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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
J.B. PARDIWALA, A.C. RAO, JJ.
Kalupur Commercial Co-Operative Bank Ltd. – Petitioner
Versus
State of Gujarat – Respondent
Special Civil Application No. 17891 of 2018
Decided On : 23-09-2019
Constitution of India, 1950 - Article 226 -Securitization and Reconstruction of Financial Assets Act, 2002 - Section 26E, 13(4) , (2) - Value added Tax Act -Section 48 -Gujarat Value added Tax Act, 2003 - Attachment of property - Mortgaged -
Facts of the Case:
Excess sale proceeds this petition under Article 226 of the Constitution of India the Petitioners pray for writ of mandamus quashing and setting aside attachment notice dated 22.1.2018 issued by the learned Respondent No. 2 in relating to tax dues of M/s M.M. Traders under the Gujarat Value added Tax Act, affixed at the mortgaged properties in September 2018 and the letter claiming first charge over the properties mortgaged with the Petitioners. The Petitioners pray for a writ declaring that the Petitioners under the SARFAESI Act have first charge over the properties which overrides the charge of the learned Commercial Tax Authorities under the Vat Act. Copies of the impugned attachment notices and the letter are attached herewith and marked and Annexure-B respectively –
Finding of the Court:
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 has become due, then such transfer would be a void transfer. The reason why we are referring to Section 47 is that the phrase therein ‘after any tax has become due from him’ assumes significance. The same is suggestive of the fact that before the assessment proceedings, or, to put it in other words, before a particular amount is determined and becomes due to be payable if there is any transfer of property of the dealer, such transfer would not be a void transfer. Therefore, the condition precedent is that the tax should become due and such tax which has become due shall be payable by a dealer. Once this part is over, then Section 48 of the VAT Act would come into play. It is preposterous to suggest in the case on hand that as the assessment year was 2012-13, Section 48 could be said to apply itself. Even in the absence of Section 26E of the SARFAESI Act or Section 31B of the RDB Act, Section 48 of the VAT Act would come into play only after the determination of the tax, interest or penalty liable to be paid to the Government. Only thereafter it could be said that the Government shall have the first charge on the property of the dealer –
Result: Writ petition allowed
JUDGMENT :
J.B. PARDIWALA, J.
1. By this writ application under Article 226 of the Constitution of India, the writ applicants have prayed for the following reliefs:
(B) This Hon’ble Court may be pleased to declare that the Petitioners have first charge over the properties mortgaged from M/s. M.M. Traders under Section 26E of the SARFAESI Act which would override the charge of the learned Respondents under Section 48 of the VAT Act.
(C) This Hon’ble Court may be pleased to hold that the learned Respondents can claim right only over the excess sale proceeds, if any, from sale of mortgaged properties by the Petitioners after adjusting the sale proceeds towards the secured dues of the Petitioners.
(D) This Hon’ble Court may be pleased to hold that the learned Respondents cannot proceed against purchasers of properties sold under the SARFAESI Act.
(E) Pending notice, admission and final hearing of this petition, this Hon’ble Court may be pleased to prohibit the learned Respondent authorities from taking any further steps in relation to the properties mortgaged by the Petitioners from M/s. M.M. Traders.
(F) Ex-parte ad interim relief in terms of prayer E may kindly be granted.
(G) Such other reliefs as deemed fit in the facts and circumstances of the case may kindly be granted in the interest of justice for which act of kindness your petitioners shall forever pray.”
2. The writ applicant No. 1 is a Multi-State Cooperative Scheduled Bank, whereas the writ applicant No. 2 is the Chief Manager and the Authorized Officer of the Bank.
3. The case of the writ applicants, in their own words, as pleaded in the writ application, is as under:
2. The relevant facts giving rise to the present petition are briefly stated herein below:
The 1st Petitioner is a Multi-State Scheduled Bank having place of business at “Kalupur Bhavan” Near Income Tax Circle, Ashram Road, Ahmedabad-380014. The 2nd Petitioner is Director of the 1st Petitioner and his rights and interest are directly affected by the impugned attachment notices and letter issued under the Vat Act. The 1st Respondent is the State of Gujarat. The 2nd Respondent is an officer of the State of Gujarat entrusted with the task of collecting tax under the Vat Act and thereby being a State within the meaning of Article 12 of the Constitution is amenable to the writ jurisdiction of this Hon. Court.
The Petitioners are engaged in banking business. The Petitioners had given loan/credit facilities of Rs. 60 Crores to M/s M.M. Traders (hereinafter referred to as “the borrower”) for which immovable properties located at the following addresses were taken as security by way of mortgage:
(a) Residential F
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