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Madras High CourtWP(MD)/7111/2017dismissed

Assistant Commissioner v. The Regional Manager,

2017-06-05Honourable Mr Justice T. S. Sivagnanam,Honourable Mr Justice P. Velmurugan4 pages

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 05.06.2017

CORAM:

THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM AND THE HONOURABLE MR.JUSTICE P.VELMURUGAN W.P.[MD].No.7111 of 2017 and W.M.P.(MD).Nos.5626 and 5627 of 2017 Assistant Commissioner, Commercial Tax Department, Thirumangalam Assessment Circle, Thirumangalam, Madurai District.

: Petitioner Vs.

1.The Regional Manager, Central Bank of India, Raja Muthaiah Mandram, First Floor, Dr.Ambedkar Road, Madurai - 625 020 2.Authorised Officer, Central Bank of India, Raja Muthaiah Mandram, First Floor, Dr.Ambedkar Road, Madurai - 625 020.

3.M/s. Goodwill Team Paper (P) Ltd., rep. by its Managing Director P. Rajendran, Uthappanayakkanur, Usilai Taluk, Madurai District-625537.

...Respondents

PRAYER: Writ Petition is filed under Article 226 of the Constitution of India to issue a Writ of Certiorarified Mandamus to call for the records from the file of 2nd respondent Public EAuction Notice for sale of immovable properties of the third respondent dated 18.01.2017 and quash the same and consequently, forbearing the first and second respondent or his servant or his subordinate or anybody to conduct auction of the properties of the companies property in survey No.SF89/1A, 1.70.0 Hectares (4 Acre Cents) and Survey No.89/1B, 1.33.0 Hectare of Uthappanayakkanur, Usilai Taluk, Madurai District, on the strength of the possession taken by the respondent bank under SARFEASI Act.

For Petitioner : Mr.V.R. Shanmuganathan Special Government Pleader For R1 and R2 : Mr. S. Rengasamy For R3 : No appearance

ORDER

********* [Order of the Court was made by T.S.SIVAGNANAM, J.] This Writ Petition has been filed to call for the records from the file of 2nd respondent Public E-Auction Notice for sale of immovable properties of the third respondent, dated 18.01.2017 and quash the same and consequently, forbear the first and second respondent or his servant or his subordinate or anybody to conduct auction of the properties of the companies' property in survey No.SF89/1A, 1.70.0 Hectares (4 Acre 20 Cents) and Survey No.89/1B, 1.33.0 Hectare of Uthappanayakkanur, Usilai Taluk, Madurai District, on the strength of the possession taken by the respondent bank under SARFAESI Act.

2. The legal issue, which is involved in this Writ Petition is as to whether the Commercial Tax Department would have precedence over the secured asset over and above from the respondent Bank, who is the secured creditor. The assets have been offered as collateral security to the Bank by the third respondent to secure a loan obtained by them. This legal issue has been answered by the Hon'ble Full Bench in the case of Assistant Commissioner (CT) Anna Salai, III, Assessment Circle, Chennai Vs. Indian Overseas Bank, Chennai and another reported in AIR 2017 Madras 67. For better appreciation, the entire order of this Court is quoted hereunder:

The Writ petitions have been listed before the Full Bench in pursuant to the reference order in W.P.No.6267 of 2006 and W.P.No.253 of 2011 in respect of the following issues:

"a)As to whether the Financial Institution, which is a secured creditor, or the department of the Government concerned, would have the 'Priority of Charge' over the mortgaged property in question, with regard to the tax and other dues.

b) As to the status and the rights of a third party purchaser of the mortgaged property in question"

2.We are of the view that if there was at

all any doubt, the same stands resolved by view of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions(Amendment) Act, 2016, Section 41 of the same seeking to introduce Section 31B in the Principal Act, which reads as under:

"31B 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 Bank ruptcy 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"

3.There is, thus, no doubt that the rights of a secured creditor to realise secured debts due and payable by sale of assets over which security interest is created, would have priority over all debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or Local Authority. This section introduced in the Central Act is with " notwithstanding" clause and has come into force from 01.09.2016.

4.The law having now come into force, naturally it would govern the rights of the parties in respect of even a lis pending.

5.The aforesaid would, thus answer question(a) in favour of the financial institution, which is a secured creditor having the benefit of the mortgaged property. 6.Insofar as question(b) is concerned, the same is stated to relate only to auction sales, which may be carried out in pursuance to the rights exercised by the secured creditor having a mortgage of the property. This aspect is also covered by the introduction of Section 31B, as it includes

"secured debts due and payable to them by sale of assets over which security interest is created"

7.We, thus, answer the aforesaid reference accordingly.

8.The matters be placed before the roster Division Bench for dealing with the individual cases.

3. In the light of the law laid down by the Hon'ble Full Bench of this Court, we hold that the auction sale notice issued by the respondent Bank is well within the jurisdiction of the respondent Bank and cannot be interfered with on the grounds raised by the petitioner and accordingly, this Writ Petition is dismissed. However, this will not prevent the petitioner / Assistant Commissioner, Commercial Tax Department, Thirumangalam Assessment Circle, Thirumangalam, Madurai District, to proceed independently for recovery of the sales tax arrears from the third respondent. Liberty is also given to the respondent Bank for raising attachment and removal of the attachment by approaching the office of the Sub-Registrar concerned. No costs. Consequently, connected Miscellaneous Petitions are closed.

Sd/- Assistant Registrar /True copy/ Sub Assistant Registrar To 1.The Regional Manager, Central Bank of India, Raja Muthaiah Mandram, First Floor, Dr.Ambedkar Road, Madurai - 625 020 2.Authorised Officer, Central Bank of India, Raja Muthaiah Mandram, First Floor, Dr.Ambedkar Road, Madurai - 625 020.

+2cc's to Mr.S.Rengasamy, Advocate in SR.No.58445 trp/msa AE/MR/SAR3/19.06.2017/4P/5C W.P.[MD].No.7111 of 2017 and W.M.P.(MD).Nos.5626 and 5627 of 2017 05.06.2017