State Bank Of India vs Commissioner Of Sales Tax & Anr

The petitioner Bank of India has filed present petition being aggrieved by order dated 03/05/2018 passed by Commissioner of Commercial Tax in

respect of property which is also mortgaged with the Bank. The Commercial Tax Department has issued a public notice for auctioning the property

and the contention of the Bank is that in light of the amendment published in official gazette on 16/08/2016 i.e. Enforcement of Security Interest and

Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016. Section 41 has been amended and the Bank is having first charge in

respect of all mortgaged properties over the dues of Commercial Tax Department.

He has drawn the attention of this Court towards two judgments delivered by this Court. First in the case of Punjab National Bank Vs. The State of

Madhya Pradesh (Writ Petition No.2151/2016, decided on 16/11/2016). He has also brought to the notice of this Court another judgment delivered in

case of Bank of India Vs. The State of Madhya Pradesh (Writ Petition No.4441/2015, decided on 03/07/2017) and his contention is that matter stands

concluded in light of the amendment.

This Court in Punjab National Bank Vs. The State of Madhya Pradesh (supra) has held as under:-

“WP-2151-2016

(PUNJAB NATIONAL BANK Vs THE STATE OF MADHYA PRADESH)

16-11-2016

Parties through their counsel.

Petitioner before this Court, Punjab National Bank, has filed this present petition against the attachment order dated 06.02.2016 issued by the

Additional Tehsildar and Commercial Tax Officer by which property in question has been attached by the respondent No.2 in order to recover the

commercial tax dues.

Learned counsel for the petitioner has vehementally argued before this Court that Bank is having first charge over the property in question and,

therefore, the property cannot be attached by the State Government nor by the Commissioner, Commercial Tax Department nor by the Commercial

Tax Officer.

He has drawn attention of this Court towards the notification published in the Gazette of India on 16.08.2016 in respect of Enforcement of Security

Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016. Section 41 of the aforesaid amendment reads as

under:-

“œ41€. In the principal Act, after section 31A, the following section shall be inserted, namely:-

“œ31B€. Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realise secured debts

due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts

and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority.

Explanation : For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016,

in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in

payment of debt shall be subject to the provisions of that Code.â€​€

The aforesaid amendment makes it clear that the Bank is having first charge over the property in question.

In light of the aforesaid insertion of 31B in the Act, no further orders are required to be passed in the matter. Petitioner-bank is having first charge

over the property in question. Resultantly, the impugned notice is hereby set aside. Petitioner bank shall be free to proceed further in the matter.

In other connected matters also, in light of the amendment, the notice issued by the Commercial Tax Officer/attachment order issued by the

respondents/ Commissioner of Sales Tax/State Government are set aside and the petitioner-bank shall be free to proceed ahead with the auction

process to recover the dues.â€​

In light of the aforesaid and keeping in view the the amendment, the petition stands allowed. The impugned auction notice Annex.-P/1 is hereby

quashed. The Bank shall be free to proceed ahead keeping in view the statutory provisions as contained in the Enforcement of Security Interest and

Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016.

It has been brought to the notice of this Court by learned counsel for the petitioner Bank that in spite of large number of judgments on the subject and

in spite of their being statutory provisions, the learned Sales Tax Commissioner is repeatedly issuing public notice in respect of properties mortgaged

with the Bank and every time Banks are being forced to approach this Court for quashment of public notice.

Let a copy of this order be forwarded to the learned Commissioner, Sales Tax, State of Madhya Pradesh as well as to the Principal Secretary,

Commercial Tax Department to ensure compliance of order passed by this Court in future. It is made clear in case the order passed by this Court and

the statutory provisions are not being complied with in other cases by the Sales Tax Commissioner and the Banks are forced to approach this Court,

this Court shall be imposing heavy cost upon the State of Madhya Pradesh.

With the aforesaid, writ petition stands allowed.

Certified copy as per rules.