2017 (4) TMI 1498 - HC - VAT and Sales Tax

Auction - recovery of dues - priority of charges over the property - whether the bank is having first charge over the property in question? - It was argued by the learned Government Advocate that the proceeding for attachment had been made prior to coming into force of Section 31B - effect of amended provision of Section 31-B of Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, which came into force on 16.8.2016 - HELD THAT - In absence of any vested right in any one, the attachment proceeding has necessarily to be dealt with according to Section 31B in force on the date of disposal of attachment proceedings, we are unable to accept the submission of the learned Government Advocate that the proceeding for attachment and attachment order passed in the matter was prior to the date of amendment dated 16.8.2016 and should be dealt with as per amended provisions. The 1993 Act is a special one and would prevail over 1994 Act. The learned writ court has rightly held that the bank shall have preference over others - Appeal dismissed.

Summary

Issues:
1. Condonation of delay in writ appeals.
2. Priority of bank over property in recovery of dues.
3. Authority to attach and sell property.
4. Interpretation of Section 31-B of the Amendment Act.
5. Application of Section 31-B retrospectively or prospectively.

Condonation of Delay in Writ Appeals:
The writ appeals were filed by the State against an order dated 16.11.2016, which favored the bank's first charge over a property. The appeals were delayed by 52 days, leading to applications for condonation of delay. The court considered the amended provision of Section 31-B of the Enforcement of Security Interest and Recovery of Debts Laws and concluded that the bank had priority in recovering dues.

Priority of Bank Over Property in Recovery of Dues:
The court analyzed the rights of the bank as a secured creditor under Section 31-B, which grants priority to secured creditors for realizing debts. The court set aside an attachment order issued by the State Government, allowing the bank to proceed with the auction process to recover dues. The judgment emphasized that the bank should have the first right over all other debts and government dues.

Authority to Attach and Sell Property:
The case involved a dispute regarding the authority of the appellants to attach and sell a property belonging to a guarantor. The court ruled that the bank, as a secured creditor, had priority over the property in question, and the appellants did not have the legal authority to restrain the bank from selling the property.

Interpretation of Section 31-B of the Amendment Act:
The court examined Section 31-B of the Amendment Act, which prioritizes the rights of secured creditors in realizing debts. The court rejected the argument that the amendment should not apply retrospectively, stating that the proceeding for attachment had to be dealt with according to the law in force at the time of disposal, which favored the bank's priority.

Application of Section 31-B Retrospectively or Prospectively:
The court addressed the issue of whether Section 31-B should apply retrospectively or prospectively. The court held that the proceeding for attachment should be governed by the law in force at the time of disposal, rejecting the argument that the amendment should not apply retrospectively. The court affirmed the priority of the bank over other debts and dismissed the appeals filed by the State.

In conclusion, the judgment upheld the bank's priority in recovering dues, emphasizing the rights of secured creditors under Section 31-B of the Amendment Act. The court dismissed the appeals, ruling that the bank should have preference over other claimants, and rejected the argument against the retrospective application of the amendment.