TaxTMI 
TaxTMI 
2023 (3) TMI 121
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....public e-auction on 27.04.2022 by the respondent no.1- The Recovery Officer-I, DEBT Recovery Tribunal-II, Ahmedabad due to the default committed by the borrower/mortgagor, after taking the possession of the property, under the Recovery of debts due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as "RDDBI Act") Act. 2.2 The petitioner purchased the said property in the said public e-auction conducted by respondent no.1 for a sale consideration of Rs.13,75,00,000/- and the respondent no.1 issued a sale certificate in favour of the petitioner. 2.3 The petitioner was made aware by respondents No.1 and 2 that the claim of the banks dues are prior to the State dues as per Section 31-B of the RDDBI Act. 2.4 Thereafter, on 31.05.2022, respondent No.1 issued sale certificate. 2.5 There is a revenue entry being Entry No.6209 of the year 2018 which pertains to the charge created by the State Tax Department qua the land in question. 2.6 The petitioner therefore requested respondent No.1 - Recovery Officer of the Debt Recovery Tribunal for deciding the priority of charge between the bank and the VAT Department which was incorporated vide Entry No.6209. ....
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....on the decision in the case of Pattech Fitwell Tube Components versus State of Gujarat - Special Civil Application No.16352 of 2021 dated 30.03.2022 and has submitted that the issue is no more res integra. 4.4 He has further relied upon the following decisions in support of his submissions : (i) Special Civil Application No.15298 of 2020 - Bank of Baroda versus State of Gujarat (ii) Special Civil Application No.16855 of 2020 dated 29.06.2021 - The lakshmi Vilas Bank Ltd. Versus State of Gujarat (ii) Special Civil Application No.17891 of 2018 - Kalupur Commercial Co-operative Bank Ltd., versus State of Gujarat (iii) Special Civil Application No.17567 of 2022 - Dineshkumar Maneklal Patel versus Bank of Baroda, dated 12.01.2023 4.5 He has submitted that this petition may be allowed. 5. Learned AGP Mr. Kathiriya for respondents - State Authorities has submitted that there is a charge of the Government and the same may be taken care of by this Court. He has submitted that this petition may be dismissed. 6. The issue involved in this petition is as to whether the dues of secured financial institution will have priority over State tax dues o....
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....019. Relevant paragraphs 9 to 14, 27, 29 to 35 and 48 to 55 are as under : "9. The Value Added Tax Act, 2003, came into force from 1st April 2006 in the State of Gujarat. The Act was enacted to consolidate and amend the laws relating to the levy and collection of tax on the value added basis in respect of the sale of goods in the State of Gujarat. Section 48 of the Act, 2003, is with regard to the charge on the property. Section 48 reads as under : "48. Tax to be first charge on property.- Notwithstanding anything to the contrary contained in any law for the time being in force, any amount payable by a dealer or any other person on account of tax, interest or penalty for which he is liable to pay to the Government shall be a first charge on the property of such dealer, or as the case may be, such person." 10, Section 46 of the VAT Act is with regard to the special powers of the tax authorities for recovery of tax as arrears of land revenue. Section 46 of the VAT Act reads as under : "46. Special powers of tax authorities for recovery of tax as arrears of land revenue. (1) For the purposes of effecting recovery of the amount of tax, penal....
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....de thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984) [the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and the Small Industries Development Bank of India Act, 1989 (39 of 1989)." 12. Sections 26E, 35 and 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, read as under : "26-E. Priority to secured creditors.- Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or 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....
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.... areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the court. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on the 21st June, 2002 to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable the banks and financial institutions to realize long-term assets, manage problem of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction. It is now proposed to replace the Ordinance by a Bill, which, inter alia, contains provisions of the Ordinance to provide for - (a) Registration and regulation of securitisation companies or reconstruction companies by the Reserve Bank of India; (b)....
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....islation to non-banking financial companies and other entities; (m) Non-application of the proposed legislation to security interests in agricultural lands, loans not exceeding rupees one lakh and cases where eighty per cent, of the loans are repaid by the borrower. The Bill seeks to achieve the above objects." 14. We may also quote the statement of objects and reasons specified in The Recovery of Debts Due to Banks & Financial Institutions Act, 1993 The same read thus; " THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 STATEMENT OF OBJECTS AND REASONS Banks and financial institutions at present experience considerable difficulties in recovering loans and enforcement of securities charged with them. The existing procedure for recovery of debts due to the banks and financial institutions has blocked a significant portion of their funds in unproductive assets, the value of which deteriorates with the passage of time. The Committee on the Financial System headed by Shri M. Narasimham has considered the setting up of the Special Tribunals with special powers for adjudication of such matters and speedy recovery as criti....
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....y be in conflict with the provisions of the other Acts. The third principle discernible is that the court must look into the language of the provisions. If the language of a particular provision is found to be more emphatic, the same would be indicative of the intention of the legislature that the Act shall prevail over the other statutes. 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 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. We are conscious of the fact that in the case on hand there is no conflict between two special statutes enacted by the Parliament. The conflict is with the State Act and the Central Ac....
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.... 34. We are 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 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 beca....
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.... Income-tax department would not have priority over all debts owned by defaulter member. The first thing to be noticed is that the Income Tax Act does not provide for any paramountancy of dues by way of income tax. This is why the Court in the case of Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. [2005] 5 SCC 694 (para 19) held that Government dues only have priority over unsecured debts and in so holding the Court referred to a judgment in Giles v. Grover (1832) (131) English Reports 563 in which it has been held that the Crown has no precedence over a pledgee of goods. In the present case, the common law of England qua Crown debts became applicable by virtue of Article 372 of the Constitution which states that all laws in force in the territory of India immediately before the commencement of the Constitution shall continue in force until altered or repealed by a competent legislature or other competent authority. In fact, in Collector of Aurangabad v. Central 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 an....
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....ld 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. 52. 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 the amount is determined accordingly by the authority concerned. Without any assessment proceedings, the amount cannot be determined, and if the amount is yet to be determined, then prior to such determination there cannot be any application of Section 48 of the VAT Act. We may also refer to Section 47 of the VAT Act. Section 47 of the VAT Act is with respect to transfer of property by the dealer to defraud the Revenue. According to Section 47, if a dealer creates a charge over his property by way of sale, mortgage, exchange or any other mode of transfer after the tax....
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....uestion by way of mortgage and has first right to sell the same in view of priority under Section 31B of the RDDBI Act, so also Section 26E of the SARFAESI Act and recovered its dues from it. The petitioner is a bona fide purchaser, purchased the property in question from the public e-auction held by the Recovery Officer and paid full and total sale consideration and the Recovery Officer has issued sale certificate in favour of the petitioner. The debts due to Bank - a secured creditor shall be paid in priority over other debts/taxes payable to the State Government. The petitioner has no concern with the dues of the State Authorities. The petitioner has paid full and final sale consideration and if the State Authorities have dispute qua their dues, they can avail appropriate legal remedy before appropriate forum against the appropriate person/s. Any of the contesting respondent has no right to disturb the right, title and interest of the petitioner qua the property in question. Under these circumstances, the petitioner cannot be left in lurch. The petitioner therefore is required to be protected. Moreover, now it is well settled legal position that the mortgagor bank has priority t....