TMI Blog2023 (2) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the nature of sales tax or VAT payable by the original owner cannot claim priority over the dues of the secured creditor. The principle that the state debt or crown debt has no prior claim or the dues payable to the secured creditor is no longer res integra. In BANK OF BIHAR VERSUS STATE OF BIHAR [ 1971 (4) TMI 96 - SUPREME COURT] , the supreme court laid down certain well known principles which were followed by the supreme court in its own judgment in DENA BANK VERSUS BHIKHABHAI PRABHUDAS PAREKH AND CO. AND OTHERS [ 2000 (4) TMI 36 - SUPREME COURT] . The law laid down is that the preferential right of the Crown to recover the debt over the creditors is limited to the class of unsecured creditors. The charge in respect of the property in question created for sales tax dues is of no avail and has no efficacy in law. The property in question was sold by the bank which was a secured creditor, to enforce its secured debt under the SARFAESI Act, of which the petitioners were successful auction purchaser. They were issued sale certificate which was registered to finally become absolute owner of the property. In exercising their capacity as owners, they executed further sale d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s prayed to set aside order dated 6.3.2021 passed by respondent No.3- the Sub Registrar, Jamnagar. The said order dated 6.3.2021 is in nature of communication addressed to the petitioner whereby respondent No.3 has kept pending document No.1169 dated 16.2.2021, refusing to release the same on the ground that on the subject matter land covered under the said document, there exists an encumbrance in the nature of government dues of unpaid sales tax as communicated by letter dated 14.10.2019 of Assistant Commissioner of State Tax- respondent No.5 herein. It was stated that the properties were under attachment under Section 45 of the Gujarat Value Added Tax Act, for non-payment of the tax by original owner of the properties named Pradipkumar Govindbhai Lakkad. 2.1 The document refused to be returned by the Sub Registrar was the sale deed executed in respect of Plot No.43 admeasuring 140 sq.mtrs. of survey No.1149/2, Jamnagar. 2.2 The aforementioned communication dated 14.10.2019 by respondent No.5 is also prayed to be set aside. The Assistant Commissioner of State Tax thereby intimated the authorities including respondent No.3 to register charge on the property as recovery of Val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aforementioned Special Civil Application filed by the tenant came to be rejected by order dated 26.2.2019 of this court and petitioner- tenant was directed to avail the alternative remedy before the Debt Recovery Tribunal. Letters Patent Appeal by the tenant was also dismissed. The said tenant moved Securitization Application No.611 of 2019. In that proceedings delay has not been condoned till date. 3.4 As the stay was vacated pursuant to dismissal of Special Civil Application No.16956 of 2017 as stated above, the Axis Bank executed registered sale certificate in favor of the petitioner on 28.2.2019. The petitioners were also handed over the possession. The petitioner started developing the land. Thirty- two plots came to be divided amongst the petitioners as per the share of each of the petitioners, and partition deed was also executed for the said thirty-two plots. Each of the petitioners became independent owners of four plots. The said so called tenant Girishbhai Gajipara objected to the entering the name of the petitioner as owners of the plot, however, Mamlatdar Jamnagar dismissed Case No.3 of 2019 by order dated 10.1.2020. The said order has been challenged before the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction was held and the petitioner purchase the properties. Section 26E of the SERFAESI Act was relied on to further submit that the dues of the sales tax authorities would not take precedence. It was submitted that the sale was confirmed in favor of the petitioner pursuant to the auction. It was submitted by highlighting the conduct of the sales tax authorities that they acted in collusion. It was next submitted that respondent No.7 intentionally gave undertaking for liability of his mother and not himself. It was submitted that respondent Nos.4 and 5 sales tax authorities failed to verify the status of property. 4.2 Respondent No.7- original owner of the property filed affidavit-in-reply to raise various contentions including to submit that sale of the property was effected with all encumbrances and liabilities and that the sale certificate mentioned the said aspect. It was submitted that the even then the Mamlatdar passed order dated 10.1.2020 certifying the entry in favor of the petitioner, which recorded the dues of the sales tax- Value Added Tax. It was submitted that attachment of the sales tax department existed. 4.3 The petition was also contested by respondent No.5 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered. (iv) Original owner- respondent No.7 conveyed to the sales tax authorities that he had no objection to register the charge in respect of the sales tax dues. (v) No interest had survived for original owner after auction sale by the Bank and the petitioner becoming owner of the property. (vi) The so called tenant claiming to be in occupation of the property failed in the litigation before this court. No stay was granted to him and the court permitted issuance of sale certificate in favor of the petitioner. (vii) In the proceedings before the Mamlatdar, objecting to the mutation entry in favor of the petitioners, none of the contentions held merit. The Mamlatdar refused the prayer. (viii) On the basis of the sale certificate No.1383, the name of the petitioners- the holder of the sale certificate was mutated in the revenue records subject to the outcome of the proceedings before the Debt Recovery Tribunal. (ix) The petitioners sold the property in question which belonged to their share and ownership by executing sale deed dated 16.2.2021 which was presented for registration. (x) The Sub-Registrar- respondent No.3 herein, refused to return the said sale docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, of which the petitioners were successful auction purchaser. They were issued sale certificate which was registered to finally become absolute owner of the property. In exercising their capacity as owners, they executed further sale deed dated 15.2.2021 which was registered with the office of Sub-Registrar at No.1169 on 16.2.2021, however the Sub-Registrar refused to return the sale registered sale deed in view of the order of the respondent No.5 Sales Tax Authority on the ground that it had created charge over the properties for the sales tax dues. 6. Considering the facts involved and the propositions of law highlighted, respondent No.3 Sub Registrar was wholly unjustified in passing order dated 6.3.2021 to keep the document No.1169 dated 16.2.2021 which was sale deed executed by the petitioners, keeping the same pending and not returning the same to the petitioners. 6.1 Since the petitioner had purchased in the auction sale conducted by the bank under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 the property travelled in favor of the petitioner free from any encumbrances, order of sales tax officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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