Madras High Court
)E.Subbian vs The Assistant Commissioner on 1 November, 2018
1
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
ORDER RESERVED ON : 16.08.2018
ORDER PRONOUNCED ON : 01.11.2018
CORAM :
THE HONOURABLE MRS.JUSTICE J.NISHABANU
W.P(MD)Nos.2778 and 4921 of 2012
and
M.P.(MD).No.2 of 2012
W.P(MD).No.2778 of 2012
1)E.Subbian
2)S.Balakrishnan ... Petitioners
Vs.
The Assistant Commissioner,
(Commercial Tax)-3
O/o.the Assistant Commissioner
(Commercial Tax)-3,
Sivakasi,
Virudhunagar District. ... Respondent
Petition filed under Article 226 of the Constitution
of India, praying for issuance of a Writ of Certiorari to
call for the records relating to the order passed by the
respondent in his proceedings in Na.Ka.No.A3/2522/02 dated
02/02/2012 and quash the same as illegal.
W.P(MD).No.4921 of 2012
1)E.Subbian
2)S.Balakrishnan
3)K.Govindan ... Petitioners
http://www.judis.nic.in
2
Vs.
The Assistant Commissioner,
(Commercial Tax)-3
O/o.the Assistant Commissioner
(Commercial Tax)-3,
Sivakasi,
Virudhunagar District. ... Respondent
Petition filed under Article 226 of the Constitution
of India, praying for issuance of a Writ of Certiorari to
call for the records relating to the order passed by the
respondent in his proceedings in Na.Ka.No.A3/2522/02 dated
02/02/2012 and quash the same as illegal.
For Petitioners : Mr.M.Mohaboob Athiff
for M/s.Ajmal Associates
For Respondent : Mr.D.Muruganantham
Addl.Govt.Pleader
********
COMMON ORDER
Since the issue involved in both the Writ Petitions are one and the same, they are taken up together and decided by a common order.
2. The petitioners would aver among other things that they are the joint auction purchasers of the property comprised in S.No.1318/1 & 1319/1 at Anaiyur village along with their erstwhile partner one K.Govindan. The properties http://www.judis.nic.in 3 comprised in the afore-said survey numbers including other properties were originally belonged to one M/s.Ravi Shankar Fire Works, Sivakasi and its Partners. It is averred that the factory concern obtained a loan from the Indian Overseas Bank, Sivakasi branch by mortgaging its property as surety for the same. Since there was some default in the repayment of the amount, the secured property was classified as Non-performing Asset by the bank and in furtherance of the same, the Bank proceeded under the provisions of SARFAESI Act,2002. Subsequently, the possession of the defaulter property was taken by the Bank and after complying with all provisions of the SARFAESI Act, the property including the one comprised in S.Nos. 1318/1 & 1319/1 were brought for sale by auction notification dated 21.09.2015 published in a leading daily for a realisation of Rs.46,97,272/-.
2.1. While the matter stood thus, the petitioners participated in the auction conducted by the bank and they were declared as highest bidder and a Sale Certificate was issued and it was executed on 29.03.2007. In such circumstances, the respondent herein issued a notice in his http://www.judis.nic.in 4 impugned proceedings dated 02.02.2012 calling upon to pay a sum of Rs.4,31,400/- with interest being the due to the respondent by the defaulter, namely, M/s.Ravishankar Fire Works Factory, Sivakasi. In the said notice, it is stated that in the event of failure to pay the demanded amount within 15 days from the date of receipt of notice, action would be initiated under the provisions of the Tamil Nadu Revenue Recovery Act.
2.2. As far as W.P.(MD).No.4921 of 2012 is concerned, the petitioners projected the similar set of facts except the Survey Number purchased by the petitioners and due amount to the respondent alone are different.
2.3. In the above factual aspects of the matters, the petitioners have preferred the Writ Petitions.
2.4. Originally, W.P.(MD).No.2778 OF 2012 was listed on 07.03.2012 and this Court, after hearing both parties, granted an interim stay to ascertain the fact that as to whether the Bank indicated the fact that the auction purchaser has to pay dues to the statutory authorities. On http://www.judis.nic.in 5 that condition, it granted interim stay and subsequently, when it was listed on 27.03.2012 also, the learned counsel for the petitioner sought time to produce the notification and it was adjourned to 18.04.2012. Pending the said Writ Petition, the petitioners moved another W.P.(MD).No.4921 of 2012, in that, this Court granted an order of interim stay on 16.04.2012. On 20.04.2018, both the Writ Petitions were tagged together and listed for further hearing.
3. A detailed counter affidavit has been filed on 30.07.2002 itself, in which, it is stated that the sales tax dues were payable by the defaulted assessee Firm M/s.Ravi Shankar Fire Works Factory. Hence, the Commercial Taxes Department attached the said immovable properties with factory shed thereon by issue of demand notice in 'Form No.4' of the Tamil Nadu Revenue Recovery Act, 1864 and was served on the partner one G.Ravindran on 17.04.2002. Further, 'Form No.5' notice dated 05.12.2003 was issued under the Revenue Recovery Act was also published in the Virudhunagar District Gazette dated 26.01.2004 besides wide publicity was circulated to Revenue, Registration and other department officials. It is http://www.judis.nic.in 6 also averred that the statutory notices were issued with “Form B-6” dated 01.11.2001 along with the letter, prescribed under the Tamil Nadu General Sales Tax Act 59, to some of the locally functioning nationalised banks, namely, Indian Overseas Bank, Tamil Nadu Mercantile Bank and State Bank of India with a request to remit into Government Treasury of any credit available with the said banks in the name of the defaulted firm, so as to recover it. The said Banks including the Indian Overseas bank have since informed that no credit was available to honour the request of the department and particularly the Indian Overseas Bank in its letter dated 16.11.2001 replied intimating that there was no balance in the account. The Form B-6 notice shall have the binding effect on the said IOB to recover any amount and freeze it until the clearance order to that effect were obtained from the tax authorities, hence the IOB is lawful to remit even any fresh amount that would be receivable at a later date and such was the legal obligation cast upon them.
3.1. Further, the IOB was specifically reminded on 30.06.2006 to realise the Government due along with the http://www.judis.nic.in 7 dues to the said bank loan and again in its letter dated 29.12.2006 citing various decisions of the legal forums on the first charge upon the defaulters property and was called upon to stall further transfer proceedings in respect of those properties. But the IOB ignoring such notices issued the Sale Certificate dated 29.03.2007 stated supra, transferred the properties in favour of the petitioners following the auction proceedings held on 27.10.2005.
3.2. It is further averred that the petitioners filed first Writ Petition W.P.(MD)No.2728 of 2012 against the notice dated 02.02.2012 and yet another W.P.(MD).No. 4921 of 2012 filed against the issue of reminder notice dated 28.03.2012. It is also averred that the buyers/petitioners seem to have full knowledge of the Government dues and the auction sale by the Indian Overseas Bank was circulated vide its newspaper advertisement dated 20.09.2005 and item No.8 of the terms and conditions annexed thereon, indicates the obligation of the buyers to settle the dues payable to Government Departments, Electricity and Local bodies. Hence, the petitioners are http://www.judis.nic.in 8 duty bound to pay the amount in question to the respondent and the Writ Petitions are liable to be dismissed.
4. Learned counsel for the petitioners would contend that the impugned notice is purportedly issued under Section 24 of the Tamil Nadu General Sales Tax Act, 1959. According to him, though the respondent being a State, cannot have any first charge on the property of the defaulter for the recovery of due, over and above the nature of the first charge held by secured creditor/bank under SARFEASI Act. He would further submit that there was no fraud or collusion on the part of the petitioners in purchasing the property in question so as to defeat the right of the respondent over the property in recovering its due and in the absence of the same, the respondent is not entitled to claim any due amount from the petitioner and as such, the action on the part of the respondent is illegal and arbitrary. To sum up, he prays for quashing of the impugned order issued in both the Writ Petitions.
5. Per contra, learned counsel appearing for the respondent would submit that Notice in 'Form No.4' was http://www.judis.nic.in 9 issued followed by Notice under 'Form No.5' was issued and the same was also published in Virudhunagar District Gazette dated 26.01.2004. Subsequently, notice under 'Form No.6 dated 01.11.2001 was also issued. Due process of law was followed scrupulously to enlighten the actual facts to the bona fide purchasers so as to avoid the third party interest in the subject properties. Despite all these factual aspects, the petitioners went ahead of purchasing the property in question. The petitioners never disputed their ignorance of sales tax dues in their affidavits filed before this Court and therefore, prayed for dismissal of the writ petition.
6. Heard the learned counsel for the petitioners and the learned counsel for the respondent.
7. The question of who holds first charge as to whether the crown debt / the revenue to the government under the fiscal laws or the claim of secured creditors under SARFESAI Act is laid to rest by the decision of the Hon'ble Supreme Court in the case of Central Bank of India http://www.judis.nic.in 10 vs. State of Kerala & Others in Civil Appeal No.95 of 2005 dated 27.02.2009. Accordingly, the statutory charge prevail over mortgage charge over any pledged property. The crown debt is treated as unsecured and mortgage rights will get priority only when the statute does not create a charge under the Act.
8. It is also settled that the non obstante clauses of the Tamil Nadu General Sales Tax Act, 1959, and the SARFESAI Act are not at conflict with each other as both the statutes can be given effect harmoniously through purposive interpretation. Accordingly, those statutes under which a charge is created on the assets will have priority over mortgage rights under any other Act. And those statutes where charges are not created will be accorded a status of unsecured debts and will have low priority over the secured creditors under the SARFESAI Act. The Tamil Nadu General Sales Tax Act, 1959, having created charge on the assets of the assessee by virtue of Section 24, the interest of revenue cannot be separated from the assets of the defaulters.
http://www.judis.nic.in 11
9. In view of the above, the writ petition fails and the same is dismissed. No costs. Consequently, connected miscellaneous petition is closed.
01.11.2018
Index : Yes/No
Internet : Yes/No
bala/ssm
To
The Assistant Commissioner,
(Commercial Tax)-3
O/o.the Assistant Commissioner
(Commercial Tax)-3,
Sivakasi,
Virudhunagar District.
http://www.judis.nic.in
12
J.NISHABANU, J.
bala/ssm
Pre-delivery orders made in
W.P(MD)Nos.2778 and 4921 of 2012
01.11.2018
http://www.judis.nic.in