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2024 Supreme(HP) 186
IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
VIVEK SINGH THAKUR, SANDEEP SHARMA, JJ.
State of Himachal Pradesh & others - Appellants
Versus
Himanshu Prashar & others - Respondents
LPA No. 8 of 2024
Decided on : 27-02-2024
Advocate Appeared:
For the Appellants :Mr.Rakesh Sharma, Advocate.
IMPORTANT POINT
The main legal point established is that the provisions of the Central Acts, RDB Act and SARFAESI Act, prevail over the State Act, H.P. VAT Act, entitling the bank to have priority to recover, despite the provision under VAT Act creating a first charge in favor of the State debt.
Headnote:
Priority of Charge - Property Rights - H.P. VAT Act, 2005, RDB Act, SARFAESI Act - Section 26 of H.P. VAT Act, 2005, Section 31-B of RDB Act, Section 26-E of SARFAESI Act
Fact of the Case:
The appeal concerns the priority of charge on the property of M/s Gilvert ISPAT Pvt. Ltd. purchased by respondent No.1-petitioner Himanshu Prashar, with the State pressing for priority based on the provisions of Section 26 of the H.P. VAT Act, 2005.
Finding of the Court:
The court found that the provisions of the Central Acts, RDB Act and SARFAESI Act, prevail over the State Act, H.P. VAT Act, entitling the bank to have priority to recover, despite the provision under VAT Act creating a first charge in favor of the State debt.
Issues: The main issue was whether the State/Excise Department would have the first charge upon the property in terms of the H.P. VAT Act, 2005, or if the secured creditor Punjab National Bank would have priority to recover over any other charge, including the charge in favor of the State, in terms of the RDB Act and SARFAESI Act.
Ratio Decidendi: The court relied on the provisions of Section 26 of H.P. VAT Act, 2005, Section 31-B of RDB Act, and Section 26-E of SARFAESI Act, along with relevant case law, to determine the priority of charge on the property.
Final Decision: The appeal was dismissed, affirming the decision of the learned Single Judge to allow the writ petition preferred by respondent No.1-petitioner Himanshu Prashar.
JUDGMENT :
Vivek Singh Thakur, J.
This appeal has been preferred by the State of Himachal Pradesh against judgment dated 11.05.2023 passed in CWP No.2719 of 2022, titled as Himanshu Prashar vs. Punjab National Bank & others, and other connected matters, whereby writ petition preferred by respondent No.1-petitioner Himanshu Prashar, praying for quashing the entries in revenue record as depicted in Nakal Jamabandi for the year 2016-2017 (Annexure P-5 of CWP No.2719 of 2022) has been allowed by referring judgment passed in Civil Appeal No. 2169 of 2012, titled as Punjab National Bank vs. Union Bank of India & others, reported in (2022) 7 SCC 260: AIR 2022 SC 1475.
2. Respondent No.1-petitioner Himanshu Prashar participated in e-Auction conducted by and on behalf of Punjab National Bank, for selling of assets of M/s Gilvert ISPAT Pvt. Ltd. in accordance with law and provisions of SARFAESI Act read with Security Interest (Enforcement) Rules, 2002. By offering highest price bid of an amount of Rs.6,38,00,000/-, he deposited the Earnest Money Deposit (EMD) on 21.09.2021. Vide communication dated 23.09.2021 Punjab National Bank accepted and confirmed the bid offered by respondent No.1-petitioner Himanshu Prashar for the purchase of assets of M/s Gilvert ISPAT Pvt. Ltd. and Sale Certificate dated 30.09.2021 was issued in his favour by mentioning description of property purchased by respondent No.1-petitioner Himanshu Prashar and list of encumbrances freed from. On depositing the sale price physical possession was handed over to respondent No.1-petitioner Himanshu Prashar alongwith superstructure constructed thereon. On finding record of report No.231 dated 18.03.2015 creating charge in favour of the State for liability of Tax to be paid by M/s Gilvert ISPAT Pvt. Ltd., respondent No.1-petitioner Himanshu Prashar preferred CWP No.2719 of 2022 for removal thereof.
3. Appellant-State mainly relying upon judgment of the Supreme Court in case Central Bank of India vs. State of Kerala and others, (2009) 4 SCC 94, is pressing for allowing appeal on the ground that keeping in view provisions of Section 26 of Himachal Pradesh Value Added Tax Act, 2005 (hereinafter referred to as ‘H.P. VAT Act, 2005’) first charge was created in favour of State on the property of M/s Gilvert ISPAT Pvt. Ltd. purchased by respondent No.1-petitioner Himanshu Prashar, and thus, priority has to be given to the statutory charge over all other charges on the property including mortgage.
4. Perusal of Jamabandi (Annexure P-5) depicts that vide Rapat No.231, dated 18.03.2015 charge was created in favour of Excise and Taxation Department on the property owned by M/s Gilvert ISPAT Pvt. Ltd., for outstanding arrears of Rs.50,35,56,792/-. It is also noticeable that prior to that vide Rapat No.171, dated 29.01.2015 entire property was attached in favour of respondent No.2-Punjab National Bank.
5. As recorded by learned Single Judge issue involved in the matter is as to whether appellant State/Excise Department will be having first charge upon the property of M/s Gilvert ISPAT Pvt. Ltd., in terms of provisions of Section 26 of the H.P. VAT Act, 2005 or secured creditor Punjab National Bank shall have priority to recover over any other charge, including charge in favour of State, in terms of provisions of Recovery of Debts and Bankruptcy Act, 1993 (hereinafter referred to as ‘RDB Act’) and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘SARFAESI Act’) as amended from time to time.
6. In Central Bank of India’s case, it was held by the Supreme Court that charge created in favour of State under the provisions of General Sales Tax Act in respect of sales tax dues prevailed over the charge created in favour of the Bank in respect of loan taken by a person/Firm/Company and the amendment made in the State operated in respect of charge that were in force on the date of introduction of Section 33-C of Madhya Prad
