2022 (9) TMI 732 - HC - VAT and Sales Tax

Removal of attachment in the records of the Sub- Registrar in respect of the properties - creation of charge by the petitioner in respect of the schedule properties - fixation of priority of charges by the Court - HELD THAT - The sale certificate in favour of R4 has been kept apart in a separate interest bearing marked account. Let this position continue for the present since the report filed by the Official Liquidator brings to notice of the Court that while the balance sheet of R2 as on 31.03.2014 reveals the outstanding loan amount at Rs.8,03,56,460/-, the claim of the consortium is of a sum of Rs.114.27 crores, together with future interest - The Official Liquidator has requested that a break-up of the demand be supplied by the Consortium and the discrepancy in the amounts be clarified. Though this report of the Official Liquidator has been supplied to learned counsel as early as on 03.12.2019, no objection has been filed till date in this regard. Thus, clearly the aspect of quantification has to be looked into to determine the exact amount to be appropriated by the petitioner. Fixation of priority of charges and such priority has been fixed by this Court - HELD THAT - The question of quantification is left to be decided by the petitioner and the Official Liquidator appearing for R2 for which purpose the petitioner will furnish the break-up as sought for. Necessary orders be passed by the Official Liquidator within a period of twelve (12) weeks from today. It is directed that the sale consideration remain untouched and in suspense, till such time, the exercise of quantification is complete - petition allowed.

Issues:
1. Challenge to the order of the Commercial Taxes Officer to remove attachment on properties.
2. Creation of charge by the petitioner on the properties in question.
3. Default in payment of Commercial Tax demands by the company in liquidation.
4. Priority of charge between the petitioner bank and Commercial Taxes Department.
5. Consideration of the sale of properties in question and registration.
6. Quantification of the exact amount to be appropriated by the petitioner.

Detailed Analysis:
1. The writ petition challenges the order of the Commercial Taxes Officer to remove the attachment on specific properties. The Consortium represented by Punjab National Bank contests this decision concerning the properties owned by a company in liquidation, V.R. Textiles Private Limited. The assets were used as security against financial facilities availed from the petitioner and other banks, with equitable mortgages created over the properties in question.

2. The petitioner established a charge on the properties from 2008 through memoranda of deposit of title deeds. The Encumbrance Certificate and relevant documents confirm the creation of the charge by the petitioner bank on the specified properties. The petitioner's claim to priority in the charge is based on these legal instruments and records.

3. The company in liquidation, V.R. Textiles Private Limited, defaulted not only in repayment of financial facilities but also in payment of Commercial Tax demands. The timeline of tax default and subsequent actions by the authorities is outlined, including the creation of a charge by the Commercial Taxes Department in 2015. The default in tax payment adds complexity to the determination of priority between the petitioner bank and the tax department.

4. The judgment addresses the issue of priority between the petitioner bank and the Commercial Taxes Department. The court confirms that the transaction is not tainted, and the charge created by the tax department in 2015 places the petitioner bank ahead in the priority of repayment. The legal provisions regarding priority of debts due to secured creditors over other debts and government dues are discussed to determine the rightful order of payment.

5. The court considers the sale of the properties in question and directs the registration of the sale if all documents are in order. The petitioner bank is instructed to segregate the sale proceeds in a separate interest-bearing account pending the resolution of the writ petition. The Sub-Registrar is mandated to facilitate the necessary procedures related to the sale and registration.

6. Quantification of the exact amount to be appropriated by the petitioner is a crucial aspect left for further determination. The court directs the petitioner and the Official Liquidator to clarify discrepancies in the outstanding loan amount and the consortium's claim. The quantification process is to be completed within a specified timeframe to finalize the amount to be appropriated by the petitioner.

In conclusion, the judgment addresses the challenges to the attachment order, the creation of charges on the properties, defaults in tax payment, the priority of repayment between the petitioner bank and the tax department, the consideration of property sale, and the quantification of the amount to be appropriated. The detailed analysis provides a comprehensive overview of the legal complexities and decisions made by the court in this case.

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