Gujarat High Court
Hardik Narsinhbhai Patel vs State Of Gujarat on 2 January, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/5840/2023 ORDER DATED: 02/01/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 5840 of 2023
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HARDIK NARSINHBHAI PATEL
Versus
STATE OF GUJARAT & ORS.
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Appearance:
DEV D PATEL(8264) for the Petitioner(s) No. 1
GOVERNMENT PLEADER for the Respondent(s) No. 1,2,3
MR NEERAJ J VASU(3159) for the Respondent(s) No. 5
MR TATTVAM K PATEL(5455) for the Respondent(s) No. 4
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 02/01/2025
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr.Dev D. Patel for the petitioner and learned Assistant Government Pleader Ms.Shrunjal Shah for the respondent No.1.
2. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following reliefs : Page 1 of 13 Uploaded by JYOTI V. JANI(HC00213) on Thu Jan 16 2025 Downloaded on : Fri Jan 17 22:20:33 IST 2025
NEUTRAL CITATION C/SCA/5840/2023 ORDER DATED: 02/01/2025 undefined "(a) to issue writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or directions, quashing and setting aside the impugned order dated 02.04.2020 passed by State Tax Officer-(1), Unit-33, Kadi and Revenue Entry No. 35500 mutated in the revenue record of land bearing Survey No. 715 paiki 2 admeasuring 5132 sq.yards of village-Kadi Kasba, Taluka-Kadi, District-
Mehsana (Annexure A);
(b) to issue writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or directions, quashing and setting aside the impugned order dated 30.01.2023 passed by Ld Deputy Collector (Prant Adhikari), Kadi in RTS Takrari Case No. 433/2022 (Annexure B) and further be pleased to direct respondents to certify Entry No. 36412 in the revenue record of Land bearing Page 2 of 13 Uploaded by JYOTI V. JANI(HC00213) on Thu Jan 16 2025 Downloaded on : Fri Jan 17 22:20:33 IST 2025 NEUTRAL CITATION C/SCA/5840/2023 ORDER DATED: 02/01/2025 undefined Survey No. 715 paiki 2 admeasuring 5132 sq.yards of village-Kadi Kasba, taluka-Kadi, District- Mehsana."
3. The brief facts of the case are as under :
3.1. The petitioner purchased a land bearing Survey No. 715 paiki 2 admeasuring 5132 sq.yards of village-Kadi Kasba, Taluka-Kadi, District-Mehsana by way of registered sale deed dated 23.07.1990.
Entries to that effect were mutated in the revenue records vide Entry Nos. 7591 and 7889. The petitioner also put up construction upon the said land after getting construction permission on 20.09.1990.
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NEUTRAL CITATION C/SCA/5840/2023 ORDER DATED: 02/01/2025 undefined The petitioner availed the credit facility of total Rs. 469 lakh including term loan and cash credit respectively from Union Bank of India against the equitable mortgage deed.
3.2 Since, there has been default in repayment of loan, the petitioner Bank issued a demand notice dated 30.08.2018 u/s. 13(2) of the Securitisation and Reconstructions of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'the SARFAESI Act') and further took symbolic possession of the premises. The Bank further published auction sale notice on 01.01.2022 and in the said auction, sale has been confirmed in favour of the petitioner for the amount of Rs. 1,41,20,000/-.
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NEUTRAL CITATION C/SCA/5840/2023 ORDER DATED: 02/01/2025 undefined 3.3 It is further the case of the petitioner that the Bank further executed a sale deed and placed the same before the Registrar, Kadi for registration. However, due to complaint filed by one Patel Prakash Ashokbhai-respondent No.4 herein against one of the partners of M/s. Keshar Oil Industries, the Registrar, Kadi refused registration of the sale deed on the ground of imposition of bail condition against one of the partners of M/s. Keshar Oil Industries imposed in CRMA No. 12503 of 2018 by this Court. The Bank therefore preferred CRMA No. 1 of 2022 in CRMA No. 12503 of 2018. This Court, vide order dated 10.08.2022, allowed the application of the Bank and also lifted the restriction of sale on the said premises. Page 5 of 13 Uploaded by JYOTI V. JANI(HC00213) on Thu Jan 16 2025 Downloaded on : Fri Jan 17 22:20:33 IST 2025
NEUTRAL CITATION C/SCA/5840/2023 ORDER DATED: 02/01/2025 undefined 3.4 Thereafter, a sale deed was executed by the Bank in favour of the petitioner and the same came to be registered at Serial No. 15129 of 2022 by the Registrar, Kadi. Consequently, a revenue Entry No. 36412 came to be mutated in the revenue records.
3.5 Thereafter, respondent No.4 has filed objection against the mutation of the said entry whereby RTS Takrari Case No. 433 of 2022 came to be registered. 3.6 Further, respondent No.2-State Tax Officer vide letter dated 12.01.2023 stated that for the outstanding amount pending towards the VAT, the said land is attached vide order dated 04.07.2020 and an Entry no. 35500 dated 14.10.2020 has been mutated.
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NEUTRAL CITATION C/SCA/5840/2023 ORDER DATED: 02/01/2025 undefined 3.7 It is the case of the petitioner that the learned Deputy Collector without appreciating provisions of law, cancelled revenue Entry No. 36412 vide order dated 30.01.2023. Further, the Corporation Bank had registered the charge created upon the said land before the Central Registry of Securitization Asset Reconstruction and Security Interests of India under the SARFAESI Act.
Being aggrieved by the same, the petitioner has preferred the present petition.
4. Learned advocate Mr.Dev D. Patel for the petitioner submitted that as per the provisions of Section 26D of the SARFAESI Act, the petitioner has already registered the charge with the Central Registry under Page 7 of 13 Uploaded by JYOTI V. JANI(HC00213) on Thu Jan 16 2025 Downloaded on : Fri Jan 17 22:20:33 IST 2025 NEUTRAL CITATION C/SCA/5840/2023 ORDER DATED: 02/01/2025 undefined the provisions of the the SARAFESI Act and accordingly, as per the provisions of Section 26E of the SARFAESI Act, the petitioner is having the priority of the charge on the mortgaged property over the dues of the respondents-State. 4.1 It was further submitted that as per the settled legal position as held by this Court in case of Kalupur Commercial Cooperative Bank Limited versus State of Gujarat rendered in Special Civil Application No.17891 of 2018 as well as the decision in case of Partners of Siddheshwar Tax Fab & Ors versus State of Gujarat & Ors rendered in Special Civil Application No.2527 of 2023, the petitioner being a secured creditor shall have the priority of the charge upon the mortgaged property over the dues of the Page 8 of 13 Uploaded by JYOTI V. JANI(HC00213) on Thu Jan 16 2025 Downloaded on : Fri Jan 17 22:20:33 IST 2025 NEUTRAL CITATION C/SCA/5840/2023 ORDER DATED: 02/01/2025 undefined respondent-State and therefore, the attachment order passed in the year 2011 by the respondent is liable to be quashed and set aside and accordingly, mutation of the revenue entries is required to be cancelled.
5. On the other hand, learned Assistant Government Pleader Ms.Shrunjal Shah for the respondent No.1 could not controvert the facts of the case to the effect that petitioner had created the charge over the properties in the year 1988 whereas, the attachment order under Section 48 of the SARFAESI Act was passed in the year 2011.
6. Considering the above submissions, it would be germane to refer to the decision of this Court in case of Partners of Siddheshwar Tax Fab & Ors versus State of Page 9 of 13 Uploaded by JYOTI V. JANI(HC00213) on Thu Jan 16 2025 Downloaded on : Fri Jan 17 22:20:33 IST 2025 NEUTRAL CITATION C/SCA/5840/2023 ORDER DATED: 02/01/2025 undefined Gujarat & Ors (supra) which read as under :
"36. From the above, it is clear that the Judgment in case of Rainbow Papers Ltd. (Supra) is confined to the facts of the said case only and therefore, it would not be required to relook the decision of the Kalupur Commercial Cooperative Bank (Supra) considering the decision of the Rainbow Papers Ltd. (Supra) of the Apex Court, as the facts of the present case are in the realm of the provisions of the RDB Act decision and of SARFAESI the Apex Act, whereas Court in case the of Rainbow Papers Ltd. (Supra) was in realm of IBC Code confined to the facts of the said case as observed in the subsequent decision of the Apex Court.
37. It is also pointed out by the learned AGP that Papers the Ltd. Decision (Supra) of was the Rainbow considered in review, which is disposed of by the Apex Court as per para 26 and 27 extracted herein above. In such circumstances, we are of the decision opinion of the that Hon'ble the Apex subsequent Court, in case of Rainbow Papers Ltd. (Supra) would not be applicable Page 10 of 13 Uploaded by JYOTI V. JANI(HC00213) on Thu Jan 16 2025 Downloaded on : Fri Jan 17 22:20:33 IST 2025 NEUTRAL CITATION C/SCA/5840/2023 ORDER DATED: 02/01/2025 undefined with regard to the applicability of provision of Section 26E of the SARFAESI Act as well as provisions of Section 31B of RDB Act vis-a-
visSection 48 of the vat Act as analysed and discussed by this Court in Kalupur Commercial Cooperative Bank (Supra).
38. In view of the above analysis and facts, we would also like to refer to the subsequent decision of the Coordinate Bench in case of Odhavji Mohanbhai Gadhiya Vs. State of Gujarat (supra), wherein it is observed by this Court, that it is a settled legal position that VAT and Sales Tax dues has no precedence over the dues of the Bank for recovery of which the bank exercises powers under the SARFAESI Act and dues in nature of sales tax and VAT payable by the original owner cannot claim priority over the dues of the secured creditor and the principle that the state debt or crown debt has no prior claim or the dues payable to the secured creditors is no longer resintegra,wherein the Coordinate Bench of this Court has also referred to the decision of the Hon'ble Apex Court in case of Bank of Bihar Vs. State of Bihar reported in (1972) 3 SCC 196 which is followed in the decision of the Dena Bank (Supra) and the Page 11 of 13 Uploaded by JYOTI V. JANI(HC00213) on Thu Jan 16 2025 Downloaded on : Fri Jan 17 22:20:33 IST 2025 NEUTRAL CITATION C/SCA/5840/2023 ORDER DATED: 02/01/2025 undefined law laid down is that preferential right of the Crown to recover the debt over the creditors is limited to the class of unsecured creditors and the common law principles of of England equity or and the good conscience would not allow the Crown to have preferential right for recovery of debt over the mortgagee or pledge of goods of secured creditors.
39. In view of the above settled legal position, the charge in respect of the property in question created for sales tax dues or VAT dues is of no availand has no efficacy in law in view of the provisions of SARFAESI Act and the RDB Act. The property in question was sold by respondent no.6-Bank under the provisions of SARFAESI Act and the petitioners were successful purchasers and the sale certificate is issued and sale deed is also executed by which the petitioners have become absolute owners of the property and therefore considering the existing position of law, the charge created by the respondent State over the property in question in the year 2018, cannot be sustained and is accordingly quashed and set aside and as a consequence the mutation entries in revenue records also stands Page 12 of 13 Uploaded by JYOTI V. JANI(HC00213) on Thu Jan 16 2025 Downloaded on : Fri Jan 17 22:20:33 IST 2025 NEUTRAL CITATION C/SCA/5840/2023 ORDER DATED: 02/01/2025 undefined deleted. The petition accordingly succeeds in the aforesaid terms. Rule is made absolute to the aforesaid extent. No order as to costs."
7. In view of the above settled legal position, the attachment order of the respondent-State would not survive and is accordingly ordered to be quashed and set aside and consequently, the mutation entries in the revenue record also stand cancelled. The petition is accordingly disposed of. No orders as to cost.
(BHARGAV D. KARIA, J) (D.N.RAY,J) JYOTI V. JANI Page 13 of 13 Uploaded by JYOTI V. JANI(HC00213) on Thu Jan 16 2025 Downloaded on : Fri Jan 17 22:20:33 IST 2025