TaxTMI 
TaxTMI 
2019 (9) TMI 1049
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....ent 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 Gandhinagar. The original title-deeds of the properties were handed over by the r....
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....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 deeds of the properties are with the Bank, the Bank has got the first and the foremost charge over the properties of the partnership firm and its partners. The....
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....E 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 to have been created in favour of the State. 7. Mr.Rao, in the last, submitted that in view of the provisions of Section 26E of the SARFAESI Act, the Bank of Baroda has got the first charge over the secured assets. ....
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....nwards 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 of E.P.F. Commissioner v. O.L. of Esskay Pharma, reported in (2011)5 GLR 3739, has taken a very categorical view on considering the SARFAESI Act, 2002 visa- vis E.P.E. Act, interpreting the said legal proposition, has held considering several judgments if there is a specific provision in these enactments creating first charge but the Parliament has n....
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.... 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 'banking' which find its place in List 1 Schedule 7 Entry 45 and 94 hence both the said enactments operate in different areas, hence there is no question of repugnancy between the State enactment and the Central legislation. (9) This High Court, in the Special Civil Application No.3372 of 2012 passed an order dated 23.7.2012 and held that the first charge ov....
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....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 favour executed on 28.08.2012, 19.06.2013 and 31.01.2014. On the date of registration of mortgage, there was no order of State Government under GVAT Act, and order of State Government has been passed for the first time for assessment year 2012-2013 on 24.03.2017. Before the order of assessment has been passed, the account has been declared as N.P.A. on 30.04.2016 by the Bank of Baroda (pg. 100 of the petition) and notice under Section 13 (2) has been issued on 03.05.2016 and thereaf....
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.... 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, letter issued by the CTO, Kalol on 28.05.2017 is also against the provisions of law. It is submitted that, no such notices and documentary evidences have been produced before this Hon'ble Court by the State Government. 12. It is submitted that, as far as the case of the petitioner is concerned, the account of the borrower become N.P.A. on 30.04.2016, notice under Section 13 (2) has been issued on 03.05.2016. 13. It is submitted that, all action taken by the CTO is after the symbolic possession been taken ov....
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.... 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 on 3.8.1992 and is yet to be executed. Therefore, looking to the case on hand before the Hon'ble Supreme Court, the Hon'ble Supreme Court has held that, "Karnataka Sales department has priority over the bank dues. 17. In the case of State of Maharashtra v. Bharat Shantilal Shah & Ors. reported in 2008 (13) SCC 5, in this case, the question before the Hon'ble Supreme Court was the constitutional validity of the Maharashtra Control of Organised Crime Act, 1999 (for short the `MCOCA' or the `Act') on the ground that the State Legislature did not have th....
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....ated 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, 2003 of Rajasthan is pari-materia of Gujarat Act. The judgment of the Hon'ble Supreme Court in the case of Central Bank of India was prior to the amendment of the Act, 2000 and 1993, Thus would not apply to the amended provisions of the Act. In the case hand also the amended provision does not apply. It is submitted that, the Rajasthan High Court has examined the Section 26 (E) of the Act and it is held in view of the amended provisions of Section 26 (E), looking to the language of section, the effect of Section 48 has been nullified, because Section 26 (E) specifically stated that secured c....
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.... 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 aforesaid period of years, much prior to the property put in auction. Therefore, that first charge over the property cannot be made applicable in the present case. Therefore, when the bank has taken possession of the property in question in advance/first point of time, before first order which has been passed by the assessment authority/ State Government, the State Government cannot be has preference over the same." ANALYSIS : 11. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for my consideration is, whether the Central Legisla....
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....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 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 other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority. Explanation.- For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code." "34. Act to have ove....
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....orce." 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 'notwithstanding anything contained in any other law for the time being in force'. 20. As regards the non-obstante clause, this Court deems it fit to consider few decisions : (i) In State of West Bengal v. Union of India, AIR 1963 SC 1241, it is observed as under: "The Court must ascertain the intention of the legislature by directing its attention not merely to the clauses to be construed but to the entire statute; it must compare the clause with the other parts of the law and the setting in which the clause to be interpreted occurs." (ii) In Union of India v. Maj I.C. Lala, AIR 1973 SC 2204, the Supreme Court held that non-obstante clause does not mean that the whole of the said provision of law has to be made applicable or ....
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....bjects 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 determine the purport and object for which the same was enacted.... 36. The non-obstante nature of a provision although may be of wide amplitude, the interpretative process thereof must be kept confined to the legislative policy.... 37. A non-obstante clause must be given effect to, to the extent the Parliament intended and not beyond the same." (vii) The Supreme Court, in the case of Central Bank of India v. State of Kerala, [2009] 4 SCC 94, at Paragraphs 103 to 107, considered many cases on non-obstate clause, which are extracted, "103. A non obstante clause is generally incorporated in a statute to give overriding effect to a particular section or the statute as a whole. While interpreting non obstante clause, the Court is required to find out the extent to which the legislature intended to do so and the context in ....
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....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 (Fixation of Ceiling on Land) Act, 1961 held :- "It is well settled that while dealing with a non obstante clause under which the legislature wants to give overriding effect to a section, the court must try to find out the extent to which the legislature had intended to give one provision overriding effect over another provision. Such intention of the legislature in this behalf is to be gathered from the enacting part of the section. In Aswini Kumar Ghose v. Arabinda Bose [AIR 1952 SC 369], Patanjali Sastri, J. observed: "The enacting part of a statute must, where it is clear, be taken to control the non obstante clause where both cannot be read harmoniously;"" 21. A non-obstante clause is generally appended to a section with a view to give the enacting part of the section, in case of conflict, an overriding effect over the provision in the same or other Act mentioned in the non-obstante cla....
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....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 in (2001)3 SCC 71. Although the ratio of the two decisions referred to above may not be directly applicable to the case on hand, yet having regard to certain principles of law enunciated, I would like to follow and apply the same for the purpose of resolving the controversy as regards Section 48 of the VAT Act, Section 31B of the RDB Act and Section 26E of the SARFAESI Act. 25. In Kumaon Motor Owners' Union Ltd. (supra), the Supreme Court had the occasion to resolve the conflict between the provisions of the Defence of India Act (No.51 of 1962) and the Motor Vehicles Act. The Supreme Court noticed that there was an apparent conflict between Section 43 of the Defence of India Act on the one hand and Section 68-B of the Motor Vehicles Act, 1939 read with Section 6(4) of the Act on the other. The Supreme Court resolved the conflict by holding that the provisions of Section 43 of the Act would prevail over th....
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....mergency 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. Thirdly, if we compare the language of S.43 of the Act with S.68-B of the Motor Vehicles Act we find that the language of S.43 is more emphatic than the language of S.68-B. Section 43 provides that the provisions of the Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than the Act. This would show that the intention of the legislature was that the Act shall prevail over other statutes. But we do not find the same emphatic language in S.68-B which lays down that the provisions of Ch.IV-A would prevail notwithstanding anything inconsistent therewith contained in Ch.IV of the Motor Vehicles Act or in any other law for the time being in force. The intention seems to be clear in view of the collocation of the words "in Chapter IV of this Act" with the words "in any other law for the time being in force" that Ch.IV-A was to prevail over Ch.IV of the Motor Vehicles Act....
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.... 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 is that the said Act will have effect notwithstanding anything inconsistent therewith contained in any other law except to the provisions of the Foreign Exchange Regulation Act, 1973 and the Urban Land (Ceiling and Regulation) Act, 1976. A similar non-obstante provision is contained in Section 13 of the Special Court Act which reads as follows: "13. Act to have overriding effect-The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any: instrument having effect by virtue of any law, other than this Act, or in any decree or order of any court, tribunal or other authority." 9. It is clear that both these Acts are special Acts. This Court has laid down in no uncertain terms that in such an event it is the later Act which must prevail. The decisions cited in the above context are as follows: Maharashtra Tubes Ltd. v. State Industrial & Investment Corporation of ....
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....rt 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, assets which stand attached. These are assets which have to be collected by the Special Court for the purposes of distribution under Section 11(2). The distribution can only take place provided the assets are first collected. The whole aim of these provisions is to ensure that monies which are siphoned off from banks and financial institutions into private pockets are returned to the banks and financial institutions. The time and manner of distribution is to be decided by the Special Court only. Under Section 22 of the 1985 Act. recovery proceedings can only be with the consent of the Board for Industrial and Financial Reconstruction or the Appellate Authority under that Act. The Legislature being aware of the provisions of Section 22 under the 1985 Act still empowered only the Special Court under the 1992 Act to give directions to recover and to distribute the assets of the notified persons in the manner set down under section 11(2) of the 1992 Act. This can only mean that the Legislature wanted the provi....
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..... 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 time of enactment of the later statute, the legislature could be said to be aware of the earlier legislation and its non-obstante clause. If the legislature still confers the later enactment with a non-obstante clause, it means that the legislature wanted that enactment to prevail. 30. Let me clarify that in the case on hand there is no conflict between the two special statutes enacted by the Parliament. The conflict is with the State Act and the Central Act. I am trying to understand the true purport and effect of Section 26E of the SARFAESI Act which came to be enacted later in point of time and also the effect of Section 31B of the RDB Act which came to be enacted later in point of time. 31. Let me, at the outset, clarify that the Government of India, Ministry of Finance, notified the provisions of Section 26(E) on 1st September 2016. The copy of the Notification issued by the Government of India, published in the Official Gazette Part-II, Section 3, at Serial No.2142 dated 1st September 2016 has been placed on record. T....
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....35. While it is true that the Bank has taken over the possession of the assets of the defaulter under the SARFAESI Act and not under the RDB Act, Section 31B of the RDB Act, being a substantive provision giving priority to the "secured creditors", the same will be applicable irrespective of the procedure through which the recovery is sought to be made. This is particularly because Section 2(la) of the RDB Act defines the phrase "secured creditors" to have the same meaning as assigned to it under the SARFAESI Act. Moreover, Section 37 of the SARFAESI Act clearly provides that the provisions of the SARFAESI Act shall be in addition to, and not in derogation of inter-alia the RDB Act. As such, the SARFAESI Act was enacted only with the intention of allowing faster recovery of debts to the secured creditors without intervention of the court. This is apparent from the Statement of Objects and Reasons of the SARFAESI Act. Thus, an interpretation that, while the secured creditors will have priority in case they proceed under the RDB Act they will not have such priority if they proceed under the SARFAESI Act, will lead to an absurd situation and, in fact, would frustrate the object of the ....
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....ur of the secured creditors at the relevant time. Section 47 of the Act of 2003 is relevant for it, thus quoted hereunder for ready reference: "47. Liability under this Act to be the first charge- Notwithstanding anything to the contrary contained in any law for the time being in force, any amount of tax and any other sum payable by a dealer or any other person under this Act, shall be the first charge on the property of such dealer or person." Section 47 of the Act of 2003 starts with non-obstante clause and creates first charge on the property. The issue about priority claim of the secured creditor vis a vis first charge on the property under the State legislation was considered by the Supreme Court in the case of Central Bank of India (supra). If State Act creates first charge on the property then secured creditors cannot have claim against the statutory provision. Therein, consideration was also made even in reference to Section 100 of the Act of 1882. The relevant paras of the judgment in the case of Central Bank of India (supra) are quoted hereunder for ready reference: "111. However, what is most significant to be noted is that there is no provision in either of ....
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....ation Act, the provisions contained in those Acts cannot override other legislations. Section 38C of the Bombay Act and Section 26B of the Kerala Act also contain non obstante clauses and give statutory recognition to the priority of State's charge over other debts, which was recognized by Indian High Courts even before 1950. In other words, these sections and similar provisions contained in other State legislations not only create first charge on the property of the dealer or any other person liable to pay sales tax, etc. but also give them overriding effect over other laws. 126. While enacting the DRT Act and Securitisation Act, Parliament was aware of the law laid down by this Court wherein priority of the State dues was recognized. If Parliament intended to create first charge in favour of banks, financial institutions or other secured creditors on the property of the borrower, then it would have incorporated a provision like Section 529A of the Companies Act or Section 11(2) of the EPF Act and ensured that notwithstanding series of judicial pronouncements, dues of banks, financial institutions and other secured creditors should have priority over the State's statutor....
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....State legislations on the property of the dealer or any other person, liable to pay sales tax etc., cannot be destroyed by implication or inference, notwithstanding the fact that banks, etc. fall in the category of secured creditors. It is submitted that judgment of the Apex Court in the case of Central Bank of India (supra) was prior to the amendment in the Act of 2002 and 1993 thus would not apply to the cases governed by the amended provisions. In the case in hand, the attachment of property by the State is prior to the amendment thus amended provision would not apply. Section 47 of the Act of 2003 was invoked prior to the amendment. I am yet considering the effect of the amended provision. The Apex Court has made analysis of a provision of first charge vis a vis secured creditor in the case of Central Bank of India (supra). The first charge was given supremacy than rights under mortgagee or to a secured creditor. The distinction between "first charge and secured creditor" is necessary to analyse scope of Section 26E of the Act of 2002 and Section 31B of the Act of 1993. The amended provisions are having overriding effect and give priority to the secured creditors vis a vis ....
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....g in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that code." 9. Thus, the aforesaid statute makes it very clear that the dues of the bank are to be recovered at the first instance. Section 33 of the MP VAT Act, 2002 reads as under:- "33 : Tax to be first charge (1) Notwithstanding anything to the contrary, contained in any law for the time being in force and subject to the provisions of section 530 of the Companies Act, 1956 (No.1 of 1956), any amount of tax and/ or penalty or interest, if any, payable by a HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE W.P. No.4909/17 & W.P. No.6297/17 (- 4-) dealer or other person under this Act shall be first charge on the property of the dealer or such person. (2) Notwithstanding anything contained in this Act, where a dealer or person is in default or is deemed to be in default under clause (a) of subsection (11) of section 24 and whose property is being sold by a bank or financial institution for recovery of its loan, the Commissioner may forgo the right of first charge as mentioned in subsection (1) against the property sold on the following cond....
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....uld have the 'Priority of Charge' over the Mortgaged property in question, with regard to the tax and other dues, and (ii) As to the status and the rights of a Third party Purchaser of the Mortgaged property in question." 40. Sanjay Kishan Kaul, CJ. (as His Lordship then was) observed as under : "...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 other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority. Explanation. - For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code,....
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....SI Act (Unamended) primacy can be extended to the provisions like Section 38-C of the Bombay Sales Tax Act or Section 37 of the MVAT Act. Section 13 envisages application of money received by the secured creditor and by adopting any of the measures specified in Section 13 (4) merely regulates distribution of money received by the secured creditor and it does not create first charge in favour of the secured creditor. Though in normal course in view of Section 35 of the SARFAESI Act, 2002 no priority can be claimed by the bank or financial institutions over the State's statutory first charge in the matter of recovery of dues of sales tax etc. However, in respect of company under liquidation, in view of the provisions of Section 529-A of the Companies Act, a distinction has to be made and as has been laid down by the Division Bench of this Court in the matter of SICOM Ltd, which view has been upheld by the Supreme Court, the claim of the secured creditor in respect of the company being under liquidation shall have the priority in view of the language applied in Section 529-A of the Companies Act, 1956. It also must be taken note of that there is statutory recognition of priority c....
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....ereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016, in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code." 3. There is, thus, no doubt that the rights of a secured creditor to realise debts due and payable by sale of assets over which security interest is created, would have priority over all debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or Local Authority. This section introduced in the Central Act is with "notwithstanding" clause and has come into force from 01.09.2016. 4. The law having now come into force, naturally it would govern the rights of the parties in respect of even a lis pending." 44. In the course of the hearing of this matter, two judgments, one of the Supreme Court, and another, of the Bombay High Court, were also discussed. The Supreme Court decision is in the case of Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. and others, reported in (247) ITR 165 (SC), and the Bombay High Court decision is....
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.... is not the same thing as giving the amendment a retrospective operation. Principle of s. 25 of Partnership Act cannot be stretched and extended to such situations in which the firm is deemed to be a person and hence a legal entity for certain purpose. The Karnataka Sales-tax Act also gives the firm a legal status by treating it as a dealer and hence a person for the limited purpose of assessing under the Sales-tax Act.-CST vs. Radhakishan AIR 1979 SC 1588 and ITO vs. Arunagiri Chettiar (1996) 134 CTR (SC) 167 : (1996) 220 ITR 232 (SC) relied on. The counsel for the appellant is right in submitting that on the day 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 sales-tax arrears payable by the firm and defeating the bank's security in view of the law as laid down by this Court in CST vs. Radhakishan (1979) 43 STC 4 : AIR 1979 SC 1588. However, still in the facts and circumstances of the case, the appellant bank cannot be allowed any relief. Sec. 15(2A) of Karnataka Sales-tax Act had come into force on 18th Dec., 1983 while the decree in favour of the ba....
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.... over dues of Income - tax department." While dealing with the tax recovery under Section 226 of the Income-tax Act, 1961, read with Sections 8 and 9 of the Securities Contracts (Regulation) Act, 1956, it was held by the Apex Court that collection and recovery of tax has to be based on proper appreciation of facts of the case. While deciding Other modes of recovery (Priority over debts), the Apex Court duly considered the power of Central Government to direct rules to be made or to make rules and observed that a membership card is only a personal permission from Stock Exchange to exercise rights and privileges that may be given subject to Rules, Bye-Laws and Regulations of Exchange and moment a member is declared a defaulter, his right of nomination shall cease and vest in Exchange because even personal privilege given is at that point taken away from defaulting member. It therefore held that by virtue of rule 43 of Bombay Stock Exchange Rules security provided by a member shall be a first and paramount lien for any sum due to Stock Exchange. Thus, Bombay Stock Exchange being secured creditor would have priority over Govt. dues and if a member of BSE was declared a defaulter, Incom....
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....o note that the Bank declared the account as 'NPA' on 3rd May 2016. The symbolic possession of the secured assets was taken over on 2nd September 2016. The possession, therefore, could be said to have been taken over by the Bank. The first order of the State Government with regard to the liability under the provisions of the VAT Act was passed for the Assessment Year 2012-13 in March 2017. Legally speaking, the liability of the respondent no.4 under the VAT Act could be said to have been determined and became due only in March 2017. 49. Section 48 of the VAT Act would come into play only when the liability is finally assessed and the amount becomes due and payable. It is only thereafter if there is any charge, the same would operate. The authority under the VAT Act passed the assessment order later in point of time. 50. The language of Section 48 of the VAT Act is plain and simple and the phrase 'any amount payable by a dealer or any other person on account of tax, interest or penalty' therein assumes significance. The amount could be said to be payable by a dealer on account of tax, interest or penalty once the same is assessed in the assessment proceedings and t....