2024 (9) TMI 831 - HC - VAT / Sales Tax

Challenge to order of attachment - Priority of charge of Multi-State Co-operative Bank over Sales Tax Department for recovery of dues - Section 26 (E) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - HELD THAT - There is no material placed on record by the Sales Tax Department that the attachment of the secured asset was made in accordance with the provisions of the Maharashtra Land Revenue Code, 1966 and the Rules framed thereunder. As held by the Full Bench in Jalgaon Janta Sahakari Bank Ltd and another 2022 (9) TMI 163 - BOMBAY HIGH COURT , an attachment made under the Code should be followed by a proclamation as required by the Rules framed thereunder. If the said procedure has not been followed, then the Sales Tax Department would not be in a position to claim priority notwithstanding the fact that the order of attachment was passed prior to 24/01/2020. The affidavit filed on behalf of the Sales Tax Department is silent in that regard. Petition allowed.

Summary

Issues:
1. Priority of a Multi-State Co-operative Bank over Sales Tax Department for recovery of dues.
2. Interpretation of Section 26(E) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
3. Compliance with attachment procedures under the Maharashtra Land Revenue Code, 1966.

Detailed Analysis:

1. The High Court of Bombay heard a case where a Multi-State Co-operative Bank challenged an order of attachment issued by the Deputy Commissioner of Sales Tax under the Maharashtra Value Added Tax Act, 2002. The bank claimed priority over the Sales Tax Department for recovery of its dues based on a prior charge created in its favor through a mortgage deed. The bank argued that the subsequent attachment by the Sales Tax Department should not override its claim. The court considered the bank's contention and the provisions of Section 26(E) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 in determining the priority of dues.

2. The petitioner's counsel relied on a previous Full Bench decision and argued that the Sales Tax Department should not have priority over the Co-operative Bank's dues. The Sales Tax Department, represented by the Additional Government Pleader, contended that the attachment order gave them priority, especially after the amendment to Section 26(E) of the Act in 2020. The court examined the arguments presented by both parties to determine the validity of the attachment order and the priority of dues.

3. The court referred to the Full Bench decision in Jalgaon Janta Sahakari Bank Ltd case, which emphasized the importance of following proper procedures for attachment under the Maharashtra Land Revenue Code, 1966. The court highlighted that merely ordering an attachment is insufficient; a public proclamation following specific rules is essential before the attached property can be sold. The court noted that the Sales Tax Department failed to provide evidence that the attachment was made in accordance with the prescribed procedures, as required by the law. Therefore, the court ruled in favor of the petitioner, quashing the attachment order and notice issued by the Sales Tax Department.

In conclusion, the judgment addressed the priority of a Co-operative Bank over the Sales Tax Department for recovery of dues, the interpretation of relevant legal provisions, and the necessity of following proper attachment procedures under the law. The court's decision was based on the lack of evidence supporting the validity of the attachment made by the Sales Tax Department, ultimately ruling in favor of the petitioner.