State Bank Of India, Nagpur ... vs The State Of Maharashtra Thr. ...
2021 Latest Caselaw 10253 Bom

    Judgment                                 1                                    w p579.21



                  IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
                            NAGPUR BENCH, NAGPUR.


                               WRIT PETITION NO. 579/2021


          State Bank of India,
          A Corporation constituted under
          the State Bank of India Act, 1955
          and having one of its branch
          office amongst others known as Stressed
          Asset Resolution, Branch 5, Sai Complex,
          Bharat Nagar, Nagpur
          Acting Through one of its Asst. General Manager
          having authority to file the application
          which includes the authority to verify
          and sign the application
                                                                      .... PETITIONER

                                      // VERSUS //

 1]       The State Of Maharashtra,
          Through its Secretary,
          Ministry Of Finance/Revenue,
          Mantralaya, Mumbai 32

 2]       The Collector/District Magistrate,
          LIC Square, Bangar Nagar, Yavatmal
          Maharashtra 445001
          [email protected]

 3]       Inspector General Of Registration &
          Controller Of Stamps, Maharashtra
          C/o. Office of the Inspector General of Registration
          and Controller of Stamps,
          Ground Floor, Opposite Vidhan Bhavan (Council Hall),
          New Administrative Building, Pune 411001,
          Maharashtra, India

 4]       Jt. Collector Of Stamps And Registration,
          New Administrative Building,
          Ground Floor, Yavatmal
          [email protected]




 ANSARI


::: Uploaded on - 04/08/2021                         ::: Downloaded on - 05/08/2021 06:56:23 :::
     Judgment                                  2                                  w p579.21




 5]       The Sub-Registrar, Class I,
          Shri S. S. Patil,
          Zarijamni Office, Tahsil Building,
          1st Floor, Zarimani, Tah. Zarimani,
          District Yavatmal
          [email protected]

 6]       The Taluka Dandadhikari/Tahsildar,
          Office Of The Collector, Yavatmal

 7]       Government of Maharashtra,
          Through its Sales Tax Department,
          VAT-C-022, Recovery Branch,
          1st Floor, Vikrikar Bhavan, Civil Lines,
          Nagpur, acting through its Sales Tax Officer
                                                                .... RESPONDENT(S)

  *******************************************************************
               Shri M. Anilkumar, Advocate for the petitioner
           Ms. S.S. Jachak, AGP for the respondent nos. 1 to 4 & 6
  *******************************************************************

                 CORAM : A.S. CHANDURKAR & AMIT B. BORKAR, JJ.

JUDGMENT RESERVED ON :- 27/07/2021 JUDGMENT PRONOUNCED ON :- 04/08/2021

JUDGMENT : (PER:- AMIT B. BORKAR, J.)

1] RULE. By consent of the parties, Rule is made returnable

forthwith.

2] By this writ petition, the petitioner is seeking direction against

the respondent no. 5 - Sub-Registrar (Class-I) to register sale certificate on

receipt of stamp duty and registration charges. In addition to the said prayer,

the petitioner is also seeking a direction against the respondent no. 7 -

 ANSARI



     Judgment                                  3                                 w p579.21

Government of Maharashtra, Through Sales Tax Department to take action

against the defaulters for evading taxes and attaching their movable

properties and not to obstruct the sale of the properties by the petitioner -

Bank for recovery of its dues. The petitioner has also sought a declaration

that the respondent nos. 1 and 2 i.e. the State of Maharashtra, Through

Ministry of Finance / Revenue and the Collector, Yavatmal are not entitled to

recover the dues in view of mandate of Section 26-E of the Securitization and

Reconstruction of Financial Assets and Enforcement of Security Interest Act,

2002 (for short "the Act of 2002").

3] The facts relevant for adjudication of the issues involved in the

present petition are as under :-

The petitioner - Bank is a Public Sector Nationalized Bank

constituted under the Banking Companies (Acquisition and Transfer of

Undertakings) Act, 1970. The petitioner - Bank initiated proceedings under

the provisions of the Act of 2002. The certificate of sale dated 28/09/2020

was issued in favour of Ms. Maroti Cottons, Proprietor : Shilpa Preetam

Kohar in exercise of power under the Security Interest (Enforcement) Rules,

2002 (for short "the Rules of 2002"). The copy of the certificate of sale is

annexed at Exh. II.

4] The main grievance in this petition is as regards the

communication dated 19/10/2020 issued by the respondent no. 5 (Registrar

of Assurances, Class-I, Tah. Zarijamni, Dist. Yavatmal) by which the

ANSARI

Judgment 4 w p579.21

respondent no. 5 refused to register the aforesaid sale certificate in

accordance with the provisions of the Registration Act, 1908 (for short "the

Act of 1908"). The petitioner has therefore filed the present petition seeking

various reliefs. During the course of hearing, learned advocate for the

petitioner pressed for prayer clauses (f), (f-a) & (f-b) only, which are referred

to in paragraph no. 2 above.

5] This Court by the order dated 29/01/2021 issued notices to the

respondents and directed the petitioner to add the Sales Tax Department as

party respondent. In pursuance of the notice issued by this Court, the

respondents have appeared and have filed their reply. The reply is filed by

Tejrao Kisan Pacharne, Joint Commissioner of State Tax (Adm.), Amravati

Division, Amravati. In the reply, it is stated that the Sales Tax Department has

first charge over the dues of the secured creditor in view of Section 37 of the

Maharashtra Value Added Tax Act (for short "MVAT Act"). It is stated that the

charge created under Section 37 read with Section 100 of the Transfer of

Property Act will continue with the property even if the property is sold by

the mortgagor, and therefore the purchaser will have to discharge the liability

before registration of sale certificate. It is stated that the property in respect

of which the sale certificate was issued has been attached under the

provisions of the Maharashtra Land Revenue Code, and therefore the

purchaser will have to pay an amount of Rs. 01,04,89,132/- excluding

accrued statutory interest thereon.

 ANSARI



     Judgment                                5                                  w p579.21



 6]               Learned advocate for the petitioner submitted that the Act of

2002 being the Central Statute, the secured creditor shall have the first right

to recover its dues from property of the borrower in view of Section 26-E of

the Act of 2002. He submitted that Section 37(1) of the MVAT Act shall not

override the rights of the secured creditor protected under Section 26-E of

the Act of 2002 as the language of Section 37 makes the sales tax dues

subject to the provisions under the Central Act. He submitted that even

otherwise also, the Registrar of Assurances has no power to consider any

other factors than the factors mentioned under Rule 44 of the Maharashtra

Registration Rules, 1961 (for short "the Rules of 1961"). He placed reliance

on the judgments in the case of State Bank of India vs. State of Maharashtra

reported in 2021 (2) Mh.L.J. 721, in the case of ASREC (India) Limited,

Mumbai vs. State of Maharashtra reported in 2020 (2) BCR 243 and in the

case of Axis Bank Limited, Mumbai vs. State of Maharashtra & anr. reported

in 2017 (3) BCR 456.

7] Per contra, learned AGP submitted that in view of the language

of Sub-section (1) of Section 37 of the MVAT Act, the first charge is created

over the property of the borrower and the said charge being the statutory

charge, it will go with the property and will follow the property, whoever

may be the purchaser. She submitted that the petitioner - Bank had sufficient

knowledge of the attachment and encumbrances over the said property,

therefore it is the duty of the purchaser to clear the dues of the respondent

no. 7. The sale certificate issued in favour of the auction purchaser can be

ANSARI

Judgment 6 w p579.21

registered by the Registrar of Assurances after getting the No Objection

Certificate from the respondent no. 7. She therefore submitted that the

Registrar of Assurances is therefore justified in refusing to register the sale

certificate issued in favour of the auction purchaser. She placed reliance on

the un-reported judgment of this Court in W.P. No. 7971/2019 (Medineutrina

Pvt. Ltd. vs. State of Maharashtra) dated 18/02/2021.

8] With the assistance of learned advocates for the respective

parties, we have carefully scrutinized the petition, affidavit-in-reply, rejoinder

along with its annexures and in particular the communication dated

19/10/2020 issued by the respondent no. 5 (Registrar of Assurances)

refusing to register the sale certificate issued as per the provisions of the

Rules of 2002. The Registrar of Assurances has refused to register the sale

certificate on the following grounds :-

"(1) The document is not routed through proper source.

(2) Demarcation of the area in the sale certificate is not done.

(3) The area of construction is not stated.

(4) The certified copy of 7/12 Extract is not annexed.

(5) Proper description of machinery on site is not mentioned.

(6) The stamp duty payable for sale certificate needs to be

adjudicated under the provisions of the Stamp Act before

registration.

(7) There is encumbrance of the Department of Sales Tax."

ANSARI

Judgment 7 w p579.21

9] Insofar as the Ground No. 1 regarding document not being

routed through proper source is concerned, the Authorized Officer being the

Competent Authority under the provisions of the Rules of 2002, he can

present the document before the respondent no. 5 for registration. Insofar as

the Ground Nos. 2 and 3 are concerned, the petitioner has shown willingness

to supply the details of the area as required by the respondent no. 5 and has

also shown its willingness to give the details of the area of construction.

Insofar as the Ground No. 4 is concerned, it is stated that now 7/12 Extracts

are available online and the same could be verified. Even otherwise, the

petitioner can get the certified copy of 7/12 Extract from the Competent

Authority under the Maharashtra Land Revenue Code. Insofar as the Ground

No. 5 regarding proper description of machinery in the property is

concerned, the same being movable property, it is not necessary to be

mentioned in the sale certificate. The provisions of the Act of 1908 apply only

to the immovable properties. Insofar as the Ground No. 6 regarding

document to be adjudicated from the Authorities under the Maharashtra

Stamp Act is concerned, the petitioner has shown its willingness to pay the

amount of stamp duty as per the ready reckoner as per the valuation of the

respondent no. 5, and therefore the said ground does not survive.

10] The main ground i.e. Ground No. 7 is regarding encumbrance of

the Department of Sales Tax. The respondent no. 7 in its reply has stated that

it has attached the property which is the subject matter of sale certificate

under the Maharashtra Land Revenue Code and has registered its

ANSARI

Judgment 8 w p579.21

encumbrance in revenue record. For deciding the said objection, it is

necessary to note that the State of Maharashtra made an amendment in the

form of Section 22-A of the Act of 1908 vide Act No. 24 of 1938 read with 35

of 1958. Section 22-A reads as under :-

"22-A. Documents registration of which is opposed to public

policy - (1) The State Government may, by notification in the

Official Gazette, declare that the registration of any document or

class of document is opposed to public policy.

(2) Notwithstanding anything contained in this Act, the

registering officer shall refuse to register any document to which a

notification issued under sub-section (1) is applicable."

11] At this stage, it is necessary to note that similar amendment

incorporated in the State of Rajasthan was challenged before the High Court

of Rajasthan. The High Court of Rajasthan held the said amendment to be

unconstitutional and struck it down. The decision of High Court of Rajasthan

holding the similar amendment as unconstitutional was affirmed by the

Hon'ble Supreme Court in the case of State of Rajasthan vs. Basant Nahata

reported in 2005 (12) SCC 77. It is pertinent to note that Section 22-A

introduced by the Maharashtra Act No. 24 of 1938 came to be deleted by the

Maharashtra Act No. 10 of 2012 which came into force on 25/05/2012. In

clause (h) of Sub-Rule (1) of Rule 44 of the Rules of 1961, there was a

provision made for giving effect to Section 22-A. It needs to be noted that by

the notification dated 27/06/2006, Clause (i) was added to Sub-Rule (1) of

ANSARI

Judgment 9 w p579.21

Rule 44 of the Rules of 1961 covering a transaction which is prohibited by

any existing Act of Central or State Government.

12] On careful reading of the last ground mentioned in the

communication dated 19/10/2020, it appears that the respondent no. 5 has

purportedly refused to register the sale certificate relying on Clause (i) of

Sub-Rule (1) of Rule 44 of the Rules of 1961, though it is not specifically

stated in the affidavit-in-reply filed by the respondent no. 5 or during the

submissions made on behalf of the respondents. It needs to be noted that

Sub-Section (1) of Section 22-A clearly provided that only if a notification is

published in the Official Gazette declaring that registration of any document

or class of document is opposed to any public policy, only then the question

of refusal of registration of the document will arise. Even otherwise, since

Section 22-A is no longer on the statute book, registration of the sale

certificate could not have been refused on the ground of same being in

contravention of Section 22-A of the Act of 1908. The ground of

encumbrance to refuse registration of a document is in relation to marketable

title of the property. We may make a useful reference to the decision of the

Hon'ble Supreme Court in the case of Satyapal Anand vs. State of Madhya

Pradesh and ors. reported in 2016 (10) SCC 767, and in particular para

no. 41 which reads thus :-

"41. Section 35 of the Act does not confer a quasi-judicial power on the Registering Authority. The Registering Officer is expected to reassure that the document to be registered is accompanied by supporting documents. He is not expected to evaluate the title or

ANSARI

Judgment 10 w p579.21

irregularity in the document as such. The examination to be done by him is incidental, to ascertain that there is no violation of provisions of the 1908 Act. In the case of Park View Enterprises, it has been observed that the function of the Registering Officer is purely administrative and not quasi-judicial. He cannot decide as to whether a document presented for registration is executed by person having title, as mentioned in the instrument. We agree with that exposition."

13] The purported source of power for rejection of sale certificate is

under Clause (i) of Sub-Rule (1) of Rule 44 of the Rules of 1961. The

notification dated 27/07/2006 published in the Official Gazette on

22/07/2006 incorporates Clause (e) (which is in Marathi) and Clause (i)

(which is in English). Clause (i) reads thus :-

"44(1). Before accepting any document for registration, a registering officer may not concern himself with its validity, but shall ascertain -

(a) .....

(b) .....

(c) .....

(d) .....

(e) .....

(f) .....

(g) .....

(h) .....

(i) that, if the transaction which is intended by the document, is prohibited by any existing act of Central or State Government, then the true copy of requisite permission or No Objection Certificate from the Competent Authority under the said act, has been attached along with the document, and that, the document

ANSARI

Judgment 11 w p579.21

is not written in contradiction with any vital term or condition mentioned in that permission or No Objection Certificate."

14] On plain reading of Clause (i), we are of the view that the

respondent no. 5 could not have purportedly invoked Clause (i). Sub-Rule

(1) of Rule 44 of the Rules of 1961 provides that before accepting any

document for registration, the Registering Officer is concerned with its

validity but he should ascertain the various factors set out in Clauses (a) to

(i). Clause (i) of Rule 44 of the Rules of 1961 will apply only when the

transaction is covered by the document which is prohibited by a Central or

State Statute. There is encumbrance of the Department of Sales Tax. The

Registering Officer shall have to ascertain whether the requisite permission

from the Competent Authority under the relevant enactment has been

obtained and is required to annex the said permission, if it is prohibited. The

Registering Officer will also have to ascertain whether the document

presented for registration is contrary to any of the terms and conditions

mentioned in the NOC granted by the Competent Authority. Undisputedly, in

the present matter, the respondents have not shown any such statutory

prohibition which enables the Registering Officer to refuse registration of the

sale certificate.

15] In view of the authoritative pronouncement of the Hon'ble

Supreme Court in the case of Satyapal Anand (supra), the Registering Officer

under the Act of 1908 has no power to adjudicate upon the issue of

ANSARI

Judgment 12 w p579.21

marketable title to the property. The power of the Registering Officer is

purely administrative and is not quasi judicial power. The Registering Officer

has no right to decide whether a person who has presented the document for

registration has marketable title or not.

16] Section 17(2)(xii) of the Act of 1908 specifically provides that a

certificate of sale granted to any purchaser of any property sold by public

auction by a Civil or Revenue Officer does not fall under the category of non-

testamentary document which requires registration under Sub-Sections (b) &

(c) of Section 17(1) of the Act of 1908. Such sale certificate does not require

registration which may have been issued by an Officer authorized by the

Court. It is well settled that when a property is sold by public auction, in

pursuance of an order of the Court and the sale is confirmed by the Court in

favour of the purchaser, the said becomes absolute and the title vests in the

purchaser. A sale certificate is issued to the purchaser only when the sale

becomes absolute. It is well settled that when an auction purchaser derives

title on confirmation of sale in his favour, no further deed of transfer from

the Court is required. The sale certificate itself is evidence to such sale and

title. Therefore, the respondent no. 5 ought to have taken into consideration

this position of law before refusing to register the sale certificate issued by

the Authorized Officer.

17] Much emphasis is made on Section 26-E of the Act of 2002 by

learned advocate for the petitioner - Bank. Insofar as the priority of the

ANSARI

Judgment 13 w p579.21

secured creditor to recover its debt over the liability to pay the tax under the

MVAT Act is concerned, the issue is no longer res-integra in view of the

pronouncement of the three judgments of the Division Bench of this Court in

the case of State Bank of India (supra), ASREC (India) Limited, Mumbai

(supra) and Axis Bank Limited, Mumbai (supra). It is categorically held by

this Court that if any Central Statute creates priority of a charge in favour of

the secured creditor, the same will rank above the charge in favour of the

State for a tax due under the Value Added Tax of the State. Therefore, it is

not necessary to dilate on the said issue anymore.

18] Learned AGP placed reliance on the un-reported judgment of

this Court in the case of Medineutrina Pvt. Ltd. (supra). This Court in the

said case, inter alia held that the dues under Section 37(1) of the MVAT Act,

being a statutory charge on the property, would also be recoverable by a sale

of property and thus puts a liability upon the auction purchaser, who in case,

wants an encumbrance free title, will have to clear such dues. In the facts of

the present case, the petition is filed by the Bank seeking relief of registration

of the sale certificate. Therefore, we are not making any adjudication on the

issue of right of the respondent no. 7 to recover its dues from the auction

purchaser.

19] For foregoing reasons, we are of the view that it is the duty of

the respondent no. 5 to register the sale certificate issued in favour of the

ANSARI

Judgment 14 w p579.21

auction purchaser by the Authorized Officer under the provisions of the Rules

of 2002.

20] Insofar as the prayer clause (f-a) is concerned, we have no

doubt that the respondent no. 7 is duty bound to take action against the

defaulter for evading taxes and recovering its dues by attaching their

movable properties. Second part of the prayer as sought by the petitioner is a

general prayer which needs to be adjudicated in the facts of each case and

this Court cannot grant omnibus prayer against the respondent no. 7 not to

obstruct the sale of the properties by the petitioner - Bank, in absence of

cause of action accrued in favour of the petitioner - Bank in an individual

case.

21] Insofar as the prayer clause (f-b) is concerned, as we have already

held that in view of the consistent view taken by this Court that the priority

of charge created under Section 26-E of the Act of 2002 in favour of the

secured creditor will rank above the charge in favour of a State for a tax due

under Value Added Tax of the State, in our opinion, the aforesaid position of

law takes care of prayer clause (f-b) prayed by the petitioner. Therefore, the

petition must partly succeed.

 22]              Hence, the following order:-

                  (a)          The communication dated 19/10/2020 is hereby

                  quashed and set aside.


 ANSARI



  Judgment                                    15                                  w p579.21



                  (b)          We direct the respondent no. 5 to register the sale

certificate dated 06/07/2020 subject to compliance of Ground

Nos. 2 and 3 and on payment of stamp duty as per the ready

reckoner and after following all the other requirements of law as

per the Registration Act, 1908.

(c) We direct that registration of the sale certificate

shall not be refused on the basis of encumbrance of the

respondent no. 7.

(d) We make it clear that we have not made any

adjudication on the issue of recovery of sales tax dues from the

auction purchaser, if recoverable as per law.

Rule is made partly absolute in the above terms. Pending

application(s), if any, stand(s) disposed of.

                   (JUDGE)                                   (JUDGE)




 ANSARI