Madras High Court
Shriram Non-Conventional Energy ... vs The District Collector on 26 August, 2022
Author: G.R.Swaminathan
Bench: G.R.Swaminathan
W.P(MD)Nos.11631 of 2021 & 11412 of 2022
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 26.08.2022
CORAM
THE HONOURABLE MR.JUSTICE G.R.SWAMINATHAN
W.P(MD)Nos.11631 of 2021 & 11412 of 2022
and
W.M.P.(MD)Nos.9146, 9147 & 9149 of 2021
and
W.M.P.(MD)Nos.8112 & 8115 of 2022
In W.P.(MD)No.11631 of 2021
Shriram Non-Conventional Energy Private Limited,
Rep. by its Authorised Signatory,
Basco Future SV,
4th Floor, No.10/1, Venkatnarayana Road,
T.Nagar, Chennai-600 017. ... Petitioner
Vs.
1.The District Collector,
Thanjavur District,
Thanjavur.
2.The Tahsildar,
Pattukottai Taluk,
Thanjavur District.
3.The Sub-Registrar,
II Joint Sub Registrar Office,
Pattukottai.
4.Yes Bank Limited,
Mayank Towers,
Survye No.31 (old) 31/2 (New)
https://www.mhc.tn.gov.in/judis
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W.P(MD)Nos.11631 of 2021 & 11412 of 2022
Rajbhavan Road, Somajiguda,
Hyderabad-500 082.
5.Anita Nirmala Rosalin
6.The Chief Electrical Inspector
to the Government,
Thiru.V.Ka.Industrial Estate,
Guindy, chennai-32.
(R6 is impleaded vide order dated 06.12.2021
in W.M.P.(MD)No.17303 of 2021) ... Respondent
Prayer : Writ Petition filed under Article 226 of the Constitution of India,
praying this Court to issue a Writ of Certiorarified Mandamus, to call for the
records comprised in letter dated Na.Ka.11257/2019/A1, dated 27.04.2021
issued by the second respondent to the third respondent and quash the same as
arbitrary and illegal and consequently, direct the third respondent to register the
sale deed to be presented by the petitioner for the schedule mentioned
properties in favour of the fifth respondent pursuant to e-auction conducted by
the fourth respondent.
For Petitioner : Mr.Raguvaran Gopalan
for Mr.Rahul Balaji
For R1 to R3 &
R6 : Mr.R.Baskaran
Additional Advocate General
assisted by Mr.K.S.Selvaganesan
Additional Government Pleader
In W.P.(MD)No.11412 of 2022
Shriram Non-Conventional Energy Private Limited,
Rep. by its Authorised Signatory,
Basco Future SV,
4th Floor, No.10/1, Venkatnarayana Road,
T.Nagar, Chennai-600 017. ... Petitioner
Vs.
https://www.mhc.tn.gov.in/judis
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W.P(MD)Nos.11631 of 2021 & 11412 of 2022
1.The District Collector,
Thanjavur District,
Thanjavur.
2.The Tahsildar,
Pattukottai Taluk,
Thanjavur District. ... Respondents
Prayer : Writ Petition filed under Article 226 of the Constitution of India,
praying this Court to issue a Writ of Certiorari, to call for the records comprised
in letter dated Na.Ka.11257/2019/A1, dated 29.04.2022 issued by the second
respondent and quash the same as arbitrary and illegal.
For Petitioner : Mr.Raguvaran Gopalan
for Mr.Rahul Balaji
For Respondents : Mr.R.Baskaran
Additional Advocate General
assisted by Mr.K.S.Selvaganesan
Additional Government Pleader
COMMON ORDER
Heard the learned counsel on either side.
2. Shriram Non-Conventional Energy Private Limited availed loan from the Shriram City Union Finance Limited in the year 2010. The petition mentioned property was mortgaged to secure the loan. The loan turned out to be a non-performing asset. Yes Bank Limited took over the said account. The memorandum of deposit of title deeds was created in favour of the Yes Bank https://www.mhc.tn.gov.in/judis 3/10 W.P(MD)Nos.11631 of 2021 & 11412 of 2022 Limited on 17.02.2014 and it was also duly registered on the file of the Sub Registrar, Pattukkottai. An additional memorandum of deposit of title deed was executed on 06.03.2019. In order to clear the liability, the petitioner approached the Yes Bank Limited and asked for permission to bring the property to sale. Yes Bank Limited granted permission to do so. Thereafter, through the offices of a third party auctioneer, the property was sold and purchased by the fifth respondent. It was brought to auction on 07.04.2021. The fifth respondent was declared as the successful bidder. They also complied with the terms of the auction by tendering 25% of the purchase money. Thereafter, the petitioner executed the sale deed. Before the parties would finalise the sale transaction, the Tahsildar, Pattukottai sent a communication dated 27.04.2021 calling upon the registering authority not to register any sale deed in respect of the petition mentioned property. The said communication is put to challenge in W.P.(MD)No.11631 of 2021.
3. During the pendency of this writ petition, the property was also sought to be auctioned by the revenue department. Questioning the said auction notice, W.P.No.11412 of 2022 was filed. The reason for Tahsildar to take action in the matter was because the petitioner had admittedly incurred tax liability under the provisions of the Tamil Nadu Tax on Consumption or Sale of https://www.mhc.tn.gov.in/judis 4/10 W.P(MD)Nos.11631 of 2021 & 11412 of 2022 Electricity Act, 2003. The tax liability arose from April 2010 and fructified in the form of certificate issued by the Chief Electrical Inspector to Government, Guindy Chennai on 19.03.2019.
4. The only question that calls for consideration is whether in view of the aforesaid tax liability incurred by the writ petitioner, the petition mentioned property could be brought to sale and whether the registering authority can decline to register any sale document in respect thereof.
5. The learned Additional Advocate General appearing for the official respondents took me through the provisions of the Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003. He laid particular emphasis on Section 3 of the said Act which reads as follows:-
3.(1) Save as otherwise provided in this Act, every licensee and every person other than a licensee shall pay every month to the Government in the prescribed manner, a tax on the electricity sold or consumed during the previous month at the rates specified hereunder:
(a) In the case of licensees other than captive generating plants, the rate shall not less than 5% and not more than 10% of the consumption charge, as may be notified by the Government.
Provided that no tax shall be paid on sale of electricity for agricultural purpose and hut service connections.
(b) In the case of licensees who are captive generating plants, the rate shall be not less than 10 paise and not more than 20 paise per unit of electricity on the https://www.mhc.tn.gov.in/judis 5/10 W.P(MD)Nos.11631 of 2021 & 11412 of 2022 consumption for own use; and shall be not less than 5% and not more than 10% on the consumption charge on the sale of surplus electricity as may be notified by the Government.
Provided that no tax shall be paid on the sale of electricity to the Board.
(c) In the case of a person other than a licensee, the rate shall not be less than 10 paise and not more than 20 paise per unit of electricity on the consumption for own use as may be notified by the Government;
(2) The Government may pay such amount as may be prescribed as collection charge to every person collecting electricity tax under this section.
Provided that such amount shall not exceed one percent of the electricity tax collected by such person.
6. My attention has also been drawn to Section 7 of the Act which is as follows:-
7. Any electricity tax due under this Act which remains unpaid:-
(a) shall be deemed to be in arrears and thereupon interest at the rate prescribed by the Government from time to time shall be payable on such electricity tax; and
(b) shall, together with any interest payable under clause (a) be recoverable either as an arrear of land revenue or by deduction from any amount payable by the Government to the licensee.
7.The contention of the learned Additional Advocate General is that the liability of the petitioner had periodically arisen right from the year 2010 onwards and that this liability can be enforced by proceeding against the property as if it is an arrear of land revenue.
8. In my view, this issue is no longer res integra. The learned counsel appearing for the petitioner drew my attention to the decision of the Hon'ble https://www.mhc.tn.gov.in/judis 6/10 W.P(MD)Nos.11631 of 2021 & 11412 of 2022 Full Bench of the Madras High Court in W.P.(MD)No.2675 of 2011 etc batch dated 10.11.2016. The Hon'ble Full Bench in the said decision had held that the rights of a secured creditor to realise secured debts due and payable by sale of assets over which security interest is created, would have priority over all debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or Local Authority.
9. My attention has also been drawn to the recent decision of the Hon'ble Apex Court reported in (2022) 7 Supreme Court Cases 260 (Punjab National Bank Vs. Union of India). The Hon'ble Apex Court approvingly referred to an earlier Full Bench decision of the Madras High Court reported in 2006 SCC Online Mad 1182. The said decision reads as follows:-
43. A Full Bench of the Madras High Court in UTI Bank Ltd., Vs. CCE while dealing with a similar issue, has held that:
“25. In the case on hand, the petitioner Bank which took possession of the property under Section 13 of the SARFAESI Act, being a special enactment, undoubtedly is a secured creditor. We have already referred to the provisions of the Central Excise Act and the Customs Act. They envisage procedures to be followed and how the amounts due to the Departments are to be recovered. There is no specific provision either in the Central Excise Act or the Customs Act, claiming “first charge” as provided in other enactments, which we have pointed out in earlier paragraphs.
26. In the light of the above discussion, we conclude.” https://www.mhc.tn.gov.in/judis 7/10 W.P(MD)Nos.11631 of 2021 & 11412 of 2022 In paragraph No.50, the Hon'ble Apex Court held as follows:-
“50. In view of the above, we are of the firm opinion that the arguments of the learned counsel for the appellant on Issue 2 hold merit. Evidently, prior there was no provision in the 1944 Act inter alia, providing for first charge on the property of the assessee or any person under the 1944 Act. Therefore, in the event like in the present case, where the land, building, plant, machinery etc., have been mortgaged / hypothecated to a secured creditor, having regard to the provisions contained in Sections 2(1)(zc) to (zf) of the SARFAESI Act, 2002 read with provisions contained in Section 13 of the SARFAESI Act, 2002, the secured creditor will have a first charge on the secured assets. Moreover, Section 35 of the SARFAESI Act, 2002, inter alia, provides that the provisions of the SARFAESI Act shall have overriding effect on all other laws. It is further pertinent to note that even the provisions contained in Section 11-E of the Central Excise Act, 1944 are subject to the provisions contained in the SARFAESI Act, 2002.”
10. In view of the aforesaid authoritative decision, the tax liability could be enforced against the petition mentioned property only if under the Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003, there is a provision creating “first charge”.
11. I carefully went through the provisions of the Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003. No where, there is any provision creating “first charge”. It is true that right from April 2010, month to month, tax liability had been created against the writ petitioner. It is true that they https://www.mhc.tn.gov.in/judis 8/10 W.P(MD)Nos.11631 of 2021 & 11412 of 2022 constitute an arrear of land revenue. But then, it remained an unsecured one. Only when the proceedings under the Revenue Recovery Act came to be initiated, they become charge over the property in question.
12. The Hon'ble Supreme Court in Union of India Vs.Sicom Limited ((2009) 2 SCC 121) held that to secure priority over the secured debts, the provisions were inserted in various statutes providing that the statutory dues shall be the first charge over the properties of the assessee. In Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003, no such provision has been incorporated. Section 26(E) of the SARFAESI Act clearly provides priority to secured creditors. It is as follows:-
26-E Priority to secured creditors:- Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority.
13. Admittedly, when the Yes Bank Limited is a secured creditor and the tax arrears of the petitioner culminated into charge only in October 2019, it was not open to the Tahsildhar, Pattukottai to have issued the impugned communication or the auction sale notice. Both are patently contrary to the statutory scheme set out in the SARFAESI Act. They stand quashed. https://www.mhc.tn.gov.in/judis 9/10 W.P(MD)Nos.11631 of 2021 & 11412 of 2022 G.R.SWAMINATHAN, J.
rmi Both the writ petitions are allowed. No costs. Consequently, connected miscellaneous petitions are closed.
26.08.2022
Index : Yes / No
Internet : Yes/ No
rmi
To
1.The District Collector,
Thanjavur District,
Thanjavur.
2.The Tahsildar,
Pattukottai Taluk,
Thanjavur District.
3.The Sub-Registrar,
II Joint Sub Registrar Office,
Pattukottai.
4.The Chief Electrical Inspector
to the Government,
Thiru.V.Ka.Industrial Estate,
Guindy, chennai-32.
W.P(MD)Nos.11631 of 2021 & 11412 of 2022
26.08.2022
https://www.mhc.tn.gov.in/judis
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