Bombay High Court
Cholamandalam Investment And Finance ... vs The State Of Maharashtra Through Govt. ... on 8 September, 2025
Author: R.I. Chagla
Bench: R.I. Chagla
2025:BHC-OS:15209-DB
22-WPL-19679-24.doc
Sharayu Khot.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO. 19679 OF 2024
Cholamandalam Investment & Finance ...Petitioner
Company Ltd.
Versus
State of Maharashtra & Anr. ...Respondents
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Mr. Charles De'Souza a/w Mr. Alok D. Mishra for the Petitioner.
Ms. Jyoti Chavan, Addl. G.P. for the Respondent No. 1.
Mr. Paarth Singh (through VC) for the Respondent No. 2.
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CORAM : R.I. CHAGLA J
FARHAN P. DUBASH, J
DATE : 8 September 2025
ORDER :
1. By this Writ Petition, the Petitioner is seeking a direction to the Respondent No. 1 to remove its lien / charges on the subject SHARAYU PANDURANG KHOT property recorded with the Respondent No. 2 or any other Authority. Digitally signed by SHARAYU PANDURANG KHOT Date:
2025.09.16 11:20:16 +0530
2. A brief statement of facts is as under :-
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22-WPL-19679-24.doc i. The Petitioner has sanctioned a home equity loan of Rs. 1,50,00,000 (Credit Facility 1) to Mr. Lalchand Jain, Ms. Badamiben Jain, Mr. Mayur Jain and M/s. Kajal Trading Co. (Borrowers).
ii. Repayment of Credit Facility I was secured by the Borrowers by a mortgage by deposit of Title Deeds i.e. Flat No. 404, 4th Floor (Flat 404), and Flat No. 901, 9th Floor (Flat 901), Cosmos Sunshine M.B. Cooperative Housing Society Limited, Bhuleshwar Division, 3 Panjrapole Lane, Mumbai 400004 (Secured Assets) on 30th November 2018.
iii. The Petitioner registered its charge over the secured assets with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) on 22nd January 2019.
iv. The Petitioner sanctioned a home equity loan of Rs.
75,00,000 (Credit Facility II) to the Borrowers on 31st March 2019.
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22-WPL-19679-24.doc v. Repayment of Credit Facility II was secured by the Borrowers by memorandum recording past transaction of creation of mortgage by deposit of Title Deeds qua Flat 404 on 31st March 2019.
vi. The Petitioner registered its charge over Flat 404 with the CERSAI on 2nd May 2019.
vii. On 4th March 2022, Office of the Deputy Commissioner of Sales Tax (Respondent No. 1) vide letter to the Respondent No. 2 - Cosmos Sunshine M. B. Cooperative Housing Society Limited (Society) claimed alleged sales tax arrears of Mr. Lalchand Jain, Proprietor of M/s. Kajal Trading Co. (Borrowers) and asserted charge on Flat 901 for recovery of its alleged dues.
viii. The Respondent No. 1 on 7th March 2022 issued an order of attachment of immovable property attaching Flat 404 for recovery of its alleged sales tax arrears of Borrower.
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22-WPL-19679-24.doc ix. Respondent No. 1 called upon the Society vide the above order of attachment to note the attachment and withhold any sale or transfer of Flat 404 without prior permission of Respondent No. 1.
x. The Petitioner classified the Borrowers loan account as a Non-Performing Asset (NPA) on 5th September 2022.
xi. The Petitioner issued a statutory demand notice dated 11th April 2023 under Section 13(2) of the SARFAESI Act calling upon the Borrowers to pay Rs. 1,84,66,155/- as on 10th April 2023, along with further interest.
xii. Pursuant to the order of attachment, Respondent No. 1 registered its charge over Flat 404 with the CERSAI on 26th July 2023.
xiii. Chief Metropolitan Magistrate, Mumbai vide order dated 20th September 2023 allowed Petitioner's 4/15 ::: Uploaded on - 16/09/2025 ::: Downloaded on - 19/09/2025 22:13:53 ::: 22-WPL-19679-24.doc Application No. 599 of 2023 filed under Section 14 of the SARFAESI Act and appointed an advocate commissioner to take physical possession of the secured assets.
xiv. On 17th November 2023, the Petitioner took possession of the secured assets under the aegis of the SARFAESI Act.
xv. The Petitioner on three occasions, i.e. 23rd November 2023, 15th January 2024 and 22nd February 2024 attempted to sell the secured assets by public auction under the SARFAESI Act read with the Rules framed thereunder. All three auctions failed for want of bids. xvi. On Petitioner's enquiry with the Society in March 2024, the Petitioner learnt of the aforesaid letter dated 4th March 2022, and the order of attachment. xvii. The Petitioner filed the present Writ Petition on 25th June 2024 seeking directions against Respondent No.1 5/15 ::: Uploaded on - 16/09/2025 ::: Downloaded on - 19/09/2025 22:13:53 ::: 22-WPL-19679-24.doc to withdraw its alleged lien / charge over the secured assets recorded with the Society or any other Authority.
xviii. Respondent No. 1 has filed its Affidavit in Reply on 23rd June 2025 opposing grant of reliefs as prayed for by the Petitioner.
3. Mr. De'Souza, the learned Counsel for the Petitioner has submitted that the issue arising in the present Petition is covered by the Full Bench decision of this Court in Jalgaon Janta Sahakari Bank Ltd. and Anr. Vs. Joint Commissioner of Sales Tax Nodal 9, Mumbai and Anr.1. He has submitted that the Petitioner having registered its charge over the secured assets with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) on 22nd January 2019 and 2nd May 2019, i.e. prior to the Respondent No. 1 registering its charge over Flat 404 with the CERSAI on 26th July 2023, the Petitioner as Secured Creditor is the first charge holder and the charge of the Respondent No. 1 would be subordinate to the dues of the Secured Creditor. 1 WP 2935 of 2018 a/w companion Petitions reported in 2022 SCC OnLine Bom 1767 6/15 ::: Uploaded on - 16/09/2025 ::: Downloaded on - 19/09/2025 22:13:53 ::: 22-WPL-19679-24.doc
4. Mr. De'Souza has placed reliance upon paragraphs 75, 78, 89, 92, 148, 150, 153 and 154 of the Full Bench decision. He has submitted that Section 26E of the SARFAESI Act begins with a non- obstante clause, and use of the word 'priority' in the said provision is to be given effect to. The rights accorded to 'first charge' holders by Central as well as State legislation would be subordinate to the dues of the Secured Creditor. This is in view of there being a 'priority' in payment over all other dues is accorded to the Secured Creditor in enforcement of the security interest, if it has a CERSAI registration.
5. Mr. De'Souza has submitted that the Full Bench decision has further held that the attachment orders issued post 24th January 2020, if not filed with the Central Registry, any department of the Government to whom a person owes money on account of unpaid tax has to wait till the Secured Creditor by sale of the immovable property being the secured asset, mops up its secured dues.
6. Mr. De'Souza has submitted that the Full Bench decision having expounded Section 26E of the SARFAESI Act, then applied the law laid down to the facts of each matter considered by this Court. He has submitted that the facts which arose in Writ Petition (L) No. 7/15 ::: Uploaded on - 16/09/2025 ::: Downloaded on - 19/09/2025 22:13:53 ::: 22-WPL-19679-24.doc 436 of 2021 is similar to the facts in the present case. In that case, the borrower was in arrears of sales tax dues to an extent of Rs. 5,49,68,048 for the period 1st April 2011 to 31st December 2014. Upon the Secured Creditor attempting to auction the secured asset, the Sales Tax Department addressed a communication to the Society in which the secured asset was situated, directing the Society not to permit transfer of the secured asset without the prior permission of the Sales Tax Department. In this backdrop, the Full Bench has in Jalgaon Janta Sahakari Bank Ltd. (supra) observed that there was no material to show that the secured asset was attached in accordance with law and the said attachment was followed by proclamation, prior to Section 26E of the SARFAESI Act being enforced, thereby denuding the Secured Creditor of the preferential right under Section 26E.
7. Mr. De'Souza has also referred to the facts in Writ Petition (L) No. 7999 of 2021, which fell for consideration before the Full Bench. In that case the secured asset was attached by an order dated 19th August 2017. However, the charge on the secured asset was not registered with CERSAI by the Revenue Authorities. The Secured Creditor registered its charge on the secured asset with 8/15 ::: Uploaded on - 16/09/2025 ::: Downloaded on - 19/09/2025 22:13:53 ::: 22-WPL-19679-24.doc CERSAI on 22nd June 2012 / 24th April 2017. The Full Bench has observed in the facts of that case that if the immovable property of the defaulter is shown to have been attached in accordance with law prior to Chapter IV-A of the SARFAESI Act, or for that matter, Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 ("RDDB Act"), being enforced, and such attachment is followed by a proclamation according to law, the 'priority' accorded by Section 26E of the SARFAESI Act, and Section 318 of the RDDB Act, would not get attracted.
8. Further, the Full Bench has in the facts of the aforementioned Writ Petition found that there was no material on record which would show that the Sales Tax Authorities had passed an order of attachment in conformity with the governing provisions of the MLR Code and the MRLR Rules, followed by a proclamation duly promulgated in the manner ordained by law.
9. Mr. De'Souza has submitted that in the present case, the Respondent No. 1 has not issued any proclamation in accordance with the Maharashtra Land Revenue Code ("MLRC") and Maharashtra Realization of Land Revenue Rules, 1967 ("1967 9/15 ::: Uploaded on - 16/09/2025 ::: Downloaded on - 19/09/2025 22:13:53 ::: 22-WPL-19679-24.doc Rules"). As per Section 192 of the MLRC and Rule 11(2) of the 1967 Rules, any attachment of a property must be followed by a proclamation in a prescribed form.
10. Mr. De'Souza has referred to the Affidavit in Reply filed on behalf of the Respondent No. 1, which though asserting charge in respect of the secured assets has not brought any evidence on record to demonstrate compliance with Section 192 of the MLRC and Rule 11(2) of the 1967 Rules.
11. Mr. De'Souza has submitted that the Respondent No. 1's Reply is based on erroneous contentions viz. the mortgage of the secured assets is prior to the sanction of the credit facilities; Petitioner's charge over the secured assets is not crystalized until the Borrower's loan account is classified as an NPA; Petitioner's charge is registered with the CERSAI after classification of the Borrower's account as an NPA; alternatively, the Petitioner's charge with CERSAI cannot be registered prior to classification of the Borrower's account as an NPA; and Respondent No. 1's charge with CERSAI is registered on 1st March 2022, prior to that of the Petitioner. 10/15 ::: Uploaded on - 16/09/2025 ::: Downloaded on - 19/09/2025 22:13:53 :::
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12. Mr. De'Souza has submitted that the aforementioned contentions raised by Respondent No. 1 in the Reply are misleading. He has submitted that the classification of the defaulting Borrower's account as an NPA and registration of the charge with the CERSAI, are two independent and distinct measures. Secondly, the Petitioner has registered its charge with CERSAI on 22nd January 2019 and 2nd May 2019, i.e. prior to issuance of Respondent No. 1's order of attachment dated 7th March 2022 and its registration of charge with the CERSAI. Thus, Respondent No. 1's contentions are untenable.
13. Mr. De'Souza has submitted that the Respondent No. 1 having failed to comply with the procedure specified in the MLRC and the 1967 Rules and having registered its charge with the CERSAI only on 26th July 2023, i.e. subsequent to the Petitioner registering its charge with CERSAI on 22nd January 2019, and 2nd May 2019 the Petitioner as Secured Creditor has a priority of charge qua the secured assets. He has accordingly, submitted that the Writ Petition be allowed.
14. Ms. Jyoti Chavan, learned A.G.P. for the 11/15 ::: Uploaded on - 16/09/2025 ::: Downloaded on - 19/09/2025 22:13:53 ::: 22-WPL-19679-24.doc Respondent No. 1 has relied upon the averments in the Affidavit in Reply filed on behalf of the Respondent No. 1. She has referred to Exh.E of the Writ Petition, which is the registration of security interest acknowledgment Report of CERSAI. She has submitted that the creation date under transaction details is 26th June 2023. She has submitted that the Petitioner's registration date with CERSAI is of that date. She has submitted that in view of the Petitioner having registered with CERSAI subsequent to the Respondent No. 1's order of attachment dated 7th March 2022, the order of attachment of Respondent No. 1 ought not to be set aside by this Court.
15. Having considered the submissions, we find much merit in the submissions of the Petitioner. It is evident from the aforementioned facts that the Petitioner has registered its charge over the secured assets with the CERSAI on 22nd January 2019 and 2nd May 2019. This is also borne out from Exh.E which is the registration of security interest acknowledgment Report. This shows the registration dates as of 22nd January 2019 and 2nd May 2019. The Respondent No. 1 had issued order of attachment for the secured assets / immovable property being Flat 404 on 7th March 2022, i.e. subsequent to the Petitioner's registration with CERSAI. Further, the 12/15 ::: Uploaded on - 16/09/2025 ::: Downloaded on - 19/09/2025 22:13:53 ::: 22-WPL-19679-24.doc Respondent No. 1 registered its charge over flat 404 with CERSAI on 26th July 2023, i.e. after registration of the Petitioner's charge over Flat 404 with CERSAI on 2nd May 2019. Thus, the Petitioner being Secured Creditor would have priority over the charge of Respondent No. 1, in enforcement of its security interest. This has been laid down by the Full Bench of this Court in Jalgaon Janta Sahakari Bank Ltd. (supra). It has been held that the use of the word 'priority' in Section 26E of the SARFAESI Act is that the rights accorded to 'first charge' holders by Central as well as State legislation would be subordinate to the dues of the Secured Creditor.
16. It has been laid down by the Full Bench in paragraph 150 of the said judgment that the attachment orders issued post 24th January 2020, if not filed with the Central Registry, any department of the Government to whom a person owes money on account of unpaid tax has to wait till the Secured Creditor by sale of the immovable property being the secured asset mops up its secured dues.
17. It is pertinent to note that the Respondent No. 1 has not issued any proclamation in accordance with the MLRC and 13/15 ::: Uploaded on - 16/09/2025 ::: Downloaded on - 19/09/2025 22:13:53 ::: 22-WPL-19679-24.doc the 1967 Rules. It is provided in Section 192 of the MLRC and Rule 11(2) of the 1967 Rules that any attachment of a property must be followed by a proclamation in a prescribed form. The Respondent No. 1 having failed to produce any evidence of the proclamation having been issued in the prescribed form in compliance with Section 192 of the MLRC and Rule 11(2) of the 1967 Rules, the priority of the Petitioner as Secured Creditor accorded by Section 26E of the SARFAESI Act gets attracted. Further, in Jalgaon Janta Sahakari Bank Ltd. (supra), it has been held that the attachment is required to be followed by a proclamation according to law and it is only then that the 'priority' accorded by Section 26E of the SARFAESI Act, and Section 318 of the RDDB Act, would not get attracted.
18. Thus, the Petitioner has made out a case for allowing the Writ Petition, particularly, since the issue arising in the present Writ Petition is covered by the Full Bench in Jalgaon Janta Sahakari Bank Ltd. (supra). I do not find merit in the contention on behalf of the Respondent No. 1 that the Petitioner's registration date with the CERSAI is of 26th July 2023, as it is evident from Exh.E that the registration date is 22nd January 2019 and 2nd May 2019. The date of 26th June 2023 appearing on the security Inter 14/15 ::: Uploaded on - 16/09/2025 ::: Downloaded on - 19/09/2025 22:13:53 ::: 22-WPL-19679-24.doc Acknowledgment Report is only the downloaded date and not the registration date.
19. In view thereof, the Petition is made absolute in terms of prayer clause (a). The Respondent No. 1 shall remove its attachment / lien / charges on the subject property / secured assets recorded with the Respondent No. 2 within a period of three weeks from uploading of this order.
20. It is made clear that the dues of the Petitioner may be satisfied from the sale of the secured assets and any surplus may be used to satisfy the statutory charges of Respondent No. 1.
21. In the event, the Petitioner is selling the secured assets, 48 hours' prior working day notice shall be issued to the Respondent No. 1.
22. Writ Petition is accordingly disposed of. There shall be no order as to costs.
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