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TMI Blog2016 (11) TMI 1132X X X X Extracts X X X X X X X X Extracts X X X X ..... d amount and requested the respondents 3 and 4 to execute the Sale Deed free of all encumbrances which include the sales tax arrears. However, the Bank, in their impugned communications dated 25.10.2010 and 24.11.2010, had made a turn around stating that the request/demand made by the petitioner cannot be acted upon as he has purchased the properties knowing pretty well about the attachment from the Sales Tax Department and they are prepared to execute the Sale Deed, subject to the incorporation of the clause regarding sales tax arrears. In the considered opinion of the Court, the stand taken by the respondents 3 and 4 is wholly untenable as the borrower submitted his bid subject to the clearance of the sales tax arrears/dues by them and the communication and the reply dated 10.03.2010 and 15.04.2010 sent by the Axis Bank to the Commercial Tax Authority would also indicate that they have taken a consistent stand that their claim will have priority over the sales tax arrears and even in the Auction Sale proceedings also, a positive assurance has been given to the borrower that the said issue will be taken care of by the Bank. Therefore, the respondents 3 and 4 cannot resile from tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Sales Tax due must be paid by the Bank out of the Sale Proceeds . 4 The petitioner was declared as the successful bidder and they recorded the result of the auction as follows:- The successful bidder Mr.T.Ganesan, Chairman, Indra Ganesan Educational and Charitable Trust, sought clarification regarding the Sales Tax Deferral Dues of ₹ 1,19,73,498/- being demand raised by Commercial Taxes Department, Trichy-20, on the Bank. The bidder requested that this Sales Tax issue/Settlement to be taken care by the Bank stating that in order to proceed with the sale Transaction and to provide for 25% advance amount today. In response to that, Bank clarified that the Letter/demand from Sales Tax Department has been replied by the Bank stating that the Bank's Dues are paramount and further assured the successful bidder that the sales tax issue would be dealt by the bank and requested the bidder to pay 25% advance amount for confirmation of sale. 5 The petitioner would further state that regarding Sales Tax dues payable by M/s.Swastika Agro Foods Private Limited, he had also sought a clarification and the Axis Bank has responded by saying that their dues are p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, the respondents 3 and 4 sent the impugned communication dated 24.11.2010 wherein it has been stated that they have never given any assurance either for clearing the encumbrance or registering the Sale Deed without any encumbrance and therefore, requested the petitioner to attend the registration formalities for the purpose of execution of the Sale Deed. The petitioner challenging the legality of the said communication, has filed this writ petition. 9 The learned counsel appearing for the petitioner has invited the attention of this Court to the typed set of documents filed by the respondents 3 and 4 filed along with the counter affidavit and would contend that M/s.Axis Bank has sent a letter dated 10.03.2010 to the Assistant Commissioner, Commercial Tax [FAC], Srirangam Assessment Circle, Trichy-20, wherein they have invited the attention of the said officials to section 35 of the SARFAESI Act and also to the judgment dated 16.07.2009 passed by a Division Bench of this Court in WA.No.1360/2008 [Indian Bank Vs. CTO] and informed that in the light of the ratio laid down in the above cited decision, the Bank is not liable to pay the sales tax arrears of ₹ 1,19,73,498/- o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dues due and payable to them and has also drawn the attention of this Court to sections 21 and 42 of the TNVAT Act, and would submit that the tax under section 21, shall become due without any notice of demand to the dealer on the last date of the period for filing the return and as per section 42[2], any tax assessed on or has become payable by, or any other amount due under this Act from any dealer or person and any fee due from him, shall, subject to the claim of the Government in respect of the land revenue and the claim of the Agricultural and Rural Development Bank in regard to the property mortgaged to it under section 28[2] of the Tamil Nadu Cooperative Societies Act, 1983, have priority over all other claims against the property of the said dealer or person and the same may without any prejudice to any other mode of collection to be recovered as and as such, they are having superior claim or having first charge over the properties of M/s.Swastika Agro Foods Private Limited, and as such, the Bank cannot claim priority by invoking the provisions of the SARFAESI Act and prays for appropriate orders. 12 Per contra, Mr.V.V.Sivakumar, the learned Standing Counsel appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allee High Road, Maduravoyal, Chennai- 600 095 for recovery of tax arrears of M/s.Pioneer Cashew Industries Limited is not sustained and the same is quashed. Accordingly, the writ petition is allowed. However, there will be no order as to costs. 15 The Division Bench, in the above cited decision, while answering the moot question, has followed the earlier judgment of the Division Bench reported in 2006 [3] MLJ 919 [DB] [PUNJAB NATIONAL BANK, ASSET RECOVERY BRANCH Vs. COMMERCIAL TAX OFFICER-II, THENI AND ANOTHER], wherein, it has been held that the amount of Sales Tax payable under the provisions of the Tamil Nadu General Sales Tax has first charge over the properties of the dealer and it will have priority over all the other debts including prior mortgage and the said decision, in turn, relies upon the judgment of the Hon'ble Supreme Court of India reported in 1974 [2] SCC 799 [Dattatreye Shanker Mote v. Anad Chintama Datar] and concluded that a State has got priority over the Bank dues. However, having found that Auction purchasers were bona fide purchasers, has directed the Sales Tax Authorities, not to auction the properties for the tax dues of the borrowing company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner has become the successful bidder as their bid amount of ₹ 3,50,25,000/- has been accepted and also acknowledged the remittance of ₹ 88,00,000/- and calling upon the petitioner to remit the balance amount of ₹ 2,62,25,000/- within fifteen days, i.e., on or before 29.03.2010, for transfer of the assets/properties in their favour. In page No.27 of the typed set of documents filed by the respondents 3 and 4, the Auction Sale proceedings were also enclosed and it is relevant to extract the same:- T.Ganesan, Chairman, Indra Ganesan Educational Charitable Trust, has sought clarification regarding Sales Tax Deferred Dues of the amount raised by Commercial Taxes Department, Trichy-20 on the Bank. The Sales Tax issue/settlement to be taken care by the Bank in order to ......[illegible]..35% advance amount today. Bank clarified that the letter on demand from the Sales Tax Department has been replied and the Bank dues are paramount and further, assured the successful bidder that the Sales tax issue will be dealt with by the Bank and requested to pay 25% of the advance amount for the confirmation of sale. 19 In the light of the assurance given by the Axis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay Act ] and section 26-B of the Kerala General Sales Tax Act, 1963 [for short the Kerala Act ] and similar provision contained in other State legislations by which first charge has been created on the property of the dealer or such other person, who is liable to pay sales tax, etc., are inconsistent with the provisions contained in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 [for short the DRT Act ] for recovery of debt and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [for short the Securitisation Act ] for enforcement of security interest and whether by virtue of non obstante clauses contained in Section 34[1] of the DRT Act and section 35 of the Securitisation Act, two Central Legislations will have primacy over State legislations are the questions which arise for determination in these appeals. and the Hon'ble Apex Court, had gone through the relevant provisions of the Recovery of Debts Due to Banks and Financial Institutions Act [DRT Act] and the SARFAESI Act, 2002 and also various decisions as well as section 26-B of the Kerala General Sales Tax Act, and held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te the Sale Deed free of all encumbrances which include the sales tax arrears. However, the Bank, in their impugned communications dated 25.10.2010 and 24.11.2010, had made a turn around stating that the request/demand made by the petitioner cannot be acted upon as he has purchased the properties knowing pretty well about the attachment from the Sales Tax Department and they are prepared to execute the Sale Deed, subject to the incorporation of the clause regarding sales tax arrears. In the considered opinion of the Court, the stand taken by the respondents 3 and 4 is wholly untenable as the borrower submitted his bid subject to the clearance of the sales tax arrears/dues by them and the communication and the reply dated 10.03.2010 and 15.04.2010 sent by the Axis Bank to the Commercial Tax Authority would also indicate that they have taken a consistent stand that their claim will have priority over the sales tax arrears and even in the Auction Sale proceedings also, a positive assurance has been given to the borrower that the said issue will be taken care of by the Bank. Therefore, the respondents 3 and 4 cannot resile from that promise or undertaking. In the light of the above sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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