CENTRAL BANK OF INDIA v. STATE OF KERALA AND ORS.

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A for issue of a direction to the auction purchaser to hand over ... ' the possession of the property to the revenue officer for conducting fresh auction for realization of the arrears of sales tax. The appellant also filed Writ Petition No.27302 of 2003 for restraining the revenue officer from taking action against the B auctioned property. During the pendency of the writ petition, the company was wound up. By an order dated 10.11.2004, the Division Bench of the High Court disposed of Writ Petition Nos.26523 of 2003 and 27302 of 2003 along with Writ Appeal • Nos.1165 of 2003 and 1230 of 2003 filed by the company and c licensee against dismissal of the writ petitions filed by them challenging the sale conducted by the recovery officer of the Tribunal. The Division Bench referred to Section 26B of the Kerala Act, judgments of this Court in State Bank of Bikaner and Jaipur v. National Iron and Steel Rolling Corporation and others (supra) and State of M.P. v. State Bank of Indore (supra) and held that the sale conducted by the recovery officer of the Tribunal is illegal because no notice was given to the revenue officers despite the fact that the property which was • - subjected to auction had already been attached. The Division Bench further held that the State was entitled to enforce the first charge on the property of the company by conducting fresh auction. The Review Petition filed by the appellant was dismissed by another Division Bench by recording the following observations:-

F "We have already found that the various provisions of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 would not affect the statutory charge of the State - Government. Therefore the contention raised on the basis of the Second Schedule to the Income Tax Act, 1961 need not be examined. Since we have already found that State Government stands outside the purview of the ORT Act and that the State need not stand in the queue for claiming ... priority, the contention of the counsel for the review Petitioners that the sale effected by State is vitiated cannot be sustained.

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ORS. [G.S. SINGHVI, J.]

We therefore find no reason to accept the contention · A raised by senior counsel. We also find no substance in the arguments raised by the counsel for the Canara Bank. Contentions raised by the counsel are only to disturb the substantial right of the State which has already been recognized by the Division Bench holding that they have B got first charge and the State can adopt its own procedure for enforcing the statutory charge. Procedural provision pointed out by the counsel have no relevance while the State is enforcing the statutory charge. Regarding the contention raised by senior counsel Sri N.N. Sugunapalan c we are of the view, if any amount is due towards employees provident fund those matters could be taken up before the State Government. The power under Section 11 (2) would not annul the statutory charge of the State. Under such circumstance review petitions would stand 0 dismissed."

Ms. lndu Malhotra, learned counsel for the appellant argued that decree passed by the Tribunal on 17.2.2000 was prior to the notice for attachment issued by Tehsildar under Section 36 of the Kerala Revenue Recovery Act and as the sale notice issued by him was stayed by the High Court on 15.3.2001, the bank did not commit any illegality by auctioning the first property of the company. She further argued that State can recover its dues by auctioning the second property of the company and the High Court was not justified in nullifying the auction conducted by the recovery officer of the Tribunal. Learned counsel appearing for . the bank argued that since the State was not a party before the Tribunal, it was not necessary to give notice to the Tehsildar.

In our view, the High Court did not commit any illegality by nullifying the auction conducted by the recovery officer of the Tribunal, who, as per admitted factual matrix of the case, did not give notice ~o the revenue officer despite the fact that the property had been attached under Section 36 of the Kerala Revenue Recovery Act and the bank had challenged the notice H

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A issued under Section 49(2) of that Act in Writ Petition No.8845 of 2001 and succeeded in persuading the High Court to stay that notice. ~ -

63Copy pinpoint63. C.A. No.4909 of 2006 - Central Bank of India v. The Deputy Tehsildar and others - The petitioner-bank extended B financial facilities to the private respondents, who mortgaged immovable properties for securing repayment. In 1994, the bank filed suits for recovery of its dues. On establishment of t - the bench of the Tribunal at Ernakulam, all the suits were c transferred to the Tribunal which passed decree dated 31.3.2000 in T.A. No.1032/1997, 25.7.2001 in T.A. No.1009/ 1997 and 9.8.2001 in T.A. No.1015/1997 The bank also issued recovery certificate dated 1.12.2003. However, before the bank could execute the decrees, Tehsildar (Revenue Recovery), Kallam, initiated proceedings under the Kerala Revenue D Recovery Act for sale of the mortgaged properties which was attached for recovery of the arrears of sales tax. The petitioner " - challenged the sale notices issued by Tehsildar in Writ Petition No.13425 of 2004. The learned Single Judge by relying on the judgment of this Court in Dena Bank v. Bhikabhai Prabhudas E Parekh & Co. (supra) and of the Division Bench of the High Court in Sherry Jacob v. Canara Bank [2004 (30) KLT 1089] dismissed the writ petition. The Division Bench dismissed the writ appeal.

F In our opinion, the High Court rightly held that the Tehsildar was entitled to give effect to the primacy of statutory first charge "'"' 1.,reated on the property of the dealer under Section 268 of the Kerala Act.

64Copy pinpoint64. C.A. No.1288 of 2007 - UCO Bank v. State of Kera/a G & others-Respondent No.4, M/s. International Trade Links took loan from the appellant-bank but failed to repay the same. The ,_ ,, appellant issued notice under Section 13(2) of the Securitisation Act and approached Tehsildar (Revenue Recovery) Kanayannur for rendering assistance to take H

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ORS. [G.S. SINGHVI, J.] possession of the mortgaged property. The latter declined the appellant's request on the ground that action has already been initiated under the Kerala Revenue Recovery Act for recovery of sales tax under the Kerala Act. Thereupon, the appellant filed Writ Petition No.4198 of 2005 for issue of a direction to the District Collector, Ernakulam and Tehsildar, Kanayannur to take vacant possession of the mortgaged property. It also prayed that Section 26A and 26B of the Kerala Act be declared unconstitutional and void being inconsistent with the provisions of the Securitisation Act. By an order dated 7.2.2005, the learned Single Judge directed the Tehsildar to sell mortgaged c property and to permit the bank to coordinate in the sale. That order was modified on 22.9.2005 and the bank was allowed to sell the property subject to certain conditions. The bank applied for modification of order dated 22.9.2005 and prayed '!o': that it may be permitted to retain the money realized from sale of the mortgaged property. The learned Single Judge did not entertain the appellant's prayer but directed that if the sale price is lower than the one mentioned by the government pleader then the sale shall be confirmed only after getting further order from the court. Liberty was also given to the borrower/guarantor to pay the arrears. Writ appeal filed by the appellant-bank against the interim order was disposed of by the Division Bench with the following observations:-

"Since the revenue authorities have already attached the property this court will not be justified in directing respondents 2 and 3 to hand over possession of the property to the Bank. All the same it is entirely for the State and its officers to decide whether possession should be handed over to the Bank for taking further proceedings under the Secur::isation Act. We leave it to the State to take a decision in this matter in accordance with law. Needless to say, since State has got prior charge it is open to the State to proceed in accordance with law. Let a decision be taken by the district Collector within one month from the date of receipt of a copy of this judgment. H

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A The appeal and the writ petition are disposed of as above. I.A. No.14420 of 2005 would stand dismissed."

Since we have already expressed the view that in terms of Section 26B of the Kerala Act, the State has got prior charge over the property of the dealer and the facts of the case show B that the revenue authorities had already attached the property, °;}"''~

there is no valid ground to interfere with the order passed by the Division Bench. -

65Copy pinpoint65. C.A. No. of 2009 [arising out of S.L.P. (C) No.24767 c of 2005]- The South Indian Bank Ltd., Trichur-1 v. State of Kera/a & others - In the year 1984, the appellant-bank granted loan to respondent nos.3 to 5, who mortgaged their immovable t properties as security for repayment. After 8 years, the bank filed O.S. No.720of1992 for recovery of amount of loan with D interest. The suit was decreed on 30.1.1995 for a sum of Rs.3,51,36,973/-. After lapse of three years, the bank filed O.A. No.1081 of 1998 for recovery of the amount in terms of decree dated 30.1.1995. On 26.7.2000, the Tribunal issued recovery certificate in favour of bank. In the meanwhile, Tehsildar, E Ottapalam issued notice under Section 49(2) of the Kerala Revenue Recovery Act on 2.6.1999 for sale of the mortgaged properties for recovery of sales tax dues amounting to Rs.85,45,276/-. The appellant challenged the proposed sale in • Writ Petition (O.P. No.17701 of 1999) and prayed that the State F and its functionaries may be restrained from selling the property. The learned Single Judge, after noticing the judgment of this Court in State of M.P. v. State Bank of Indore [(2002) 10 KTR 366 (SC)] held that even if there is first charge in favour of the bank, the same will not adversely affect the statutory first charge of the State. Accordingly, he refused to interfere with G the proposed sale of the mortgaged properties but gave liberty to the bank to proceed to execute the decree passed in its .. ,,~

favour in accordance with law. Writ appeal filed by the bank was dismissed by the Division Bench making observations which have been extracted hereinabove. H

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ORS. [G.S. SINGHVI, J.]

66Copy pinpoint66. We are in complete agreement with the Division Bench A that statutory first charge created in favour of the State under Section 268 of the Kerala Act has primacy over the right of the bank to recover its dues.

67Copy pinpoint67. In the result, the appeals are dismissed. However, it 8 is made clear that this judgment shall not preclude the banks from realising their dues by taking recourse to other • proceedings, as may be permissible under law. The appellant in Civil Appeal No.4174 of 2006 shall be free to avail appropriate remedy for refund of the amount deposited by him C in furtherance of the auction conducted by the recovery officer.

D.G. Appeal dismissed.