TaxTMI 
TaxTMI 
2004 (11) TMI 570
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....ion to creating mortgage by deposit of title deeds of certain items of immovable property as a continuing collateral security. The mortgage was created, initially, on July 9, 1974 which was renewed from time to time. Since the Company defaulted in repayment of the loan, the Bank instituted a suit for recovery of money before the Subordinate Judge's Court, Kollam. Later the suit was transferred to the Debt Recovery Tribunal at Ernakulam (for short, 'the Tribunal'). By judgment dated February 17,2000, the Tribunal directed the company to pay the plaintiff/Bank a sum of ₹ 41,25, 451.64 together with interest at the rate of 15% per annum from August 24, 1992. It was held that the plaintiff/Bank was entitled to realise the decree debt by sale of the mortgaged/hypothecated properties. 5. On October, 4,2002 the Recovery Officer of the Tribunal issued a proclamation for sale of two items of the mortgaged properties in execution of the decree in favour of the Bank. The sale was held on January 31, 2003. One Ahammed Koya (hereinafter referred to as the auction purchaser) was the successful bidder in respect of item No. l. The bid amount of ₹ 60,60,010/- offered by th....
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.... of the property to the Revenue Officers to enable them to conduct "fresh sale for realisation of arrears". 9. The third Writ Petition viz., W.P.No.27302/2003 has been filed by the auction purchaser. The prayer in the Writ Petition is to issue a Writ of mandamus to the Revenue Officers and also the Regional Provident Fund organisation not to proceed against the property purchased by the auction purchaser in the auction held by the Recovery Officer of the Tribunal and also to release the property from attachment, if any, effected by the said authorities. There is a further prayer for a declaration that the property purchased by him in the auction is not liable to be proceeded against for recovery of either arrears of sales tax or towards dues payable under the Employees Provident Fund and Miscellaneous Provisions Act. 10. W.A. Nos. 1165/2003 and 1232/2003 are filed by the Company and the licensee respectively against a common judgment passed by the learned Single Judge dismissing the two Original Petitions filed by them challenging the sale conducted by the Recovery Officer of the Tribunal. 11. The above three Writ Petitions filed by the Bank, the State and the auction ....
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....e property of the dealer if he commits default in payment of sales tax, penalty etc. 14. The doctrine of "Priority of Crown debts" has been the subject of a catena of judicial pronouncements of the Apex Court and various High Courts. The preferential right of the Crown in the matter of recovery of debts over other creditors subject to certain conditions is well settled. In Builders Supply Corpn. v. Union of India, AIR 1965 SC 1061, a Constitution Bench of the Apex Court had noticed a consensus of judicial opinion that the arrears of tax due to the State can claim priority over private debts. 15. The following observation of their Lordships of the Supreme Court in Dena Bank v. Bhikhabhai Prabhudas Parekh & Co., (2000) 5 SCC 694, is apposite: "The principle of priority of Government debts is founded on the rule of necessity and of public policy. The basic justification for the claim for priority of State debts rests on the well recognised principle that the State is entitled to raise money by taxation because unless adequate revenue is received by the State, it would not be able to function as a sovereign Government at all. It is essential that as a sovereign, the ....
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....aju Joseph, the learned Government Pleader, that the Company which was an assessee under the KGST Act had failed to remit the sales tax, penalty etc. for the assessment year 1974-75 and thereafter; Though notices of demand were issued to the Company on several occasions, the tax arrears were never paid. In March 1978 the Government had granted stay of all revenue recovery proceedings on condition that the Company furnished security for the amount in arrears. Pursuant to the above order of the Government, the Company had executed a security bond on June 26, 1978 by which they gave the movable and immovable assets of the Company as security. In July 2000 revenue recovery proceedings were again initiated. Ext.P4 notice under Section 34 of the RR Act was issued and subsequently the property of the Company was put under attachment. It was thereafter that in February 2001 sale notice under Section 49(2) of the R.R. Act was published for sale" of the immovable property of the Company. It is the admitted position that the Recovery Officer of the Tribunal had sold the property in auction when the property was under revenue attachment and also after a notice of sale was issued by the re....
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.... The claim of the Commercial. Taxes Officer was accepted by the Trial Court and it was affirmed in revision by the High Court. After considering the provisions contained in S 11- AAAA of the Rajasthan Act, the Supreme Court held that the statutory first charge created by the above provision operates on the entire property of the dealer including the interest of the mortgagee therein. The contention that the first charge would operate only over the equity of redemption was rejected by the Supreme Court. A perusal of the above provision is Section 11-AAAA introduced by an amendment in 1989 in the Rajasthan Act shows that the said provision is exactly identical to Section 26B of the KGST Act but for a slight change in the title of the section. 21. In State of Madhya Pradesh and Anr. v. State Bank of Indore and Ors., (2002) 10 KTR 366 (SC), Section 33-C of the Madhya Pradesh General Sales Tax Act, 1958 was considered. Incidentally, Section 33-C of the M.P. Act is also identical to Section 26-B of the KGST-Act. In this case also their Lordships held that the statutory first charge prevails over any other charge including mortgage. The dictum laid down in Bhikhabhai's case (supra) w....
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....999. The sale of the mortgaged property was held in the year 2003. It is true that the mortgage was created in favour of the Bank in the year 1979. But significantly, the liability of tax had arisen in the year 1974-75, long prior to the creation of the mortgage in favour of the Bank. Thus, in our view, the contention raised by the learned counsel cannot be sustained for the above reasons also. 25. The other contention raised by the learned counsel is based on Section 100 of the Transfer of Property Act. It is urged by the learned counsel that the charge created under Section 100 at the time of creation of the mortgage cannot be defeated by a statutory charge which came into operation at a later stage. This contention has also been answered by their Lordships in Bhikhabhai's case and the answer is against the petitioner. 26. In view of the above legal position, it has to be held that the right, if any, of the Recovery Officer to conduct sale of the mortgaged property in question was only subject to the statutory first charge available in favour of the State to recover the sales tax arrears from the Company. The admitted position is that the revenue authorities had effected at....