Gujarat High Court

Chintan Bharatbhai Patel vs State Of Gujarat on 2 January, 2025

Author: Bhargav D. Karia

Bench: Bhargav D. Karia

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                               C/SCA/22131/2022                                    ORDER DATED: 02/01/2025

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                                      IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                       R/SPECIAL CIVIL APPLICATION NO. 22131 of 2022

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                                                        CHINTAN BHARATBHAI PATEL
                                                                  Versus
                                                         STATE OF GUJARAT & ORS.
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                        Appearance:
                        ARPIT R SINGHVI(9524) for the Petitioner(s) No. 1
                        MR SP MAJMUDAR(3456) for the Petitioner(s) No. 1
                        MR RAJ TANNA, AGP for the Respondent(s) No. 1,3
                        MR RITURAJ M MEENA(3224) for the Respondent(s) No. 6
                        NOTICE SERVED BY DS for the Respondent(s) No. 2,4,5
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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. Arpit Singhvi

for the petitioner and learned Assistant

Government Pleader Mr. Raj Tanna for

respondent Nos. 1 and 3.

2. By this petition under Article 226 of the

Constitution of India, the petitioner has

prayed for quashing and setting aside the

order of attachment passed by the

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respondent-authority under the provision

of the Gujarat Sales Tax Act, 1961 and the

consequential entries made in the revenue

record.

3. Brief facts of the case are as under:

3.1 The petitioner along with four

other persons, purchased a land situated

admeasuring 7571 sq.mtrs from the Court

Commissioner/Receiver appointed by the

Debts Recovery Tribunal. The petitioner

purchased the said property in an auction

held by Dena Bank under the The

Securitisation And Reconstruction Of

Financial Assets And Enforcement Of

Security Interest Act, 2002

['Securitization Act' for short]. The said

land was originally converted into non-

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agriculture land by order dated

08.09.2010. The petitioner after purchase

of the same, had applied for revised non-

agriculture permission. The Collector,

Patan dismissed the said application of

the petitioner vide order dated 27.07.2022

by stating that there is a charge of Sales

Tax Department over the property in

question and therefore, the revised N.A

permission cannot be granted.

3.2 It is the case of the petitioner

that there is mutation of Entry No. 6127

dated 17.09.2013 which reflects the

outstanding dues of Sales Tax Department

over the said land and the said entry was

based on order dated 26.08.2013 of the

Commercial Tax Recovery Officer.

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3.3 It is further the case of the

petitioner that Entry No. 6492 of

04.04.2015 was also mutated in the revenue

records on 04.04.2015 stating further

charge of Sales Tax Department over the

land in question and the said entry was

mutated with regard to outstanding dues of

VAT for a period from 01.12.2012 to

31.12.2012.

3.4 Since the rights of the petitioner

over the property in question got

frustrated by the aforesaid entries of

charge mutated in the revenue record, the

petitioner approached this Court by way of

present petition with the aforesaid

prayers.

4. Learned advocate for the petitioner

submitted that the petitioner has

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purchased the property in question from

the Court Commissioner/receiver appointed

by the Debts Recovery Tribunal under the

Securitisation Act. It was submitted that

the petitioner was the auction purchaser

of the property and sale deed was executed

in favour of the petitioner on 26.02.2019

and at that point of time, there was no

order of attachment passed by respondent-

Sales Tax Department. It was submitted

that the petitioner after purchasing the

property applied for passing the mutation

entry in the revenue record which was

rejected by the Collector on the ground

that there was charge of Sales Tax

Department over the property in question.

4.1 It was submitted that the

respondent-Bank had registered the charge

on 11.10.2010 whereas, the Sales Tax

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Department has registered the charge

subsequently in the year 2018 and

therefore, in view of the decision of this

Court in case of Kalupur Commercial Co-

operative Bank Limited vs. State of

Gujarat rendered in Special Civil

Application No. 17891 of 2018, the

respondent-authorities be directed to

remove the charge from the revenue record

by quashing and setting aside the impugned

order of attachment passed by the

respondent-Sales Tax Department.

5. On the other hand, learned Assistant

Government Pleader Mr.Raj Tanna for the

respondent No.1 submitted that it is not

in dispute that the respondent-Authorities

have registered the charge subsequent to

that of the charge created by the

petitioner-Bank.

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6. In case of Partners of Siddheshwar Tax Fab

& Ors vs. State of Gujarat and ors

rendered in Special Civil Application

No.2527 of 2023, this Court held 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

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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 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

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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 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 settle 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

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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 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, the impugned order

of attachment is quashed and set aside.

The respondent-authorities are directed to

remove the charge over the property in

question as it is not in dispute that the

respondent-Bank has created the charge

prior in point of time and hence, as per

the settled legal position, the charge

created by the Sale Tax Department

subsequently in the Year 2017-18 would not

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