TMI Blog2014 (7) TMI 701X X X X Extracts X X X X X X X X Extracts X X X X ..... since the tax and the penalty shall be the first charge over the property of the dealer and such a person. Only in exercise of its power to recover the tax payable or the penalty, as a first charge on the property of the dealer, the State of Jharkhand issued the impugned notification directing the petitioner Corporation that no industrial unit to be sold without obtaining "no objection certificate" from the Department of Commercial Taxes, Jharkhand, Ranchi. The first charge created in favour of the State in respect of sales tax dues shall have precedence over an existing mortgage in favour of the Bank. The judicial pronouncement settled the law once for all stating that the State has got priority in the matter of recovery of tax, penalty and debts due and the specific statutory charges created under the said Act (notwithstanding the equitable mortgages created by the defaulters in favour of the banks). The impugned Notification S.O. No. 95 dated September 1, 2004 cannot be said to be arbitrary or illegal, and this writ petition is liable to be dismissed - Following decision of State Bank of Bikaner & Jaipur v. National Iron & Steel Rolling Corporation [1994 (12) TMI 72 - SUPREM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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. 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 46B 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 thereu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in the sub-section and it is for the Corporation to take a decision whether to sell the assets of a defaulting unit or not. It was submitted that the State Financial Corporation Act confers the right on the Corporation to take such an action and transfer the property as if the Corporation was the owner and section 29(4) provides as to how the sale proceeds on such a sale is to be appropriated, giving first right of appropriation to the Corporation over all other rights and the said right of Bihar State Financial Corporation cannot be taken away and the notification issued is wholly without jurisdiction. The learned senior counsel for the petitioner-Corporation further submitted that section 46B of the State Financial Corporation Act clearly indicates that the provisions of the Act as well as any rules/orders made under the State Financial Corporation Act shall have the effect, notwithstanding anything contained in any other law for the time being in force and in this view of the matter also the provisions of the State Financial Corporation Act shall prevail and the same cannot be altered by an executive notification of the State Government as contained in the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial Corporation Act. We shall now consider whether there is a conflict between the State Financial Corporation Act on one hand and section 29 of the Bihar Finance Act and whether by virtue of non obstante clause in section 46B of the State Financial Corporation Act, the provisions contained in the State Financial Corporation Act would override the provisions contained in section 29 of the Bihar Finance Act, 1981. For reference, we shall refer to section 29(4) and section 46B of the State Financial Corporation Act. Section 29(4) of the State Financial Corporation Act reads as under: 29. Rights of Financial Corporation in case of default.-(4) Where any action has been taken against an industrial concern under the provisions of sub-section (1), all costs, charges and expenses which in the opinion of the Financial Corporation have been properly incurred by it as incidental thereto shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC); [2009] 4 SCC 94 (Central Bank of India v. State of Kerala) at (paragraphs 103 and 116 in 4 SCC; paras 32 and 37 in Comp Cas), the honourable Supreme Court has held as under (pages 534 and 537 in 153 Comp Cas): 103. A non obstante clause is generally incorporated in a statute to give overriding effect to a particular section or the statute as a whole. While interpreting non obstante clause, the court is required to find out the extent to which the Legislature intended to do so and the context in which the non obstante clause is used. This rule of interpretation has been applied in several decisions. . . . . . 116. The non obstante clauses contained in section 34(1) of the DRT Act and section 35 of the Securitisation Act give overriding effect to the provisions of those Acts only if there is anything inconsistent contained in any other law or instrument having effect by virtue of any other law. In other words, if there is no provision in the other enactments which are inconsistent with the DRT Act or Securitisation Act, the provisions contained in those Acts cannot override other legislations. Section 38C of the Bombay Act and section 26B of the Kerala Act also conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Dattatreya Shanker Mote v. Anand Chintaman Datar [1974] 2 SCC 799. The court has observed (at SCC pages 806-07) that a charge is a wider term as it includes also a mortgage, in that, every mortgage is a charge, but every charge is not a mortgage. The court has then considered the application of the second part of section 100 of the Transfer of Property Act which, inter alia, deals with a charge not being enforceable against a bona fide transferee of the property for value without notice of the charge. It has held that the phrase 'transferee of property7 refers to the transferee of entire interest in the property and it does not cover the transfer of only an interest in the property by way of a mortg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non obstante clauses contained in section 34 of the DRT Act and section 35 of the Securitisation Act override section 38C of the Bombay Act and section 26B of the Kerala Act. After referring to various Central enactments containing non obstante clauses including section 46B of the State Financial Corporation Act, vis-a-vis the non obstante clauses contained in section 38C of the Bombay Act and section 26B of the Kerala Act and similar other State legislations, and holding that when a first charge is created by operation of law over any property, that charge will have precedence over the existing mortgage, the honourable Supreme Court in Central Bank's case [2010] 153 Comp Cas 497 (SC); [2009] 4 SCC 94 at (paragraph 158 in SCC; para 60 in Comp Cas) held as under (page 558 in 153 Comp Cas): 158. On the basis of the above discussion, we hold that the DRT Act and the Securitisation Act do not create first charge in favour of banks, financial institutions and other secured creditors and the provisions contained in section 38C of the Bombay Act and section 26B of the Kerala Act are not inconsistent with the provisions of the DRT Act and the Securitisation Act so as to attract no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rable Supreme Court has also considered the provisions of the State Financial Corporation Act vis-a-vis the statutory charge created by the State legislation under the Sales Tax Act. The learned senior counsel for the petitioner further submitted that in terms of section 64 of the Bihar Re-organisation Act, it is evident that the Bihar State Financial Corporation shall continue to function over the entire area of the erstwhile State of Bihar and only the Central Government has competence to issue instructions in the matter relating to or in respect of functioning of the said Corporation and submitted that the impugned notification is directly contrary to the provisions of section 64 of the Bihar Reorganisation Act, inasmuch as by the impugned notification, Bihar State Financial Corporation has been virtually prevented from functioning in the area falling within the State of Jharkhand. The above contention does not merit acceptance. The Bihar Reorganisation Act, 2000 provides for the reorganization of the existing State of Jharkhand and the matters connected therewith. The first charge on the property of the dealer or such person for any amount of tax and penalty payable by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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