Gujarat High Court
Hina Manubhai Panchal vs State Of Gujarat on 4 April, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/12854/2022 JUDGMENT DATED: 04/04/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 12854 of 2022
With
R/SPECIAL CIVIL APPLICATION NO. 17497 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
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Approved for Reporting Yes No
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HINA MANUBHAI PANCHAL
Versus
STATE OF GUJARAT & ORS.
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Appearance:
SCA No. 12854 of 2022
MR ABHISHEK M MEHTA(3469) for the Petitioner(s) No. 1
DR VENUGOPAL H PATEL(7411) for the Respondent(s) No. 5
MS. SHRUNJAL SHAH, AGP for the Respondent(s) No. 1,2,3
MR AS PANESAR(5390) for the Respondent(s) No. 4
SCA NO. 17497 of 2022
Mr.PRASHANT KUMAR SHARMA WITH MR. KEYUR SHAH FOR THE
Petitioner
MS. SHRUNJAL SHAH, AGP FOR THE Respondent NOS. 1 TO 3
MR.A.S.PANESAR, ADVOCATE FOR THE Respondent NO.4
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 04/04/2025
COMMON ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE D.N.RAY)
1. Heard learned advocate Mr.Abhishek M. Mehta for the Petitioner and learned advocate Dr.Venugopal H. Patel for the Page 1 of 12 Uploaded by BINA SHAH(HC00353) on Fri Apr 25 2025 Downloaded on : Sat Apr 26 03:31:38 IST 2025 NEUTRAL CITATION C/SCA/12854/2022 JUDGMENT DATED: 04/04/2025 undefined Respondent No.5; learned Assistant Government Pleader Ms. Shrunjal Shah for the Respondent Nos.1 to 3 and learned advocate Mr. A. S. Panesar for the Respondent No.4 in Special Civil Application No. 12854 of 2022.
1.1 Heard learned advocate Mr.Prashant Kumar Sharma with learned advocate Mr. Keyur Shah for the Petitioner; learned Assistant Government Pleader Ms. Shrunjal Shah for the Respondent Nos. 1 to 3; learned advocate Mr. A.S.Panesar for the Respondent No.4 in Special Civil Application No. 17497 of 2022.
2. Rule returnable forthwith. Learned advocates appearing for the respective Respondents in both the petitions waive service of notice of rule. With the consent of the learned advocates for the respective parties, the matter is taken up for hearing, as the issue involved is quite brief.
3. As the issues arising in these petitions are common they are heard together and disposed of by this common Judgment. Page 2 of 12 Uploaded by BINA SHAH(HC00353) on Fri Apr 25 2025 Downloaded on : Sat Apr 26 03:31:38 IST 2025
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4. For the sake of convenience, Special Civil Application No. 12854 of 2022 is being taken up as the lead matter.
5. The brief facts of the case are as follows:
5.1 The Petitioner holds ownership of residential bungalow No.34, admeasuring about 405.80 sq. mtr., located at Shree Swati Cooperative Housing Society Ltd. (Respondent No.6), constructed on NA land of Final Plot No. 212 of TP Scheme No.19, which was allotted in lieu of Survey No.170/2, 172 & 120 Paiki. The property is situated in Mouje Shaikhpur-Khanpur, Taluka Sabarmati, in the Registration District of Ahmedabad and the Sub-District of Ahmedabad (Memnagar), (hereinafter referred to as 'the said property').
5.2 The property in question was initially offered as collateral security and mortgaged with Punjab National Bank in 2015 by the original owners for securing bank loans/guarantors. Subsequently, the mortgage was transferred to the Respondent No. 5, Union Bank of India (hereinafter referred to as 'the Respondent Bank'). The owners of the property executed the necessary documentation, Page 3 of 12 Uploaded by BINA SHAH(HC00353) on Fri Apr 25 2025 Downloaded on : Sat Apr 26 03:31:38 IST 2025 NEUTRAL CITATION C/SCA/12854/2022 JUDGMENT DATED: 04/04/2025 undefined creating a charge on the property first in favor of Punjab National Bank and later in favor of the Respondent No. 5, in exchange for the disbursal of loan facilities to the borrower, Shri Haridarshan Jewellers, represented by its proprietor Shri Kaushikbhai Vrajlal Patadia. It is further noted that the mortgage was later replaced with that of the Respondent No.4 Bank.
5.3. The borrower, Shri Haridarshan Jewellers, failed to operate the loan account as per the norms established by the Respondent Bank. Consequently, the loan account was classified as a Non-
Performing Asset (NPA) on 31.05.2018, triggering the initiation of proceedings through the issuance of a demand notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "SARFAESI Act, 2002"), dated 01.06.2018. 5.4 Due to the borrower's failure to repay the outstanding dues, the Respondent Bank took possession of the property in question pursuant to the provisions of the SARFAESI Act and subsequently initiated the sale process by issuing an e-auction notice on Page 4 of 12 Uploaded by BINA SHAH(HC00353) on Fri Apr 25 2025 Downloaded on : Sat Apr 26 03:31:38 IST 2025 NEUTRAL CITATION C/SCA/12854/2022 JUDGMENT DATED: 04/04/2025 undefined 22.02.2022, in accordance with the procedure prescribed under the Act.
5.5 The Petitioner participated in the auction conducted by the Respondent Bank and emerged as the successful bidder, with the highest bid of Rs. 3,03,97,000/-. The Petitioner then paid the full sale consideration.
5.6 Upon receipt of the total sale amount of Rs. 3,03,97,000/-, the Respondent Bank issued a Sale Certificate dated 29.03.2022, in compliance with Rule 9(6) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as 'the Rules'). The possession of the property was handed over to the Petitioner, along with the original title documents, as per the terms of the sale certificate. 5.7 The transaction was concluded with the issuance of the Sale Certificate on 29.03.2022 and the execution of a registered sale deed on 05.05.2022 between the Respondent Bank and the Petitioner. 5.8 The Petitioner was also notified, as mentioned in the registered Page 5 of 12 Uploaded by BINA SHAH(HC00353) on Fri Apr 25 2025 Downloaded on : Sat Apr 26 03:31:38 IST 2025 NEUTRAL CITATION C/SCA/12854/2022 JUDGMENT DATED: 04/04/2025 undefined sale deed, that permission for the transfer of the property had been obtained from the Deputy Collector of Ahmedabad, pursuant to Order No. 4436/2022, as the property fell under the purview of the Gujarat Prohibition of Transfer of Immovable Property and the Protection for Tenants from Eviction from Premises in Disputed Areas Act, 1991 (commonly referred to as 'Ashant Dhara'). The sale deed was duly registered at the Sub-Registrar's office (Memnagar), Ahmedabad-3, which is reflected in the records. The Petitioner also paid the requisite 4.9% stamp duty at the time of registration. 5.9 Subsequently, the Petitioner approached Respondent No.5, the society where the subject property was located, to have their name recorded in the society's share certificate. It was then brought to the Petitioner's attention that an attachment order had been issued by Respondent No.2 on 11.08.2021 concerning dues of the original owners.
5.10. The Petitioner received a copy of the attachment order along with a letter dated 08.06.2022. Upon review, it was revealed that certain dues, amounting to Rs. 34,12,002/- (plus 1.5% compounding Page 6 of 12 Uploaded by BINA SHAH(HC00353) on Fri Apr 25 2025 Downloaded on : Sat Apr 26 03:31:38 IST 2025 NEUTRAL CITATION C/SCA/12854/2022 JUDGMENT DATED: 04/04/2025 undefined interest), were owed by the original owner, Shri Kaushik Vrajlal Patadia, on behalf of Haridarshan Jewellers. The attachment order, issued by Respondent No.2, sought recovery of this amount, despite the fact that the liability was primarily attributable to the original owner and not the Petitioner. The attachment notice was also addressed to the other Respondents and the original owner. 5.11 The attachment notice specifically outlined that the outstanding amount of Rs. 34,12,002/- was due for various assessment years and, in accordance with Section 155 of the Land Revenue Code, the Respondent No. 2 had the authority to recover the said amount as land revenue.
5.12 Aggrieved by the attachment notice dated 11.08.2021 and the letter dated 08.06.2022 in respect of the subject property, the Petitioner has filed this Petition under Article 226 of the Constitution of India, seeking appropriate reliefs, orders, and directions in light of the peculiar facts of this case, as outlined below :- Page 7 of 12 Uploaded by BINA SHAH(HC00353) on Fri Apr 25 2025 Downloaded on : Sat Apr 26 03:31:38 IST 2025
NEUTRAL CITATION C/SCA/12854/2022 JUDGMENT DATED: 04/04/2025 undefined "(A) YOUR LORDSHIPS may be pleased to admit and allow the present petition;
(B) YOUR LORDSHIPS may be pleased to issue a writ of prohibition or a writ in the nature of prohibition or a writ of mandamus or any other appropriate writ, prohibiting the Respondent no.2 from proceeding further with and in connection with the impugned attachment notice dated 11.08.2021;
(C) YOUR LORDSHIPS may be pleased to issue a writ in the nature of mandamus or a writ of certiorari or any other appropriate writ, order or direction, quashing and setting aside the impugned attachment notice dated 11.08.2021 and the letter dated 08.06.2022 in respect of the subject property being residential premises together with construction admeasuring 275.08 sq. mtr. bearing Municipal Tenement No.7027-0191-00-0001-F situated in Shree Swati Cooperative Housing Society Ltd.-Respondent No.6 herein constructed on NA land of Final Plot No.212 of TP Scheme No.19 allotted in lieu of Survey No.170/2, 172 & 120 paiki situated at Mouje: Shaikhpur-Khanpur, Taluka: Sabarmati in the Registration District of Ahmedabad and Sub-District of Ahmedabad (Memnagar), as being illegal, unjust, unreasonable and contrary to the provisions of SARFAESI Act and also violative of the statutory and fundamental rights of the Petitioner and to cancel any kind of attachment or charge of the Respondent No.2 (if any), in the interest of justice and equity.
(D) YOUR LORDSHIPS may be pleased to issue a writ in the nature of mandamus or a writ of certiorari or any other appropriate writ, order or direction directing the Respondent and specially Respondents No.2 to 5 to record the name of the Petitioner as owner in the property card/revenue record / record of the society /share certificate of the subject property forthwith, being an successful auction purchaser of the subject property. Page 8 of 12 Uploaded by BINA SHAH(HC00353) on Fri Apr 25 2025 Downloaded on : Sat Apr 26 03:31:38 IST 2025
NEUTRAL CITATION C/SCA/12854/2022 JUDGMENT DATED: 04/04/2025 undefined (E) YOUR LORDSHIPS may be pleased to issue a writ in the nature of mandamus or a writ of certiorari or any other appropriate writ, order or direction holding the proceedings initiated by the Respondent No.2 qua the subject property by way of the attachment notice dated 11.08.2021 as being null and void and of no effect.
(F) Pending hearing and final disposal of the captioned writ petition, YOUR LORDSHIPS may be pleased to stay the operation, implementation and execution of the impugned attachment notice dated 11.08.2021 and to stay proceedings being conducted by the Respondent No.2 pursuant to and/or in connection therewith;
(G) Ad-interim relief in terms of para 10(F) be granted by this Hon'ble Court.
(H) Any other and further orders that are deemed necessary in the interests of justice may be passed."
6. Learned advocates for the Petitioners submitted that once the share certificate has been issued then as held by a catena of decisions of this Court, the secured creditors of the assets under sale will have priority over Government debts and taxes due to the State Government by virtue of Section 26E of the SARFAESI Act, 2002. Reliance was placed upon the following decisions :-
1. Kalupur Commercial Co.Operative Bank Ltd. Vs. State of Gujarat [Special Civil Application No. 17891 of 2018]. 2 Bank of India Vs. State of Gujarat and others [Special Civil Application No. 13863 of 2014].
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3. Axis Bank Vs. State of Gujarat and others [Special Civil Application No.124 of 2019].
7. Learned advocates for the respective Respondents have failed to controvert the arguments advanced by the Petitioners and have failed to counter the applicability of the decisions cited by the learned Counsel for the Petitioners.
8 DISCUSSION & FINDINGS :-
8.1 From the records of the case, we find that the CERSAI Registration of the Assets in question is prior to the issuance of notice under Section 152 of the Bombay Land Revenue Code, 1879.
In both the cases, the date of registration of the charge by the Bank in the CERSAI portal is 08.09.2016 which is prior to the respective attachments created by the State Tax Authorities. 8.2 In the above conspectus of facts, the decisions relied upon by the respective learned Counsel for the Petitioners would be squarely applicable.
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NEUTRAL CITATION C/SCA/12854/2022 JUDGMENT DATED: 04/04/2025 undefined 8.3 In the decision of this Court in the case of Bank of India Vs. State of Gujarat and others passed in Special Civil Application No. 13863 of 2014 after considering the entire gamut of the provisions of the SARFAESI Act, 2002 and the interplay of the VAT Act 2003, and several decisions of the Hon'ble Apex Court and various Hon'ble High Courts, it has been conclusively and emphatically held as under :-
"10. Mr. Dave, the learned AGP, pointed out that sometime in 2013-14, the assessment proceedings were finalized and the liability towards the dues under the VAT was determined. However, such determination, on conclusion of the assessment proceedings, would not save the situation for the State because the charge of the Bank is much more prior in point of time. To put it briefly, the insertion of Section 31B of the RDB Act will give priority to the secured creditors even over the subsisting charges under the other laws on the date of the implementation of the provision. The rights of a secured creditor to realize its secured debts due and payable by sale of assets over which security interest is created would have priority over all government debts and dues including revenue and taxes due to the State Government."
8.4. In Axis Bank (Supra), the aforesaid decision of this Court in Kalupur (Supra) and Bank of India (Supra) were followed. Page 11 of 12 Uploaded by BINA SHAH(HC00353) on Fri Apr 25 2025 Downloaded on : Sat Apr 26 03:31:38 IST 2025
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9. Accordingly, the secured creditors namely the Union Bank of India by virtue of having prior charge over the assets in question will have priority over the Crown Debts. Thus, by virtue of Section 26E of the SARFAESI Act, 2002, the auction purchasers namely the Petitioners herein would be entitled to receive the auction property free from the encumbrance of the Crown Debts, which in the instance case are the State Tax dues. Accordingly, the respective Notices of attachment, both dated 11.08.2021 are hereby quashed and set aside. Therefore the petitions succeed and are accordingly allowed. Rule is made absolute to the aforesaid extent. No order as to costs.
(BHARGAV D. KARIA, J) (D.N.RAY,J) BINA SHAH Page 12 of 12 Uploaded by BINA SHAH(HC00353) on Fri Apr 25 2025 Downloaded on : Sat Apr 26 03:31:38 IST 2025