CGST Dept Wrongly Attached Mortgaged Property | HC

Case Details: CFM Asset Reconstruction (P.) Ltd. v. Assistant Commissioner, CGST & C.EX, Durgapur-i Division - [2025] 176 taxmann.com 572 (HC - Calcutta) 

Judiciary and Counsel Details

• Raja Basu Chowdhury, J.
• Jishnu Chowdhury,
• Sr. Adv., Ms. Aasia Hasan & Ms. Sakshi Tiwari for the Petitioner. 
• Ms. Manasi Mukherjee,
• Tapan Bhanja,
• Bijitesh Mukherjee,
• Arijit Chakraborty,
• Bankim Pal,
• Sayantan Bose,
• Ms. Manisha Das & Ms. Neha Mishra for the Respondent.

Facts of the Case

In the instant case, the principal borrower had availed credit facilities from assignor banks, and to secure repayment of the said credit facilities, the principal borrower had mortgaged the subject property in favour of assignor bank no. 1.

Subsequently, the accounts of the principal borrower were declared to be non-performing asset. Since the principal borrower, despite being afforded repeated opportunities, failed to make repayment and comply with its obligations, the secured creditor issued a statutory notice under section 13(2) of the SARFAESI Act to the principal borrower demanding repayment of the credit facilities.

In the interregnum, the secured creditor, having acquired the exposure of the principal borrower from the assignor bank no. 2 in terms of its deed of assignment, intimated the principal borrower of such acquisition.
Subsequently, it came to the knowledge of the secured creditor that the CGST authorities, by invoking provisions of Section 79(1)(d) of the CGST Act, 2017, had attached the secured asset of the secured creditor for the recovery of Government dues. Challenging the aforementioned action, the secured creditor filed this petition.

It was noted that the secured creditor had not taken possession of the subject property; thus, there was no irregularity on the part of the CGST authorities in proceeding to attach the subject property in question.
Further, there were huge outstanding, both on account of CGST as also to secured creditors, thus, having regard to the provisions contained in Section 26E of the SARFAESI Act, it would be prudent to permit the secured creditors to deal with the secured assets.

HC Held

The High Court held that the issue of whether the secured creditor had priority over the statutory dues of the CGST authorities was no longer res integra. Therefore, it would be futile to direct the secured creditor to approach the Magistrate under the provisions of the SARFAESI Act to recover possession of the subject property since the CGST authority had already taken over possession.

Thus, CGST authorities were directed to transfer possession of secured assets to and in favour of the secured creditor.

List of Cases Reviewed

• Central Bank of India v. State of Gujarat [R/SPECIAL CIVIL APPLICATION NO. 13768 of 2023, dated 24-9-2024] (para 16) followed