Gujarat High Court quashes Rs 2.40 crore tax charge on land mortgaged to SBI

The Gujarat High Court on 9 October 2026 quashed a Rs 2.40 crore tax charge that the State Tax Officer had entered on mortgaged land held by State Bank of India, and declared that the bank has first charge over the property. The court held that, under Section 26E of the SARFAESI Act, 2002, the bank as a secured creditor has priority over the state's tax claim.

What Happened

According to the judgment, SBI had given cash credit and term loans totalling Rs 25 crore to a borrower company, secured by a registered mortgage of industrial land at Mouje Rupavati in Sanand taluka, Ahmedabad district. The bank classified the account as a non-performing asset, meaning a loan that has stopped being repaid, on 29 January 2023. It then issued a notice under the SARFAESI Act for Rs 25,91,11,085 and took possession of the land on 24 April 2023.

While the bank was preparing to sell the land by public auction, it found that a charge of Rs 2,39,93,020 had been entered in the land records on 20 April 2026 at the request of the State Tax Officer. The entry recorded a demand said to be outstanding from the borrower company under the CGST/GGST Act, 2017. The bank wrote to the officer on 17 August 2026 asking for the charge to be removed but, the court recorded, got no response.

Both the bank's counsel and the state's counsel told the court the issue had already been settled by an earlier ruling of the same High Court, which held that a bank's first priority over secured assets under Section 26E prevails over the state's claim. Following that ruling, the court quashed the land-record entry and declared that SBI has first charge over the mortgaged properties.

What It Means

The bank told the court it wanted to sell the land by public auction and give the buyer a clear and marketable title. With the entry quashed, the state's tax charge no longer appears on the record for these two survey numbers.

The ruling applies the principle that a secured lender holding a registered mortgage has priority over the state's tax claim on the same property.

Source: High Court judgment