WP(C) Nos. 6348 and 10107 of 2021

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE P.V.KUNHIKRISHNAN** **TUESDAY, THE 13[TH] DAY OF JULY 2021 / 22ND ASHADHA, 1943 WP(C) NO. 10107 OF 2021** ## **PETITIONER/S:** - **1 BANK OF BARODA ROSARB, ERNAKULAM, PALLIMUKKU, M.G ROAD, ERNAKULAM, REPRESENTED BY ITS CHIEF MANAGER** - **2 ANSAR A.S, S/O. ABDUL KHADERKUNJU, MANNANCHERRY P.O, ALAPPUZHA DISTRICT PIN 688 538** - **3 ARIF A.S,** **S/O. ABDUL KHADERKUNJU, MANNANCHERRY P.O, ALAPPUZHA DISTRICT PIN 688 538** **BY ADVS. K.M.ANEESH SRI.K.SANTHOSH KUMAR (KALIYANAM) SRI.ADARSH KUMAR SRI.BIJU VARGHESE ABRAHAM SRI.DILEEP CHANDRAN SRI.SHASHANK DEVAN** ## **RESPONDENT/S:** - **1 DISTRICT COLLECTOR COLLECTORATE, CIVIL STATION, ALAPPUZHA, PIN 688 001** - **2 SUB REGISTRAR, MARARIKKULAM SUB REGISTRARS OFFICE, MARARIKKULAM P.O, ALAPPUZHA DISTRICT PIN 688 522** - **3 VILLAGE OFFICER, MANNANCHERRY VILLAGE, MANNANCHERRY P.O, ALAPPUZHA DISTRICT PIN 688 538** - **4 AGRICULTURE INCOME TAX AND SALE TAX OFFICER, STATE GENERAL SALES TAX DEPARTMENT, MINI CIVIL STATION,** WP(C) Nos. 6348 and 10107 OF 2021 2 ## **ALAPPUZHA 688 013** ## **5 THAHSILDAR (REVENUE RECOVERY) AMBALAPUZHA, KIDANGAMPARAMP, ALAPPUZHA DISTRICT PIN 688 013** **BY ADV SHRI.K.P.JAYACHANDRAN, ADDL. ADVOCATE GENERAL** ## **OTHER PRESENT:** **SRI.JAFAR KHAN.Y, GP** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 13.07.2021, ALONG WITH WP(C).6348/2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** WP(C) Nos. 6348 and 10107 OF 2021 3 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE P.V.KUNHIKRISHNAN** **TUESDAY, THE 13[TH] DAY OF JULY 2021 / 22ND ASHADHA, 1943 WP(C) NO. 6348 OF 2021** ## **PETITIONER/S:** - **1 BANK OF BARODA ROSARB, ERNAKULAM, PALLIMUKKU, M.G.ROAD, ERNAKULAM REPRESENTED BY ITS CHIEF MANAGER.** - **2 RAJ TRADERS, REPRESENTED BY ITS MANAGING PARTNER MR.JANNATHUL FIRDOUSE OPPOSITE FEDERAL BANK, MANNANCHERRY P.O., ALAPPUZHA DISTRICT, PIN- 688 538.** **BY ADVS. K.M.ANEESH SRI.K.SANTHOSH KUMAR (KALIYANAM) SRI.ADARSH KUMAR SRI.BIJU VARGHESE ABRAHAM SRI.DILEEP CHANDRAN SRI.SHASHANK DEVAN** ## **RESPONDENT/S:** - **1 DISTRICT COLLECTOR COLLECTORATE, CIVIL STATION, ALAPPUZHA, PIN - 688 001.** - **2 SUB REGISTRAR, MARARIKKULAM SUB REGISTRARS OFFICE MARARIKKULAM P.O., ALAPPUZHA DISTRICT, PIN - 688 522.** - **3 VILLAGE OFFICER MANNANCHERY VILLAGE, MANNANCHERRY P.O.,** WP(C) Nos. 6348 and 10107 OF 2021 4 ## **ALAPPUZHA DISTRICT, PIN - 688 538.** - **4 STATE OF KERALA REPRESENTED BY ITS SECRETARY TO GOVERNMENT, DEPARTMENT OF TAXES, SECRETARIAT, THIRUVANANTHAPURAM - 695 001.** - **5 THHSILDAR (REVENUE RECOVERY) AMBALAPUZHA, KIDANGAMPARAMP, ALAPPUZHA DISTRICT, PIN - 688 013.** - **6 ADDL. AGRICULTURE INCOME TAX AND SALE TAX OFFICER SOUGHT TO BE IMPLEADED** **BY ADVS.** ## **SHRI.K.P.JAYACHANDRAN, ADDL. ADVOCATE GENERAL GOVERNMENT PLEADER** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 13.07.2021, ALONG WITH WP(C).10107/2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** WP(C) Nos. 6348 and 10107 OF 2021 5 ## **P.V.KUNHIKRISHNAN, J.** **=================== WP(C) Nos. 6348 and 10107 OF 2021 =================== Dated this the 13[th] day of July 2021** ## **J U D G M E N T** These two writ petitions are connected and therefore, I am disposing these two writ petitions by a common judgment. 2. I will narrate the facts in WP(C) No.6348/21 first. First petitioner in this writ petition is a nationalized bank. According to the petitioners, on 01.03.2011 Mr. Gopalakrishnan Pillai, S/o Bhaskara Panicker and Rajalakshmi, D/o Gopalakrishnan Pillai created mortgage of their property having 35.98 Ares of land and building in Re.Sy.No.214/1/2, 214/1/3 and 214/03/2 (old Sy. No. 281/11) in Mannachery Village, Ambalapuzha Thaluk, in Alappuzha District as a WP(C) Nos. 6348 and 10107 OF 2021 6 security for a loan availed by them from the Alappuzha Branch of the 1[st] petitioner. Subsequently, the above loan account was transferred to 1[st] petitioner branch at Ernakulam for administrative purposes. According to the 1[st] petitioner, there was default in repaying the loan amount and consequently, the proceedings under Securitsation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (for short SARFEASI Act) was initiated. Ultimately the mortgage property was sold by the petitioner under the provisions of the SARFEASI Act. Ext.P1 is the sale certificate dated 29.05.2020 issued by the 1[st] petitioner in favour of the 2[nd] petitioner. 3. While the petitioner was continuing the SARFEASI proceedings, the Village Officer, Mannachery village issued a communication to the 1[st] WP(C) Nos. 6348 and 10107 OF 2021 7 petitioner stating that, there are sales tax arrears from the borrowers and they have attached the property of the borrowers for the recovery of sales tax arrears. Ext.P6 was issued to the 1[st] petitioner. Ext.P7 is the letter issued by the District Collector to the 1[st] petitioner dated 30.11.19 which also contain the same version in Ext.P6. In Ext.P7, the District Collector also stated that, the bank should vacate the property and otherwise, appropriate steps will be taken. Challenging Ext.P6 and P7 the petitioners filed WP(C) No. 35082/2019. This Court after considering Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 and Section 26 E of the SARFEASI Act was pleased to quash Ext.P6 and Ext.P7. Ext.P2 is the judgment. Subsequently, the petitioners approached this Court by filing WP(C) No. 12678/2020. Ext. P3 is the judgment in which this Court directed the WP(C) Nos. 6348 and 10107 OF 2021 8 petitioner to produce the sales certificate before the Sub registrar, Mararrikulam, Sub registrar office to register the sales certificate. It is submitted that, the petitioners subsequent to Ext.P2 judgment approached the second respondent for registration of sales certificate. Exts.P2 and P3 judgments were produced before the 2[nd] respondent. However 2[nd] respondent informed the petitioner that, 2[nd] respondent is not a party to Ext.P2 judgment and hence they cannot accept the document for registration until a communication from the 1[st] respondent is received with respect to the judgment of this Court. Ext.P4 is the letter issued by the 2[nd] respondent to the 1[st] respondent. Thereafter, Ext.P5 communication was issued by the District Collector, Alappuzha to the 5[th] respondent-thahsildar to initiate revenue recovery proceedings. At that stage, this writ WP(C) Nos. 6348 and 10107 OF 2021 9 ## petition is filed with following prayers. “i. Issue a writ of mandamus or other appropriate writ, direction or order directing the 2[nd] respondent to delete the entry of Revenue recovery attachments in their records with respect to the property having 35.98 Ares of land and building in Re.Sy.No.214/1/2, 214/1/3 and 214/03/2 (old Sy. No. 281/11) in Mannachery Village, Ambalapuzha Thaluk, in Alappuzha District. ii. Issue a writ of mandamus or other appropriate writ, direction or order directing the 2[nd] respondent to to register the original of Exhibit P1 Sale certificate issued by the 1[st] petitioner in favour of the 2[nd] petitioner. iii. Issue a writ of mandamus or other appropriate writ, direction or order directing the 3[rd] respondent to effect the transfer of registry of the properties covered by Exhibits P1 Sale certificate in favour of 2[nd] petitioner and to permit them to pay property tax in their name after the registration of original of Exhibit P1 Sale certificate is completed. iv. To grant such other reliefs as may be prayed for in the circumstances of the case.” 4. In WP(C) No. 10107/2021 also the contentions of the petitioners are similar. In that case also, the Mr. Gopalakrishnan Pillai, S/o Bhaskara Panicker and Rajalakshmi, D/o Gopalakrishnan Pillai WP(C) Nos. 6348 and 10107 OF 2021 10 mortgage yet another property for the same loan and that property was having 6.85 Ares of land with a building in Re. Sy. No. 214/2, (old Sy. No. 281/11) in Mannachery Village, Ambalapuzha Thaluk, in Alappuzha District. As far as that property is also concerned the sale proceedings was initiated under SARFEASI Act and Ext.P1 in that writ petition is the sale certificate. The similar orders were passed by this Court in that case also and Ext.P4 judgment dated 15.12.20220 in WP(C) No. 35082/2019 is the judgment by which Exts.P2 and P3 were quashed. WP(C) No. 10107/2021 is filed with the following prayers. “i. Issue a writ of mandamus or other appropriate writ, direction or order directing the 2[nd] respondent to delete the entry of Revenue recovery attachments in their records with respect to the property having 6.85 Ares of land and building in Re. Sy. No. 214/2, (old Sy. No. 281/11) in Mannachery Village, Ambalapuzha Thaluk, in Alappuzha District. WP(C) Nos. 6348 and 10107 OF 2021 11 ii. Issue a writ of mandamus or other appropriate writ, direction or order directing the 2[nd] respondent to to register the original of Exhibit P1 Sale certificate issued by the 1[st] petitioner in favour of the 2[nd] petitioner. iii. Issue a writ of mandamus or other appropriate writ, direction or order directing the 3[rd] respondent to effect the transfer of registry of the properties covered by Exhibits P1 Sale certificate in favour of 2[nd] and 3[rd] petitioners and to permit them to pay tax in their name after the registration of original of Exhibit P1 Sale certificate is completed. iv. To grant such other reliefs as may be prayed for in the circumstances of the case.” 5. The learned Government Pleader filed a detailed counter affidavit in both the writ petitions. The learned Government Pleader submitted that, Ext.P4 judgment dated 15.12.2020 in WP(C) No. 35082/2019 is challenged before the division bench by filing Writ Appeal No. 616/2021 and the writ appeal is even now pending. The learned Government Pleader submitted that, the judgment passed by the learned single judge in the above writ petition is against the provisions of the statute and also against WP(C) Nos. 6348 and 10107 OF 2021 12 the settled position as per the judgment of this Court and the Apex Court. The learned Government Pleader takes me through the judgment of the Apex Court in _**Central Bank of India Vs. State of Kerala and others (2009 (4) SCC 94), Maharashtra State Co-operative Bank Ltd. v. Babulal Lade and Others (2019 KHC 7202) and The Madras High Court judgment in Sridhar V. V. Authorized Officer Indian, Bank, Guindy Branch, Chennai (2018 KHC 2927).**_ 6. The learned Government Pleader also submitted that, as per the Security Interest (Enforcement) Rule 2002, Ext. P1 sale certificate itself will not stand. The learned Government Pleader takes me through Rules 8 (7), 9 (7) to contend that Ext.P1 sale certificate will not stand. The learned Government Pleader also relied the interim order WP(C) Nos. 6348 and 10107 OF 2021 13 passed by this Court on 01.10.2020 in WP(C) No. 19291/2020. The learned Government Pleader also relied a Calcutta High Court judgment also to canvas his position. 7. It is an admitted case that this Court as per judgment dated 15.12.2020 was pleased to set aside the order passed by the District Collector and the Village Officer. The relevant partition of the judgment dated 15.2.2020 in WP(C) No. 35082/2019 is ## extracted hereunder; “ 6. I have considered the submissions so advanced and also perused the materials placed before me. 7. It is seen from records that subject property was taken possession under the SARFAESI Act by the petitioner as the loan account became Non Performing Asset. On the very same property, the respondent/State is contending that it has first charge for recovery of dues of the sale tax. The 3rd respondent had issued a communication dated 25.11.2019 to the effect that the property is attached by the State and the petitioner bank should provide access to the property. Similar is the notice at Ext.P3 issued by the District Collector, asking the petitioner to open the gate and door of the property of which the possession is taken by the WP(C) Nos. 6348 and 10107 OF 2021 14 ## petitioner under the SARFAESI Act. 8. The question which falls for consideration is whether the State has better right over the secured assets for recovery of its dues. This question is no more res integra. The petitioner has rightly relied on the judgments of this Court in Travancore Devaswom Board V. Local Fund Audit reported in 2020(3) KLT 296 and State Bank of India V. State of Kerala reported in 2019(4) KLT 521. Perusal of the rulings cited by the learned Standing Counsel appearing for the petitioner makes it clear that Section 26E of the SARFAESI Act and Section 31B of the RDB Act create a 'First Charge' by way of a priority to the Banks/Financial Institutions to recover and satisfy their debts, notwithstanding any statutory 'First Charge' in favour of the Revenue. 9. In the light of law laid down by this Court in the above mentioned rulings, the petition deserves to be allowed and the same is allowed by quashing and setting aside Exts.P1 and P3 communications issued by respondents and quashing the attachment of the secured assets by the respondents.” 8. A division bench of this Court in ## _**Travancore Devaswom Board V. Local Fund**_ _**Audit (2020(3) KLT 296)**_ considered a similar issue and this Court observed in para 10 and 17, which is extracted hereunder; “ 10. Under Section 26E of the SARFAESI Act, priority in payment has been statutorily created in WP(C) Nos. 6348 and 10107 OF 2021 15 favour of a secured creditor over all other debts including taxes payable to the Central Government or State Government on registration of the security interest. Section 31B of the RDB Act has created a right upon the secured creditor to realize debts due and payable to them by sale of assets over which security interest has been created, with priority in sale and priority in payment over all other debts including Government dues due to the Central or State Governments. A mere reading of the aforesaid extracted provisions leave no room for any doubt, that a secured creditor under the SARFAESI Act has predominance over statutory charges due to the Government. The non obstante clause in both provisions makes the intention of Parliament explicit that even as against statutory charges created under other Central Enactments, secured creditors shall have the right for priority in payment and priority to realise the debt by bringing the secured asset for sale. 17. Viewed in the above principles of law, it can safely be concluded that the provisions of SARFAESI Act and RDB Act (as amended) containing provisions commencing with nonobstante clauses and giving specific priority to secured creditors even over the taxes due from the Governments, will prevail over the KVAT Act.” 9. This Court in _**State Bank of India V. State**_ _**of Kerala 2019(4) KLT 521**_ considered a similar issue and this Court observed in para 36, which is extracted hereunder; “36. Irrefragibly, when the secured creditors have a right in priority to have their debts extinguished, WP(C) Nos. 6348 and 10107 OF 2021 16 obviously, their right to proceed against the property would also rank high than that is claimed by the Revenue. The assertion of the Revenue that their 'Charge' will continue over the property until it is sold by them, hence, is rendered without forensic support to stand on.” 10. In the light of the above judgments of the division bench in _**Travancore's**_ case (Supra) and the judgment of this Court in _**State Bank of India's**_ case (Supra), the contention of the learned Government Pleader will not stand. The learned Government Pleader submitted that, the judgment in WP(C) No. 35082/2019 and the decisions in _**Travancore's**_ case (Supra) and _**State Bank of India's**_ case (Supra) has not attained finality. But this Court can not wait indefinitely till those judgments attained finality. As far as this particular case is concerned, there is a judgment of this Court in WP(C) No. 35082/2019 by which, the orders passed by the Village Officer and District Collector are already quashed by this Court WP(C) Nos. 6348 and 10107 OF 2021 17 and this Court specifically stated that Section 26E of the SARFEASI Act and Section 31B of the RDB Act create a first charge by way of priority to the banks, financial institutions to recover and satisfy their debts notwithstand to any statutory first charge in favour of the revenue. In such circumstances, till the above judgment is varied or modified by the division bench, that judgment will stand. In such circumstances, according to me, these writ petitions are to be allowed. Therefore, these writ petitions are allowed with the following directions. 1. The 2[nd] respondent is directed to delete the entry of revenue recovery attachment in their records with respect to property having for 6.85 Ares of land and building in Re. Sy. No. 214/2, (old Sy. No. 281/11) and 35.98 Ares of land and building in Re.Sy.No.214/1/2, 214/1/3 and 214/03/2 (old Sy. No. WP(C) Nos. 6348 and 10107 OF 2021 18 281/11) in Mannachery Village, Ambalapuzha Thaluk, in Alappuzha District. 2. The 2[nd] respondent is directed to register the original of Ext.P1 sale certificate issued by the 1[st] petitioner in favour of the above petitioners in these writ petitions if it is other wise in order. 3. The competent authority will complete the mutation of property and accept tax in accordance to law. 4. The above exercise should be completed within one month from the date of receipt of a copy of this judgment. **(Sd/-)** ## **P.V.KUNHIKRISHNAN** ## **JUDGE** LU WP(C) Nos. 6348 and 10107 OF 2021 19 ## **APPENDIX OF WP(C) 6348/2021** ## **PETITIONER ANNEXURE** - **EXHIBIT P1** **TRUE COPY OF THE SALE CERTIFICATE DATED 29/05/2020 ISSUED IN FAVOUR OF 2ND PETITIONER.** - **EXHIBIT P2** **TRUE COPY OF THE JUDGMENT DATED 15/12/2020 IN W.P.(C) NO.35082/2019.** - **EXHIBIT P3 TRUE COPY OF THE JUDGMENT OF THIS HON'BLE COURT IN W.P. (C) NO.12678/2020.** - **EXHIBIT P4** - **TRUE COPY OF THE LETTER NO.6/2021 DATED 19/02/2021 ISSUED BY THE 2ND RESPONDENT.** - **EXHIBIT P5** - **TRUE COPY OF THE DIRECTION GIVEN BY THE 1ST RESPONDENT TO THAHSILDAR (RR).** - **EXHIBIT P6 TRUE COPY OF THE COMMUNICATION DATED 25-11-2019 ISSUED BY THE 5TH RESPONDENT.** - **EXHIBIT P7** - **TRUE COPY OF THE COMMUNICATION DATED 30-11-2019 ISSUED BY THE 1ST RESPONDENT.** - **RESPONDENTS EXHIBITS** **ANNEXURE R1(a) THE TRUE COPY OF THE ORDER IN WRIT PETITION (C ) NO. 19291/2020 DATED 01.10.2020.** WP(C) Nos. 6348 and 10107 OF 2021 20 ## **APPENDIX OF WP(C) 10107/2021** ## **PETITIONER ANNEXURE** **EXHIBIT P1** **TRUE COPY OF THE SALE CERTIFICATE DATED 2-03-2020 ISSUED IN FAVOUR OF 2ND AND 3RD PETITIONERS.** - **EXHIBIT P2** - **TRUE COPY OF THE COMMUNICATION DATED 25-11-2019 ISSUED BY THE 5TH RESPONDENT** - **EXHIBIT P3** - **TRUE COPY OF THE COMMUNICATION DATED 30-11-2019 ISSUED BY THE 1ST RESPONDENT** - **EXHIBIT P4** - **TRUE COPY OF THE JUDGMENT OF THIS HON'BLE COURT IN W.P(C) NO. 35082/19** - **EXHIBIT P5** - **TRUE COPY OF THE LETTER NO. 6/2021 DATED 19-01-2021 ISSUED BY THE 2ND RESPONDENT.** - **EXHIBIT P6** - **TRUE COPY OF THE DIRECTION GIVEN BY THE 1ST RESPONDENT TO THAHSILDAR (R.R)** ## **RESPONDENTS EXHIBITS** - **ANNEXURE R1(a) THE TRUE COPY OF THE ORDER IN WRIT PETITION (C ) NO. 19291/2020 DATED 01.10.2020.** - **// True Copy // PA To Judge**