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TMI Blog2025 (3) TMI 951X X X X Extracts X X X X X X X X Extracts X X X X ..... rty No. 3 in the auction notice has been wrongly attached as a property of M/s. Rameshwar Cotton Industries or any of its partners, whereas, in reality it was a self own property, a third party - guarantor. Further it will be seen that the CERSAI Registration in respect of the charge by the Bank is dated 11.04.2008. Whereas, the date of issuance of notice under Section 135D of the Bombay Land Revenue Code, 1879 is 03.06.2015 and the date of attachment of the State Tax Authority is dated 13.08.2019. Therefore, evidently the Bank has prior charge over the property and following the law declared by this Court in Kalupur Commercial Co-operative Bank Ltd. Vs. State of Gujarat [2019 (9) TMI 1018 - GUJARAT HIGH COURT], it has to be held that the property in question, being property No. 3 in the auction notice dated 20.06.2022 does not bear any charge for the crown debts, after the same has been purchased in the auction by the Petitioner. Conclusion - i) The actions of Respondent No. 1 in issuing a conditional sale certificate with encumbrances are unlawful under the SARFAESI Act. ii) The attachment orders by Respondent No. 2 are also found to be invalid as they were applied to a propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Amreli, as the said property is not of the main borrower, the Respondent No. 3 herein and also that the so-called charge of the Respondent No. 2 was subsequent and subservient to the charge of the Respondent No. 1 Bank. C. No basis has been given in the impugned order which can justify the issuance ofthe conditional sale certificate by the Respondent No. 1. The impugned action is totally fallacious and unsustainable in the eyes of law. D. The action of the Respondent No. 1 is even otherwise contrary to law and suffers from the vice of complete nonapplication of mind. E. The Petitioner submits that the action of the Respondent no. 1, which is completely illegal and unconstitutional, has caused huge prejudice and immeasurable consequences, pecuniary and otherwise, to the Petitioner. F. The action of the Respondent No. 1 is even otherwise contrary to law and suffers from the vice of complete nonapplication of mind." 4. The brief facts of the case are as follows: 4.1 The Respondent No. 1 granted financial assistance to the Respondent No. 3 who failed to repay the same within the prescribed time, as a result of which, the account of the Respondent No. 3 was classified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter-IV-A by amending Act, 44 of 2016 dated 01.01.2016, by which the Central Government has introduced concept of Registration by Secured Creditors and other Creditors. 5.1 She has further submitted that the impugned action is a colourable exercise of power and amounts to depriving the Petitioner of its right to seek the clear rights under the Sale Certificate, without there being any other appropriate writ, order or direction given to the Respondent No. 1 Bank to remove encumbrances of commercial tax office of Rs. 34, 02, 518/- from the sale certificate dated 24.08.2022, issued by the Respondent No. 1 to the Petitioner. 5.2 Ms. Darji further submitted that she has moved a draft amendment by which it was contended that the property in question belongs to a guarantor and therefore, should fall outside the purview of the attachment in respect of crown debts. 6. Ms. Shrunjal T.Shah, learned Assistant Government Pleader does not controvert the aforesaid position. 7. DISCUSSION & FINDINGS:- 7.1 As it is evident from the additional affidavit filed by the competent officer of the Respondent-Bank, particularly paragraph No. 4 of the said affidavit dated 17.10.2024, that though th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Petitioner. In Kalupur (Supra) this Court had categorically held as under:- "47. Thus, the dictum of law as laid by the Supreme Court in the aforesaid decision is that the State's preferential right to the recovery of debts over other creditors is confined to ordinary or unsecured creditors. The Supreme Court took the view that the Common Law of England or the principles of equity and good conscience (as applicable to India) do not accord the Crown a preferential right for the recovery of its debts over a mortgagee or pledgee of the goods or a secured creditor. It is true that ultimately the bank was not granted any relief, but the same was not granted in the peculiar facts of the case. Otherwise, the principle of law as explained is very clear. In no uncertain terms, the Supreme Court held that the appellant, i.e. the bank, was right in submitting that on the date on which the State of Karnataka proceeded to attach and sell the property of the partners of the firm mortgaged with the bank, it could not have appropriated the sale proceeds to the sales tax arrears payable by the firm, thereby defeating the bank's security. In taking such view, the Supreme Court relied o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution shall continue in force until altered or repealed by a competent legislature or other competent authority. In fact, in Collector of Aurangabad v. Central Bank of India [1967] 3 SCR 855 after referring to various authorities held that the claim of the Government to priority for arrears of income tax dues stems from the English common law doctrine of priority of Crown debts and has been given judicial recognition in British India prior to 1950 and was therefore "law in force" in the territory of India before the Constitution and was continued by Article 372 of the Constitution (at page 861, 862). In the present case, as has been noted above, the lien possessed by the Stock Exchange makes it a secured creditor. That being the case, it is clear that whether the lien under Rule 43 is a statutory lien or is a lien arising out of agreement does not make much of a difference as the Stock Exchange, being a secured creditor, would have priority over Government dues. 49. The two decisions referred to above, one of the Supreme Court and another of the Bombay High Court, as such may not be helpful to the Bank because the principal issue in the case on hand is with regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be any application of Section 48 of the VAT Act. We may also refer to Section 47 of the VAT Act. Section 47 of the VAT Act is with respect to transfer of property by the dealer to defraud the Revenue. According to Section 47, if a dealer creates a charge over his property by way of sale, mortgage, exchange or any other mode of transfer after the tax has become due, then such transfer would be a void transfer. The reason why we are referring to Section 47 is that the phrase therein 'after any tax has become due from him' assumes significance. The same is suggestive of the fact that before the assessment proceedings, or, to put it in other words, before a particular amount is determined and becomes due to be payable if there is any transfer of property of the dealer, such transfer would not be a void transfer. Therefore, the condition precedent is that the tax should become due and such tax which has become due shall be payable by a dealer. Once this part is over, then Section 48 of the VAT Act would come into play. 53. One of us, J.B. Pardiwala, J., sitting as a Single Judge, had the occasion to consider this issue in the case of Bank of Baroda, Through its Assista ..... X X X X Extracts X X X X X X X X Extracts X X X X
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