Security for statutory dues remains enforceable without registered mortgage when no present property interest is created

Immovable property furnished only as security for statutory dues under the Tamil Nadu General Sales Tax Act did not require a registered mortgage where the Department acquired no direct present interest in the property. The absence of registration did not invalidate the security bond, and the Revenue could invoke the undertaking against the secured property on default of the dealer's statutory liability. The Court rejected the objection that the bond was unenforceable for want of registration and sustained recovery proceedings against the property offered as security.

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Issues: (i) Whether a security bond furnished for registration under the Tamil Nadu General Sales Tax Act, 1959 required registration as a mortgage of immovable property and whether the absence of such registration invalidated recovery from the secured property. (ii) Whether the Revenue could proceed against the immovable property offered as security for recovery of statutory dues.

Issue (i): Whether a security bond furnished for registration under the Tamil Nadu General Sales Tax Act, 1959 required registration as a mortgage of immovable property and whether the absence of such registration invalidated recovery from the secured property.

Analysis: The security was furnished by a third person only as an undertaking to secure payment of statutory dues arising from registration of the dealer. The arrangement did not create a direct present interest in favour of the Department in the immovable property. In that situation, the Court held that compulsory registration under the Registration Act, 1908 was not attracted, and the omission to execute a registered mortgage did not make the security void.

Conclusion: The contention that the security bond was unenforceable for want of registration was rejected.

Issue (ii): Whether the Revenue could proceed against the immovable property offered as security for recovery of statutory dues.

Analysis: The Court held that statutory dues must be recoverable and the statutory scheme permitting security at the time of registration had to be interpreted to advance recovery of tax. Once the proprietor defaulted, the Department was entitled to invoke the security and proceed in accordance with the recovery provisions. The petitioner, having executed the bond in her individual capacity, could not avoid the undertaking merely by asserting limited liability or absence of direct possession by the Department.

Conclusion: The Revenue was held entitled to proceed against the secured property for recovery of the dues.

Final Conclusion: The writ petition failed, and the recovery action based on the security bond was sustained.

Ratio Decidendi: Where immovable property is furnished only as security for statutory dues and the revenue authority has no direct present right in the property, a registered mortgage is not for enforceability, and the security may be invoked for recovery when the statutory liability defaults.

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