{"id":132324,"date":"1982-09-01T00:00:00","date_gmt":"1982-08-31T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/state-bank-of-indore-vs-the-additional-on-1-september-1982"},"modified":"2018-02-24T12:31:40","modified_gmt":"2018-02-24T07:01:40","slug":"state-bank-of-indore-vs-the-additional-on-1-september-1982","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/state-bank-of-indore-vs-the-additional-on-1-september-1982","title":{"rendered":"State Bank Of Indore vs The Additional &#8230; on 1 September, 1982"},"content":{"rendered":"<div class=\"docsource_main\">Madhya Pradesh High Court<\/div>\n<div class=\"doc_title\">State Bank Of Indore vs The Additional &#8230; on 1 September, 1982<\/div>\n<div class=\"doc_citations\">Equivalent citations: 1983 52 STC 201 MP<\/div>\n<div class=\"doc_author\">Author: G Singh<\/div>\n<div class=\"doc_bench\">Bench: G Singh, B Varma<\/div>\n<\/p>\n<pre><\/pre>\n<p>JUDGMENT<\/p>\n<p>G.P. Singh, C.J.<\/p>\n<p>1. This order shall also dispose of Misc. Petition No. 196 of 1981. The question that arises for decision in both these petitions is as to the construction of Section 33-C introduced in the Madhya Pradesh General Sales Tax Act, 1958, from 15th March, 1976, by Amendment Act No. 20 of 1976, whether the charge for arrears of sales tax over the properties of the dealer brought into effect by this section would affect a mortgage or pledge created by the dealer before 15th March, 1976.\n<\/p>\n<p>2.   Section 33-C reads as follows :\n<\/p>\n<p> 33-C. Tax to be first charge.&#8211;Notwithstanding anything to the contrary contained in any law for the time being in force, any amount of tax and\/or penalty, if any, payable by a dealer or other person under this Act shall be a first charge on the property of the dealer or such person.\n<\/p>\n<p>3.   The petitioner in both these petitions is the State Bank of Indore which is a statutory corporation constituted and incorporated under the State   Bank of India   (Subsidiary   Banks)   Act, 1959.   M\/s. Gayatri Tiles, respondent No. 3, in Misc.   Petition No. 545 of 1980 obtained a medium term loan  of  Rs. 73,000 on 14th May, 1975,   from the petitioner-bank for construction of factory buildings and installation of machinery. The said respondent mortgaged with the petitioner-bank on 15th May, 1975, its land and factory buildings. On 1st September, 1975, the respondent entered into an agreement of pledge regarding raw materials and finished   goods   securing   loan  to the extent of Rs. 30,000.   Another agreement was   executed   on   the   same   day  hypothecating   other goods to the extent of Rs. 20,000.    The   respondent was assessed to sales tax on 21st November, 1978, for   the   period   from  1st April, 1975, to 31st March, 1976.   There were further assessments and it appears that for the period from 1st April, 1975, to 31st December, 1978, the respondent became in arrears of tax to the extent of Rs. 68,729. After issuing the demand notice, the respondent&#8217;s movable and immovable properties were attached for recovery of the arrears. The petitioner objected on the ground that the mortgage and pledge created in its favour before 15th March, 1976, were not affected by Section 33-C but this objection was rejected.\n<\/p>\n<p>4.   M\/s. Steel Industries, respondent No. 3, in  Misc.   Petition  No.   196   of 1981,   hypothecated   and   pledged   its   goods in   favour  of the   petitioner on 30th April, 1969, 8th August, 1969, and 3rd October, 1970.   The respondent also created   a   mortgage   by   deposit   of title deeds on 27\/28th August, 1970.   The respondent was assessed to sales tax on 15th December, 1974, for the period from 15th   September,   1969,   to   31st March, 1970, on 21st December, 1976, for the period from 1st April, 1970, to 31st March, 1971, and on 28th  November,   1977, for the period from 1st April, 1971, to 31st March, 1972.   On 10th March,   1976, the respondent&#8217;s land and factory buildings were attached for recovery of arrears of tax.\n<\/p>\n<p>5.  The learned counsel for the. petitioner raised before us three contentions : (1) Section 33-C violates the petitioner&#8217;s fundamental rights under Article 19(1)(f) and 19(1)(g) of the Constitution and is invalid and void;   (2) the words &#8220;shall be a   first   charge   on   the property of the dealer&#8221; as used in Section 33-C will not affect any pledge or mortgage created before   the tax   which   is   sought   to   be recovered   became   due;   and   (3)   in   any case, it will not affect any pledge or mortgage created before 15th March, 1976, when the section came into force.\n<\/p>\n<p>6.  As we are accepting the third contention raised by the learned counsel for the petitioner that Section 33-C does not affect any mortgage or pledge created by   a   dealer   before   15th   March, 1976, and as this  is enough to   dispose   of the present petitions for the mortgages and pledges in both  the  petitions   were created before that date, we are not inclined to express any opinion on the first two contentions raised by the learned counsel.\n<\/p>\n<p>7.    There   can   be   no doubt that   a   mortgage   of   immovable   property creates an interest in the property mortgaged in favour of the mortgagee which interest is itself immovable property.    The mortgagee is in a position to say that &#8220;the   mortgaged   property   is   to the extent of the mortgage my property&#8221; : see <a href=\"\/doc\/1126538\/\">M. K. Ranganathan v. Government of Madras AIR<\/a> 1955  SC 604   at   607   quoting Lord Wrenbury in  Food  Controller v. Cork [1923] AC 647.   Similarly, a pawnee has a &#8220;special property or special interest in the thing pledged&#8221; and this right to property vests in the pawnee in so far it is  necessary to   secure   the   debt   by enabling   the   pawnee  to compel payment of the debt or to sell the goods when the right to do so arises.   This special property is to be distinguished from   the mere right of detention which the holder of a lien possesses :   see Bank  of Bihar v. State of Bihar AIR 1971 SC 1210 at 1212, 1213.   Section 33-C, as earlier stated, came into force on 15th March, 1976.   It says that any   amount   of   tax   and\/or penalty   payable   by   a   dealer   &#8220;shall be  a first charge on the property of the dealer&#8221;.    Now if the dealer sold his property before   15th   March,   1976,   it   is obvious   that   the   property   sold would not be affected by Section 33-C for the reason that after sale it ceased to be the property of the dealer.   Similarly, if the dealer made a mortgage or pledge of his property before 15th March, 1976, the interest so transferred in favour of the mortgagee or pawnee, which is itself property, would not be affected by Section 33-C as it ceased to be the property of the dealer before the charge under Section 33-C started operating. Even if the tax due is for any period prior to 15th March, 1976, it becomes a first charge on the property of the dealer as available on that date. It is to be noted that the charge created by Section 33-C is not on the res like the one created by Section 137 of the Madhya Pradesh Land Revenue Code, 1959, which enacts that the land revenue assessed on any land shall be first charge on the land. Had the provision been that the tax payable on sale of goods shall be first charge on the goods sold, the legal position would be different. The question as to whom the land and the goods belong is irrelevant in such cases. Section 33-C in contrast, from 15th March, 1976, creates a first charge in respect of any amount of tax payable by a dealer on the property of the dealer ; it is, therefore, relevant to enquire as to what was the property of the dealer on 15th March, 1976. The interest created before that date in favour of a mortgagee or pawnee had ceased to be the property of the dealer, and therefore, that interest could not be affected by Section 33-C. In this view of the matter, the petitioner&#8217;s interest arising in the property of the respondents in both the petitions from the mortgages and pledges created before 15th March, 1976, would not be affected by section  33-C.\n<\/p>\n<p>8.   The learned Government Advocate referred to us   the   decision   of   the Supreme Court in  Builders   Supply Corporation v. Union of India AIR 1965 SC 1061.   The question in that case was whether   the   State   can   claim   that   the recovery of the amount of tax due to it must take precedence and priority over unsecured debts due from the citizen to his   other   private   creditors   and   this question was answered in favour of the State and it was held that the State  dues in respect of taxes have priority over unsecured debts of other creditors.   We are here dealing not with any unsecured debt but with   the   secured   debts   of   the petitioner, to which the decision has no application.     The learned Government Advocate also submitted that sales tax becomes due immediately on the making of sale by the dealer, and therefore, Section 33-C will be applicable for   sales tax dues for any period earlier to 15th March, 1976, even though the assessment was made   subsequent   to   that date.   This submission also cannot be accepted.   In respect of sales tax dues for any period prior to 15th  March,   1976,   the   charge was created by Section 33-C over the property of the dealer only from 15th March, 1976.   The charge will, therefore, operate only on the property of the  dealer as it existed on that date. Any interest in the property which the dealer transferred or created earlier in favour of third parties would not be affected by Section 33-C for that ceased to be the property of the dealer before the operation of the charge created by Section 33-C.\n<\/p>\n<p>9.   The learned counsel for the petitioner referred to an unreported decision of the Supreme Court in State   of   Madhya   Pradesh   v.   Panchulal   decided   on 22nd April, 1969.   In that case, the question arose of the validity of Rule 3 of the Rules   known as Rules for the Recovery of State Demand.   This rule provided that &#8220;a State Demand shall have precedence over any other debt, demand or claim whatsoever   including   a mortgage or judgment debt, whether a court has issued an attachment or not&#8221;.    The Supreme Court held that   this   rule   became   void being in conflict with Article 19(1)(f) after the coming into force of the Constitution as it imposed unreasonable restriction on the rights of a mortgagee. We need not deal with this aspect for, as pointed out by us earlier, it is not necessary in this case to go into the constitutional validity of Section 33-C.\n<\/p>\n<p>10. The petitions are allowed. It is declared that Section 33-C does not affect the rights created in the petitioner&#8217;s favour by mortgage or pledge of the dealer&#8217;s property before 15th March, 1976, and that these rights cannot be sold for recovery of sales tax dues of the dealer. The petitioner will get costs from respondent No. 2, the State, in both the petitions. The Counsel&#8217;s fee Rs. 100 in each case. Security amount be refunded to the petitioner in both the petitions.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Madhya Pradesh High Court State Bank Of Indore vs The Additional &#8230; on 1 September, 1982 Equivalent citations: 1983 52 STC 201 MP Author: G Singh Bench: G Singh, B Varma JUDGMENT G.P. Singh, C.J. 1. This order shall also dispose of Misc. Petition No. 196 of 1981. The question that arises for decision in [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,24],"tags":[],"class_list":["post-132324","post","type-post","status-publish","format-standard","hentry","category-high-court","category-madhya-pradesh-high-court"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>State Bank Of Indore vs The Additional ... on 1 September, 1982 - Free Judgements of Supreme Court &amp; High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/state-bank-of-indore-vs-the-additional-on-1-september-1982\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"State Bank Of Indore vs The Additional ... on 1 September, 1982 - Free Judgements of Supreme Court &amp; 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