Karnataka High Court
Omkara Assets Reconstruction Private … vs The Official Liquidator Of on 2 July, 2026
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CA No. 49 of 2025
C/W CA NO.86 of 2025
CA No. 89 of 2025
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE DAY OF , 2026
BEFORE
R
THE HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE
COMPANY APPLICATION NO. 49 OF 2025
C/W
COMPANY APPLICATION NO. 86 OF 2025
COMPANY APPLICATION NO. 89 OF 2025
IN
COMPANY PETITION NO.160/2005
IN CA NO. 49/2025
BETWEEN:
OMKARA ASSETS RECONSTRUCTION
PRIVATE LIMITED
(A COMPANY INCORPORATED
UNDER THE COMPANIES ACT, 1956)
Digitally signed by REGISTERED AS A SECURITIZATION AND ASSETS
CHANDRASHEKAR
LAXMAN KATTIMANI RECONSTRUCTION COMPANY,
Location: HIGH COURT
OF KARNATAKA
PURSUANT TO SECTION 3 OF SARFAESI ACT,
DHARWAD BENCH
DHARWAD KOHINOOR SQUARE, 47TH FLOOR,
N.C. KELKAR MARG, R. G. GADKARI CHOWK,
DADAR (WEST), MUMBAI-400 028,
REP. BY RITESH SAWANT, CHIEF MANAGER.
...APPLICANT
(BY SRI. K G RAGHAVAN, SENIOR COUNSEL FOR
SRI. VIGNESH SHETTY, ADVOCATE)
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AND:
1. THE OFFICIAL LIQUIDATOR OF
M/S. BPL ENGINEERING LIMITED
(IN LIQUIDATION) ATTACHED TO
HIGH COURT OF KARNATAKA,
"CORPORATE BHAVAN", NO.26-27,
12TH FLOOR, RAHEJA TOWERS,
M.G. ROAD, BENGALURU-560 001.
2. THE DEPUTY COMMERCIAL TAX OFFICER,
PATAN CHERU SANGAREDDY CIRCLE,
NIZAMABAD DIVISION, MEDAK DISTRICT,
TELANGANA-502319.
(AS DIRECTED BY HON'BLE COURT
THE RESPONDENT HAS BEEN IMPLEADED
DATED 26.06.2025)
...RESPONDENTS
(BY SRI. SHRISHAIL RAGHAVAN FOR OL - R1,
SRI. MANU PRABHAKAR KULKARNI, ADVOCATE FOR R2)
THIS COMPANY APPLICATION IS FILED UNDER SECTION
151 OF CIVIL PROCEDURE CODE READ WITH RULE 6 AND 9 OF
THE COMPANY (COURT) RULES, 1959, PRAYING THIS HON'BLE
COURT TO, RECALL THE NOTICE OF ATTACHMENT DATED
25.10.2007 AND 24.11.2011 ISSUED BY COMMERCIAL TAX
DEPT., (ANNEXURE A), IN THE INTEREST OF JUSTICE.
IN CA NO. 86/2025:
BETWEEN
COMMERCIAL TAX DEPARTMENT
GOVERNMENT OF TELANGANA,
HYDERGUDA - ASHOK NAGAR CIRCLE, ABIDS DIVISION
D.NO:5-4-435, 2ND FLOOR,
OLD KAKTIYA BUILDING, NAMPALLY STATION ROAD,
NAMPALLY, HYD - 500001, REPRESENTED BY ITS
COMMERCIAL TAX OFFICER AND
ASSISTANT COMMISSIONER ( ST)
...APPLICANT
(BY SRI. MANU PRABHAKAR KULKARNI, ADVOCATE)
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AND
1. OFFICIAL LIQUIDATOR OF
BPL ENGINEERING LTD.
ATTACHED TO HIGH COURT OF KARNATAKA
"CORPORATE BHAVAN", NO.26-27, 12TH FLOOR,
RAHEJA TOWERS, M.G.ROAD,
BENGALURU - 560 001.
2. OMKAR ASSETS CONSTRUCTION
PRIVATE LIMITED
A COMPANY INCORPORATED
UNDER THE COMPANIES ACT, 1956,
HAVING REGISTERED OFFICE AT:
NO.9, M.P.NAGAR FIRST STREET,
KONGU NAGAR EXTENSION, TIRUPUR,
TAMIL NADU, INDIA-641 607.
ALSO HAVING ADDRESS AT:
KOHINOOR SQUARE, 47TH FLOOR,
N.C.KELKAR MARG, R.G.GADKARI CHOWK,
DADAR (WEST), MUMBAI - 400028
REPRESENTED BY RITESH SAWANT, CHIEF MANAGER.
(AMENDED AS PER ORDER DATED 20.02.2026 IN
CA.NO.5/2026)
3. KOTAK MAHINDRA BANK LTD
ASSETS RECONSTRUCTION DIVISION
5TH FLOOR, SAMSON TOWER
NO.402-L, PANTHEON ROAD
EGMORE, CHENNAI 600008
REPRESENTED BY ITS EXECUTIVE VICE PRESIDENT
SRI PARAG DHOLAKIA.
4. HDFC BANK LTD
DEPARTMENT FOR SPECIAL OPERATIONS
2ND FLOOR, ESEL CHAMBERS 7 & 7/1,
LALBAGH ROAD, RICHMOND CIRCLE,
BENGALURU - 560027.
REPRESENTED BY ITS SENIOR MANAGER
SRI FRANCY RAJU.
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5. ASSET RECONSTRUCTION COMPANY
(INDIA) LTD., (ARCIIL)
THE RUBY, 10TH FLOOR,
29, SENAPATHI BAPAT MARG, DADAR (WEST)
MUMBAI 400028
REP. BY ITS CHIEF MANAGER
SRI. ASHISH SHAHI.
6. JAMMU AND KASHMIR BANK
ZONAL OFFICE (SOUTH)
UNION STREET OFF INFANTRY ROAD
BENGALURU - 560001
REPRESENTED BY ITS CHIEF MANAGER
MR. FARID AHMED KHAN.
7. SICOM LIMITED
SOLITAIRE CORPORATION PARK
BUILDING NO.4, 6TH FLOOR
GURU HARGOVINDJI ROAD
(ANDHERI GHATKOPAL LINK ROAD)
CHAKALA , ANDHERI (EAST)
MUMBAI, MAHARASHTRA 400093
REPRESENTED BY ITS ASST. MANGER
SRI PRAMOD CHAUHAN.
8. KSIIDC LIMITED
KARNATAKA STATE INDUSTRIAL AND
INFRASTRUCTURE DEVELOPMENT
CORPORATION LIMITED
NO 49, KHANIJA BHAVAN
4TH FLOOR, EAST WING
RACE COURSE ROAD,
BENGALURU 560001
REP. BY ITS GENERAL MANAGER
SRI. ESWARA.
9. BANK OF BAHRAIN AND KUWAIT
JOLLY MAKER CHAMBERS II
GROUND FLOOR, 225 MARIMAN POINT
MUMBAI 400021,
REPRESENTED BY ITS LEGAL MANAGER
SRI. NEMISH KUMAR.
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10. CANARA BANK ARM I BRANCH
ASSET RECONSTRUCTION DIVISION
2ND FLOOR, CIRCLE OFFICE,
SPENCER TOWERS, NO.86, M.G.ROAD
BENGALURU - 560001,
REP. BY ITS CHIEF MANAGER
SRI. PRASHANT PANDEY.
11. STATE BANK OF INDIA
ASSET RECOVERY MANAGEMENT BRANCH
MYSORE BANK BUILDING, BKG COMPLEX
A BLOCK, 2ND FLOOR, AVENUE ROAD,
BENGALURU - 560009
REPRESENTED BY ITS CHIEF MANAGER
SRI. VENKATARAMAN DAS G.
12. CENTRAL BANK OF INDIA
MERCHANT BANKING DIVISION
DEBENTURE TRUSTEE SECTION
4TH FLOOR, CEBTRAK BANK BUILDING
M.G. ROAD, FORT, MUMBAI 400028,
REPRESENTED BY ITS AUTHORIZED OFFICER
MR. A. KESHAV BANGERA.
13. IFCI LIMITED,
IFCI BHAVAN, 4TH FLOOR,
2, CUBBONPET MAIN ROAD,
N R SQUARE, BENGALURU 560002,
REPRESENTED BY ITS ASST. GENERAL MANAGER,
SRI. P. SIVAKUMAR.
14. ICICI BANK,
ICICI BANK TOWERS,
BANDRA KURLA COMPLEX,
BANDRA EAST, MUMBAI 400051,
REP. BY ITS LEGAL MANAGER.
...RESPONDENTS
(BY SRI. SHRISHAIL NAVALGUND, FOR OL - R1,
SRI. K.G. RAGHAVAN, SENIOR COUNSEL FOR
SRI. VIGNESH S.SHETTY, ADV. FOR R2)
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THIS COMPANY APPLICATION IS FILED UNDER SECTION
151 OF CODE OF CIVIL PROCEDURE, 1908 READ WITH RULES
6 AND 9 OF THE COMPANIES (COURT) RULES, 1959 PRAYING
THIS HON'BLE COURT TO RECALL THE COMMON ORDER DATED
12.09.2024 PASSED BY THIS HON'BLE COURT IN COMPANY
APPLICATION NOS.33, 34 AND 240 OF 2024 IN COMPANY
PETITION NO.160 OF 2005; AND ETC.
IN CA NO. 89/2025
BETWEEN:
COMMERCIAL TAX DEPARTMENT,
GOVERNMENT OF TELANGANA,
HYDERGUDA - ASHOK NAGAR CIRCLE,
ABIDS DIVISION D.NO.5-4-435,
2ND FLOOR, OLD KAKTIYA BUILDING,
NAMPALLY STATION ROAD,
NAMPALLY, HYD- 500001
REPRESENTED BY ITS COMMERCIAL TAX OFFICER
AND ASSISTANT COMMISSIONER (ST)
...APPLICANT
(BY SRI. MANU PRABHAKAR KULKARNI, ADVOCATE)
AND:
1. OFFICIAL LIQUIDATOR OF BPL ENGINEERING LTD.
ATTACHED TO HIGH COURT OF KARNATAKA,
"CORPORATE BHAVAN", NO.26-27, 12TH FLOOR,
RAHEJA TOWERS, M.G. ROAD, BENGALURU- 560 001.
2. OMKARA ASSETS CONSTRUCTION PRIVATE LIMITED
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956
HAVING REGISTERED ADDRESS AT:
NO.9, M.P. NAGAR FIRST STREET, KONGU NAGAR
EXTENSION,
TIRUPUR, TAMIL NADU, INDIA - 641 607
ALSO HAVING ADDRESS AT:
KOHINOOR SQUARE, 47TH FLOOR,
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N.C.KELKAR MARG, R.G.GADKARI CHOWK,
DADAR (WEST), MUMBAI- 400028
REPRESENTED BY RITESH SAWANT, CHIEF MANAGER.
...RESPONDENTS
(BY SRI. SHRISHAIL NAVALGUND, FOR OL- R1
SRI. K.G. RAGHAVAN, SENIOR COUNSEL FOR
SRI. VIGNESH S.SHETTY FOR R2)
THIS COMPANY APPLICATION IS FILED UNDER
SECTIONS 446(2)(D), 529 AND 529-A OF THE COMPANIES
ACT, 1956 READ WITH RULE 9 OF THE COMPANIES
(COURT) RULES, 1959, PRAYING THIS HONBLE COURT TO
I) PERMIT THE APPLICANT TO SELL THE PROPERTY AT
PLOT NO.1 TO 8, INDUSTRIAL DEVELOPMENT AREA OF
PASAMILARAM VILLAGE, PATANCHERY MANDAL, MEDAK
DISTRICT TO RECOVER THE DEBTS OWED TO THE
APPLICANT UNDER THE ANDHRA PRADESH GENERAL
SALES TAX ACT, 1957, CENTRAL SALES TAX ACT, 1956
AND ANDHRA PRADESH VALUE ADDED TAX ACT, 2005 AND
ETC.
THESE APPLICATIONS HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 12TH JUNE, 2026 AND COMING ON
FOR PRONOUNCEMENT THIS DAY, THE COURT PRONOUNCED
THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE
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CAV JUDGMENT
These three Company Applications are heard together as
the order in one will have a bearing on the other two.
2. C.A. No.49/2025 is filed by Omkara Assets
Reconstruction Private Limited (“Omkara Assets”). The said
application is filed to recall the attachment notices dated
25.10.2007 and 24.11.2011 issued by the Commercial Tax
Department of Andhra Pradesh, now the State of Telangana
(“CTD”). The CTD is arrayed as respondent No.2 in C.A.
No.49/2025.
3. C.A. No.86/2025 is filed by the CTD seeking recall
of the order dated 12.09.2024 passed by this Court in C.A.
Nos.33/2024, 34/2024 and 240/2024 in C.O.P. No.160/2005
permitting Omkara Assets to sell the property outside the
winding-up proceedings.
4. C.A. No.89/2025 is filed by the CTD seeking leave
of the Court to sell the property comprising Plots No.1 to 8
situated in the Industrial Development Area, Pashamylaram
Village, Patancheru Mandal, Sangareddy District (as per the
latest valuation report), formerly Medak District (as described
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in the Company Applications), Telangana, for recovery of the
dues payable to the CTD under Andhra Pradesh General Sales
Tax Act, 1957 (“APGST Act“), the Central Sales Tax Act, 1956
(“CST Act“), and the Andhra Pradesh Value Added Tax Act,
2005 (“APVAT Act”).
5. The relevant facts are as follows:
5.1. M/s BPL Engineering Limited (“BPL”) mortgaged the
immovable property in question as security for the loans
availed on 01.12.1997 and 22.06.1998 in favour of an IDBI
Bank-led consortium. The total extent of the land covered
under the mortgage is 42.99 acres situated at Pashamylaram
Village, Patancheru Mandal, Sangareddy District (as per the
latest valuation report), formerly Medak District (as described
in the Company Applications). The security interest was created
over the aforesaid property under two registered documents
dated 01.12.1997 and 22.06.1998.
5.2. BPL defaulted in repayment of the loan. On
30.12.2001, the loan account was classified as a Non-
Performing Asset (“NPA”) by the secured creditor, IDBI.
Subsequently, on 30.09.2004, IDBI assigned the debt to the
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Stressed Assets Stabilisation Fund (“SASF”). On 20.11.2008,
SASF issued a demand notice to BPL for recovery of the
outstanding dues.
5.3. In the meantime, on 25.10.2007, the CTD issued an
attachment order for recovery of tax arrears amounting to
Rs.1.81 crores.
5.4. On 18.04.2011, SASF, in exercise of its powers
under Section 13(4) of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(“SARFAESI Act“), took physical possession of the secured
property.
5.5. On 24.11.2011, the CTD issued another attachment
order for recovery of commercial tax arrears amounting to
Rs.72.21 crores.
5.6. Admittedly, the said tax dues payable to the CTD
were not discharged by BPL. Thereafter, the CTD issued a sale
notice dated 16.02.2012 proposing to auction the property of
BPL for recovery of the tax arrears and asserted a Statutory
first charge under the relevant enactments.
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5.7. SASF challenged the aforesaid sale notice by filing a
writ petition before the High Court of Andhra Pradesh. The High
Court of Andhra Pradesh granted an interim stay in favour of
SASF. During the pendency of the said writ petition, this Court,
by order dated 19.11.2012 passed in C.O.P. No.160/2005,
ordered the winding up of BPL.
5.8. On 05.05.2021 the security interest was registered
under Chapter IVA of the SARFAESI Act, by SASF.
5.9. In view of the winding-up order dated 19.11.2012
passed by this Court, the High Court of Andhra Pradesh, by
order dated 23.09.2023, disposed of the writ petition filed by
SASF as having become infructuous, while reserving liberty to
SASF to approach the Official Liquidator appointed by this Court
and seek such relief as may be available in law.
5.10. On 31.08.2024, SASF assigned its rights to recover
the loan dues from BPL to the present applicant, Omkara
Assets. Thereafter, by order dated 12.12.2024 passed in C.A.
No.33/2024, Omkara Assets was substituted in place of SASF.
6. By order dated 12.09.2024, Omkara Assets was
permitted to sell the property outside the liquidation
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proceedings. Omkara Assets claims that several attempts to
auction the property failed because the attachment orders
issued by the CTD continued to be reflected in the revenue and
property records.
7. In the above background, Omkara Assets filed C.A.
No.49/2025 seeking recall of the attachment orders dated
25.10.2007 and 24.11.2011 issued by the CTD, principally
contending that the secured creditor has priority over all other
claimants under the provisions of the SARFAESI Act,
particularly in view of the insertion of Section 26E therein.
8. The CTD has filed C.A. No.86/2025 seeking recall of
the order dated 12.09.2024 whereby Omkara Assets was
permitted to sell the property outside the liquidation
proceedings. The CTD contends that it has a Statutory first
charge over the property and that, such charge takes
precedence over the claim of the applicant in C.A. No.49/2025.
9. In addition, as already noticed, the CTD has filed
C.A. No.89/2025 seeking leave of this Court to sell the
aforesaid property for recovery of the outstanding tax arrears.
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10. Learned Senior Counsel appearing for Omkara
Assets submitted that, Section 26E of the SARFAESI Act,
introduced by the Amendment Act of 2016 and brought into
force in 2020, has retroactive application and, therefore,
applies to all transactions that have not attained finality and are
still pending adjudication. Elaborating the submission, it was
contended that even if the provision is prospective in operation,
it may nevertheless operate retroactively so as to govern all
pending proceedings in which the competing claims have not
yet been finally adjudicated.
11. In support of the said contention, the learned
Senior Counsel placed reliance on the judgment of the Apex
Court in Vineeta Sharma v. Rakesh Sharma and Others1.
12. In addition, it is urged that the law was amended to
fill the gap in the SARFAESI Act, which, though enacted to
ensure speedy recovery of dues payable to financial
institutions, did not provide for a statutory first charge in favour
of secured creditors.
1
(2020) 9 SCC 1
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13. Referring to the judgment of the Hon’ble Apex Court
in Punjab National Bank v. Union of India and others2, the
learned Senior Counsel submitted that the Apex Court has held
that a secured creditor has priority over unsecured Crown
debts. It is urged that the tax dues claimed by the CTD are not
secured debts and, therefore, the CTD cannot assert a first
charge in derogation of the rights of Omkara Assets, which has
stepped into the shoes of the secured creditor.
14. Attention of the Court is also invited to the
judgment of the Co-ordinate Bench in Canara Bank v. State
of Karnataka and Others3 to contend that the charge in
favour of a secured creditor under the SARFAESI Act would
prevail over the claim under the Goods and Services Tax Act,
2017 (“GST Act”). Applying the same principle, it is urged that
the claim of the CTD of a Statutory first charge over the
secured asset is liable to be rejected.
15. The learned Senior Counsel further submitted that,
the security interest in favour of IDBI was created on
2
(2022) 7 SCC 260
3
W.P No. 103730/2025 decided on 23.09.2025
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01.12.1997 and 22.06.1998. The CTD issued the first
attachment order on 25.10.2007 for recovery of tax dues
amounting to Rs.1.81 crore and the second attachment order
on 24.11.2011 for recovery of Rs.72.21 crores, both orders
long after the creation of the security interest in favour of the
lending bank. It is, therefore, contended that the applicant,
having acquired the rights of the lending bank, is entitled to
enforce the security interest, which had come into existence
much prior to the attachment orders.
16. Learned Senior Counsel also relied on the Full
Bench judgement of the Bombay High Court in Jalgaon Janata
Sahakari Bank Ltd. and another v. Joint Commissioner of
Sales Tax and another and connected matters4 to contend
that, if the rights of the first charge holder are not crystallised
then the registration under Central Registry of Securitisation
Asset Reconstruction and Security Interest of India (“CERSAI”)
effected on 05.05.2021 by the applicant Omkara Assets would
confer priority payment rights overriding the Statutory first
charge.
4
2022 SCC OnLine Bom 1767
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17. Learned counsel for the respondent-State submitted
that, Section 26E of the SARFAESI Act employs the expressions
“after the registration of security interest” and “shall be paid in
priority over all other debts”, but does not create or recognise a
Statutory first charge over the property. Since Section 26E of
the SARFAESI Act does not override an existing Statutory first
charge over the property, the Statutory first charge available in
favour of the respondent-State remains unaffected. In support
of the said submission, reliance was placed on the judgment of
the Apex Court in Jalgaon District Central Co-operative
Bank Ltd. v. State of Maharashtra and Others5.
18. Learned counsel for the respondent-State further
urged that the Hon’ble Apex Court in Punjab and Sind Bank
v. State of Punjab6 has held that Section 26E of the SARFAESI
Act, introduced by Act No.44 of 2016, operates prospectively. It
is submitted that, in view of the said judgement, there is no
scope to contend that the provision has retroactive application.
Reliance was also placed on the judgment of the Full Bench of
5
2025 SCC OnLine SC 2513.
6
2023 SCC OnLine SC 1894
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the Bombay High Court in Jalgaon Janata Sahakari Bank
Ltd. (supra), to contend that Section 26E of the SARFAESI Act
operates prospectively. It is also pointed out that the said view
has been affirmed by the Apex Court in Punjab and Sind
Bank (supra).
19. Elaborating the submissions, learned counsel urged
that the concepts of prospective, retrospective and retroactive
operation of a statute are distinct and mutually exclusive. As a
consequence, once the Act or provision is declared as
prospective, it cannot be declared as retroactive.
20. It was further submitted that the Co-ordinate Bench
in Canara Bank (supra), was concerned with the interplay
between the SARFAESI Act and the GST Act and was not
dealing with competing claims arising under the SARFAESI Act
on one hand and the APVAT Act, the APGST Act and the CST
Act on the other, as in the present case and the binding
decision of the Apex Court in Punjab and Sind Bank (supra),
was not brought to the notice.
21. Referring to Article 254 of the Constitution of India,
learned counsel further submitted that there is no repugnancy
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between the State enactments conferring a Statutory first
charge in favour of the State and the provisions of the
SARFAESI Act. It was further contended that, even assuming
there is any repugnancy, the relevant State enactments have
received the assent of the President and, therefore, the
statutory first charge created thereunder in respect of the tax
dues would prevail over all other claims, including those arising
under the SARFAESI Act.
22. Urging that the right is vested in the State to
enforce the statutory charge, it is submitted that the dues
payable to the State are arrears of tax and that neither the
liability nor the statutory first charge arises by virtue of the
attachment orders issued in the years 2007 and 2011.
According to the learned counsel, the liability arises, and the
Statutory first charge comes into existence, the moment the
tax liability is incurred. The tax liability in the present case
arose as early as 1995. Consequently, the Statutory first charge
in favour of the respondent-State came into existence much
prior to the security interest created in favour of the lending
bank in the years 1997 and 1998.
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23. Assuming that Section 26E of the SARFAESI Act has
retroactive application, the rights of the CTD remain unaffected,
as it had already crystallised by operation of the statute
immediately upon the determination of the tax liability.
According to the learned counsel, the pendency of litigation is
not the criterion for determining whether rights have been
crystallised.
24. In reply, the learned Senior Counsel appearing for
Omkara Assets submitted that the Hon’ble Apex Court in
Punjab and Sind Bank (supra), considered only the question
whether Section 26E of the SARFAESI Act, operates
prospectively or retrospectively. It was contended that,
although the Apex Court held the provision to be prospective, it
did not examine whether the provision also has retroactive
application. It was therefore submitted that, this Court is not
precluded from considering the question whether Section 26E
of the SARFAESI Act has retroactive application.
25. The Court has considered the rival submissions
advanced at the Bar, perused the material placed on record,
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and examined the judgments relied upon by the learned
counsel.
26. The following questions arise for consideration:
(a) Whether the priority payment conferred under
Section 26E of the SARFAESI Act prevails over
the statutory first charge created in favour of
the respondent-State under Andhra Pradesh
General Sales Tax Act, 1957, the Central Sales
Tax Act, 1956, and the Andhra Pradesh Value
Added Tax Act, 2005, where the attachment
orders for recovery of tax dues were issued
prior to the registration of the security
interest with CERSAI, but subsequent to the
creation of the security interest under the
registered mortgages?
(b) Whether a statutory provision introduced by
way of amendment, though held to operate
prospectively, can also have retroactive
application? If so, whether the CERSAI
registration entered on 05.05.2021 in respect
of the mortgages created on 01.12.1997 and
22.06.1998 can affect the attachment orders
issued in the years 2007 and 2011 pursuant to
the Statutory first charge?
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(c) Whether the statutory first charge is available
in respect of the Tax dues under the Central
Sales Tax Act, 1956? (“CST Act“).
27. The relevant dates and events are extracted below
for ready reference:
Sl. Date Event
No.
1 01.12.1997 BPL mortgaged its immovable property
and as security for the loan.
22.06.1998
2 30.12.2001 The loan account was classified as a Non-
Performing Asset.
3 30.09.2004 IDBI Bank assigned its debt to SASF.
4 25.10.2007 The CTD issued an attachment order for
recovery of Rs.1.81 crores towards tax
arrears.
5 18.04.2011 SASF, as assignee of the lending bank,
took physical possession of the property
under Section 13(4) of the SARFAESI
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Act.
6 24.11.2011 The CTD issued another attachment
order for recovery of Rs.72.21 crores
towards commercial tax arrears.
7 19.11.2012 This Court passed an order winding up
BPL in C.O.P. No.160/2005.
8 05.05.2021 The security interest was registered with
CERSAI under Chapter IVA of the
SARFAESI Act.
9 31.08.2024 SASF assigned its rights to recover the
loan from BPL to Omkara Assets.
10 12.09.2024 C.A Nos 33/2024, 34/2024, 240/2024
are disposed of based on a joint memo
agreeing to sell the property of the
debtor to recover the dues. CTD is not a
party to the proceedings.
11 20.02.2026 In C.A No. 6/2026 the Court has
recorded the statement made by the
counsel for Omkara Assets that, Omkara
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Assets has taken recovery rights of 13
lending banks.
28. Admittedly, neither the tax dues nor the loan dues
have been recovered.
29. From the materials on record, the following facts
emerge as undisputed:
(i) The tax liability of BPL in favour of the
respondent-State arose during the
years 1995 and 1996 and, under
the prevailing scheme, payment of
the tax was deferred.
(ii) The security interest in favour of the
lending bank was created in the
years 1997 and 1998.
(iii) The loan account was declared as an
NPA in the year 2001, and
proceedings under the SARFAESI
Act were initiated in the year 2008.
(iv) IDBI assigned the secured debt to
SASF in the year 2004.
(v) The respondent-State issued the first
attachment order in the year 2007
and the second attachment order in
the year 2011.
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CA No. 49 of 2025 C/W CA NO.86 of 2025 CA No. 89 of 2025 (vi) On 31.08.2024, Omkara Assets acquired the secured debt from SASF. Discussion on Question (a)
30. The Apex Court in Jalgaon District Central Co-
operative Bank Ltd. (supra), (distinct from the judgment of
the Full Bench of the Bombay High Court in Jalgaon Janata
Sahakari Bank Ltd.), considered the question whether the
priority payment conferred under Section 26E of the
SARFAESI Act prevails over the statutory first charge created
under the Employees’ Provident Funds and Miscellaneous
Provisions Act, 1952 (“the EPF Act“).
31. Answering the said question in paragraphs 25 to 27,
the Hon’ble Apex Court held as follows:
25. Hence, when there are two enactments conferring
priority in satisfaction of a debt coming under the
respective enactments, by virtue of a non-obstante
clause overriding the provisions of any law in force at
that time, the time in which the statute was enacted
or the provision was incorporated, assumes
significance and the provision latter in time would
prevail. However, if there is a first charge statutorily
created, validly, dehors the non obstante clause
conferring priority over other debts, the statutory
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charge would prevail. With these principles in mind,
when we look at the provisions under the SARFAESI
Act and the EPF&MP Act, the former with the
incorporation of Section 26-E, we are of the opinion
that there has to be found a first charge to the
EPF&MP Act dues, under Section 11(2) of that Act.
26. We extract Section 11(2) of the EPF Act and
Section 26-E of the SARFAESI Act hereunder.
“Sec. 11(2): Without prejudice to the provisions of
sub-section (1), if any amount is due from an
employer, whether in respect of the employee’s
contribution (deducted from the wages of the
employee) or the employer’s contribution, the
amount so due shall be deemed to be the first charge
on the assets of the establishment, and shall,
notwithstanding anything contained in any other law
for the time being in force, be paid in priority to all
other debts.
Sec. 26-E: Priority to secured creditors–
Notwithstanding anything contained in any other law
for the time being in force, after the registration of
security interest, the debts due to any secured
creditor shall be paid in priority over all other debts
and all revenues, taxes, cesses and other rates
payable to the Central Government or State
Government or local authority.”
27. Undisputedly, SARFAESI Act is the latter act and
if the question was solely of the non-obstante clause
giving it overriding effect from any law for the time
being in force, the SARFAESI Act would prevail.
However, in the EPF&MP Act, Section 11(2) creates a
statutory first charge on the assets of the
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establishment for any amount due from an employer,
be it the employers’ or employees’ contribution,
which would include any interest or damages also as
has been held in Maharashtra State Co-operative
Bank Limited. In that circumstance, the effect of the
non obstante clause giving precedence over any other
law for the time being in force pales into
insignificance, as held in Central Bank of India. There
being a clear first charge created under the EPF&MP
Act, it overrides the priority under Section 35 and
Section 13 as also that conferred under Section 26-E
since a priority cannot be equated with a first charge
and cannot be given prevalence over the first charge
statutorily created.
(Emphasis supplied)
32. On a careful perusal of the judgment, two distinct
principles emerge:
(a) Where there are two enactments
containing non obstante clauses
which are in conflict with each
other, the later enactment
ordinarily prevails.
(b) However, where the competing
enactments deal with priority in
the satisfaction of debts, the above
principle does not automatically
apply. The Court must first
ascertain whether a statutory first
charge has been validly created
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dehors the non obstante clause. If
such a statutory first charge,
dehors non obstante clause exists,
it will prevail. In other words, a
non obstante clause conferring
priority in recovery must yield to
a statutory provision
independently creating a first
charge.
33. To ascertain as to whether the statutory charge is
created independent of non obstante clause, the Court now has
to consider Sections 16(4) and 16C of Andhra Pradesh General
Sales Tax Act, 1957. The said provisions read as follows:
“16. Payment of tax and other dues payable under
the Act.
(1) xxxxx
(4) If the tax assessed or penalty levied or
interest payable under this Act or any instalment
thereof, and the fees payable towards licence or
registration, are not paid by a dealer within the
time specified thereof, the whole of the amount
then remaining unpaid may be recovered from him
as if it were an arrear of land revenue.
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16C. Liability under this Act to be the first
charge.
-Notwithstanding anything to the contrary
contained in any law for the time being in force,
any amount of tax, Government loan extended to
the dealer due to treating deferred tax as deemed
to have been paid, penalty, interest and any other
sum if any, payable by a dealer or any other
person under this Act, shall be the first charge
on the property of dealer, or such person.”
(emphasis supplied)
34. Section 16C of the APGST Act, was introduced with
effect from 06.04.1999 by way of amendment. Thus the said
provision creates the first charge, over the tax dues.
35. Section 16(4) of the APGST Act creates a first
charge over the tax dues, as it provides for recovery of tax
dues as if they were arrears of land revenue. The reason is
under the Andhra Pradesh Revenue Recovery Act, 1864 or the
applicable Land Revenue Act, arrears of land revenue constitute
a first charge over the property of the defaulter.
36. Thus, what emerges is Section 16C of the APGST
Act does not, in substance, create a first charge over the
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property of a dealer in arrears of tax for the first time. It
merely declares that such first charge shall operate
notwithstanding anything contained in any other law for the
time being in force, thereby facilitating the enforcement of the
first charge recognised under Section 16(4) of the APGST Act.
37. This being the position, if the two principles laid
down by the Apex Court in Jalgaon District Central Co-
operative Bank Ltd. (supra), are applied, the non obstante
clause contained in Section 26E of the SARFAESI Act does not
override the Statutory first charge created under the State
enactments, notwithstanding that the SARFAESI Act is the later
enactment. The reason is that Section 26E of SARFAESI Act
does not create a statutory first charge; it merely confers
priority in payment.
38. It is true that the Full Bench of the Bombay High
Court in Jalgaon Janata Sahakari Bank Ltd.(supra), held
that such priority will prevail over a statutory first charge if
certain conditions are satisfied, in view of the subsequent
declaration of law by the Apex Court in Jalgaon District
Central Co-operative Bank Ltd. (supra). This Court is bound
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to follow the view that, the priority conferred under Section 26E
of the SARFAESI Act, cannot override a Statutory first charge
validly created dehors the non obstante clause.
39. In Jalgaon District Central Co-operative Bank
Ltd. (supra), the Apex Court considered the interplay between
Section 26E of the SARFAESI Act and the statutory first charge
created under the EPF Act, 1952 but not the statutory first
charge under the Taxation law applicable to Andhra Pradesh.
Because of that, one may urge that the ratio applies to a
statutory first charge in a beneficial legislation and may not be
applicable to the present case, where the respondent-State
relies upon fiscal enactments. It may also be argued that
Section 11(2) of the EPF Act, 1952 expressly creates both a
statutory first charge and priority in payment, whereas the
State enactments relied upon by the CTD create only a
statutory first charge.
40. The aforementioned contentions are not tenable.
The Apex Court in Jalgaon District Central Co-operative
Bank Ltd. has taken the said view not because the EPF Act,
1952 is benevolent legislation, and assuming it to be so, that
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may be one of the reasons. The primary reason for
interpretation is found in paragraphs No. 25 to 27 of the said
judgment extracted above.
41. One may also contend that in Punjab and Sind
Bank (supra), the Apex Court referred to Full Bench judgment
in Jalgaon Janata Sahakari Bank Ltd. (supra) and held that
Section 26E is prospective, and as a corollary the view of the
Full Bench of the Bombay High Court which held that priority
payment conferred under Section 26E of the SARFAESI Act
overrides statutory first charge stands affirmed.
42. In Punjab and Sind Bank (supra), the Apex Court
did not deal with the question whether the priority conferred in
Section 26E of the SARFAESI Act supersedes statutory first
charge. Though, a reference is made to the Full Bench
judgment of the Bombay High Court, to hold that Section 26E
of the SARFAESI Act is prospective, one cannot conclude that
the Apex Court has endorsed the view of the Bombay High
Court on priority payment under Section 26E. Said question
was not raised before the Apex Court in Punjab & Sind Bank
(supra).
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43. In Punjab and Sind Bank (supra), the secured
creditor had issued a notice under Section 13(2) of the
SARFAESI Act on 06.09.2013. The State, on the other hand,
claimed a statutory first charge under the provisions of the
Punjab Value Added Tax Act, 2005 (“PBVAT Act”), and initiated
recovery proceedings in the year 2014. Both proceedings
commenced prior to the insertion of Section 26E into the
SARFAESI Act by the Amendment Act of 2016, which was
brought into force on 20.01.2020. While deciding the case, the
Hon’ble Apex Court took note of the subsequent amendment
introducing Section 26E and held that the statutory first charge
created under the State enactment would prevail over the claim
of the secured creditor, since Section 26E operates
prospectively. The Apex Court further held that Section 35 of
the SARFAESI Act, as it stood prior to the amendment, did not
eclipse the statutory first charge created under the State
enactment and that there was no inconsistency between the
provisions of the PBVAT Act and the SARFAESI Act with regard
to the creation and enforcement of the statutory first charge.
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44. The Apex Court further observed that, prior to the
2016 amendment; the SARFAESI Act did not confer any
statutory priority upon a secured creditor, whereas Section 35
of the PBVAT Act expressly created a statutory first charge over
the assets of the tax defaulter.
45. In Punjab and Sind Bank (supra), the Hon’ble
Apex Court also referred to its earlier decision in Central Bank
of India v. State of Kerala and others7 and reiterated that,
prior to the 2016 amendment, neither the SARFAESI Act nor
the Recovery of Debts Due to Banks and Financial Institutions
Act, 1993 created a statutory first charge in favour of secured
creditors so as to override the statutory first charge created
under the State enactments.
46. Thus, it is evident that on different grounds
discussed afore-paragraphs No.43 to 45, the Apex Court in
Punjab & Sind Bank (supra), has held that Section 26E is
prospective. Thus, the said judgment by Apex Court is not an
authority on the question whether the priority in payment
under Section 26E of the SARFAESI Act, prevails over statutory
7
2009 (4) SCC 94
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first charge. Said judgment holds that Section 26E is
prospective in operation. It is settled principle that the ratio is
what the Court decides but not everything that logically flows
from it.
47. At this juncture it also necessary to refer to Section
26C to Section 26 E in Chapter IVA of the SARFAESI Act which
read as under
“CHAPTER IV A
REGISTRATION BY SECURED CREDITORS AND OTHER
CREDITORS
XXXX
26C. Effect of the registration of transactions,
etc.–(1) Without prejudice to the provisions contained in any
other law, for the time being in force, any registration of
transactions of creation, modification or satisfaction of security
interest by a secured creditor or other creditor or filing of
attachment orders under this Chapter shall be deemed to
constitute a public notice from the date and time of filing of
particulars of such transaction with the Central Registry for
creation, modification or satisfaction of such security interest
or attachment order, as the case may be.
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CA No. 89 of 2025(2) Where security interest or attachment order upon any
property in favour of the secured creditor or any other creditor
are filed for the purpose of registration under the provisions of
Chapter IV and this Chapter, the claim of such secured creditor
or other creditor holding attachment order shall have priority
over any subsequent security interest created upon such
property and any transfer by way of sale, lease or assignment
or licence of such property or attachment order subsequent to
such registration, shall be subject to such claim:
Provided that nothing contained in this sub-section shall
apply to transactions carried on by the borrower in the
ordinary course of business.
26D. Right of enforcement of securities.–Notwithstanding
anything contained in any other law for the time being in
force, from the date of commencement of the provisions of
this Chapter, no secured creditor shall be entitled to exercise
the rights of enforcement of securities under Chapter III
unless the security interest created in its favour by the
borrower has been registered with the Central Registry.
26E. Priority to secured creditors.–Notwithstanding
anything contained in any other law for the time being in
force, after the registration of security interest, the debts due
to any secured creditor shall be paid in priority over all other
debts and all revenues, taxes, cesses and other rates payable
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CA No. 89 of 2025to the Central Government or State Government or local
authority.
Explanation.–For the purposes of this section, it is hereby
clarified that, on or after the commencement of the Insolvency
and Bankruptcy Code, 2016 (31 of 2016), in cases where
insolvency or bankruptcy proceedings are pending in respect of
secured assets of the borrower, priority to secured creditors in
payment of debt shall be subject to the provisions of that
Code.”
48. Section 26B of the SARFAESI Act, deals with the
registration of transactions creating, modifying or satisfying
security interests and with the registration of attachment
orders.
49. Section 26C(1) of the SARFAESI Act, declares that
registrations made under Section 26B shall constitute public
notice from the date and time of such registration.
50. Section 26C(2) the SARFAESI Act, provides that any
transfer of property by way of sale, lease, assignment or
licence, and any attachment effected subsequent to the
registration under Section 26B, shall be subject to the claim of
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the secured creditor or other creditor holding an attachment
order who has registered the same with the Central Registry.
51. Section 26D of the SARFAESI Act, disentitles a
secured creditor from enforcing its rights under Chapter III of
the SARFAESI Act unless the security interest has been
registered with the Central Registry (CERSAI). In other words,
registration with the Central Registry (CERSAI) is mandatory for
a secured creditor, as defined under Section 2(1)(zd), to invoke
the remedies under the SARFAESI Act.
52. Section 26E of the SARFAESI Act recognises the
priority of payment in favour of a secured creditor in respect of
dues secured by a security interest that has been duly
registered with the Central Registry.
53. A plain reading of Section 26E suggests that once
the secured creditor has registered its security interest with the
Central Registry, the debts due to such secured creditor are to
be paid in priority over all other debts, including:
(i) debts owed to the Central Government;
(ii) debts owed to the State Government;
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(iii) debts owed to local authorities; and
(iv) all other unsecured debts.
54. Section 26C(2) of the SARFAESI Act, contains the
following expression;
“where security interest or attachment order
upon any property in favour of the secured creditor
or any other creditor are filed for the purpose of
registration under the provisions of Chapter IV and
this Chapter, the claim of such secured creditor or
other creditor holding attachment order shall have
priority over any subsequent security interest
created upon such property…”
(emphasis supplied)
55. If the language employed in Section 26C(2)
discussed above is kept in view, while interpreting Section 26E
which merely recognises priority and not a statutory first
charge over the assets, and if both provisions are read
harmoniously, it appears that Section 26E operates to confer
priority and recognises a superior right only in respect of debts,
including Government dues, arising after registration under
Chapter IVA of the Act. Therefore, even assuming that priority
under Section 26E overrides a statutory first charge, such
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contention could arise only in respect of statutory dues that
arise after registration under Chapter IVA of the SARFAESI Act.
The judgment in Jalgaon District Central Co-operative
Bank Ltd (supra), delivered on 20.11.2025 has expressly
decided the question as to whether the priority payment under
Section 26E of the SARFAESI Act, overrides statutory first
charge. The Court answered the question in the negative.
56. What emerges from above two decisions in Jalgaon
District Central Co-operative Bank Ltd, and Punjab and
Sind Bank (supra) are;
(a) the priority for recovery of dues under
Section 26E of the SARFAESI Act does not override
the statutory first charge if such statutory first
charge is created dehors non obstante clause.
(Jalgaon District Central Co-operative Bank
Ltd) (supra).
(b) Section 26E of the SARFAESI Act, is
prospective in operation (Punjab and Sind Bank)
(supra).
In either case, the applicant Omkara Assets does not
acquire priority.
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57. However, the learned Senior Counsel would urge
that even if the statute or provision is prospective, it can also
be retroactive and would refer to the judgment of the Full
Bench of the Bombay High Court in Jalgaon Janata Sahakari
Bank Ltd (supra), and the judgment of the Apex Court in
Vineeta Sharma and also the judgment in Securities and
Exchange Board of India vs. Rajkumar Nagpal and
others8. Hence the question (b) is framed as above.
58. On behalf of Omkara Assets, reliance is also placed
on the judgement in Assets Care and Reconstruction
Enterprise Limited Vs Karnataka Real Estate and others9
in addition to Canara Bank (supra). The above said
judgements are of no assistance to applicant Omkara Assets in
view of the law in Jalgaon District Central Co-operative
Bank Ltd (supra).
Discussion on question (b)
59. In view of the finding of the Apex Court in
Jalgaon District Central Co-operative Bank Ltd (supra),
8
(2023) 8 SCC 274
9
W.P No. 7844/2024 decided on 25.06.2024
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the question whether the Section 26E of the SARFAESI Act, is
prospective or retrospective in operation does not survive at all
insofar as the claim for priority payment over statutory first
charge. The said question may arise in case of conflicting
claims among secured creditors or holders of attachment
orders. However, the question raised is of seminal importance
and as arguments, have been addressed extensively, the
Court would endeavour to answer the question.
60. More important, the “prospective”, “retrospective”
or “retroactive” applications of a provision of a law or more
particularly, the applications of said doctrines on the amended
provision of law give rise to many disputes. Hence, it would be
appropriate to endeavour to answer the question.
61. The Full Bench of the Bombay High Court in
Jalgaon Janata Sahakari Bank Ltd. (supra), exhaustively
examined the operation of Chapter IVA of the SARFAESI Act.
One of the questions framed for consideration therein, namely
Question (c), reads as under:
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CA No. 89 of 2025“44. xxxx
(c).Are the provisions, inter alia, according
‘priority’ in payment of dues to a secured creditor
for enforcing its security interest under the
provisions of the SARFAESI Act prospective?
xxx”
62. The Full Bench of the Bombay High Court has held
that Section 26E operates prospectively.
63. Before answering the question, whether a provision
which is declared as prospective can be declared as retroactive
or also to be retroactive, in addition to being prospective, it is
necessary to examine the concepts of prospective,
retrospective and retroactive operation of statutes.
64. At this juncture it is necessary to refer to some of
the observations of the Apex Court on such doctrines. In
Securities and Exchange Board of India(supra), in
paragraphs No. 101 and 102 has held as under:
“101. The terms “retrospective” and “retroactive” are
often used interchangeably. However, their meanings are
distinct. This Court succinctly appreciated the difference
between these concepts in State Bank’s Staff Union (Madras
Circle) v. Union of India,
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102. Many decisions of this Court define “retroactivity”
to mean laws which destroy or impair vested rights. In real
terms, this is the definition of “retrospectivity” or “true
retroactivity”. “Quasi-retroactivity” or simply “retroactivity”
on the other hand is a law which is applicable to an act or
transaction that is still underway. Such an act or transaction
has not been completed and is in the process of completion.
Retroactive laws also apply where the status or character of a
thing or situation arose prior to the passage of the law.
Merely because a law operates on certain circumstances
which are antecedent to its passing does not mean that it is
retrospective.
(Emphasis supplied)
65. In paragraph No.61 in Vineeta Sharma (supra),
the Apex Court described the nature of prospective,
retrospective, and retroactive laws as under:
“61. The prospective statute operates from the date
of its enactment conferring new rights. The retrospective
statute operates backwards and takes away or impairs
vested rights acquired under existing laws. A retroactive
statute is the one that does not operate retrospectively. It
operates in futuro. However, its operation is based upon the
character or status that arose earlier. Characteristic or event
which happened in the past or requisites which had been
drawn from antecedent events. xxxx”
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66. Paragraphs No. 20 and 21 in State Bank’s Staff
Union (Madras Circle) v. Union of India and others10 read
as under:
“20. Judicial Dictionary (13th Edn.) by K.J. Aiyar,
Butterworth, p. 857, states that the word “retrospective”
when used with reference to an enactment may mean (i)
affecting an existing contract; or (ii) reopening up of past,
closed and completed transaction; or (iii) affecting accrued
rights and remedies; or (iv) affecting procedure. Words and
Phrases, Permanent Edn., Vol. 37-A, pp. 224-25, defines a
“retrospective or retroactive law” as one which takes away or
impairs vested or accrued rights acquired under existing
laws. A retroactive law takes away or impairs vested rights
acquired under existing laws, or creates a new obligation,
imposes a new duty, or attaches a new disability, in respect
to transactions or considerations already past.
21. In Advanced Law Lexicon by P. Ramanath Aiyar
(3rd Edn., 2005) the expressions “retroactive” and
“retrospective” have been defined as follows at p. 4124, Vol.
4:
“Retroactive.–Acting backward; affecting what is
past.
(Of a statute, ruling, etc.) extending in scope or effect
to matters that have occurred in the past.
— Also termed retrospective. (Black’s Law Dictionary,
7th Edn., 1999)“Retroactivity” is a term often used by lawyers but
rarely defined. On analysis it soon becomes apparent,
moreover, that it is used to cover at least two distinct
concepts. The first, which may be called “true retroactivity”,10
(2005) 7 SCC 584
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consists in the application of a new rule of law to an act or
transaction which was completed before the rule was
promulgated. The second concept, which will be referred to
as “quasi-retroactivity”, occurs when a new rule of law is
applied to an act or transaction in the process of
completion…. The foundation of these concepts is the
distinction between completed and pending transactions….’
T.C. Hartley, Foundations of European Community Law, p.
129 (1981).
***
Retrospective.–Looking back; contemplating what is past.
Having operation from a past time.
‘Retrospective’ is somewhat ambiguous and that good
deal of confusion has been caused by the fact that it is
used in more senses than one. In general, however, the
courts regard as retrospective any statute which operates on
cases or facts coming into existence before its commencement in
the sense that it affects, even if for the future only, the character
or consequences of transactions previously entered into or of
other past conduct. Thus, a statute is not retrospective merely
because it affects existing rights; nor is it retrospective merely
because a part of the requisite for its action is drawn from a time
antecedent to its passing.” (Vol. 44, Halsbury’s Laws of England,
4th Edn., p. 570, para 921.)
(Emphasis supplied)
67. These expressions are not defined in any
enactment. They are judicial constructs evolved while
interpreting statutes, particularly amending enactments. Over a
period of time, certain broad principles have emerged
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governing their application, which may be summarised as
follows:
(a) A statute operates retrospectively when it
creates, alters or extinguishes rights or liabilities in
respect of acts, transactions or events that
occurred before its commencement, thereby
affecting accrued or vested rights.
(b) A statute operates prospectively when it
governs rights, liabilities and consequences arising
from acts, transactions or events occurring after its
commencement, without disturbing accrued or
vested rights.
(c) Retroactive operation occupies an
intermediate position. A statute may be regarded
as retroactive where it applies to existing or
pending situations by taking into account
antecedent facts or events, without disturbing
rights that have already vested or finally accrued.
(d) As a general rule, substantive provisions
are presumed to operate prospectively unless a
contrary legislative intention is evident, whereas
procedural provisions ordinarily apply to pending
proceedings.
(e) Declaratory or clarificatory amendments
are generally regarded as retrospective.
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(f) The above principles are not absolute.
Whether a provision operates prospectively,
retrospectively or retroactively depends upon the
language employed, the legislative intent and the
object sought to be achieved.
(g) Judicial decisions have also recognised
sub-categories such as true retroactivity and
quasi-retroactivity.
(h) Even where a statute expressly declares
its operation to be prospective or retrospective, the
Court may examine its true legal effect in the
context of the legislative scheme. However,
departure from the expressed legislative intent can
be justified only in exceptional circumstances.
68. The Full Bench of the Bombay High Court in
Jalgaon Janata Sahakari Bank Ltd. (supra) has held that a
CERSAI registration effected before or after 20.01.2020 would
confer priority in payment, including over a statutory first
charge, provided that the statutory first charge had not
crystallised into a vested right by the initiation of recovery
proceedings in accordance with law. Thus, although the Full
Bench held Chapter IVA to be prospective, it nevertheless took
into account transactions and events that had occurred prior to
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its introduction. In a way, the statutory first charge created by
operation of law, and not crystallised into a vested right (for
want of further steps to enforce statutory charge) yielding to
CERSAI registration exhibits a degree of retroactive operation.
69. The Full Bench further held that where the rights of
the holder of a statutory first charge had crystallised before the
CERSAI registration, the statutory first charge would not be
diluted by such registration. In that situation, the CERSAI
registration obtained by the secured creditor would not confer
priority over the statutory first charge. In such a scenario the
CERSAI registration will confer priority only over subsequent
charges, transfers and attachment orders but not statutory first
charge in view of the law in Jalgaon District Central Co-
operative Bank Ltd (supra). Then the application of the
provisions will be prospective.
70. If the broad principles governing prospective,
retrospective and retroactive applications are kept in mind, and
also considering the actual application of the said principles as
applied by the Full Bench of the Bombay High Court supra, it is
possible to take a view that doctrines “prospective”,
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“retrospective”, “retroactive”, quasi retroactive”, “true
retroactive” which are essentially judicial constructs cannot be
applied like inflexible formula.
71. In a given legislative context, it is entirely possible
that a statute may operate prospectively without taking into
account any event or transaction that occurred before its
commencement.
72. Likewise, a statute may be prospective in operation,
yet, for achieving its legislative object, it may legitimately take
into account acts and events that occurred before its
commencement. In such a situation, whether the statute is
described as prospective, retroactive, truly prospective or
quasi-retroactive may not assume significance, since these
expressions are only broad indicators and not sure-fire
formulas for determining the application of the law.
73. In some cases such labelling may give a complete
picture as to how the law operates eliminating any doubt as to
the applicability of other doctrines. In some other case such
labelling may not give a clear picture. These concepts provide
broad guidance as to the manner in which an amended
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provision may operate, but they may or may not invariably fit
every legislative situation into a single doctrine. If a Court,
while declaring the operation of a statute, expressly or by
necessary implication excludes the application of the other
doctrines, the matter stands concluded accordingly. However,
where the Court has not expressly or impliedly considered the
applicability of the remaining doctrines, it may still be open to a
subsequent Court to examine whether the provision admits of
such application. The actual application of these doctrines
depends upon the language of the statute, the legislative intent
and the factual context in which the issue arises.
Discussion on question (c)
Whether the statutory first charge is available in respect
of the dues recoverable under the Central Sales Tax Act,
1956?” (“CST Act“).
74. This question assumes significance because, unlike
the APGST Act and the APVAT Act, the CST Act does not
expressly create a statutory first charge in respect of the dues
payable thereunder. However, the CST Act provides a
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mechanism for recovery of such dues through the authorities
functioning under the State enactments.
75. The dues sought to be recovered by the CTD arise
under three enactments, namely, the APGST Act, the APVAT Act
and the CST Act. Of these, the CST Act does not expressly
provide for a statutory first charge in favour of the Central
Government. The APGST Act and the APVAT Act, however,
specifically create a statutory first charge in respect of the dues
recoverable thereunder. There is no dispute that both the State
enactments confer such a statutory first charge.
76. Section 9 of the CST Act prescribes the mechanism
for levy, collection and recovery of tax under the Act. Section
9(2), in particular, authorises the authorities empowered under
the general sales tax law of the appropriate State to assess,
reassess, collect and enforce payment of tax, interest and
penalty payable under the CST Act, as if such amounts were
payable under the State sales tax law. It further authorises
those authorities to exercise all the powers available to them
under the corresponding State enactment.
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77. The language employed in Section 9 of the CST Act
does not expressly provide for the creation of a statutory first
charge. Nevertheless, the scheme of the provision leaves little
room for doubt that the State authorities, who are empowered
to recover dues under the CST Act, are entitled to exercise all
the powers available to them under the State sales tax laws,
including the power to enforce the statutory first charge
created by those enactments.
78. This interpretation flows from the expressions:
“collect and enforce payment of tax … as if
the tax, interest or penalty payable under this Act
is a tax, interest or penalty payable under the
general sales tax law of the State”;
And
“they may exercise all or any of the powers
they have under the general sales tax law of the
State.”
79. These expressions clearly indicate that the
provisions of the State enactments, including the statutory
incidents attached to recovery proceedings, stand incorporated
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into the CST Act for the purpose of recovery of dues, unless
expressly excluded by the CST Act.
80. Since Section 9(2) incorporates, by reference, the
recovery machinery contained in the State enactments, and
there is no provision in the CST Act excluding the operation of
the statutory first charge available under the State laws, the
powers available under the State enactments must necessarily
be read into the CST Act for the limited purpose of recovery.
81. Accordingly, this Court is of the considered view
that the statutory first charge available under the State
enactments is equally available for recovery of the dues
payable under the CST Act.
82. Before concluding, this Court considers it
appropriate to make certain observations regarding statutory
provisions introduced by way of amendment.
83. Whenever a statute is amended, disputes frequently
arise regarding the manner in which the amendment applies to
conclude transactions which are subject matter of pending
proceedings, concluded transactions which become subject
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matter of lis in proceedings initiated after the law coming in to
force. Quite often, different High Courts have taken divergent
views on whether a particular amendment operates
prospectively, retrospectively or retroactively. As noticed earlier,
Chapter IVA of the SARFAESI Act has itself given rise to
divergent judicial opinions on its operation.
84. There are also instances where even the Hon’ble
Apex Court has, in different contexts, examined whether a
particular amendment operates prospectively or retrospectively.
The amendment to Section 6 of the Hindu Succession Act,
1956, by Act 39 of 2005, is one such illustration. Suffice it to
say such examples are galore.
85. Experience also shows that the characterisation of
an amendment as prospective or retrospective frequently
depends upon the manner in which the amendment is
introduced. An amendment effected by substitution is often
regarded as retrospective, though that is not an inflexible rule.
Likewise, amendments introduced by using expressions
“inserted” or “amended” are construed differently. These
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principles are only general guides and cannot be applied like a
statute in every case.
86. Chapter IVA of the SARFAESI Act, has evoked the
considerable debate on its application and interpretation. This is
evident from the fact that there were a number of divergent
views expressed by various courts and various benches.
Whether a Statute or a provision of law or amended provision
of law, has prospective or retrospective or any other kind of
application, should not be a subject matter of debate.
87. It would always be desirable for the Legislature,
while introducing an amendment, to indicate in clear terms
whether the law or the amended provision is prospective,
retrospective, retroactive and more important, with additional
prescription as to how the amended provision is intended to
apply to transactions and events that occurred prior to the
amendment, to pending proceedings, and to future
transactions. Such legislative clarity, though it may not
altogether eliminate interpretative disputes, may substantially
reduce conflicting judicial opinions.
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88. The importance of illustrations found in several
enactments, such as the Indian Penal Code, 1860, the Indian
Contract Act, 1872, the Transfer of Property Act, 1882 the
Specific Relief Act, 1963 the Bharatiya Nyaya Sanhita, 2023
and the Bharatiya Sakshya Adhiniyam, 2023 and the like, in
capturing the true import of a provision is well known.
However, perhaps unknowingly or unintentionally such a
worthy practice is forgotten. It is high time it should be revived.
Wherever needed and appropriate, the incorporation of
illustrations while enacting or amending a legislation may
greatly assist all stakeholders in the justice delivery system.
After all the law is meant for the common man and should be
drafted in the simplest possible way. It should never be a
puzzle.
89. These observations should not be understood as an
attempt by this Court either to legislate or to issue directions
regarding legislative policy. This Court is conscious that such
power does not vest in it. The Court is also conscious that
legislation is a task by itself. The endeavour is only to draw
attention on the issue which may result in different legislative
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practices which, if adopted, may reduce uncertainty and avoid
unnecessary litigation.
90. CONCLUSIONS.
(a) The statutory first charge under Andhra Pradesh
General Sales Tax Act, 1957, The Central Sales
Tax Act,1956 and The Andhra Pradesh Value
Added Tax Act, 2005 created dehors the non
obstante clause, is not affected by reason of
registration of security interest/attachment order
under the SARFAESI Act.
(b) The declaration of a law, or a provision of a law, as
“prospective” by itself in all circumstances cannot be
said to have ruled out “retroactive” application of such
law. The provision of law, which is declared as
“prospective” by the Apex Court, excluding the
“retrospective” and “retroactive” or any other kind of
application, cannot be examined by the High Court to
consider if such law has a retroactive application.
However, if a law declared as “prospective”, without
dealing with the question on its “retroactive”
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application, then the Court can examine if such law
has “retroactive” application.
(c) The statutory first charge applicable under the State
enactments namely Andhra Pradesh General Sales
Tax Act, 1957, and The Andhra Pradesh Value
Added Tax Act, 2005 also applies to recover the
dues payable under The Central Sales Tax Act, 1956.
91. In view of the foregoing discussion, C.A.
No.49/2025 filed by Omkara Assets Reconstruction Private
Limited to recall the attachment orders dated 25.10.2007 and
24.11.2011 passed by CTD is liable to be dismissed.
92. C.A. No.86/2025 filed by CTD to recall the order
dated 12.09.2024 in C.A. Nos.33/2024, 34/2024 and 240/2024
is allowed as the said order is passed without hearing the
Commercial Tax Department which has a claim over the
property in question.
93. C.A. No.89/2025 is filed by the Commercial Tax
Department seeking permission to sell the property of M/s BPL
to recover the dues. Same has to be allowed in part. Sale of the
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property by CTD is permitted. The amount shall be deposited
before the Official Liquidator attached to the High Court till
further adjudication on other applications claiming right of
recovery filed by Official Liquidator.
94. Accordingly, the following order is passed:
ORDER
(i) C.A. No.49/2025 is dismissed.
(ii) C.A. No.86/2025 is allowed. The order dated
12.09.2024 passed in C.A. Nos.33/2024,
34/2024 and 240/2024 is recalled.
(iii) C.A. No.89/2025 is allowed.
(iv) The Commercial Tax Department is permitted
to proceed with the sale of the property in
accordance with law for recovery of the tax
dues payable under the APGST Act, the
APVAT Act and the CST Act.
(v) On such sale of the property, the amount
realised shall be deposited in the account
maintained by Official Liquidator attached to
this Court. Later, same shall be kept in fixed
deposit in a nationalized bank for one year
with auto-renewal mandate till the
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adjudication of the claims made by the
Official Liquidator.
(vi) No order as to costs.
Sd/-
(ANANT RAMANATH HEGDE)
JUDGE
BRN/CHS
