High Court · 2009

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 12.06.2009CORAMTHE HONOURABLE MR. JUSTICE S.J.MUKHOPADHAYAANDTHE HONOURABLE MR. JUSTICE N.KIRUBAKARANW.P. NO. 6020 OF 2009Indian BankKilpauk BranchChennai 600 010 rep. byits Asst. General ManagerCircle Office, Chennai NorthChennai... Petitioner- Vs -1. The Sub Registrar Periamet Sub Registration Office Poonamallee High Road Chennai 600 003.2. The Commercial Tax Officer Ambattur Assessment Circle Chennai 600 049.3. Shree Ragavendra Engineering Industries rep. by its Partners L-53, Ambattur Industrial Estate Chennai 600 058.4. R.Dakshinamoorthy5. M.P.Sukumaran.. RespondentsWrit Petition filed for the issuance of a writ of mandamusdirecting the 1st respondent to entertain and register the salecertificate issued in favour of the petitioner-Bank in respect of theproperty being ground and premises situated at Door No.103 on theWestern Row of New Aavadi Road, Kilpauk, Chennai 600 010 bearing PlotNo.A-45 in the sanctioned plan of Kilpauk Garden Road comprised inR.S. No.77/5 as stated therein.For Petitioner : Mr. B.MurugavelFor Respondents: Mr. A.Edwin Prabhakar, AGP https://hcservices.ecourts.gov.in/hcservices/ ORDERS.J.MUKHOPADHAYA, J.This writ petition has been preferred by the petitioner, Indian,Bank, (hereinafter referred to as the 'Bank'), a nationalised bank,for issuance of a writ of mandamus directing the 1st respondent toentertain and register the sale certificate issued in favour of thepetitioner-Bank in respect of the property being ground and premisessituated at Door No.103 on the Western Row of New Aavadi Road,Kilpauk, Chennai 600 010 bearing Plot No.A-45, Kilpauk Garden Roadand comprised in R.S. No.77/5.2. According to the petitioner-Bank, it sanctioned over draftfacility of Rs.40 lakhs each to respondents 4 and 5 in theirindividual names on 14th Aug., 1990. As security to the due repaymentof loan, respondents 4 and 5 created equitable mortgage over theirone half undivided share each on the land measuring about one groundand 2105 sq.ft., together with building thereon situate on thewestern row of New Aavadi Road by depositing the title deeds on 30thJan., 1991. Whileso, the 2nd respondent has issued a B-6 notice dated6th Dec., 2001 to the petitioner on account of respondents 3 to 5, andon receipt of the notice, the petitioner sent a reply dated 2nd Jan.,2002. Since respondents 3 to 5 have committed default in repaymentof loan, the petitioner-Bank had initiated recovery proceeding inO.A. No.1046/2000 (new O.A. No.1165/2001) against respondents 3 to 5before the Debts Recovery Tribunal – II, Chennai, (hereinafterreferred to as 'Tribunal') for recovery of a sum of Rs.4,93,77,443.33with further interest @ 18.50% p.a. with quarterly rest and costs andthe said suit is pending.3. Counsel for the petitioner submitted that respondents 4 and 5having taken loan from the petitioner and having mortgaged theproperty as secured asset on 29th Jan., 1991, the 2nd respondent has nojurisdiction to issue the impugned B-6 notice dated 6th Dec., 2001 norcan direct the petitioner to make the payment of the rent payable forthe portion of the building and plot by the petitioner, which belongto respondents 4 and 5.It appears that the 2nd respondent issued a subsequent notice on8th March, 2002, asking the Bank to make payment to them, failingwhich to attach the property on the ground that the 2nd respondent haspriority over all the properties of the other respondents. Thepetitioner-Bank had again sent a reply through counsel on 16th March,2002 stating that it is a secured creditor and has paramount chargeover the secured asset to it. Two writ petitions, W.P. Nos.31572 and31573 of 2002 were preferred by the petitioner against such notice,which are still pending. https://hcservices.ecourts.gov.in/hcservices/

4. Further case of the Bank is that the Bank has alreadyinitiated proceeding u/s 13 of the Securitisation and Reconstructionof Financial Assets and Enforcement of Security Interests Act.Notice u/s 13 (2) was issued on the respondents on 30th Aug., 2002 andhaving not received proper reply, the Bank had taken steps u/s 13 (4)by taking possession of the assets on 12th Sept., 2006. Subsequently,the Bank has brought the secured property for public sale and thesame was sold on 25th March, 2008 to the petitioner-Bank and the salewas confirmed. Thereafter, a sale certificate has been issued inrespect of the secured asset in favour of the petitioner-Bank, whichhas been produced before the 1st respondent for registration. At thatjuncture, the 1st respondent has orally refused to register the salecertificate on the ground that there was an order for attachment andagainst registration of any document in respect of the mortgagedproperty vide document No.25/07 on 13th Dec., 2007 at the instance ofthe 2nd respondent.5. Inspite of notice, respondents 3 to 5 have not appeared.Though counsel for respondents 1 and 2 appeared, but no separatecounter affidavit has been filed. Learned counsel appearing onbehalf of the 2nd respondent submitted that there being due under theTamil Nadu General Sales Tax Act (hereinafter referred to as 'GSTAct'), action has been taken u/s 24 of the GST Act and notice underForm-6 has been issued against the assessee.6. From the proceeding in Rc No.3349/2000 A3 dated 6th Dec.,2001, it appears that the Ambattur Assessment Circle of theCommercial Tax Department had issued notice for payment of arrearsunder the GST Act on Tvl. Sri.Ragavendra Industries and Tvl.Sri.Balaji Industries u/s 26 of the said Act. It is not clear as towhat is the stage of the proceeding against the assessee initiatedunder the GST Act. In absence of any counter affidavit filed by the1st respondent, it is not clear as to why the 1st respondent refused toregister the sale deed, if validly issued under the Securitisationand Reconstruction of Financial Assets and Enforcement of SecurityInterests Act.In the present case, as we find that the matter is still pendingbefore the 1st respondent for registration of the sale deed inquestion, and in absence of any affidavit, we are not inclined togive any specific finding or direction with regard to theregistration of the same, but we may observe that with regard to theissues relating to priority of debts of State over the securedassets, this Court, vide its (unreported) judgment in W.P.No.10246/07 (M.Nagarajan – Vs – The Dy. Commercial Tax Officer &Anr.) dated 12th June, 2009, has observed and held as follows :“15. Having regard to the judicial pronouncementsrendered by Courts and noticed above, we may sum upthe law as under :- https://hcservices.ecourts.gov.in/hcservices/ “(i) Arrears of tax due to the State canclaim priority over unsecured debts.(ii) The common law doctrine about priorityof Crown debts/State debts is recognised lawin force within the meaning of Article 372 (1)of the Constitution of India.(iii) The doctrine will not apply if firstcharge by way of priority is not claimed underthe statute.(iv) The doctrine of first charge/priority ofthe State over the property will prevail overthe private debt, which is an unsecured debt,but such doctrine of first charge/priorityover the property cannot prevail over secureddebts of a person. If the statute permits tohave first charge/priority over the propertyhaving regard to the plain meaning of Article272 of the Constitution of India, then onlythe State can claim priority over an unsecureddebt.”“16. So far as the present case is concerned, theclaim of the State is based on Section 24 of the GSTAct, which reads as follows :-“24. Payment and recoverhy of tax. -(1) ................(2) Any tax assessed on or has becomepayable by, or any other amount due underthis Act from a dealer or person and anyfee due from him under this Act, shall,subject to the claim of the Government inrespect of land revenue and the claim ofthe Land Development Bank in regard to theproperty mortgaged to it under Section 28(2) of the Tamil Nadu Co-operative LandDevelopment Banks Act, 1934 (Tamil Nadu ActX of 1934) have priority over all otherclaims against the property of the saidealer or person and the same may withoutprejudice to any other mode of collectionbe recovered -- https://hcservices.ecourts.gov.in/hcservices/ (a) as land revenue ; or(b) on application to any magistrate, bysuch Magistrate as if it were a fineimposed by him;Provided that no proceedings for suchrecovery shall be taken or continued aslong as he has, in regard to the payment ofsuch tax, other amount or fee, as the casemay be, complied with an order by any ofthe authorities to whom the dealer orperson has appealed or applied forrevision, under Sections 31, 31-A, 33, 35,36, 37 or 38. “17. The aforesaid provision fell for considerationbefore this court in the case of Tamil NaduMercantile Bank Ltd. - Vs – Commercial Tax Officer,South Aavani Moola Veedhi Circle, C.T.O. Complex,Madurai in W.P. (MD) No.10366/08. In the said case,the Court noticed that the provision of Section 24 isin contrast to the other enactments, such as BombaySales Tax Act and the Rajasthan Sales Tax Act, wherefirst charge was created.It will be evident from the Bombay Sales Tax Act,Rajasthan Sales Tax Act and the Kerala General SalesTax Act that in all those Acts it was specificallymentioned that notwithstanding anything contrarycontained in any law for the time being in force, anyamount of tax, etc., due from a dealer or personunder these Acts shall be the first charge in theproperty of the dealer. The rights of the Stateunder the GST Act has to be seen in the context ofthe statutory provisions. All that the provisioncontemplates is that the tax assessed on or hasbecome payable by, or any other amount due under thesaid Act from a dealer or person or any due from himunder the said Act, shall be subject to the claim ofthe Land Development Bank in regard to the propertymortgaged to it u/s 28 (2) of the Tamil NaduCooperative Land Development Banks Act, 1934 and itwill have priority over all other claims against theproperty of the said dealer or person to be recoveredas land revenue. By so holding, the provision(Section 24 of GST Act) by itself does not create thefirst charge as under the other enactments and theclaim of the State is to subserve the claim of thesecured creditors, who, by the anterior chargecreated in its favour, has a superior claim over even https://hcservices.ecourts.gov.in/hcservices/ the State's claim.7. In view of the aforesaid observation of this Court, we are ofthe view that the 1st respondent should consider the matter in itsproper perspective and decide the question of registration of thesale deed in question within one month from the date ofreceipt/production of a copy of this order. In case of any adversedecision, the 1st respondent will give specific reason, which shouldnot be against the law laid down by the Supreme Court or this Courtand quoted above.The writ petition stands disposed of with the aforesaidobservation and direction. But there shall be no order as to costs.Sd/Asst.Registrar/true copy/Sub Asst.RegistrarGLNTo1. The Sub Registrar Periamet Sub Registration Office Poonamallee High Road Chennai 600 003.2. The Commercial Tax Officer Ambattur Assessment Circle Chennai 600 049.1 cc To Mr.R.Munuswamy, Advocate, SR.22950/09 W.P. NO. 6020 OF 2009sv(co)pmk.18.6.2009