2010 (3) TMI 1025 - HC - VAT and Sales Tax

Creation of equitable mortgage - preferential claim on property - Held that - In view of the fact that the petitioner s son C.V. Sanjeev Kumar, proprietor of Sri Annapoorna Farm Equipments, Singanallur, Coimbatore-15 in his statement dated December 24, 1999 has categorically stated that he has no properties in his name and that his father, viz., writ petitioner, is possessing five acres of agricultural land at Kallapalayam Village, Palladam Taluk, etc., and in view of the fact section 24(2) of the Tamil Nadu General Sales Tax Act which speaks of 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 Cooperative Land Development Banks Act, 1934 (Tamil Nadu Act 10 of 1934), have priority over all the claims 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 it were a fine imposed by him, etc., this court is of the considered view that the disputed question of fact as to the creation of equitable mortgage and in the absence of demand being made against the petitioner his property would not be attached, etc., cannot be gone into by this court or the same cannot be completely and comprehensively decided by this court on the basis of available materials on record in the present writ petition and the disputes/controversies can be agitated by necessary party before a civil forum by means of filing of a civil suit - writ petition fails.

Summary

Issues Involved:
1. Liability of the petitioner to pay sales tax dues.
2. Validity of property attachment for tax recovery.
3. Existence and validity of the security bond (Form XIX-B).
4. Creation of an equitable mortgage.
5. Jurisdiction and maintainability of the writ petition.

Issue-wise Detailed Analysis:

1. Liability of the Petitioner to Pay Sales Tax Dues:
The petitioner argued that he was not liable to pay any amount to the Tamil Nadu Sales Tax Department under the Tamil Nadu General Sales Tax Act, 1959 or the Central Sales Tax Act, 1956. He contended that the assessment proceedings were not in his name, and no demand was made against him. Therefore, his property could not be attached.

2. Validity of Property Attachment for Tax Recovery:
The respondent claimed that the petitioner's property was attached as security for the tax dues of his son, who was a dealer in arrears of Rs. 24,10,859. The petitioner had tendered his immovable properties as security in Form XIX-B, binding himself to pay any tax dues. The respondent argued that under Section 24(2) of the Tamil Nadu General Sales Tax Act, 1959, the tax assessed or any amount due from a dealer or person has priority over other claims and can be recovered as land revenue.

3. Existence and Validity of the Security Bond (Form XIX-B):
The petitioner contended that he did not sign any papers giving security of his property for his son's business and that the original documents were not produced before the court. He argued that the security bond (Form XIX-B) was not properly executed as it lacked the witnesses' column and signatures, which is a mandatory requirement under the Tamil Nadu General Sales Tax Rules.

4. Creation of an Equitable Mortgage:
The petitioner argued that an equitable mortgage could only be created by depositing original title deeds, not xerox copies, and only in specified towns. Since the property was in Kallapalayam Village, which is not a notified place for creating an equitable mortgage, no valid mortgage was created. The respondent countered that the lien was created when the petitioner deposited the xerox copy of the title deed as security.

5. Jurisdiction and Maintainability of the Writ Petition:
The court noted that the issue of whether an equitable mortgage was created is a disputed question of fact that cannot be resolved in a writ petition. Such disputes require oral and documentary evidence that should be adjudicated by a competent civil forum. The court referred to precedents that support the principle that writ jurisdiction is not suitable for resolving complex factual disputes.

Conclusion:
The court dismissed the writ petition, stating that the disputed questions of fact regarding the creation of an equitable mortgage and the validity of the security bond could not be resolved in the writ petition. The petitioner was advised to initiate a civil suit to seek appropriate remedies. The court emphasized that under Section 24(2) of the Tamil Nadu General Sales Tax Act, any tax assessed or amount due from a dealer has priority over other claims and can be recovered as land revenue. Consequently, the writ petition was not maintainable.