TMI Blog2010 (4) TMI 982X X X X Extracts X X X X X X X X Extracts X X X X ..... l counsel for the petitioners; the learned Special Government Pleader for Commercial Taxes Mr. Krishna Koundinya for the State of Andhra Pradesh, the Commissioner of Commercial Taxes and other designated officials of the Commercial Taxes Department; and other learned counsel for other respondents in the several writ petitions. In all the cases the common issue whether the liability of a dealer or other person in respect of tax, penalty, interest or any other sum payable to the State/Commercial/Sales Tax Department under the provisions of the Andhra Pradesh General Sales Tax Act, 1957 ( the Act ) has priority, would prevail and have precedence over even an existing secured debt created by such dealer or person in favour of any other individual, institution or instrumentality, falls for consideration. This issue arises in the context of the provisions contained in section 16C of the Act, which reads: 16C. Liability under this Act to be the first charge. Notwithstanding anything contrary contained in any law for the time being in force, any amount of tax, penalty, interest and any other sum, if any, payable by a dealer or any other person under this Act, shall be the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Revenue directing the Corporation to remit the proceeds of the sale of a secured asset ordered by the Corporation under section 29 of the 1951 Act in respect of the property of a dealer attached under the provisions of the Act, is in challenge. In W.P. No. 24334 of 2001 the Corporation challenged a notice of attachment, issued by the Revenue to enable the Corporation to proceed against the attached property for realization of its own dues under section 29 of the 1951 Act, in respect of a borrower who is also a dealer under the provisions of the Act. In W.P. No. 24097 of 2003 the Corporation challenged a letter of the Revenue intimating sale of property under the provisions of the A.P. Revenue Recovery Act, 1864 ( the RR Act ). W.P. No. 25394 of 2003 is a challenge by the Corporation to the notice of attachment of the property of the sixth respondent for tax arrears. The property was attached by the third respondent. The 6th respondent had also defaulted on repayments of a loan advanced by the Corporation. (B) W.P. Nos. 4625 of 2004, 24489 of 2005, 459 of 2006, 25305 of 2007, 5322 of 2008 are filed by the Revenue. In W.P. No. 4625 of 2004 auction of the specified property b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of respondent Nos. 3 and 4. The second respondentCorporation by a legal notice dated August 20, 2007 intimated the petitioner that the assets of respondent Nos. 3 and 4 were seized and sold and an amount of Rs. 4,55,250 was kept in fixed deposit. (C) W.P. Nos. 10744 of 2004 and 5761 of 2005 are by bank/financial institutions. In W.P. No. 10744 of 2004 the bank assails an order of attachment and consequent sale by the Revenue of the assets of the second respondent, which was mortgaged to the petitioner for a loan availed of. The first respondent-Revenue attached and sold the assets secured to the bank even while bank's application in O. A. No. 175 of 2003 was pending before the DRT, Visakhapatnam. W.P. No. 5761 of 2005 is again by a bank challenging the action of the Revenue in attaching the specified property under the provisions of the RR Act even while the petitioner's application before the DRT, Hyderabad for recovery of the amounts due to it from the borrower/dealer is pending. Vires of section 16(c) of the APGST Act, 1957 The policy justification for the impugned provision is the well entrenched common law doctrine of priority of crown debts. The common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utions in the matter of recovery of their dues without being bogged down by the technicalities of the Code of Civil Procedure; and that securitisation enables banks, financial institutions and other secured creditors to recover their dues without the intervention of the courts or Tribunals and incorporates provisions for registration and regulation of securitisation/reconstruction companies, securitisation of financial assets of banks and financial institutions and related provisions; (B) That significantly there is no provision in either of these enactments by which a first charge has been created in favour of banks, financial institutions or secured creditors qua the property of the borrower; (C) That under section 13(1) of the Securitisation Act a limited primacy is given to the right of the secured creditors to enforce security interest vis-a-vis section 69 or 69A of the Transfer of Property Act without the intervention of a court or Tribunal. However, the primacy conferred under section 13(1) does not extend to other provisions like sections 38C and 26B of the Bombay and Kerala Acts by which first charge has been created in favour of the State over the property of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relying on the following passages of its earlier judgment in State Bank of Bikaner and Jaipur v. National Iron and Steel Rolling Corpn. [1995] 96 STC 612 (SC); [1995] 212 ITR 428; [1995] 2 SCC 19 (at page 569 of 21 VST): 7. . . . Section 100 of the Transfer of Property Act deals with charges on an immovable property which can be created either by an act of parties or by operation of law. It provides that where immovable property of one person is made security for the payment of money to another, and the transaction does not amount to a mortgage, a charge is created on the property and all the provisions in the Transfer of Property Act which apply to a simple mortgage shall, so far as may be, apply to such charge. A mortgage on the other hand, is defined under section 58 of the Transfer of Property Act as a transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced as set out therein. The distinction between a mortgage and a charge was considered by this court in the case of Dattatreya Shanker Mote v. Anand Chintaman Datar [1974] 2 SCC 799. The court has observed (at SCC pages 806 and 807) that a charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any property, that charge will have precedence over an existing mortgage. (H) Repelling the contention that the earlier judgments in State Bank of Bikaner Jaipur [1995] 96 STC 612 (SC); [1995] 212 ITR 428; [1995] 2 SCC 19 and R.M. Arunachalam v. Commissioner of Income-tax [1997] 227 ITR 222 (SC); [1997] 7 SCC 698 require reconsideration for incorrectly appreciating the true import of the judgment in Dattatreya Shanker Mote [1974] 2 SCC 799, the court held: In our opinion, the judgments in State Bank of Bikaner Jaipur v. National Iron and Steel Rolling Corporation [1995] 96 STC 612 (SC); [1995] 212 ITR 428; [1995] 2 SCC 19 and R.M. Arunachalam v. Commissioner of Income-tax [1997] 227 ITR 222 (SC); [1997] 7 SCC 698 are based on a correct reading of the ratio of Dattatreya's case [1974] 2 SCC 799 and the propositions laid down therein do not call for reconsideration. At the cost of repetition, we consider it appropriate to observe that in Dattatreya's case [1974] 2 SCC 799 the court was not dealing with the statutory first charge created in favour of the State. (I) Applying the several ratios above referred to, the court held that the first charge created by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attachment dated July 14, 1999 is challenged. The liability of the defaulting dealer/Bharani Oils, Kattamur, E.G. District to the Revenue under the Act and the ST Act is Rs. 1,10,93,513. The petitioner-Corporation sold the property of the defaulting dealer for recovery of its dues, under section 29 of the 1951 Act. Interim directions were issued in this writ petition granting stay of the attachment ordered by the Revenue, subject to the condition that the amounts realized by the petitioner on disposal of the defaulting dealer's unit should be kept in a separate deposit in a bank. The relief sought in this writ petition is unsustainable and is accordingly rejected. The amount realized by the petitioner along with the interest accrued on the amount consequent on its deposit in a bank is liable to be made over to the Revenue. This writ petition is disposed of as above. (iii) In W.P. No. 24334 of 2001 the Corporation has questioned the attachment ordered by the Revenue of the property of the dealer towards realization of sales tax dues under the provisions of the Act. The liability of the second respondent dealer to the Revenue is Rs. 23,88,850. Pending the writ petition and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attached the property of the dealer under the provisions of the RR Act, published on September 20, 2003. The attachment of the dealer's assets by the Revenue is challenged by the Corporation. On December 15, 2003 this court granted liberty to the Revenue to proceed under the RR Act. No sale of the property has however been effected. In the facts and circumstances the relief sought in the writ petition cannot be granted and the writ petition is dismissed. (C) W.P. Nos. 4625 of 2004, 24489 of 2005, 459 of 2006, 25305 of 2007 and 5322 of 2008 are by the Revenue. (i) In W.P. No. 4625 of 2004 respondent Nos. 3 to 5 were due a total amount of Rs. 16,12,736 towards arrears of tax and interest thereon. To recover the liability, the Revenue initiated proceedings under the RR Act and attachment of the property of the defaulted dealers was also notified. While so the Debts Recovery Officer, DRT, Visakhapatnam conducted auction and sold the property mortgaged to the first respondent-bank with a view to recover the liability of the defaulted dealer to the said bank. The Revenue therefore filed this writ petition to declare the auction of the property conducted on February 26, 2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst charge in favour of the Revenue, under section 16C of the Act. This writ petition requires to be allowed and is accordingly allowed as prayed for. (iii) W.P. No. 459 of 2006 is by the Revenue for a declaration that it has a first charge over the property of the first respondent-defaulting dealer. The Revenue initiated proceedings under the RR Act and attached the property, duly notifying the attachment. The second respondent a financial institution informed the Revenue that the first respondent's property was sold by it pursuant to an auction, for Rs. 80.50 lakhs. The second respondent and the Corporation to which the first respondent had defaulted on repayment of loan instalments had shared the sale proceeds amongst themselves on a pro rata basis. Hence the Revenue is before this court. In accordance with the interim order of this court, the second respondent deposited Rs. 40,21,558 with a nationalized bank on May 17, 2006, but the Corporation did not deposit the balance amount of the Revenue dues (owed by the first respondent) out of the sale proceeds appropriated by it on a pro rata basis. In the facts and circumstances, the writ petition is allowed as prayed for. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and R2) exercised powers under section 29 of the 1951 Act and sold the property of respondent Nos. 3 and 4 for recovery of its dues. It would appear that the Corporation deposited an amount of Rs. 4,55,250 out of the sale proceeds in a separate account towards the tax liability under the Act in respect of the fourth respondent. This writ petition by the Revenue requires to be and is accordingly allowed. The Corporation represented by respondents Nos. 1 and 2 is directed to make over to the Revenue an amount representing the up-to-date liability of respondent Nos. 3 and 4 (in respect of which liability the Revenue initiated proceedings under the RR Act), to the extent of the amounts realized by the Corporation from the sale of the assets of respondents 3 and 4 and the interest accrued and received by the Corporation on the deposit of such sale proceeds, if any. (D) W.P. Nos. 10744 of 2004 and 5761 of 2005 are by a bank/financial institution. (i) In W.P. No. 10744 of 2004 the petitioner-bank assailed an order of attachment by the Revenue of the assets of the defaulting dealer represented by respondent Nos. 2 to 4 and for invalidation of the sale of assets of these non-official ..... X X X X Extracts X X X X X X X X Extracts X X X X
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