TMI Blog2023 (5) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court, the borrower had offered a compromise proposal which PNB had accepted. In terms thereof, the borrower paid to PNB an amount of Rs.36 lakh towards full and final settlement of the loan liability. Upon receipt of the compromise amount, the title deed of the mortgaged property was duly returned to the borrower. Pursuant thereto, PNB filed an application for withdrawing the execution case before the Recovery Officer, DRT, Chandigarh on 13th August, 2002 and the case, upon being disposed of as withdrawn, was consigned to the record room. The High Court by its judgment and order dated 2nd January, 2008 decided an infructuous writ petition and, in the process, outlawed section 16-B of the HPGST Act when the same was not at all warranted - it was also a clear but inadvertent error on the part of this Court to dismiss only the special leave petition against PNB as infructuous; the appropriate course for this Court ought to have been to dismiss the writ petition of PNB itself as infructuous having regard to the clear stand taken by PNB in its aforesaid affidavit dated 30th September, 2010 that nothing survived for a decision on the writ petition on the date it was decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer other than the one excluded to initiate a special mode of recovery. While adopting such a stand, the State and its department either overlooked or were ignorant of the requirement of law that section 16-B would be attracted only after determination of the liability and upon any sum becoming due and payable; and that, it is only thereafter that the charge, if any, would operate - no relevant documentary evidence having been placed before the High Court, when CWP 306 of 2007 was being heard, to indicate that necessary steps under the HPGST Act had been initiated by the State and its officers, the third issue has to be answered by holding that the State not having taken steps as required by law for realization of its dues, there was no determination of liability, a fortiori, question of taking recourse to the HPLR Act for recovery of dues as arrears of land revenue did not arise. Without such determination of liability, no red entry marks could have been inserted in the revenue records and the High Court was right in holding that the State ought not to have refused mutation. Whether dismissal of the review petition/application for recall instituted by the State by the High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first respondent, on 6th March, 2007. The operative portion of the order reads as follows: - For all the aforesaid reasons, the writ petition is allowed. Order rejecting petitioner's application for not mutating the entry in their name is quashed and set aside. The respondents no. 1 to 5 are directed to delete the adverse entry showing the sales tax dues of M/s Regent Rubber and M/s Eastman Rubber in relation to the property comprising in Khasra No. 254/2/1, Khatauni Nos. 7 Min, 14 Min, Measuring 3 Bighas 7 Bishwas, situated at Village Moginand, Kala-Amb, Tehsil Nahan, District Sirmour, HP and further respondent no. 3 is directed to mutate the property in the name of petitioner company. The petitioner shall be entitled to costs, which is quantified at Rs, 25,000/- from respondents no. 1 to 5. 3. Aggrieved by the judgment and order dated 7th September, 2007, the official respondents in the writ petition applied for a review CMP No. 1160/2008 . By an order dated 29th October, 2009, the High Court proceeded to dispose of the application for review by, inter alia, the following order:- The present application of review has been filed after delay of more than one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of the money demanded by the undersigned. 6. After issuance of the sale certificate, the State Bank by its letter dated 24th February, 2006 informed various authorities including the taxation department of the State of sale of the subject property to the first respondent. In due course of time, the first respondent obtained permission from the State vide order dated 17th August, 2006 and consequently was able to have the sale deed executed and registered on 6th September, 2006. 7. The first respondent having applied for mutation of the subject property in its name, an order of rejection thereof came to be passed on 22nd December, 2006 in the circumstances noted now. On 18th January, 2005, an ex parte assessment order under the provisions of the Himachal Pradesh General Sales Tax Act, 1968 (for brevity HPGST Act , hereafter) was passed in relation to the assessment years 1998-1999, 1999-2000, 2000-2001 and 2001- 2002 against Regent and Eastman amounting to Rs. 19,03,845/- and Rs.13,73,115/- respectively. Having regard to the date of the ex parte assessment order, it is quite but natural that when the first respondent offered its bid for purchasing the subject property i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler on the basis of returns filed. If the Assessing Authority is not satisfied that the returns furnished are correct and complete or that no returns have been filed at all he shall serve a notice, give an opportunity of hearing and as the case may arise, adopt the best judgment method and assess the amount of tax due from the dealer. This is so provided under section 14 of the Tax Act. The amount so assessed is required to be paid by the assessee within the time stipulated in the notice to be issued by the Assessing Authority, failing which the amount due is recoverable as arrears of land revenue as provided for under section 16, which, however, in view of non obstante clause contained in section 16A comes into operation only after the dealer failed to pay the amount due when a notice in writing is issued to him. Now, in the present case no notice of demand, as stipulated under section 14(7) or section 16A has been issued to any of the dealers. The action of respondent no. 5 in asking respondents no. 3 and 4 and also the action of respondents no. 4 in acting upon the request of respondent no. 5 to make entries (in red ink) of arrears of tax due recoverable as land revenue in the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned term loan to M/s Superrugs (India) Pvt. Ltd. (for brevity borrower , hereafter) for manufacturing carpets. The loan that was provided by PNB to the borrower was secured by mortgage of its factory premises situated at Baddi Industrial Area, District Solan. Shri R.T. Tejpal and Shri Durga Dass stood as guarantors (for brevity guarantors , hereafter). The loan account of the borrower became irregular. A recovery suit was instituted by PNB against the borrower and the guarantors for Rs. 42.29 lacs. Upon introduction of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (for brevity DRT Act , hereafter) and constitution of the Debts Recovery Tribunals, the suit was transferred to the Debts Recovery Tribunal, Jaipur (for brevity DRT, Jaipur , hereafter). Consent decree was passed on 12th November, 1998 in favour of PNB and against the borrower and the guarantors. Part payment was made by the borrower towards satisfaction of the decree, but balance payment was not made resulting in PNB levying execution of the recovery certificate for an amount of Rs.2,65,97,162.50 before the DRT, Jaipur on 14th May, 1999. Subsequently, the proceedings for execution were tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the PNB to contend that its debt is prior in point of time. Section 16-B of the HPGST Act had come into force with effect from 21st October, 1994 whereas the consent decree was passed in favour of PNB on 12th November, 1998. This being the position, the provisions of section 16-B of the HPGST Act would apply and that PNB was not entitled to any relief. Reference was made to the decision of this Court in State Bank of Bikaner and Jaipur (supra) where this Court considered section 11-AAAA of the Rajasthan Sales Tax Act, 1954, which is pari materia with section 16-B of the HPGST Act, creating a first charge on the property of the dealer. In the light of the said decision, the contention of PNB that it had the prior right to recovery of the debt was claimed to be devoid of substance and, in fact, misconceived. 14. The writ petition of PNB come to be allowed by the High Court vide its judgment and order dated 2nd January, 2008. The judgment and order dated 7th September, 2007 rendered by the High Court on the writ petition CWP No. 306/2007 titled M/s A.J. Infrastructures Pvt. Ltd. vs. State of H.P. and others, being the judgment and order impugned in Civil Appeal No. 8980 of 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35 of the Act are declared ultravires of the Constitution. (emphasis ours) 16. Dissatisfied with the judgment and order dated 2nd January 2008, the State and the Commissioner on 22nd May, 2008 filed an application CMP No. 1205 of 2008 under section 151 of the CPC for rectification etc., of the judgment/order dated 2nd January, 2008 . The prayer in such petition was for recall of the judgment and order dated 2nd January, 2008 in the interest of justice, equity and fair play so that the applicants are saved from enormous adverse consequences of such judgment and order. 17. The said application came to be considered by the same Division Bench (which had decided the writ petition) and stood dismissed, inter alia, by the following order dated 5th June, 2008: This application under Section 151 CPC has been purportedly (sic, filed) for rectification of our judgement dated 2.1.2008. However, in the prayer clause it has been prayed that the judgement dated 2nd January, 2008 may be recalled. It is clear that under the garb of this application the State is seeking review of the judgement. We need not burden ourselves with the various grounds taken in the applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng respondent no. 1 herein, has already recovered its dues and thereafter released the property from its hypothecation. Hence, the name of respondent no. 1 is deleted from the array of respondents and the petitions as against respondent no. 1 stand dismissed. These petitions also stand dismissed so far as respondent nos. 3 and 5 are concerned. Therefore, these petitions survive only against respondent nos. 2 and 4. 23. As a result of the above order, the special leave petitions stood dismissed against PNB (the first respondent), the borrower (the second respondent) and Shri Durga Dass (the fifth respondent) and survived qua the Recovery Officer, DRT, Chandigarh (the second respondent) and Shri R.T. Tejpal (the fourth respondent). 24. Practically, with the exit of PNB from the proceedings in view of the developments subsequent to filing of the special leave petitions resulting in dismissal of the special leave petitions qua PNB, it admits of no doubt that the issue inter se the relevant parties, i.e., the State and PNB, as to whether the High Court was justified in outlawing section 16-B of the HPGST Act, attained finality. 25. Notwithstanding such position, this C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court would not allow reopening of an issue that has attained finality and, that too, in the absence of party who has benefited by reason of such an order. However, this is not a normal case and we can unhesitatingly record our satisfaction of a gross error having crept in requiring correction. 29. A law, which the State legislature had the competence to enact, has been outlawed by the High Court while hearing a writ petition which was rendered infructuous due to developments subsequent to its filing and prior to its disposal but such developments had not been brought to the notice of the High Court. 30. During the pendency of these proceedings where challenge had been laid to the judgment and order dated 2nd January, 2008 of the High Court, PNB filed an affidavit dated 30th September, 2010, referred to in the order of this Court dated 8th April, 2011. A reading of the affidavit reveals that during the pendency of the writ petition (filed by PNB) before the High Court, the borrower had offered a compromise proposal which PNB had accepted. In terms thereof, the borrower paid to PNB an amount of Rs.36 lakh towards full and final settlement of the loan liability. Upon rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a decision. Hence, we hold that the decision on an infructuous writ petition is inconsequential and can never be of any effect. However, we do not wish to rest our decision only on this technical point. Having considered the relevant provisions of law as well as the decisions of this Court, rendered prior to and post the impugned judgment and order dated 2nd January, 2008, we are of the firm opinion that the issue as to whether section 16-B of the HPGST Act is ultra vires any provision of law including the supreme law of the country is no longer res integra. 36. Instead of burdening our judgment by referring to all decisions on the point, we consider it appropriate to refer to only one decision of this Court (dated 27th February, 2009) in Central Bank of India vs. State of Kerala (2009) 4 SCC 94 which, of course, came into existence after the decisions challenged in these civil appeals were rendered. This Court having considered the provisions of the DRT Act and the SARFAESI Act, as it then stood, vis- -vis section 38-C of the Bombay Sales Tax Act, 1959 and section 26-B of the Kerala General Sales Tax Act, 1963, inter alia, held that: 116. The non obstante clauses containe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es registered under the Companies Act, 1956 and having a certificate of registration from Reserve Bank under Section 3 of the Securitisation Act. Evidently, Parliament did not intend to give priority to the dues of private creditors over sovereign debt of the State. 128. If the provisions of the DRT Act and the Securitisation Act are interpreted keeping in view the background and context in which these legislations were enacted and the purpose sought to be achieved by their enactment, it becomes clear that the two legislations, are intended to create a new dispensation for expeditious recovery of dues of banks, financial institutions and secured creditors and adjudication of the grievance made by any aggrieved person qua the procedure adopted by the banks, financial institutions and other secured creditors, but the provisions contained therein cannot be read as creating first charge in favour of banks, etc. 129. If Parliament intended to give priority to the dues of banks, financial institutions and other secured creditors over the first charge created under State legislations then provisions similar to those contained in Section 14-A of the Workmen s Compensation Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Constitution and the Banking Companies Act, loses its basis and can no longer be held to be legal and valid. Section 35 of the SARFAESI Act could not have been construed as conferring any right on a secured creditor to claim priority over dues of the State in the absence of a provision in that behalf which presently can now be claimed, subject to other conditions being fulfilled, in view of section 26E of the SARFAESI Act. 39. Pertinently, the High Court while seized of the writ petition of PNB was not at all concerned with the SARFAESI Act as such. The matter had travelled to the High Court from proceedings under the DRT Act. There was, thus, no occasion for the High Court to pronounce on the validity of section 16-B of the HPGST Act based on what was held by its coordinate Bench in M/s A.J. Infrastructures Pvt. Ltd. (supra). The High Court, in our considered view, was therefore in clear error. 40. In the light of the above, while answering the second issue we hold that section 16-B of the HPGST Act is a perfectly valid piece of legislation and is not ultra vires the Constitution and/or the Banking Companies Act as erroneously held in the decision of the High Court dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the HPGST Act remaining unpaid after the due date shall be recoverable as arrears of land revenue. Section 16-A, starting with a non-obstante clause, confers power on the Commissioner or any officer other than the one excluded to initiate a special mode of recovery. Then follows section 16-B, which is to the following effect:- 16-B. Tax to be first charge on property. - Notwithstanding anything to the contrary contained in any law for the time being in force, any amount of tax and penalty including interest, if any, payable by a dealer or any other person under this Act shall be a fust charge on the property of the dealer or such other person. 46. Having regard to the terms of section 16 of the HPGST Act noted above, the HPLR Act, to the extent the same provides for the procedure for recovery of dues as arrears of land revenue, needs to be briefly noticed. 47. Section 4(4) of the HPLR Act defines a defaulter as a person liable for arrears of land revenue and includes such person who are responsible as surety for the payment of the arrears. Section 23 provides for the mode of making proclamation issued by a Revenue Officer relating to any land and provides for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced before the High Court, when CWP 306 of 2007 was being heard, to indicate that necessary steps under the HPGST Act had been initiated by the State and its officers, the third issue has to be answered by holding that the State not having taken steps as required by law for realization of its dues, there was no determination of liability, a fortiori, question of taking recourse to the HPLR Act for recovery of dues as arrears of land revenue did not arise. Without such determination of liability, no red entry marks could have been inserted in the revenue records and the High Court was right in holding that the State ought not to have refused mutation. 50. The fourth issue need not detain us for too long. As it is, the civil appeals against PNB do not survive. Qua the other appeals, we are once again of the opinion that the High Court was justified in not entertaining the application for recall. It was not maintainable in law, since the writ petition was decided on merits in the presence of the State. A recall application under section 151 of the CPC, therefore, was not the proper remedy in the circumstances. When the law provides a specific remedy, it is not open to a party to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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