IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 27042 of 2005(T)
1. STATE BANK OF INDIA, KOTTAYAM BRANCH,
... Petitioner
Vs
1. STATE OF KERALA, REPRESENTED BY ITS
... Respondent
2. THE DISTRICT COLLECTOR,
3. DEPUTY TAHSILDAR,
4. THE RECOVERY OFFICER,
5. SALES TAX OFFICER,
6. M/S.WOOD SYSTEM (INDIA) PVT. LTD.,
7. MRS.SARAMMA THOMAS, DIRECTOR,
8. PUNNEN P.MARKOSE, DIRECTOR,
For Petitioner :SRI.P.V.SURENDRANATH
For Respondent :SRI.P.RADHAKRISHNAN (1)
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
Dated :21/11/2008
O R D E R
C.N. RAMACHANDRAN NAIR, J.
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W.P.C. NO. 27042/2005 & 37536/2007
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Dated this the 21st day of November, 2008
JUDGMENT
Connected cases are filed, one by the creditor-Bank and the other
by the purchaser of properties of defaulter sold by the Recovery Officer
pursuant to the orders of Debt Recovery Tribunal for recovery of
arrears due to the State Bank of India, Kottayam Branch. When
Recovery Officer tried to sell the property, the borrower appears to
have brought to the notice of the Recovery Officer that substantial
amount of sales tax is due to the State Government. Bank therefore
approached this Court for direction to the fourth respondent to sell and
remit the sale proceeds with the Bank. However, this Court taking note
of the prior charge of the State Government directed the Recovery
Officer to retain Rs. 13 lakhs being the approximate sales tax liability
due from the borrower. Accordingly the Recovery Officer sold the
property to the petitioner in WPC No. 37536 of 2007 and after
retaining Rs. 13 lakhs in terms of interim order of this Court dated
9.9.2005, paid the balance to the Bank. Later on 6.2.2008 this Court
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released the amount to the recovery authorities. So far as WPC
No.27042 of 2005 is concerned, since State Government has priority
over the mortgage debt, sale proceeds are rightly ordered to be adjusted
towards tax liability. Even though counsel for the Bank submitted that
bank’s liability started in 1979 and sales tax liability from 1990-91, I do
not think it makes any difference because recovery and sale took place
in 2006 by which time sales tax liability had accrued on the defaulter.
This Court has taken the view that even the prior charge over the
property under mortgage will not stand in the way of State Government
getting first charge over the borrower’s property. However, since the
same issue is pending before the Supreme Court, it will be open to the
Bank to make claim depending upon the outcome of the decision of the
Supreme, as and when it is rendered. In view of the judgment, the
interim order of this Court directing retention of Rs. 13 lakhs and later
releasing of that amount towards tax liability to the State Government
is perfectly in order. W.P.C.No. 27042 of 2005 is therefore disposed of
making the interim order absolute and part of judgment.
2. So far as WPC 37536 of 2007 is concerned, additional
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demand of tax which is stated to represent interest is paid only as an
interim arrangement for the petitioner to get mutation done. Petitioner
being the purchaser of the property got the property free of charges
because at the time of sale this Court ordered retension of Rs. 13 lakhs
from out of sale proceeds towards sales tax liability. When this is done
by the Recovery Officer in terms of the interim order, there is no more
charge over the property towards tax liability. Therefore petitioner in
WPC No. 37536 of 2007 is entitled to get release of the deposit
receipts from the Village Officer and Village Officer is directed to do
so on production of a copy of this judgment by the petitioner.
3. Government Pleader submitted that State is entitled to recover
arrears of interest for the balance period. I do not think State after
getting interim orders from this Court on 9.9.2005 can demand interest
on Rs. 13 lakhs either from the Bank or from the purchaser of the
property. Since defaulters have not taken any steps for adjustment of
deposited amount towards tax arrears, interest if any payable is to be
recovered from the defaulters. However, there will be no charge for tax
arrears on the property of the defaulters sold by the Recovery Officer to
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the petitioner in WPC 37536 of 2007. Recovery authorities are
directed to proceed against borrowers and against their personal assets,
if the same are recoverable under law. W.P.C.No. 37536 of 2007 is
disposed of as above.
(C.N. RAMACHANDRAN NAIR)
Judge
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