TaxTMI 
TaxTMI 
2019 (9) TMI 1049
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....ing any further action, pursuant to the public advertisement given by them in Gujarat Samachar newspaper dated 20.8.2018 (Annexure-P), in view of the provisions of Section 26-E of the SARFAESI Act, 2002 coupled with the fact that the petitioner is in possession of the property in question from 02.08.2017 and making efforts to dispose of the property in question through public auction, for the reasons stated in the Memo of Petition and in the interest of justice; (C) The Hon'ble Court may kindly be pleased to grant any other appropriate relief as the nature circumstances of the case may require." 2. The facts giving rise to this writ-application may be summarised as under : (1)On 12th June 2012, the writ-applicant Bank sanctioned loan to the tune of Rs. 1,40,00,000=00 in favour of the respondent no.4, a partnership firm. By way of security, the respondent no.4 created a mortgage in favour of the Bank of non-agricultural land bearing Block No.806/ paiki/5 admeasuring 1443 sq.meters along with the construction admeasuring about 518 sq.meters standing thereon in the name of Kothari Industrial Estate, Rakanpur-Santej Road, Santej, Taluka Kalol, District Gandhina....
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....e put to auction. (8)On 23rd August 2017, the first auction notice was issued by the Bank. (9) It appears that the auction notice dated 20th August 2018 came to be issued by the Assistant Commissioner, Commercial Tax, State of Gujarat, in the local daily newspaper, namely Gujarat Samachar. 3. The clash is now between the Bank and the State Government. The question is, who would have the precedence over the secured assets. 4. The following facts are not in dispute : (1) The original title deeds of the immovable properties of M/s.Waterforce Pumps as well as the residential properties of Navin Patel and Pallavi Patel situated at Ahmedabad and Visnagar are mortgaged with the Bank of Baroda by registered mortgage deed. (2) The original borrowers, viz. Navinbhai Dahyabhai Patel and Pallaviben Navinbhai Patel, are absconding and have left India. They are not traceable. SUBMISSIONS ON BEHALF OF THE WRIT-APPLICANT : 5. Mr.B.T.Rao, the learned counsel appearing for the writapplicant - Bank, has tendered his written submissions. The submissions are as under : "(1) Once the charge is created in favour of the Bank and the original title d....
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.... VAT Commissioner under the VAT Act and a certificate issued thereafter. (8) Section 48 of the VAT Act provides that the tax to be first charge on the property. But, in view of the provisions of Section 26E of the SARFAESI Act and the fact that the Bank has been given primacy from all the taxes of the Central Government and the State Government and the local authorities, therefore in view of the amendment in the SARFAESI Act which is a Central Act, Section 48 of the VAT Act cannot march over Section 26E of the SARFAESI Act." 6. Mr.Rao placed strong reliance on a decision of the Rajasthan High Court in the case of G.M.G. Engineers & Contractor Pvt. Ltd. and another v. State of Rajasthan and others (S.B. Civil Writ Petition No.6872 of 2017, decided on 5.7.2017). Mr.Rao submitted that the Bank has already initiated the proceedings for the purpose of putting the secured assets to auction. The first public notice issued in the newspaper is dated 23rd August 2017, followed thereafter on 6th November 2017 and 7th August 2018 respectively. According to him, the authority concerned, by merely addressing a letter to the Mamlatdar as regards the claim, a charge could not be said t....
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....nancial Institutions Act, 1993 (2) Even otherwise, Section 26(E) has no retrospective applicability and it has not come into force and even assuming that the same has come into force, the charge of the State Government cannot be nullified. (3) The dues of the State Government have accrued from the year 2012 onwards and prior to 2016. (4) That, where the State creates a first charge on the property of a dealer, the said charge shall have the precedence over the other existing mortgages. The term 'charge' is wider than a mortgage, and hence, would cover within its ambit, a mortgage also. The said aspect of a statutory first charge having the precedence over a mortgage has been decided by the Supreme Court in the case of State Bank of Bikaner & Jaipur v. National Iron & Steel Rolling Corporation and others, reported in (1995)2 SCC 19, wherein the Apex Court has observed that when a first charge is created by operation of law over any property, that charge will have the precedence over an existing mortgage. (5) The said aspect of statutory first charge is having precedence over the SARFAESI Act, 2002. The Supreme Court, in the case o....
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....lid. (8) The aspect of conflict between the Central Legislation vis-a-vis the State legislation and the non-obstante clause prevailing in the State legislation by way of first charge, its overriding effect over Section 35 of the Securitization Act has been dealt by the Supreme Court in Central Bank of India v. State of Kerala and others, reported in (2009)4 SCC 94, whereby the Supreme Court has recognized the sales tax dues shall prevail being the charge created under the provisions of the Kerala General Sales Tax Act being statutory first charge. The Supreme Court also dealing with the aspect of legislative competence and repugnancy has held that the question of repugnancy between law made by the Parliament and a law made by the State Legislature may arise only in cases when both the legislations occupy the same field with respect to one of the matters enumerated in the Concurrent List. In the present case, there is no such overlapping which would make the Gujarat Value Added Tax Act, 2003 redundant in operation. The core issue herein in the present case is that the Gujarat Value Added Tax Act, 2003 is enacted having its legislation competence falling within the term '....
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....rovisions of Section 26 (E) on 01.09.2016. Copy of notification issued by the Government of India published in the Official Gazette Part-II Section-3 at serial no. 2142 dated 01.09.2016 is annexed herewith and marked as ANNEXURE-W-1 to this written submission. Therefore, the contention raised by the State Government has no merit. The Notification has been published in the Official Gazette. 4. It is submitted that, prior to 2016, Chapter-5 (A) was not there and it was brought into effect by virtue of Enforcement of Security Interest and Recovery of Debts Law and Misc. Provisions Amendment Act, 2016. 5. It is submitted that, after the judgment of the Central Bank of India v. State of Kerala and others reported in (2009)4 SCC 94, the Central Government has amended the Securitization Act by amendment Act 44 of 2016 on 16.08.2016. The date of Notification of this Act is 01.09.2016. Therefore, Amendment Act has been come into force on 01.09.2016. Only Section 4 (13), Section 7 and 32 came into force on 04.11.2016.] 6. It is submitted that, what is stated by the State Government is also not correct. It is submitted that, the Bank has a registered mortgage in his....
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....46 of the Act is only special power of act for recovery of tax, as arrears of land revenue. It is submitted that, provisional order of attachment has been passed under Section 45 of the Act and this order has been passed only on 29.07.2017, and at that point of time, the possession of the premises is already with the bank. Therefore, this also subsequent action. It is submitted that, for taking action under Section 46, the Commissioner has to take steps under the Bombay Land Revenue Code, and under Bombay Land Revenue Code first a recovery certificate is required to be issued, and thereafter, proceedings have to be initiated, on this issue also, the written submission filed by the State Government is silent and on the contrary, the CTO without passing any order under Section 46, straightaway wrote a letter dated 28.05.2017 to the Mamlatdar which could not have been made, because the stage of entering the name of the Government dues will come only after the stage of Sections 44 and 45 of the Act are over. It is submitted that, notice Section 200 of the Bombay Land Revenue Code has been issued on 29.07.2017 to the Company and attachment order was also issued on 29.07.2017. Therefore,....
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....FAESI Act being a special Act enacted in the year 2002 and it has enacted only with a view to speedy recovery of the financial institution from the borrower, therefore, looking to the provisions of the Act, the State Government cannot claim over the priority of the claim of the petitioner bank, because the State Government has passed first assessment order on 24.03.2017. Therefore, it cannot claim priority over the same. 16. It is submitted that, as far as judgment in the case of Dena Bank v. Bhikhabhai Prabhudas Parekh and Company & ors. reported in 2000 (5) SCC 694 is concurred, where priority of precedence of State debts have been discussed. In the case of Dena Bank the dues of the Sales Tax department is of the year 1957-1958, 1966-1967 to 1969-1970 under the State Act and for the years 1958-1959 to 1964-1965 and 1967-1968 to 1969- 1970 under the Central Act. Therefore, the dues of the Sales Tax department is much prior to the mortgaged created by Shri Bhikhabhai Prabhudas Parekh & Co. in favour of the bank on 24.04.1969. In Dena Bank's case, Section 15 (2A) of Kartanaka Sales Tax Act had come into force on 18.12.1983 while the decree in favour of the Bank was passed o....
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.... the bank has taken symbolic possession of the property under SARFAESI Act, therefore, the bank has first charge over the property in question. 18. In the case of Central Bank of India v. State of Kerala & Ors., reported in 2009 (4) SCC 94, it pertains to Article 254, 245 and 246 of the Constitution of India and scope of applicability of Article 254. It is submitted that, the aforesaid judgment is about the conflict of Article 254, 245 and 246 of the Constitution of India and priority of the State. In all these matters, the fact remains that the sales tax dues have been adjudicated and ascertained and order has also been passed by the competent authority and on the basis of that priority was claimed over. While in the present case the State has first time passed an order dated 20.03.2017, therefore, merely passing of subsequent order cannot give priority over the same. It is submitted that, in view of the fact that the judgment which is relied upon by the State Government cannot be made applicable in the present case. 19. It is submitted that, the Rajasthan High Court has examined the provisions of Section 26-E of the SARFAESI Act. There also Section 47 of the Act....
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....sessed by the department on 30.03.2009 for the assessment year 2006-2007 and thereafter order has been passed. Therefore, the amount was outstanding before the bank has released the loan amount, therefore, the company has to pay sales tax dues to the State Government of the year 2006-2007, therefore, the said judgment does not apply in the present case. 21. It is submitted that, in the case of Ahmedabad Municipal Corporation v. Saurashtra Paints Pvt. Ltd. reported in 2002 (2) GLR 1109, where, meaning of creation of charge, first charge, scope and meaning of enforcement of charge over property has been considered and examined by the Hon'ble Division Bench of this Hon'ble Court. The Hon'ble Division Bench has examined the provisions of the Bombay Provincial Municipal Corporation Act and Section 100 of the Transfer of Property Act. The fact of the case is that, the Corporation has outstanding dues of the years 1965-66, 1966-67, 1967-68 and 1968-69. It is submitted that, the City Civil Court has held auction of the property on 17.07.1973, prior to that the Corporation has already claimed the charge for the outstanding amount. The Corporation property tax amount has due for the....
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.... revenue. - (i) The Commissioner, the special Commissioner, Additional Commissioner and the joint Commissioners shall have and exercise all the powers and perform all the duties of the Collector under the Bombay Land Revenue Code, 1879. (ii) The Deputy Commissioners and Assistant Commissioner shall have and exercise all the powers (except the powers of arrest and confinement of a defaulter in a civil jail) and perform all the duties the assistant Collector or Deputy Collector under the said Code. (iii) The Commercial Tax Officers shall have and exercise all the powers (except the powers of arrest and confinement of a defaulter in a civil jail) and perform all the duties of the Mamlatdar under the said Code. (2) Every order passed in exercise of the powers conferred buy sub-section (1) shall, for the purpose of section 73, 75, 79, or 94, be deemed to be an order passed under this Act." 15. Sections 31B and 34 of the Recovery of Debts and Bankruptcy Act, 1993, read as under : "31B. Priority to secured creditors.- Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realise s....
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....sions of that Code." "35. The provisions of this Act to override other laws. -The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." "37. Application of other laws not barred.-The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force." 17. The plain reading of Section 48 of the VAT Act indicates that it starts with a non-obstante clause 'notwithstanding anything to the contrary contained in any law for the time being in force'. 18. Section 31B of the RDB Act also starts with a non-obstante clause 'notwithstanding anything contained in any other law for the time being in force'. 19. Section 26E of the SARFAESI Act also starts with a nonobstante clause....
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....h India Corporation (P.) Ltd., v. The Secretary, Board of Revenue, Trivandrum & Anr., AIR 1964 SC 207 at 215-[1964] 4 SCR 280." (v) In Vishin N. Kanchandani v. Vidya Lachmandas Khanchandani, AIR 2000 SC 2747, at Paragraph 11, the Supreme Court held that, "There is no doubt that by non-obstante clause the Legislature devices means which are usually applied to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other statute. In other words such a clause is used to avoid the operation and effect of all contrary provisions. The phrase is equivalent to showing that the Act shall be no impediment to measure intended. To attract the applicability of the phrase, the whole of the section, the scheme of the Act and the objects and reasons for which such an enactment is made has to be kept in mind." (vi) In ICICI Bank Ltd. v. SIDCO Leathers Ltd., [2006] 67 SCL 383 (SC), the Supreme Court, at Paragraphs 34, 36 and 37, held as follows: "34. Section 529-A of the Companies Act no doubt contains a non-obstante clause but in construing the provisions thereof, it is necessary to determi....
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....G.M. Kokil [1984 (Supp.) SCC 196], Chandravarkar Sita Ratna Rao v. Ashalata S. Guram [(1986) 4 SCC 447] and observed: "... The non-obstante clause is appended to a provision with a view to give the enacting part of the provision an overriding effect in case of a conflict. But the non-obstante clause need not necessarily and always be co- extensive with the operative part so as to have the effect of cutting down the clear terms of an enactment and if the words of the enactment are clear and are capable of a clear interpretation on a plain and grammatical construction of the words the nonobstante clause cannot cut down the construction and restrict the scope of its operation. In such cases the non-obstante clause has to be read as clarifying the whole position and must be understood to have been incorporated in the enactment by the legislature by way of abundant caution and not by way of limiting the ambit and scope of the Special Rules." 107. In A.G. Varadarajulu v. State of Tamil Nadu [(1998) 4 SCC 231], this Court relied on Aswini Kumar Ghose's case. The Court while interpreting non obstante clause contained in Section 21-A of Tamil Nadu Land Reforms (Fixatio....
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....d in this Act' is equivalent to saying that the Act shall be no impediment to the measure [See Law Lexicon words 'notwithstanding anything in this Act to the contrary']. Use of such expression is another way of saying that the provision in which the non-obstante clause occurs usually would prevail over the other provisions in the Act. Thus, the non-obstante clauses are not always to be regarded as repealing clauses nor as clauses which expressly or completely supersede any other provision of the law, but merely as clauses which remove all obstructions which might arise out of the provisions of any other law in the way of the operation of the principle enacting provision to which the non-obstante clause is attached. [See Bipathumma & Ors. v. Mariam Bibi; 1966(1) Mysore Law Journal page 162, at page 165] 24. Having regard to the nature of the controversy which I am called upon to resolve, I would like to look into two decisions of the Supreme Court; one, in the case of Kumaon Motor Owners' Union Ltd. and another v. State of U.P., reported in AIR 1966 SC 785, and another, in the case of Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. and others, reported ....
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....ave effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument having effect by virtue of any enactment other than this Act." It does appear that there is some apparent conflict between S.43 on the one hand and S.68-B of the Motor Vehicles Act read with S.6(4) of the Act on the other, and that conflict has to be resolved. The only way to do it is to decide whether in such a situation, S.43 of the Act will prevail or S.68-B of the Motor Vehicles Act will prevail. We are of opinion that S.43 of the Act must prevail. In the first place, S.43 appears in an Act which is later than the Motor Vehicles Act and therefore in such a situation unless there is anything repugnant, the provisions in the later Act must prevail. Secondly, if we look at the object behind the two statutes, namely, the Act and the Motor Vehicles Act, there can be no doubt that the Act, which was passed to meet an emergency arising out of the Chinese invasion of India in 1962, must prevail over the provisions contained in Ch.IV-A of the Motor Vehicles Act which were meant to meet a situation arising out of the taking over of motor transport by the State. T....
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....ndia Ltd. (supra), had the occasion to consider the effect of conflict between two special Acts. In the case before the Supreme Court, the conflict was between the provisions of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 with the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. The Supreme Court took the view that the later one would prevail. I may quote the relevant observations thus : "7. Coming to the second question, there is no doubt that the 1985 Act is a special Act. Section 32(1) of the said Act reads as follows: "32. Effect of the Act on other laws-(1) The provisions of this Act and of any rules or schemes made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and the Urban Land (Ceiling and Regulation) Act, 1976 (33 of 1976) for the time being in force or in the Memorandum or Articles of Association of an industrial company or in any other instrument having effect by virtue of any law other than this Act." 8. The effect of this provision ....
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....urt (Trial of Offences Relating to Transactions and Securities) Act, 1992, provides in Section 13, that its provisions are to prevail over any other Act. Being a later enactment, it would prevail over the Sick Industrial Companies (Special Provisions) Act, 1985. Had the Legislature wanted to exclude the provisions of the Sick Companies Act from the ambit of the said Act, the Legislature would have specifically so provided. The fact that the Legislature did not specifically so provide necessarily means that the Legislature intended that the provisions of the said Act were to prevail even over the provisions of the Sick Companies Act. Under Section 3 of the 1992 Act, all property of notified persons is to stand attached. Under Section 3(4), it is only the Special Court which can give directions to the custodian in respect of property of the notified party. Similarly, under Section 11(1), the Special Court can give directions regarding property of a notified party. Under Section 11(2), the Special Court is to distribute the assets of the notified party in the manner set out thereunder. Monies payable to the notified parties are assets of the notified party and are, therefore,....
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....e Act in that behalf. Mrs. Shiraz Rustomjee has drawn our attention to Section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 wherein after giving an overriding effect to the 1993 Act it is specifically provided that the said Act will be in addition to and not in derogation of a number of other Acts including the 1985 Act. Similarly under Section 32 of the 1985 Act the applicability of the Foreign Exchange Regulation Act and the Urban Land Ceiling Act is not excluded. It is clear that in the instant case there was no intention of the Legislature to permit the 1985 Act to apply notwithstanding the fact that proceedings in respect of a company may be going on before the B.I.F.R. The 1992 Act is to have an overriding effect notwithstanding any provision to the contrary in another Act." 29. The principles of law discernible from the decision of the Supreme Court in the case of Solidaire India Ltd. (supra) are that, if there is a conflict between the two special Acts, the later Act must prevail. To put it in other words, when there are two special statutes which contain the non-obstante clauses, the later statute must prevail. This is because at the tim....
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....xes. 33. Apart from the fact that Section 31B of the RDB Act is a later enactment, the language of the said provision also clearly indicates the intention of the Parliament to give precedence even over the Government dues notwithstanding anything to the contrary in any other law. 34. I am sure of one thing that there exists no repugnancy in the two legislations. The intention of the Parliament could not be said to nullify the State enactment providing the first charge on the property. The legislations have been made by the Central Government and the State respectively under Entries I and II of the Schedule and not of the Concurrent List. The amendment made by the Parliament is to give priority to the secured creditors vis-a-vis the State dues without speaking about the first charge. This aspect was duly considered by the Supreme Court in the case of Central Bank of India (supra). The amended provision, i.e. Section 26E of the SARFAESI Act and Section 31B of the RDB Act, would have been different as indicated by the Apex Court in the case of Central Bank of India (supra). 35. While it is true that the Bank has taken over the possession of the assets of the defaulter under t....
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.... consideration is as to whether amended provisions of Section 26E of the Act of 2002 and Section 31B of the Act of 1993 would apply to the present case. It is for the reason that both the provisions were inserted in the year 2016, whereas, attachment of the property in question to recover the dues was made by the respondent-department in the year 2014 itself. It is not the case of either of the parties that amended provision is retrospective and otherwise perusal of amended provision does not show it thus would apply prospectively. The property already attached towards recovery of State dues cannot be nullified by the subsequent legislation when it has not been given retrospective effect. If argument of the learned counsel for petitioner about priority rights of the secured creditors vis a vis Government dues is accepted, it would apply from the date of amendment, whereas, attachment of the property was made in the year 2014, thus it was not free for auction. The enforcement of statutory first charge by attachment cannot be nullified by subsequent auction when no priority right was existing in favour of the secured creditors at the relevant time. Section 47 of the Act of 2003 is re....
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....imacy to the right of secured creditor vis a vis other mortgagees who could exercise rights under Sections 69 or 69A of the Transfer of Property Act. However, this primacy has not been extended to other provisions like Section 38C of the Bombay Act and Section 26B of the Kerala Act by which first charge has been created in favour of the State over the property of the dealer or any person liable to pay the dues of sales tax, etc. Sub-section (7) of Section 13 which envisages application of the money received by the secured creditor by adopting any of the measures specified under sub-section (4) merely regulates distribution of money received by the secured creditor. It does not create first charge in favour of the secured creditor. 116. The non obstante clauses contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act give overriding effect to the provisions of those Acts only if there is anything inconsistent contained in any other law or instrument having effect by virtue of any other law. In other words, if there is no provision in the other enactments which are inconsistent with the DRT Act or Securitisation Act, the provisions contained in thos....
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....effect, it is not possible to read any conflict or inconsistency or overlapping between the provisions of the DRT Act and Securitisation Act on the one hand and Section 38C of the Bombay Act and Section 26B of the Kerala Act on the other and the non obstante clauses contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act cannot be invoked for declaring that the first charge created under the State legislation will not operate qua or affect the proceedings initiated by banks, financial institutions and other secured creditors for recovery of their dues or enforcement of security interest, as the case may be. 131. The Court could have given effect to the non obstante clauses contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act vis a vis Section 38C of the Bombay Act and Section 26B of the Kerala Act and similar other State legislations only if there was a specific provision in the two enactments creating first charge in favour of the banks, financial institutions and other secured creditors but as the Parliament has not made any such provision in either of the enactments, the first charge created by the State legislati....
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....ors to realise the secured dues and debts dues, which are payable to the secured creditors by sale of assets over which security has been created, has priority over all other debts and Government dues including revenue, taxes, cesses and rates due to the Central Government, State Government and local authorities. The relevant observations are as under : "8. In the present case, undisputedly a notice of sale by the respondent/Commercial Department has been issued on 19.07.2017. The Amendment Act, 2016, which incorporates Section 31B reads as under:- "31B. Notwithstanding anything contained in any law for the time being in force, the rights of secured creditors to realise secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all the other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority. Explanation - For the purpose of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016, in cases where insolvency or bankruptcy p....
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....ate Government and local authorities. Not only this, it is having overriding effect over all other enactment including the provisions of MP VAT Act, Central Sales Tax Act, Entry Tax Act and any other Tax Act. Though, an attempt has been made by the State Government to demonstrate before this Court that the amendment will not dis-entitle to recover the dues by them as the dues are outstanding since 2012. Nothing prevented the State Government to recover the dues since 2012 and the State Government woke up from plumber only after the amendment has come into force and by virtue of the amendment in the Central Act, this Court is of the considered opinion that by no stretch of imagination, the State Government can be permitted to auction the property in question as the Bank of Baroda is having priority in the matter in light of the amendment which has been quoted above." 39. The Full Bench of the Madras High Court, in the case of The Assistant Commissioner (CT), Anna Salai-III Assessment Circle v. The Indian Overseas Bank and others, reported in AIR 2017 Mad 67, was called upon to answer the following two questions : "(i) As to whether the Financia....
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....ate only to auction sales, which may be carried out in pursuance to the rights exercised by the secured creditor having a mortgage of the property. This aspect is also covered by the introduction of Section 31B, as it includes ''secured debts due and payable to them by sale of assets over which security interest is created." 41. The Full Bench decision of the Madras High Court referred to above has been referred to and relied upon by a Division Bench of the Bombay High Court in the case of Punjab National Bank, Bandra (E), Mumbai v. Maa Banbhori Steel Industry Pvt. Ltd. & Ors. (Writ Petition No.11018 of 2018, decided on 29t October 2018). 42. The Division Bench was dealing with Section 37 of the Maharashtra Value Added Tax Act, 2002 (for short, 'the MVAT Act'). The Division Bench observed as under : "A Division Bench of this Court in Writ Petition No. 1796 of 2015 in the case of Axis Bank Limited Vs. State of Maharashtra and Ors. (MANU/MH/0379/2017) decided on 07.03.2017 had an occasion to consider the import of legislative change, in view of introduction of the Section 26-E of the SARFAESI Act. This Court had, inter alia, observed in paragraph 22 as ....
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....orin District and others (Writ Petition No.14618 of 2018, decided on 18th December 2018), had the occasion to consider Section 31B of the RDB Act. The Division Bench of the Madras High Court observed as under : "Similar issue came up for consideration before this Court in W.P.(MD).No.10724 of 2018, dated 06.12.2018, Central Bank of India Vs the Joint Sub-Registrar No.1, wherein this Court has held as follows:- "7. In Assistant Commercial Tax Officer (CT) v. Indian Overseas Bank reported in 2016 (6) CTC 769, the Full Bench of this Court has held as under: "... 2. We are of the view that if there was at all any doubt, the same stands resolved by view of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, Section 41 of the same seeking to introduce Section 31B in the Principal Act, which reads as under:- "31B. Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realise secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all o....
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....of the Karnataka Land Revenue Act specifically provides that the claim of the State Government to any moneys recoverable under the provisions of Chapter XVI shall have precedence over any other debts, demand or claim whatsoever including in respect of mortgage. Sec. 158 of the Karnataka Land Revenue Act not only gives a statutory recognition to the doctrine of State's priority for recovery of debts but also extends its applicability over private debts forming subjectmatter of mortgage, judgment-decree, execution or attachment and the like.-Builders Supply Corporation vs. Union of India AIR 1965 SC 1061 relied on; Collector of Aurangabad vs. Central Bank of India AIR 1967 SC 1831 distinguished. A legislation may be made to commence from a back date, i.e., from a date previous to the date of its enactment. To make a law governing a past period on a subject is retrospectivity. A legislature is competent to enact such a law. The ordinary rule is that a legislative enactment comes into operation only on its enactment. Retrospectivity is not to be inferred unless expressed or necessarily implied in the legislation, specially those dealing with substantive rights and obligations. It is a ....
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....sion 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 on its earlier decision in the case of CST vs. Radhakishan, (1979) 43 STC 4 : AIR 1979 SC 1588. 46. In the case of Stock Exchange, Bombay v. V.S.Kandalgaonkar,....
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....ral 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. 47. 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 statutory charge which is created by the State enactment. The Bombay High Court was dealing with a matter under the Income Tax Act and under the Income Tax Act, th....
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....s 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. It is preposterous to suggest in the case on hand that as the assessment year was 2012-13, Section 48 could be said to apply from 2012-13 itself. Even in the absence of Section 26E of the SARFAESI Act or Section 31B of the RDB Act, Section 48 of the VAT Act would come into play only after the determination of the tax, interest or penalty liable to be paid to the Government. Only thereafter it could be said that the Government shall have the first charge on the property of the dealer. 51. In view of the aforesaid discussion, I have no hesitation in coming to the conclusion that the first priority over the secured assets shall be of the Bank and not of the State Government by virtue of Section 48 of the VAT Act, 2003. 52. In the result, this writ-application succeeds and is hereby allowed. It is hereby declared that the writ-applicant Bank is entitled to put the secured assets to auction....