Gujarat High Court

Hina Manubhai Panchal vs State Of Gujarat on 4 April, 2025

Author: Bhargav D. Karia

Bench: Bhargav D. Karia

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                             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
                         ==========================================================

                                     Approved for Reporting                 Yes           No

                        ==========================================================
                                                    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
                        ==========================================================
                             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

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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.

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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,

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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

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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

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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

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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 :-

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"(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.

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(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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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.

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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