2020 (7) TMI 1 - HC - VAT and Sales Tax

Gujarat High Court prioritizes bank over state in property attachment case

The Gujarat High Court ruled in favor of the writ applicants in a dispute involving the attachment of a property under the Gujarat VAT Act. The Court ... Bidding of attached Property - priority of charge over the secured assets - Section 26E of the SARFAESI Act - HELD THAT:- The writ application bringing it to the notice of the respondent No.1 i.e. the Commercial Tax Officer (4) – Ahmedabad that the subject property was a secured asset of the respondent No.2 – Bank of India under the SARFAESI Act. Being a secured asset under the provisions of the SARFAESI Act, the respondent No.2 cannot claim preference over the subject property for the purpose of recovery of the dues towards tax. It is not in dispute that the first charge was created in favour of the bank and the bank, in exercise of its powers under the SARFAESI Act, put the subject property to auction. All these developments took place way back in the year 2015. The disputed entry No.16521 came to be mutated on 24th January 2017 for showing the attachment over the subject property. The respondents Nos.3 and 4 are directed to delete the entry No.16521 mutated and certified in the village form No.6 of village : Vejalpur. The respondents Nos.3 and 4 shall act accordingly on the certified copy of this order being produced before them by the writ applicants. For the purpose of recovery of the dues from the erstwhile owner towards VAT, it shall be open for the concerned authority to take appropriate legal steps as available in law. Application allowed. Issues:1. Dispute over attachment of subject property under Gujarat VAT Act.2. Priority of recovery rights between Bank and State Government.3. Validity of entry No.16521 in record of rights.4. Legal remedy sought by writ applicants.Issue 1: Dispute over attachment of subject property under Gujarat VAT ActThe writ applicants sought relief to produce the original order for attachment of the subject property, quash the impugned order of attachment, and remove the entry showing attachment under the Gujarat VAT Act. The property was initially sold to the writ applicants by Bank of India through a public auction under the SARFAESI Act. Subsequently, an entry showing attachment by the State Government under the Gujarat VAT Act was discovered, leading to the grievance that this entry should be deleted as the property was a secured asset of the bank.Issue 2: Priority of recovery rights between Bank and State GovernmentThe High Court analyzed the priority of recovery rights between the Bank and the State Government. Referring to previous judgments, the Court emphasized that the first priority over secured assets lies with the Bank under the SARFAESI Act, not the State Government under the VAT Act. The Court highlighted that the Bank had the first charge over the property, and any excess amount from the sale could be adjusted towards State dues. The judgment clarified that the State cannot proceed against purchasers of properties sold under the SARFAESI Act.Issue 3: Validity of entry No.16521 in record of rightsThe Court directed the concerned authorities to delete entry No.16521 showing attachment in the village form, emphasizing that the property was a secured asset of the Bank and the State Government cannot claim preference for recovery of dues. The judgment underscored that the Bank's charge over the property was established through legal auction proceedings, and the State's attachment entry was deemed invalid in light of the SARFAESI Act provisions.Issue 4: Legal remedy sought by writ applicantsThe writ applicants were granted the relief sought, with the Court ordering the deletion of the contested entry from the record of rights. The respondents were directed to take necessary actions based on the Court's order. Additionally, the judgment allowed the concerned authority to pursue legal steps available in law for recovering dues from the previous owner, ensuring that the Bank's priority in recovering its dues from the property was upheld.This detailed analysis of the judgment from the Gujarat High Court in the specified case provides insights into the legal interpretation and resolution of the issues raised by the parties involved.