(Prayer: This Writ Petition is filed under Article 226 of the Constitution of India praying for the issuance of Writ of Certiorarified Mandamus calling for the entire records relating to Rc. No.3828/1997/A3 dated 24.4.2009 on the file of the First Respondent and quash the same as illegal and arbitrary and forbear the Respondents 1 and 2 from in any manner attaching or selling the property belonging to the Petitioners viz., Door No.66 (Old Door No.300 and New Door No.245), Poonamallee High Road, Chennai 600 102.)

1. The Petitioners, who are the purchases of the property in the auction conducted by the Third Respondent under the provisions of SARFAESI Act, have approached this Court challenging the auction notice dated 24.4.2009 issued by the First Respondent for recovery of arrears of commercial tax, which are payable by M/s. Pioneer Cashew Limited to which the property originally belonged to.

2. The case of the Petitioners is that the Third Respondent advertised for tender-cum-auction for sale of the property of one M/s. Pioneer Cashew Limited under Section 13(4) of the SARFAESI Act, 2002. The said property is land and building bearing No.300 Poonamallee High Road, Maduravoyal, Chennai 600 095. The said auction was conducted by the Third Respondent for recovery of loan availed by M/s. Pioneer Cashew Industries Limited. The Petitioners were successful bidder and the sale was concluded in their favour by way of Sale Certificate dated 19.5.2008 and subsequently physical possession was also given.

3. When things stand so, the Petitioners received a communication dated 29.09.2008 issued under Section 36 of the TNGST Act from the First Respondent stating that for arrears of sale tax due and payable by M/s. Pioneer Cashew Limited, the properties purchased by the Petitioner were sought to be auctioned by the First Respondent on 24.12.2008. A suitable reply was given by the Petitioners on 20.12.2008. Subsequently another notice dated 24.4.2009 was served on the Petitioners by the First Respondent intimating about the proposed auction of the said property on 11.6.2009 for recovery of arrears of sales tax payable by the said Pioneer Cashew Industries Limited. The said auction notice is challenged before this Court.

4. Mr. Lakshminarayanan and Mr. P.B. Balaji, the learned Counsel appearing for the Third Respondent and Petitioner contended that:

(1) The purchase of the property by the Petitioners is under the provisions of SARFAESI Act, 2002 from the Bank, which is a secured creditor.

(2) The said auction sale conducted by the Third Respondent-Bank is valid.

(3) The sale by the Third Respondent was concluded as early as on 19.5.2008 by issuance of Sale Certificate and handing over possession of the property to the Petitioners.

(4)SARFAESI Act, 2002 is a special Act and it would override the provisions of Tamil Nadu General Sales Tax Act, 1959.

(5) There is no First charge created over the property regarding arrears of tax under Section 24 of the TNGST Act.

(6) There is no non-obstante clause in TNGST Act.

(7) In the absence of any specific statutory provisions, creating first charge for the tax arrears in the TNGST Act, the claim of the secured creditors (Third Respondent-Bank) would prevail over crowns debt (Sales Tax arrears).

He relied on the following judgments in support of his contentions:

1. Union of India and others v. SICOM and another, 2009 (2) SCC 121 [LQ/SC/2008/2442] ;

2. Central Bank of India v. State of Kerala and others, 2009 (6) CTC 656 (SC) : 2009 (4) SCC 94 [LQ/SC/2009/460] ;

3. AI Champdany Industries Limited v. Official Liquidator and another, 2009 (3) CTC 881 (SC) : 2009 (4) SCC 486 [LQ/SC/2009/392] ;

4. The Indian Bank, rep. by Authorised Officer, Vellore Circle Officer v. Commercial Tax Officer, Office of CTO Navalpur, Ranipet and others, 2009 (6) MLJ 659 (DB);

5. M. Nagarajan v. Deputy Commercial Tax Officers and Deputy Commercial Tax Officer and State of Tamil Nadu, 2009 (6) CTC 646 (DB) : (DB);

6. Indian Bank, Kilpauk Branch v. The Sub-Registrar, Periyamet Sub- Registration Office and others, 2009 MHC 2265 (DB);

7. Tamil Nadu Mercandile Bank Limited v. Commercial Tax Officer, 2009 (6) CTC 635 : .

5. Relying upon the above judgments the learned Counsel submitted that the claim of the secured creditor will prevail over the crowns debt (Sales tax arrears) and therefore, the sale conducted by the Third Respondent-Bank is valid and the Respondents 1 and 2 cannot bring the property for sale for the alleged tax arrears payable by M/s. Pioneer Cashew Industries Limited.

6. On the other hand, Mr. Tholkappiyan, learned Government Advocate submitted that:

(1) The tax arrears would have priority over all other claims. He referred to Section 24 of the TNGST Act, which states that the tax due would have priority over all other claims.

(2) The crowns debt would have priority over all the claims;

(3) Though SARFAESI Act is a special Act it cannot override provisions of TNGST Act, as charge is created over the property statutorily.

He relied upon the following judgments:

1 Central Bank of India v. and others, 2009 (6) CTC 656 (SC) : 2009 (4) SCC 94 [LQ/SC/2009/460] .

2. Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. and others, 2000 (4) CTC 170 (SC) : 2000 (120) STC 610 (SC) [LQ/SC/2000/783] ;

3. Central Bank of India and another v. State of Tamil Nadu and another, 1999 (113) STC 145 (DB);

4. Punjab National Bank, Assets Recovery Branch v. Commercial Tax Officer II, Theni and another, 2006 (3) MLJ 919 (DB);

5. Unreported judgment in O.S.A. No. 164 of 2001, Indian bank v. Tamil Nadu Industrial Investment Corporation Limited and 9 others.

In fine, referring to the above judgments, he submitted that the statutory dues will have priority over all other debts including the claim of the Secured Creditor. He particularly relied upon judgment in Central Bank of India v. State of Kerala and others, 2009 (6) CTC 656 (SC) : 2009 (4) SCC 94 [LQ/SC/2009/460] .

7. Heard the respective Counsel for the parties and perused the records. Both the parties relied upon different paragraphs of the very same judgment in Central Bank of India v. State of Kerala and others, 2009 (6) CTC 656 (SC) : 2009 (4) SCC 94 [LQ/SC/2009/460] . Hence, it is useful to refer the law declared by 3 Judge Bench of the Apex Court. In the said judgment the point for consideration was ehther Section 26 (B) of the Kerala General Sales Tax act, 1963 and Section 38 (c) of the Bombay Sales Tax Act, 1959 and similar provisions contained in other legislations by which first charge has been created on the property of the dealer or such other persons, who is liable to pay sales tax, etc., are not inconsistent or overlapping between the provisions of the DRT Act Securitisation Act, etc., The Apex Court thread bear considered DRT Act, SARFAESI Act and other Acts and gave dictum on various points including scheme, scope and purpose of DRT Act and SARFAESI Act.

8. After elaborately dealt with various provisions of the DRT Act and Securitisation Act, especially Section 24 (i) of the DRT Act and Sections 35 and 37 of the SARFAESI Act and the provisions contained in the Bombay Sales Tax Act, 26 (B) of the Kerala Act; Section 14-A of the Workmens Compensation Act, 1923; Section 74 (1) of Estate Duty Act, 1953; Section 25 (2) of Mines and Minerals (Development and Regulations) Act, 1957, Section 30 of Gift Tax Act, Section 529-A of Industries Act, 1956, Section 46(5) of State Finance Corporation Act, 1951, the Honble Supreme Court held as follows:

(a) However what is most significant to be noted in that there is no provisions in either DRT Act or SARFAESI Act by which first charge has been created in favour of Banks, financial institutions or secured creditors qua, the property of the borrower. (para 111)

(b) In an apparent bid to overcome the likely difficulty faced by the secured creditor which may include a Bank or a financial institution, Parliament incorporated the non-obstante clause in Section 13 and gave primacy to the right of secured creditor vis--vis other mortgagees who could exercise rights under Sections 69 or 69-A of the Transfer of Property Act. However, this primacy has not been extended to other provisions like Section 38-C of the Bombay Act and Section 26-B of the Kerala Act by which first charge has been created in favour of the State over the property of the dealer or any person liable to pay the dues of sales tax, etc, Sub-section (7) of Section 13 which envisages application of the money received by the secured creditor by adopting any of the measures specified under sub-section (4) merely regulates distribution of money received by the secured creditor. It does not create first charge in favour of the secured creditor. (Para 113)

(c) While enacting the DRT Act and Securitisations Act, Parliament was aware of the law laid down by the Court wherein privity of the State dues was recognized. If Parliament intended to create first charge in favour of Banks, financial institutions or other secured creditors on the property of the borrower, then it would have incorporated provisions like Section 529-A of the Companies Act or Section 11 (2) of the EPF Act and ensured that notwithstanding series of judicial pronouncement, dues of banks, financial institutions and other secured creditors should have priority over the States statutory first charge in the matter of recovery of dues of sales tax, etc. However, the fact of the matter is that no such provision has been incorporated in either of these enactments despite conferment of extraordinary power upon the secured creditors to take possession and dispose of the secured assets without intervention of the Court or Tribunal. The reasons for this omission appears to be that new legal regime envisages transfer of secured assets to private companies. (Para 126) (Emphasis supplied)

(d) If the provisions of the DRT Act and the Securitisation Act are interpreted keeping in view the background and context in which these legislations were enacted and the purpose sought to be achieved by their enactment, it becomes clear that the two legislations, are intended to create a new dispensation for expeditious recovery of dues of Banks, financial institutions and secured creditors and adjudication of the grievance made by any aggrieved person qua the procedure adopted by the Banks, financial institutions and other secured creditors, but the provisions contained therein cannot be read as creating first charge in favour of Banks, etc, (Para 128)

(e) If Parliament intended to give priority to the dues of Banks, financial institutions and other secured creditors over the first charge created under State legislations then provisions similar to those contained in Section 14-A of the Workmens Compensation Act, 1923, Section 11 (2) of the EPF Act, Section 74(1) of the Estate Duty Act, 1953, Section 25 (2) of the Mines and Minerals (Regulation and Development) Act, 1957, Section 30 of the Gift Tax Act, and Section 529-A of the Companies Act, 1956 would have been incorporated in the DRT Act and the Securitisation Act. (Para 129) (emphasis supplied)

(f) Undisputedly, the two enactments do not contain provision similar to the Workmens Compensation Act, etc. In the absence of any specific provision to that effect, it is not possible to read any conflict or inconsistency or overlapping between the provisions of the DRT Act and the Securitisation Act on the one hand and the Kerala Act on the other and the on obstante clauses contained in Section 34 (1) of the DRT Act and Section 35 of the Securitisation Act cannot be invoked for declaring that the first charge created under the State legislation will not operate qua or affect the proceedings initiated by Banks, financial institutions and other secured creditors for recovery of their dues or enforcement of security interest, as the case may be. (Para 130)

(g) The Court could have given effect to the non-obstante clauses contained in Section 34 (1) of the DRT Act and Section 35 of the Securitisation Act vis--vis Section 38-C of the Bombay Act and Section 26-B of the Kerala Act and similar other State legislations only if there was a specific provision in the two enactments creating first charge in favour of the Banks, financial institutions and other secured creditors but as Parliament has not made any such provision in either of the enactments the first charge created by the State legislations on the property of the dealer or any other person, liable to pay sales tax, etc., cannot be destroyed by implication or inference, notwithstanding the fact that Banks, etc. fall in the category of secured creditors. (Para 131) (Emphasis supplied)

(h) On the basis of the above discussion, we hold that the DRT Act and the Securitisation Act do not create first charge in favour of Banks, financial institutions and other secured creditors and the provisions contained in Section 38-C of the Bombay Act and Section 26-B of the Kerala Act are not inconsistent with the provisions of the DRT Act and the Securitisation Act so as to attract non obstante clauses contained in Section 34(1) of the DRT Act or Section 35 of the Securitisation Act. (Para 158).

9. The Honble Supreme Court clearly held in the above case, viz. Central Bank of India that:

1. There is no provision either in DRT Act or SARFAESI Act by which first charge is created in favour of Banks, financial institutes, etc.

2. Section 13(7), SARFAESI merely regulates distribution of money and does not create first charge in favour of secured creditor.

3. Non-obstante Clause in Section 13 of SARFAESI Act gives primacy to the right of secured creditor over other creditors who could exercise rights under Section 69-A of the Transfer of Property Act.

4. Non-obstante clause contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act would be given effect only if there was a specific provision in those two Acts creating first charge in favour of Banks.

In the light of the said judgment Section 24 of TNGST Act 2002 is required to be considered. Section 24(1) states that the tax payable under the Act shall be a charge on the property of the person liable to pay tax. Section 24 of the TNGST Act is extracted hereunder:

Section 24. Payment and recovery of tax. (1) Save as otherwise provided for in sub-section (2) of section 13, the tax assessed or has become payable under this Act from a dealer or person and any other amount due from him under this Act shall be paid in such manner and in such instalments, if any and within such time as may be specified in the notice of assessment, not being less than twenty one days from the date of service of the notice. The tax under sub-section (2) of Section 13 shall be paid without any notice of demand. In default of such payment the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax or interest under this Act.

(2) Any tax assessed on or has become payable by, or any other amount due under this Act from a dealer or person and any fee due from him under this Act, shall, subject to the claim of the Government in respect of land revenue and the claim of the Land Development Bank in regard to the property mortgaged to it under Section 28(2) of the Tamil Nadu Co-operative Land Development Banks Act, 1934 (Tamil Nadu Act X of 1934), have priority over all other claim against the property of the said dealer or person and the same may without prejudice to any other mode of collection be recovered.

(a) as land revenue, or

(b) on Application to any Magistrate, by such Magistrate as if were a fine imposed by him:

Provided that no proceedings for such recovery shall be taken on continued as long as he has, in regard to the payment of such tax other amount or fee, as the case may be, complied with an order by any of the authorities to whom the dealer or person has appealed or applied for Revision, under Sections 31, 31-A, 33, 36, 37 of 38.

(3) On any amount remaining unpaid after the date specified for its payment as referred to in sub-section (1) or in the order permitting payment in installments, the dealer or person shall pay, in addition to the amount due, interest at one and half percent per month of such amount for the first three months of default and at two percent per month of such amount for subsequent period of default:

Provided that if the amount remaining unpaid is less than one hundred rupees and the period of default is not more than a month, no interest shall be paid:

Provided further that where a dealer or person has preferred an Appeal or Revision against any order of assessment or Revision of assessment under this Act, the interest payable under this sub-section, in respect of the amount in dispute in the Appeal or Revision, shall be postponed till the disposal of the Appeal or Revision, as the case may be, and shall be calculated on the amount that becomes due in accordance with the final order passed on the Appeal or Revision as if such amount had been specified in the order assessment or revision of assessment as the cases may be.

Section 26(6) of the Act is reproduced as follows:

26(6) Any amount which a person is required to pay to the Assessing Authority or for which he is personally liable to the Assessing Authority under this Section shall, if it remains unpaid, be a charge on the properties of the said person and may be recovered as if it were an arrears of land revenue. (Emphasis supplied)

10. A perusal of the above said Section would show that the tax due under TNGST Act will have priority over all other claims against the property of the dealer. The tax due would be a charge as per Section 24(1) of the Act. Section 24(1) creates charge whereas Section 24(2) gives preference/ priority to the tax arrears over other claims except the claim of the Land Development Bank over property mortgaged under Section 28 (2) of the Tamil Nadu Co-operative Land Development Bank Act 1934. Therefore, it is very evident that except the claim of the Land Development Bank, the tax arrears would be given priority and it would be the First Charge on the property and would have priority over other claims.

11. The Honble Supreme Court in Poppatlal Shah v. State of Madras AIR 1953 SC 274 [LQ/SC/1953/37] , held as follows:

7. It is a settled rule of construction that to ascertain the legislative intent, all the constituent parts of a Statute are to be taken together and each word, phrase of sentence is to be considered in the light of the general purpose and object of the Act itself .. .

Therefore, specific employment of words in the Statue viz. have priority over all other claims against the property of the said dealer would denote that any other claim under all other acts including the claims of the secured creditors are subservient to the claim of the tax due. The adjective priority would supply special importance to the tax revenue. If Section 24 (1) alone is found in the Statue, it cannot be said that tax due would be first chare. Incorporation of Sub-section (2) of 24 by the legislature makes the difference and it is not without purpose. Section 24(2) qualifies and makes the taxes as first charge. The legislature though it fit to incorporate substantive provision in Section 24(2) in the Act by including priority over all other claims and also mode of recovery of the tax revenue as land revenue under Section 26 and to recover the tax revenue as if a fine imposed by the Magistrate would certainly denote that priority over other claims would mean Statutory first charge which overrides other claims.

12. Therefore, this Court holds that:

1. first chare is created by Section 24 of the Act for Act for tax arrears.

2. Tax claim will override all other claims and against the property of the dealer except the claim of the Development Bank.

3. The words priority over other claims means and denote First charge.

13. As per judgment of the Honble Supreme Court, in Central Bank of India v. State of Kerala and others, 2009 (6) CTC 656 (SC) : 2009 (4)SCC 94 IN PARAS 126, 129, 130, 131 & 158, this Court holds that the tax due would be the first charge as per Section 24 of the TNGST Act over the claim of the secured creditors.

14. A number of judgments have been cited by both the parties. In AI Champdany Industries Ltd. V. Official Liquidator and another, 2009 (3) CTC 881 (SC) : 2009 (4) SCC 486 [LQ/SC/2009/392] , a 2-Judge Bench of the Honble Supreme Court held that municipal tax in terms of provision of the Bombay Provincial Municipal Corporation Act, 1949 does not create encumbrance on the property and the municipality was held unsecured creditor even though first charge was created for tax due. The above judgment was rendered before the judgment for tax due. The above judgment was rendered before the judgment in Central Bank of India case, wherein it has been held that the first charge created under the State Act will have priority over claims of the secured creditors. Hence, the above judgment is not helpful to the Petitioner. In Union of India v. SICOM Ltd., 2009 (2) SCC 121 [LQ/SC/2008/2442] , the question was whether duty under Central Excise Act will have priority over secured debts in terms of State Financial Act. In that case it was held that the dues of the Corporation was prior in point of time and therefore, it was held to have priority over the dues of the customs. Therefore, the said cases is clearly distinguishable. No doubt, a Division Bench of this Court in M. Nagarajan v. The Deputy Commercial Tax officer, 2009 (6) CTC 646 (DB) : and in Indian Bank, rep. by Authorised officer, Vellore Circle Office v. Commercial Tax Officer, Office of the CTO, Navalpur, Ranipet and others, 2009 (6) MLJ 659 [LQ/MadHC/2009/2762] , after considering Apex Court judgment in Central Bank of India held that the claim of secured creditor will prevail over State claims. The facts remains that the Apex Court in Central Bank of India v. State of Kerala and others, 2009 (6) CTC 656 (SC): 2009 (4) SCC 94 [LQ/SC/2009/460] , categorically held in Paragraphs 111, 113 & 116 that no first charge created under DRT Act and SARFAESI Act in favour of Banks. In view of the categorical pronouncement by the Three Judge Bench of the Honble Supreme Court in Central Bank of India case, the claim of the State will prevail over the claim of the secured creditors.

15. That apart a Division Bench of this Court in which one of us was a party (Justice F.M. Ibrahim Kalifulla) in Punjab National Bank v. Commercial Tax Officer II Case, 2006 (3) MLJ 919 (DB) already held that the amount of sales tax payable by the dealer under the Tamil Nadu General Sales Tax Act is a first charge over the property of the dealer and it will have priority over all other debts including the prior mortgage. In fact the Division Bench relied upon the Three Judge Bench judgment of the Honble Supreme Court in Dattatreya Shanker Mote and others v. Anand Chintaman Datar and others, 1974 (2) SCC 799 [LQ/SC/1974/298] , which held that a charge is a wider term than mortgage and it would cover within its ambit a mortgage also. Therefore, when a first charge is created by operation of law over any property, that charge will have precedence over the existing mortgage. Paragraph 13, 16 and 19 of the Division Bench judgment in Punjab National Bank case, 2006 (3) MLJ 919, are extracted as follows:

13. Under Section 26 (6) of the TNGST Act, if the tax remains unpaid, it will be a charge. As per the provisions of Sections of Section 26 (6) of the act, any amount which an assessed is required to pay to the Assessing Authority or for which he is personally liable to the Assessing Authority, if it remains unpaid, be a charge on the properties of the assessed. It is clear from the provisions of Section 24 (2) of the act, any tax assessed on or has become payable under the act, have priority over all other claims, against the property of the dealer. So, it is evident from the said Sections that the claim of the tax department will have priority over other debts.

16. A similar case arose under Kerala General sales Tax and the same was Delhi Auto & General Finance (P) Ltd v. Tax Recovery Officer, 1998 (8) SCC 705 [LQ/SC/1996/581] . Section 23 of the Kerala General Sales Tax Act is similar to Section 24 of the Tamil Nadu General Sales Tax Act and interpreting the same, their Lord ships said thus:

It is idle to contend that the Appellant has a priority for payment of the amount due to him over the sales tax amount due to the state from the borrow under the Kerala Sales Act.

19. in the light of the above decision, it is clear that the state has got priority over the claim of the Appellant. So, the Appellant cannot claim priority over tax dues to the state. Hence, the claim of the Appellant is not maintainable and is liable to be rejected.

16. Similarly another Division Bench Judgment of this Court in Central Bank of India v. State of Tamil Nadu and others, 1999 (113) STC 145, held that Sections 24(2) and 26 (6) of the TNGST Act, 1959 as amended by Tamil Nadu Act, 1978/18 of 1986 sufficiently safeguard and also enable the State to enforce the recovery of taxes and other dues under the Tamil Nadu General Sales Tax 1959, as the first statutory charge holder in suppression of even the claims of an existing mortgage, who claims to be a secured creditor. The Honble Supreme Court in Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. and others, 2000 (4) CTC 170 (SC): 2000 STC (120) 610 held that Sales tax would get priority/ precedence over secured creditors. Therefore, this Court holds that the State (the First and Second Respondent) has first charge over the property of the assessee by operation of law and over rides the claim of the secured Creditor.

17. However in this case, the property was sold under the provision of SARFAESI Act for non-payment of dues to the Bank, the Third Respondent which brought the property for auction through tender-cum-auction sale on 19.5.2008; The Sale Certificate was also issued on 19.5.2008 and possession and also stated to be given to the Petitioners. The rights already got accrued to the Petitioners in view of the sale under the SARFASSI Act. The First Respondents communication dated 24.12.2008 to the Third Respondent-Bank reads as follows:

The Sub-Registrar, Virugambakkam has issued an Encumbrance Certificate on 24.12.2008 with the Commercial Tax Officer as one of the purchaser cannot claim the right on the said property.

The aforesaid communication would show that the Encumbrance (tax arrears) Certificate was only reflected on 24.12.2008. Whereas the Encumbrance Certificate dated 15.5.2008 issued by the Sub-Registrar office, Virugambakkam did not reflect any encumbrance except the Sale Deed dated 9.6.1998 and no claim of the First Respondent was reflected. The sale was conducted on 19.5.2008 and subsequent only the encumbrance of the First Respondent was made on 24.12.2008. It is clear from Sale Notice dated 20.9.2008 by the First Respondent, the sales tax arrears were due from 1991-92 to 1996-97. However, the Petitioners had no notice of charge over the property in question, in spite of their due verification of Encumbrance Certificate dated 15.5.2008. Hence, it has to be held that the Petitioners are bona fide purchasers without notice of charge under Section 24(2) of the TNGST Act and the rights accrued to them cannot be interfered with. For the reasons stated above the Respondents 1 and 2 belatedly could not proceed against the Petitioners property for the arrears of sales tax due of the Company which availed the loan from the Third Respondent-Bank.

18. The Honble Supreme Court in Ahmedabad Municipal Corporation v. Hajigapur Hussain, AIR 1971 SC 1201 [LQ/SC/1971/193] , held that the tax due cannot be recovered from transferee for consideration without notice of charge. Again in Chogmal Pal v. Deputy Commercial Tax Officer, 1977 (40) STC 207 (SC), it was held by the Honble Supreme Court that so long as the transfer was not fraudulent and not set aside by Civil Court, the Tax Authority cannot seek recovery of dues from the property. In this case also, the auction sale conducted the the Third Respondent-Bank under SARFAESI Act cannot be termed as fraudulent and it was not set aside by any Civil Court. A Division Bench of this Court also in 1998 (108) STC 161, following the judgment in AIR 1971 SC 1201 [LQ/SC/1971/193] , held that the property of bona fide purchaser without notice of charge under TNGST Act cannot be proceeded for recovery of Sales tax arrears. Similar is the case on hand.

19. The Honble Supreme Court in Janata Textiles v. Tax Recovery Officer, 2008 (12) SCC 582 [LQ/SC/2008/1274] , following Privy Council judgment in Nawaz Zair-Ul-Abdinkhan v. Mohd Asghar Ali Khan, 1887-88 (15) IA 121 and Apex Court judgments Janak Raj v. Gurdial Singh, AIR 1967 SC 608 [LQ/SC/1966/292] ; Gurjoginder Singh v. Jaswant Kaur, 1994 (2) SCC 368 [LQ/SC/1994/196] ; Padanavail Rugmini Amma v. P.K. Abdullah, 1996 (7) SCC 668 [LQ/SC/1996/129] , and Ashwin S. Mehta v. Custodian, 2006 (2) SCC 385 [LQ/SC/2006/3] , held that third party auction purchasers interest in the auctioned property continues to be protected, notwithstanding that underlying decree is subsequently set aside or otherwise. In view of the judgments and also considering the fact the Petitioner purchased the property bona fidely in the auction, after verification of encumbrance dated 15.5.2008 in respect of the property, the property in the hands of the third party purchasers viz., the Petitioners cannot be auctioned by the Respondents 1 and 2. Though this Court comes to the conclusion that the tax arrears payable under TNGST Act is the first charge over the property of the Assessee and it will have priority over the claim of secured creditor, this Court holds that the sale in favour of the Petitioners is valid and the same cannot be sold by respondent No.1 and 2.

20. In fine this Court holds that:

(1) Sale Tax arrears under the provisions of TNGST Act would prevail upon arrears under the claim of the secured creditor like Third Respondent-Bank.

(2) Petitioners are bona fide purchasers of the property for valuable sale consideration without notice in a valid sale under the provisions of the SARFAESI Act.

(3) Petitioners property cannot be auctioned by the First Respondent for tax dues of the borrowing Company.

21. In view of the above reasonings and on equitable consideration also the Auction Notice dated 24.4.2009 issued by the First and Second Respondent to sell the property at No.300, Poonamallee High Road, Maduravoyal, Chennai 600 095 for recovery of tax arrears of M/s. Pioneer Cashew Industries Limited is not sustained and the same is quashed. Accordingly the Writ Petition is allowed. However, there will be no order as to costs.