Gujarat High Court
Axis Bank Limited vs State Of Gujarat on 4 May, 2022
Bench: J.B.Pardiwala
C/SCA/124/2019 ORDER DATED: 04/05/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 124 of 2019
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AXIS BANK LIMITED
Versus
STATE OF GUJARAT & 5 other(s)
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Appearance:
MR PM DAVE(263) for the Petitioner(s) No. 1
MR UTKARSH SHARMA, AGP GOVERNMENT PLEADER for the
Respondent(s) No. 1,2,6
MR YOGESHKUMAR A RATANPARA(7260) for the Respondent(s) No. 5
NOTICE SERVED for the Respondent(s) No. 3,4
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CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 04/05/2022
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)
1. By this writ-application under Article 226 of the Constitution
of India, the writ-applicant has prayed for the following reliefs:-
16(A) Be pleased to quash and set aside the action of
respondent no.2 authority in registering the charge of
attachment on the subject property being "Godown Property
constructed on land admeasuring 429-18 sq.mtr. Of City Sy.
No.2863 of Street No.90 at Manavadar, DistL Junagadh" as
being illegal, unjust, unreasonable, contrary to the provision
of the Securitization and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 as also
violative of statutory rights of the petitioner bank and
cancel the charge of respondent no.2 authority, in the
interest of justice and equity;
(B) Be pleased to direct respondent no.6 authority to record
the name of respondent no.5 in the property card of the
C/SCA/124/2019 ORDER DATED: 04/05/2022
subject property forthwith, being an auction purchaser of
the subject property, pending admission, hearing and final
hearing of the present petition in the interest of justice;
(C) Be pleased to grant such other and further reliefs as
may be deemed fit and proper by this Hon'ble Court, in the
interest of justice;
2. We need not delve much into the facts of this litigation as
the issue involved is in a very narrow compass and no longer res-
integra in view of the two pronouncements of this High Court as
under:
(1) Bank of India vs. State of Gujarat and others
[Special Civil Application No.13863 of 2014; decided on
21st January 2020].
(2) Kalupur Commercial Co-operative Bank Ltd. vs. State of
Gujarat
[Special Civil Application No.17891 of 2018; decided on
23rd September 2019].
3. The respondents nos.3 and 4 respectively are the original
borrowers. They had availed loan facility from the writ-applicant -
bank. At the time of grant of the necessary finance, the original
borrowers had mortgaged the subject property and thereby, had
created a charge in favour of the writ-applicant - bank. As the
original borrowers defaulted in the repayment of the loan amount,
the subject property was taken over by the writ-applicant - bank in
accordance with the provisions of the SARFAESI Act, 2002 and was
ultimately, put to auction. The respondent no.5 was declared as the
highest bidder in the public auction conducted by the bank. The
bid ultimately came to be finalized in favour of the respondent
no.5. The bank has put the respondent no.5 in possession of the
C/SCA/124/2019 ORDER DATED: 04/05/2022
subject property. The sale certificate has also been issued by the
bank. The sale-deed has also been registered in favour of the
respondent no.5 duly executed by the bank.
4. The bank is here before this Court with the present writ-
application as the State has got its charge mutated in the revenue
records with respect to the dues to be recovered from the original
borrowers towards VAT.
5. We have heard Mr. P.M. Dave, the learned counsel appearing
for the writ-applicant; Mr. Utkarsh Sharma, the learned AGP
appearing for the State respondents and Mr. S.M. Kikani, the
learned counsel appearing for the respondent no.5.
6. It is the case of the bank that in accordance with the
provisions of the SARFAESI Act, more particularly, Section-26E and
also, in view of the two pronouncements of this High Court one in
the case of Bank of India vs. State of Gujarat and others; and
another in the case of Kalupur Commercial Co-operative Bank Ltd.
vs. State of Gujarat, the bank will have the first precedence and the
department cannot put forward its claim for the purpose of
recovering the dues towards VAT.
7. We quote the relevant paragraphs of the judgment rendered
in Kalupur Commercial Co-operative Bank Ltd. (supra) as under:
"54. In view of the aforesaid discussion, We have no
hesitation in coming to the conclusion that the first priority over
the secured assets shall be of the Bank and not of the State
Government by virtue of Section 48 of the VAT Act, 2003.
C/SCA/124/2019 ORDER DATED: 04/05/2022
55. In the result, this writ application succeeds and is hereby
allowed. The impugned attachment notice dated 22.01.2018
(Annexure-A) and the impugned communication dated 19.04.2018
(Annexure-B) issued by the respondent No.2 is hereby quashed
and set aside. It is hereby declared that the Bank has the first
charge over the properties mortgaged from M/s. M.M. Traders by
virtue of Section 26E of the SARFAESI Act.
56. It is further clarified that the excess, if any, shall be
adjusted towards the dues of the State under the VAT Act. It is
further declared that the respondents cannot proceed against the
purchasers of the properties sold under the SARFAESI Act."
8. What came to be purchased by the writ-applicant in the
auction proceedings conducted by the Bank of Baroda was a secured
asset under the provisions of the SARFAESI Act. In such circumstances,
the State cannot claim preference over the subject property for the
purpose of recovery of the dues towards tax. It is not in dispute that the
first charge was created in favour of the bank and the bank in exercise
of its powers under the SARFAESI Act, put the subject property to
auction.
9. In view of the settled position of law, this writ-application
succeeds and is hereby allowed. It is hereby declared that the State
cannot claim any first charge over the subject property on the strength of
Section-48 of the GVAT Act, 2003. The respondent no.6 is directed to
post and certify a mutation entry to record the certificate of sale by the
writ-applicant - bank in favour of the respondent no.5 with respect to
the subject property.
If there is any entry of the State in the form of charge in the
revenue records, the same stands deleted.
C/SCA/124/2019 ORDER DATED: 04/05/2022
10. With the aforesaid, this writ-application stands disposed of
accordingly.
Direct service is permitted.
(J. B. PARDIWALA, J)
(NISHA M. THAKORE,J)
A. B. VAGHELA
