2004(2) ALL MR 610
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
R.M. LODHA AND J.P. DEVADHAR, JJ.
The Bharat Co-Operative Bank Ltd. Vs. D. V. Patil & Ors.
Writ Petition No.800 of 2004
25th March, 2004
Petitioner Counsel: Mr. A. K. JASANI
Respondent Counsel: Mr. RAJIV CHAVAN,Ms. USHA PUROHIT
Maharashtra Land Revenue Code (1966), S.169 - Bombay Sales Tax Act (1959), S.38C - Gala in Shopping Centre mortgaged with Co-op. Bank - Attachment of Gala by Sales-tax Authorities to recover sales tax dues by auction of Gala - Held, conjoint reading of Ss.169 and 38-C leaves no manner of doubt that sales tax recovery has priority over secured creditors and as such auction sale cannot be challenged. (Para 6)
2. The premises being Gala No.14, Municipal Shopping Centre, S. B. Barve Nagar, Bhat Wadi, Ghatkopar, Mumbai belonging to respondent No.2 was mortgaged by the said respondent with the petitioner - bank. There is recovery of outstanding sales tax dues from the second respondent and despite efforts when the respondent No.2 did not clear the sales tax dues, the aforesaid property which is mortgaged with the petitioner - bank has been attached and is now scheduled for auction sale tomorrow. The petitioner - bank in its capacity as mortgagee and secured creditor has filed this writ petition challenging the auction sale of the aforesaid property.
3. The submission of the learned counsel for the petitioner is that the petitioner - bank being secured creditor and the subject property having been mortgaged with the petitioner, could not be put to sale under Section 38C of the Bombay Sales Tax Act, 1959.
"38-C. Liability under this Act to be first charge.
Notwithstanding anything contained in any contract to the contrary but subject to any provision regarding first charge in any Central Act for the time being in force, any amount of tax, penalty, interest or any other sum payable by a dealer or any other person under this Act, shall be the first charge on the property of the dealer, or, as the case may be, person."
5. Reliance was placed by the learned counsel for the petitioner on Section 169 of the Maharashtra Land Revenue Code, 1966 in support of his argument that the petitioner - bank being secured creditor, the claim of sales tax dues cannot have priority over the secured claim. Section 169 of the Maharashtra Land Revenue Code, 1966 reads thus :
"169. Claims of State Government to have precedence over all others :-
(1) The arrears of land revenue due on account of land shall be paramount charge on the land and on every part thereof and shall have precedence over any other debt, demand or claim whatsoever, whether in respect of mortgage, judgment-decree, execution or attachment, or otherwise howsoever, against any land or the holder thereof.
(2) The claim of the State Government to any monies other than arrears of land revenue, but recoverable as a revenue demand under the provisions of this Chapter, shall have priority over all unsecured claims against any land or holder thereof."
6. We are afraid, Section 169 of the Maharashtra Land Revenue Code, 1966 does not support the submission of the learned Counsel for the petitioner at all as contended. By virtue of Section 38-C of the Bombay Sales Tax Act, the recovery of sales tax dues has first charge. The said recovery is made as arrears of land revenue and a conjoint reading of Section 38-C of the Bombay Sales Tax Act and Section 169 of the Maharashtra Land Revenue Code, 1944 leaves no manner of doubt that the recovery of sales tax dues has priority over the secured creditors.