R. Banumathi, C.J. Bihar State Financial Corporation has filed the writ petition to quash the impugned notification being S.O. 95 dated 01.09.2004 issued by the State of Jharkhand as void and illegal.

2. The State of Jharkhand, which came into existence with effect from 15.11.2000, issued Notification No.17 dated 15.12.2000 in exercise of powers contained in Section 85 of the Bihar Reorganisation Act, 2000, inter alia, adopting the Bihar Finance Act, 1981 Part I and the Rules framed thereunder to be applicable to the entire State of Jharkhand. By exercising its powers under Section 29 of the Adopted Bihar Finance Act, 1981, the State of Jharkhand issued the impugned notification. As per the notification, the State Financial Corporation shall ensure that no industrial unit be sold without obtaining ‘No Objection Certificate’ from the Department of Commercial Taxes, Jharkhand.

The impugned notification reads as under:-

Department of Commercial Tax

Notification

27th August, 2004

S.O.-95 dated 1st September, 2004/2384 – Government of Jharkhand in exercise of powers as conferred by Section 29 of adopted Bihar Finance Act, 1981, makes following provisions for ensuring recovery of the Government dues, deeming it as first charge, upon sale/auction of closed/old Industrial Units in the State.

1. State Financial Corporation shall ensure that no Industrial Unit be sold without obtaining No objection Certificate from Department of Commercial Tax, Jharkhand, Ranchi.

2. State Financial Corporation, after deducting dues amount of Sales Tax from the proceeds of sale, shall send it to the Department of Commercial Tax, Jharkhand, Ranchi.

Sale Tax/Misc./7/2002

By the order of the Governor of Jharkhand

Alka Tiwari

Secretary-cum-Commissioner

Department of Commercial Tax,

Jharkhand, Ranchi.

3. The petitioner is a statutory Corporation, established in terms of Section 3 of the State Financial Corporation Act, 1951. The Corporation had extended financial loan facilities to various units, which, now fall within the State of Jharkhand. The case of the petitioner is that as per Section 29(4) of the State Financial Corporation Act, the manner of priority of appropriation of sale proceeds of the mortgaged/hypothecated assets has been clearly laid down and the same cannot be altered by the impugned notification of the State of Jharkhand depriving the petitioner-Corporation of its legitimate dues in a legitimate manner.

4. According to the petitioner, if it is to be held that the statutory first charge created by Section 29 of the Bihar Finance Act has to prevail, then there would be a direct conflict between the provisions of Section 29(4) of the State Financial Corporation Act, which lays down the priority of appropriation and Section 29 of the Bihar Finance Act and by virtue of Section 46-B of the State Financial Corporation Act, the provisions of the State Financial Corporation Act shall prevail. Further case of the petitioner is that under the provisions of the Bihar Finance Act, there are specific provisions for collection and recovery of tax and State Government has authority to take such steps as thereunder as are permissible to do, and to direct the Financial Corporation to first pay the dues of sales tax from recovered sale proceeds is not only arbitrary but discriminatory. According to the petitioner, the provisions for obtaining ‘No Objection Certificate’ from Department of Commercial Tax is unreasonable and arbitrary and no guidelines are provided as to when and under what conditions, ‘No Objection Certificate’ can be withheld, nor there is any time frame for grant or refusal thereof provided. According to the petitioner, in view of Section 46-B of the State Financial Corporation Act, which contains non-obstante clause, provisions of the State Financial Corporation Act shall have the effect, notwithstanding anything inconsistent contained in any other law for the time being in force and while so, the impugned notification issued is arbitrary and liable