Madhya Pradesh High Court
State Bank Of India vs Commissioner Of Sales Tax M.P. Indore on 31 January, 2018
HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE
W.P. No.4909/17 & W.P. No.6297/17 (-1-)
W.P. No.4909/2017
(Bank of Baroda Vs. Commissioner of Sales Tax, M.P., Indore
and another)
&
W.P. No.6297/2017
(Bank of Baroda Vs. Commissioner of Sales Tax, M.P., Indore
and another)
Indore, dated:31.01.2018
Parties through their counsel.
Regard being had to the similitude in the controversy
involved in the present cases, the writ petitions were
analogously heard and by a common order, they are being
disposed of by this Court. Facts of the Writ Petition
No..4909/2017 are narrated hereunder.
The petitioner before this Court is aggrieved by the
sales proclamation dated 19.07.2017 issued by Commercial
Tax Officer cum Additional Tehsildar, Pithampur Circle.
The aforesaid notification has been issued on the ground that
commercial tax dues are to be recovered from M/s. R.S.
Mould Plast (India) Ltd., a company registered under the
Companies Act, 1956.
Shri R.C. Sinhal, learned counsel for the petitioner-
Bank has argued before this Court that the property owned
by the borrower, which is a company registered under the
Companies Act was leased out by M.P. A.K.V.N. (I) Ltd. on
28.02.1994 and thereafter, it was mortgaged with the bank.
HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE
W.P. No.4909/17 & W.P. No.6297/17 (-2-)
He has further argued before this Court that there is an
amendment in the Enforcement of Security Interest and
Recovery of Debts and Loans and Miscellaneous Provision
Act and the Amendment Act, 2016 reflects that Section
31(B) has been inserted after Section 31(A) of the Act. His
contention is that on account of Section 31(B), the debts of
the Bank are having priority over all other debts including
government dues, revenue dues, taxes, cesses etc..
He has also argued that Section 31(B) also contains non
obstante clause and therefore, it is having overriding effect
over all other enactments including the provisions of M.P.
VAT Act, Central Sales Tax Act, Entry Tax Act and any other
Act, hence, the notice issued by the State Government is bad
in law and deserves to be quashed.
On the other hand, a detailed and exhaustive reply has
been filed by the Commercial Tax Department and their
contention is that the dues amounting to Rs.3,26,96,667/- is
outstanding against M/s. R.S. Mould Plast (India) Ltd.. It has
also been stated that the dues against R.S. Mould Plast
(India) Ltd. are prior to the date from which the amendment
came into force and therefore, by virtue of Section 33 of MP
VAT Act, 2002, they are entitled to recover the dues.
A prayer has been made for dismissal of the writ
petition.
Heard the learned counsel for the parties at length and
HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE
W.P. No.4909/17 & W.P. No.6297/17 (-3-)
perused the record.
In the present case, undisputedly a notice of sale by the
respondent/Commercial Department has been issued on
19.07.2017. The Amendment Act, 2016, which incorporates Section 31B reads as under:-
"31B. Notwithstanding anything contained in any law for the time being in force, the rights of secured creditors to realise secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all the other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority.
Explanation - For the purpose of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016, in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that code."
Thus, the aforesaid statute makes it very clear that the dues of the bank are to be recovered at the first instance. Section 33 of the MP VAT Act, 2002 reads as under:-
"33 : Tax to be first charge (1) Notwithstanding anything to the contrary, contained in any law for the time being in force and subject to the provisions of section 530 of the Companies Act, 1956 (No.1 of 1956), any amount of tax and/ or penalty or interest, if any, payable by a HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE W.P. No.4909/17 & W.P. No.6297/17 (-4-) dealer or other person under this Act shall be first charge on the property of the dealer or such person.
(2) Notwithstanding anything contained in this Act, where a dealer or person is in default or is deemed to be in default under clause (a) of sub-section (11) of section 24 and whose property is being sold by a bank or financial institution for recovery of its loan, the Commissioner may forgo the right of first charge as mentioned in subsection (1) against the property sold on the following conditions:-
(a) if the arrears of tax, penalty, interest or part thereof or any other amounts is up to 25 percent of the total auction value, the arrears shall be paid in full by the bank or financial institution ;
(b) if the arrears of tax, penalty, interest or part thereof or any other amount is more than 25 percent of the total auction value, the 25 percent of the total auction value and the amount in the same proportion of the remaining auction value as the remaining arrears bear to the total dues of the bank or financial institution, shall be paid by the bank or financial institution."
In the considered opinion of this Court, the Enforcement of Security Interest and Recovery of Debts and Loans and Miscellaneous Provision (Amendment) Act, 2016 came into force w.e.f. 01.09.2016 and by virtue of the said amendment, the right of secured creditors to realise the secured dues and debts dues, which are payable to the secured creditors by sale of assets over which security has been created, is having priority over all other debts and government dues including revenue, taxes, cesses and rates HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE W.P. No.4909/17 & W.P. No.6297/17 (-5-) due to Central Government, State Government and local authorities.
Not only this, it is having overriding effect over all other enactment including the provisions of MP VAT Act, Central Sales Tax Act, Entry Tax Act and any other Tax Act.
Though, an attempt has been made by the State Government to demonstrate before this Court that the amendment will not dis-entitle to recover the dues by them as the dues are outstanding since 2012.
Nothing prevented the State Government to recover the dues since 2012 and the State Government woke up from plumber only after the amendment has come into force and by virtue of the amendment in the Central Act, this Court is of the considered opinion that by no stretch of imagination, the State Government can be permitted to auction the property in question as the Bank of Baroda is having priority in the matter in light of the amendment which has been quoted above.
Resultantly, the writ petition is allowed. The impugned proclamation dated 19.07.2017 is hereby quashed.
(S.C. Sharma)
N.R. Judge
NARENDRA KUMAR
RAIPURIA
2018.02.06 10:34:02
-08'00'