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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
J.B. Pardiwala, Nisha M. Thakore, JJ.
M/s Pattech Fitwell Tube Components – Petitioner
Versus
The State Of Gujarat – Respondent
R/Special Civil Application No. 16352, 16358 of 2021
Decided On : 30-03-2022
Constitution of India, 1950 – Article 226 – Power of High Court to issue certain writs – By this writ-application under Article 226 of Constitution of India, writ-applicant has prayed for reliefs – Held, Moreover, submission that validity of confiscation order cannot be called into question merely on account of Appellant being a secured creditor is misplaced and irrelevant to issue at hand – Contention that a confiscation order cannot be quashed merely because a security interest is created in respect of very same property is not worthy of acceptance – However, what is required to be appreciated is that, in present case, confiscation order is not being quashed merely because a security interest is created in respect of very same property – On contrary, confiscation orders, in present case, deserve to be quashed because confiscation orders themselves lack any statutory backing, as they were rooted in a provision that stood omitted on day of passing of orders – Hence, it is this inherent defect in confiscation orders that paves way for its quashing and not merely fact that a security interest is created in respect of very same property that confiscation orders dealt with – writ-application allowed.
JUDGMENT :
J.B. PARDIWALA, J.
1. Since the issues raised in both the captioned writ-applications are the same and the parties are also the same, those were taken up for hearing analogously and are being disposed of by this common judgment and order.
2. For the sake of convenience, the Special Civil Application No.16352 of 2021 is treated as the lead matter.
3. By this writ-application under Article 226 of the Constitution of India, the writ-applicant has prayed for the following reliefs:-
(B) Be pleased to issue a writ of mandamus or any other appropriate writ, order or direction in the nature of mandamus, or any other appropriate writ, order or direction and quash and set aside the charge recorded in form Nos.6, 7 and 12 of the land bearing block no.873B of Village Por, Taluka and District Vadodara and direct that no charge shall be recorded in relation to land bearing block no.873B of village Por, Taluka and District Vadodara in pursuance of any proceedings or orders recorded under section 48 of the VAT Act.
(B-1) Be pleased to issue a writ of mandamus and/or a writ in the nature of mandamus and/or any other appropriate writ, order or direction to quash and set aside the decision of the Mamlatdar, Vadodara (Rural) contained in the letter dated 04.02.2022 (Annexure-H) and further be pleased to issue a writ of mandamus and/or a writ in the nature of mandamus and/or any other appropriate writ, order or direction commanding the Mamlatdar, Vadodara (Rural) to post and certify a mutation entry to record the Certificate of Sale dated 08.09.2021 (bearing registration no.2889) for the land bearing Block No.873-B, paiki 2 of Mouje Por, Taluka and District Vadodara.
(B-2) Pending the hearing and final disposal of this petition, be pleased to direct the Mamlatdar, Vadodara (Rural) to post and certify a mutation entry to record the Certificate of Sale dated 08.09.2021 (bearing registration no.2889) for the land bearing Block No.873-B paiki 2 of Mouje Por, Taluka and District Vadodara.
(C) Pending hearing and final disposal of this petition, be pleased to stay the implementation, execution and operation of the charge recorded in form nos.6, 7 and 12 of the land bearing block no.873B of village Por, Taluka and District Vadodara and direct that no charge shall be recorded in relation to land bearing block no.873B of village Por, Taluka and District Vadodara in pursuance of any proceedings or orders recorded under section 48 of the VAT Act.
(D) Be pleased to grant such other and further relief/s as may be deemed fit, just and proper, in the interest of justice.
4. The facts giving rise to this litigation may be summarized as under:-
4.1 A Public Limited Company namely M/s. Modern Tube Industries Ltd. had availed the cash credit facility to the tune of Rs.37.54 crore from the respondent no.5 – Bank of Baroda.
4.2 In pursuance of the sanction of the said facility, the Company mortgaged several properties owned by it by way of security in favour of the bank. The security included hypothecation of the current assets, mortgage of plant and machinery by depository of title, deeds of the immovable properties in favour of the bank.
4.3 M/s. Modern Tube Industries Ltd. defaulted in the repayment of the amount availed by it by way of cash credit facility over a period of time. The account of the company came to be declared as a non-performing asset (N.P.A.) on 12.12.2012. The bank initiated proceedings under the SARF
Secured creditors have priority over State debts under Section 26E of the SARFAESI Act, 2002, invalidating conflicting State charges on mortgaged assets.
Section 26E of the SARFAESI Act establishes that secured creditors have priority over State revenue claims, reinforcing the enforceability of secured debts post-registration.
Secured creditors' debts take precedence over state tax claims, as established by Section 26E of the SARFAESI Act.
The main legal point established in the judgment is that the charge of the Secured Creditor will precede over the charge of an Unsecured Creditor (Crowns Date) based on the provisions of the SARFAESI....
The provisions of Section 26E of the SARFAESI Act 2002 and Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 create "First Charge" by way of priority in favour of the Banks and Financial ....
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