TaxTMI 
TaxTMI 
2026 (9) TMI 1035
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....Assistant Government Pleader Ms. Tanushree Shrimal for the respondent nos.1 to 5, learned advocate Mr. Yuvraj G. Thakore for the respondent no. 6 and learned advocate Mr. Mahitosh U. Singh for the respondent no. 7. 4. The petitioners herein are constrained to invoke Article 226 of the Constitution of India, challenging the Entry No. 12724 as well as the order dated 24.01.2022 passed by the State Tax Officer, Unit-52, Kapadwanj, whereby, a charge is sought to be created in favour of the State Value Added Tax (for short 'VAT') Department in the property situated at 'Revenue Survey No. 782- 2, Khata No. 1474, admeasuring 8977 square meters situated at village: Pithai, Taluka: Kathlal, District Kheda' (for short 'the subject land/ subject property'). 5. Briefly stated that, one company in the name of Raffles Green Pet India Private Limited (for short 'the Company') obtained a loan from Bank of Baroda. To the knowledge of the petitioners, the said Company had obtained a cash credit limit of Rs.4 crores, term loan of Rs.1.85 crores and a further term loan of Rs.3.1 crores from the Bank of Baroda (respondent no. 7 herein). In order to secure such credit facilities, several immovable....
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....us of selling the land/property, and therefore, asked one of the consultants to verify the title of the property. Upon scrutiny of the revenue records, shockingly, there was a charge recorded in the revenue records over the subject land/property in favour of the State VAT Department by Entry No. 12724, which was certified on 10.05.2022. Neither the petitioners nor the respondent no. 6 received any notice under Section 135D of the Gujarat Land Revenue Code, 1879, for certification of the said entry in the revenue records. The respondent no. 6 contacted the petitioners and informed about such charge recorded vide Entry No. 12724. The said charge with respect to VAT dues relating to the period prior to the date of the execution of registered sale deed bearing No. 421 of 2022 dated 17.02.2022. Resultantly, the petitioners were in breach of their representations and assurances regarding marketability of the title of the subject land/property. 5.7. The respondent no. 6 called upon the petitioners to take necessary action for clearance of the said charge over the subject land/property, failing which the respondent no. 6 would take legal action against the petitioners. The petitioners a....
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....ents to take any steps in respect of the said Property pursuant to the Entry No. 12724, at Annexure D to this petition and to the attachment order dated 24.01.2022, at Annexure F to this petition, passed by State Tax officer, Ghatak-52-kapadwanj and to further prohibit the Respondents from taking any further steps in relation to the said properties. E. xxx." 6. Learned advocate Mr. Aditya A. Gupta appearing for the petitioners submitted that the action of the respondent authorities in creating charge over the subject land/property by order dated 24.01.2022, which has resulted in Entry No. 12724 in the revenue records, is contrary to the provisions of Section 26-E of the SARFAESI Act, 2002, which would have overriding effect over the VAT Act upon notifying of Section 26-E with effect from 01.09.2016 vide Notification dated 01.09.2016 in the official gazette. 6.1. It is submitted that the aforesaid issue is no longer res integra, the same having attained finality in the case of Punjab National Bank vs. Union of India and others, Civil Appeal No.2196 of 2012 decided on 24.02.2022. 6.2. Placing reliance on the aforesaid submissions, it is submitted that the present pe....
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....a recent pronouncement in the case of Punjab National Bank Vs. Union of India and Others, Civil Appeal No.2196 of 2012 decided on 24.02.2022 has taken the view that once any immovable property is mortgaged / hypothecated towards secured creditors then having regard to the provisons contained in Section 2(zc) to (zf) of the SARFAESI Act, 2002 read with the provisions contained in Section 13 of the SARFAESI Act, 2002, the secured creditor will have the first charge on the secured assets. The Supreme Court proceeded to hold that Section 35 of the SARFAESI Act, 2002 inter alia provides that the provisions of the SARFAESI Act shall have overriding effect on all other laws. 6. In the case on hand, the Income Tax Department obviously would rely upon the provisions of Section 281 of the Income Tax Act. 7. In view of the recent pronouncement, the provisions contained in Section 281 of the Income Tax Act would be said subject to the provisions contained in the SARFAESI Act, 2002. It appears that the Company was assessed for the F.Y. 2007-08. We do not have the exact date on which the assessment order came to be passed, but the records reveals that the Income Tax Department ....
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....se on the ground that the actual sale took place after the order of attachment was passed by Respondent No. 4. The High Court failed to take into account the fact that the sale of the property was pursuant to the order passed by the DRT with regard to the property over which a charge was already created prior to the issuance of notice on 11.02.2003. As the charge over the property was created much prior to the issuance of notice under Rule 2 of Schedule II to the Act by Respondent No. 4, we find force in the submissions made on behalf of the Appellant." 9. In view of the aforesaid, this writ application succeeds and is hereby allowed. The impugned letter / order dated 24.05.2021 and 31.12.2020 respectively at Annexure F are hereby quashed and set aside. The respondent No.1 is directed to release the registered sale deed bearing registration No. 1016/2020 in favour of the writ applicants with respect to the property in question. The attachment order dated 18.04.2013, Annexure G passed by the Income Tax Department is also hereby quashed and set aside. The writ applicants are entitled in law to get their names mutated in the revenue records on the strength of sale deed." ....
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....ify 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 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. Moreov....