple precedents, notably the Full Bench judgment in Jalgaon Janta Sahakari Bank Ltd. v. Joint Commissioner of Sales Tax and Bank of Baroda v. Assistant Commissioner of Sales Tax, establishing that the secured creditor’s priority under SARFAESI overrides state tax charges, subject to compliance with procedural requirements under the Maharashtra Land Revenue Code (MLRC).
  • The court examined whether the tax department complied with the MLRC proclamation requirements; it found no evidence of such compliance.
  • The court also noted that the tax department’s charge was not registered with CERSAI before the bank’s registration (bank’s CERSAI registration: 22 Jun 2012; tax department’s attempt to register: 2018, with formal registration only in 2025).

Final Outcome

  • The notices dated 13 Jan 2017 and 10 Jan 2023 issued by the GST Department (respondents No. 2 and 3) are quashed and set aside.
  • The attachment order dated 17 Jan 2017 (Order No. D.C/E‑102/RECOVERY/TIN_27260625552V/PUNE) is also quashed and set aside.
  • Respondent No. 6 (Indrayani Industrial Cooperative Estate Ltd) is directed to transfer the lease rights of the secured asset to the petitioner immediately and complete all formalities without delay.
  • All respondents (Nos. 1‑5 and 6) must complete any consequential steps within four weeks of the order.
  • If any surplus proceeds remain after the bank satisfies its dues, the surplus must be notified to respondents Nos. 1‑3, who are entitled to the residual amount.
  • Respondents Nos. 1‑3 retain the right to enforce recovery of their dues against other assets of respondent No. 5 as per law.

Topics: Court Order, Secured Creditors, GST Dues