2020 (5) TMI 635 - HC - VAT and Sales Tax

Recovery of amount alongwith penalty - N/N. 8911/DCE/T(P)/AUC/2012- 13 dated 30.05.2012 - It is the case of the petitioner that she had money transactions with the 3rd respondent and had borrowed a sum of ₹ 50,000/- and in this connection had offered her property as a security for repayment of the aforesaid loan - HELD THAT - In this case the petitioners property was offered as a security for permitting the ex-license to run a arrack shop. The 3rd respondent was not only required to offer property by way of mortgage but was also required to register the same in favour of the respondents. However, same was not registered - Similarly the information furnished by the Public Information Officer of the office of the Deputy Collector (Excise) vide communication dated 24.04.2015 in response to an application filed by the petitioner on 26.03.2015 has confirmed that the petitioner has not produced Annexure I and II. There is no clarity in the role of the petitioner i.e, whether her property was offered by her in her capacity as a surety for the arrack license issued to the 3rd respondent or as mortgage or as a bidder herself. Either way in absence of valid registration of the mortgage as is contemplated in the confirmation order dated 14.09.2012, the respondent cannot proceed against the petitioner or her property - there appears to be irregularity in permitting the 3rd respondent to run arrack shop contrary to the confirmation dated 14.09.2012. Petition disposed off.

Summary

Issues:
Challenge to recovery notice for amount due from 3rd respondent with reference to license for running an arrack shop, refusal of 3rd respondent to return title deed offered as security, misuse of title deed for arrack license, validity of registration of mortgage, role of petitioner in offering property, irregularity in permitting 3rd respondent to run arrack shop.

Analysis:
The petitioner challenged a recovery notice seeking to recover an amount and penalty from the 3rd respondent related to a license for running an arrack shop. The petitioner claimed to have borrowed money from the 3rd respondent and offered her property as security. Despite repaying the amount, the 3rd respondent refused to return the title deed. The 3rd respondent had used the title deed as security for obtaining the arrack license, leading to an order of attachment due to arrears. The petitioner had also filed a private complaint and obtained information confirming her role as a surety for the license. The petitioner argued that the 3rd respondent misused the title deed for the license without proper registration of mortgage.

The respondent contended that the petitioner had obtained a solvency certificate to participate in the arrack shop auction, suggesting awareness of the surety offered. The 3rd respondent defaulted on payments, leading to forfeiture of amounts and encashment of a bank guarantee. The respondent argued that the petitioner's property was offered as security for the license due to her participation in the auction. The court noted the lack of clarity regarding the petitioner's role and the absence of valid registration of the mortgage as required.

The court found irregularities in permitting the 3rd respondent to operate the arrack shop against the confirmation order. The writ petition was allowed, granting liberty to proceed against the 3rd respondent for recovering the due amount in accordance with the law. The judgment disposed of the writ petition with observations and without costs, closing the connected Miscellaneous Petition.