{"id":60613,"date":"2010-11-16T00:00:00","date_gmt":"2010-11-15T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/state-bank-of-travancore-vs-the-state-of-madhya-pradesh-on-16-november-2010"},"modified":"2019-01-20T04:54:30","modified_gmt":"2019-01-19T23:24:30","slug":"state-bank-of-travancore-vs-the-state-of-madhya-pradesh-on-16-november-2010","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/state-bank-of-travancore-vs-the-state-of-madhya-pradesh-on-16-november-2010","title":{"rendered":"State Bank Of Travancore vs The State Of Madhya Pradesh on 16 November, 2010"},"content":{"rendered":"<div class=\"docsource_main\">Madhya Pradesh High Court<\/div>\n<div class=\"doc_title\">State Bank Of Travancore vs The State Of Madhya Pradesh on 16 November, 2010<\/div>\n<pre>                                                                           1\n\n\n\n\n                       W.P.No.671\/08\n\nState Bank of Travancore                          State of M.P. &amp; others\n\n\n\n\n16.11.2010\n      Shri Rajesh Maindiretta, leaned counsel for petitioner.\n       Shri Naman Nagrath, learned Additional Advocate General for\nrespondents No.1, 2 &amp; 3.<\/pre>\n<p>       None for respondent No.4.\n<\/p>\n<p>       Petitioner has sought for following reliefs:-<br \/>\n       &#8220;a)   Appropriate writ striking down Section 53 of the<br \/>\n       M.P. Vanijyik Kar Adhiniyam, 1994 as ultra-vires the<br \/>\n       Constitution of India\n<\/p>\n<p>       b)    Certiorari, quashing order, dated 15.5.2007<br \/>\n       Annexure P\/5 passed by the respondent No.3.\n<\/p>\n<p>       c)    Any other order or orders that this Hon&#8217;ble Court<br \/>\n       deems fit and proper in the circumstances of the case<br \/>\n       may also be kindly granted.&#8221;\n<\/p>\n<p>       In this petition, the petitioner is challenging the constitutional<br \/>\nvalidity of Section 53 of the M.P. Vanijyik Kar Adhiniyam, 1994<br \/>\n(hereinafter referred to as &#8216;the Adhiniyam&#8217;). For ready reference,<br \/>\nsection 53 of the Adhiniyam is reproduced which reads thus:-\n<\/p>\n<blockquote><p>              &#8220;53. Tax to be first charge.&#8211;\n<\/p><\/blockquote>\n<blockquote><p>              Notwithstanding anything to the<br \/>\n              contrary contained in any law for the<br \/>\n              time being in force and subject to the<br \/>\n              provisions of Section 530 of the<br \/>\n              Companies Act, 1956 (No.1 of 1956)<br \/>\n              any amount of tax, and\/or penalty or<br \/>\n              interest, if any, payable by a dealer or<br \/>\n              other person under this Act shall be<br \/>\n              first charge on the property of the<br \/>\n              dealer or such person.&#8221;<\/p><\/blockquote>\n<p>       On various grounds, petitioner-bank has challenged the<br \/>\nconstitutional validity of Section 53 of the Adhiniyam. In nut-shell,<br \/>\nclaim of the petitioner is that it is having preferential right of recovery<br \/>\nof dues in respect of the loan advanced by the petitioner to the<br \/>\nborrowers vis-a-vis to the State Government.\n<\/p>\n<p>       The validity of Section 53 of the Adhiniyam has been<br \/>\nconsidered by a Division Bench of this Court in a bunch of cases. In<br \/>\n<span class=\"hidden_text\">                                                                         2<\/span><\/p>\n<p>                      W.P.No.671\/08<\/p>\n<p>State Bank of Travancore                       State of M.P. &amp; others<\/p>\n<p>16.11.2010<br \/>\nWrit Petition No.394\/04 Kotak Mahindra Bank Limited Vs. State of<br \/>\nM.P. &amp; others, by a common judgment dated 2.2.2010, the Division<br \/>\nBench, relying on judgment of the Apex Court in State of M.P. &amp;<br \/>\nanother Vs. State Bank of Indore &amp; others (2002) 10 SCC 441,<br \/>\nfound that the Apex Court has already held that the provisions of<br \/>\nSection 33-C of the M.P. General Sales Tax Act,1958 were intra-vires<br \/>\nwhile provisions of Section 53 of the Adhiniyam are pari materia to the<br \/>\nsaid provisions. The Division Bench found that Section    53   of   the<br \/>\nAdhiniyam is intra-vires of the Constitution of India and dismissed the<br \/>\npetition.\n<\/p>\n<p>       For ready reference, we refer paras 11 to 16 of the aforesaid<br \/>\njudgment, which read thus:-\n<\/p>\n<blockquote><p>       &#8220;11. A bare reading and understanding of<br \/>\n       Section 530 of the Companies Act would<br \/>\n       clearly provide that subject to Section 529-A<br \/>\n       there shall be paid in priority to all other<br \/>\n       debts, all revenues, taxes, cesses and rates<br \/>\n       due from the company to the Central or a<br \/>\n       State Government or to a local authority etc.<br \/>\n       Section 530 of the Companies Act would<br \/>\n       come into operation only after anything is left<br \/>\n       after specifying the workmen&#8217;s dues and<br \/>\n       debts due to the secured creditors. When<br \/>\n       Section 33-C of 1958 Act was in force as a<br \/>\n       valid piece of legislation even the secured<br \/>\n       creditors under Section 529-A or other<br \/>\n       creditors under Section 530 were not entitled<br \/>\n       to any preferential payments. Section 529-A<br \/>\n       of the Companies Act provides that in the<br \/>\n       matter of winding up of a company,<br \/>\n       particular mode is to be adopted. However,<br \/>\n       Section 530 of the Companies Act provides<br \/>\n       that the remainder is to be distributed in a<br \/>\n       particular manner. The words &#8220;and subject to<br \/>\n       the provisions of Section 530 of the<br \/>\n       Companies Act, 1956&#8221; are to be understood<br \/>\n       in their true perspective to mean that the<br \/>\n       property shall be distributed in accordance<br \/>\n       with Section 530 of the Companies Act. If<br \/>\n<span class=\"hidden_text\">                                                                3<\/span><\/p>\n<p>                      W.P.No.671\/08<\/p>\n<p>State Bank of Travancore              State of M.P. &amp; others<\/p>\n<p>16.11.2010<br \/>\n      Section 33-C of 1958 Act is held to be a valid<br \/>\n      piece of legislation, then mode of the<br \/>\n      distribution as provided under Section 530 of<br \/>\n      the Companies Act cannot be held to be ultra<br \/>\n      vires the constitution because Section 530 of<br \/>\n      the Companies Act provides for distribution<br \/>\n      of assets of a company and by force of<br \/>\n      incorporation, the said provisions contained<br \/>\n      in Section 530 of the Companies Act will have<br \/>\n      to be read in attendum to Section 53 of 1994<br \/>\n      Act. For the reasons aforesaid,        we are<br \/>\n      unable to hold that Section 53 of 1994<br \/>\n      Adhiniyam is ultra vires the Constitution.\n<\/p><\/blockquote>\n<blockquote><p>      12. It was then contended that Section 51<br \/>\n      of 1994 Adhiniyam is also ultra vires the<br \/>\n      constitution because the authority is given to<br \/>\n      the State Government or Recovery Officers to<br \/>\n      hold that during the pendency of any<br \/>\n      proceeding under 1994 Act, they can declare<br \/>\n      any transfer or charge to be a fraudulent<br \/>\n      transfer and thereby cause serious prejudice<br \/>\n      to any creditor who has extended loan facility<br \/>\n      or has purchased property or has taken the<br \/>\n      property under mortgage, gift, exchange etc.<\/p>\n<\/blockquote>\n<blockquote><p>      13. Section 51 of the 1994 Act reads as<br \/>\n      under:-\n<\/p><\/blockquote>\n<blockquote><p>       &#8220;51. Transfer to defraud revenue void.<\/p><\/blockquote>\n<p>       &#8211;Where during the pendency of any<br \/>\n       proceeding under this Act or under the<br \/>\n       Act repealed by this Act or under the<br \/>\n       Madhya Pradesh Land Revenue Code,<br \/>\n       1959 (No.20 of 1959) any dealer creates a<br \/>\n       charge on or parts with the possession by<br \/>\n       way of sale, mortgage, gift, exchange or<br \/>\n       any other mode of transfer whatsoever of<br \/>\n       any of his assets in favour of any other<br \/>\n       person with the intention to defraud<br \/>\n       revenue, such charge or transfer shall be<br \/>\n       void as against any claim in respect of any<br \/>\n       tax or any other sum payable by the dealer<br \/>\n       as a result of the completion of such<br \/>\n<span class=\"hidden_text\">                                                                 4<\/span><\/p>\n<p>                      W.P.No.671\/08<\/p>\n<p>State Bank of Travancore               State of M.P. &amp; others<\/p>\n<p>16.11.2010<br \/>\n        proceeding under this Act or in pursuance<br \/>\n        of such proceeding under the Madhya<br \/>\n        Pradesh Land Revenue Code, 1959 (No.20<br \/>\n        of 1959).\n<\/p>\n<p>            Provided that such charge or transfer<br \/>\n        shall not be void if made by the transferor<br \/>\n        and     the   transferee    for    valuable<br \/>\n        consideration under this Act or the Act<br \/>\n        repealed by this Act or the Madhya<br \/>\n        Pradesh Land Revenue Code, 1959 (No.20<br \/>\n        of 1959).&#8221;\n<\/p>\n<p>      14. If language of the Act is properly read<br \/>\n      and appreciated, it would mean that where<br \/>\n      during the pendency of any proceeding under<br \/>\n      the Act or under the Repealed Act, 1958 Act<br \/>\n      or under the Madhya Pradesh Land Revenue<br \/>\n      Code 1959, any dealer creates a charge on or<br \/>\n      parts with the possession, of his property<br \/>\n      with the intention to defraud revenue, such<br \/>\n      charge or transfer shall be void as against<br \/>\n      any claim in respect of any tax etc. When<br \/>\n      some property is transferred\/alienated or<br \/>\n      charge is created over it then unless<br \/>\n      otherwise proved a transfer would be held<br \/>\n      valid and binding on the parties. If the State<br \/>\n      Government is of the opinion that such<br \/>\n      alienation or creation of charge was to<br \/>\n      defraud revenue or was with an intention to<br \/>\n      defraud revenue then the competent officers<br \/>\n      of the State Government\/Revenue Recovery<br \/>\n      Officers will have to make an enquiry into the<br \/>\n      subject after issuing notice to the transferor,<br \/>\n      transferee and\/or the person who created the<br \/>\n      charge and the persons in whose favour the<br \/>\n      charge    is   created    and    after  giving<br \/>\n      appropriate opportunities to all the parties it<br \/>\n      has come to the conclusion that transfer was<br \/>\n      with or without an intention to defraud the<br \/>\n      revenue.\n<\/p>\n<p><span class=\"hidden_text\">                                                                                5<\/span><\/p>\n<p>                             W.P.No.671\/08<\/p>\n<p>     State Bank of Travancore                         State of M.P. &amp; others<\/p>\n<p>     16.11.2010\n<\/p>\n<p>           15. It would be trite to say that simple word<br \/>\n           or a simple finding without any supporting<br \/>\n           evidence or foundational fact that creation of<br \/>\n           charge\/allegation was with an intention to<br \/>\n           defraud revenue would not be sufficient.<br \/>\n           When somebody alleges fraud, it has to plead<br \/>\n           the requirement and they will have to prove<br \/>\n           that how the fraud was committed and how<br \/>\n           the said fraud was against the interest of the<br \/>\n           revenue and was with an intention to defraud<br \/>\n           the revenue. In our opinion, Section 51 of<br \/>\n           1994 Adhiniyam infact provides protection to<br \/>\n           the creditors in whose favour the property<br \/>\n           has been alienated by any mode i.e mortgage,<br \/>\n           gift, exchange etc. or in whose favour charge<br \/>\n           over the property has been created.\n<\/p>\n<p>           16.         Taking into consideration the<br \/>\n           totality of circumstances, we are unable to<br \/>\n           hold that Sections 53 and 51 of the<br \/>\n           Adhiniyam are ultra vires the constitution. All<br \/>\n           the petitions deserve to and are accordingly<br \/>\n           dismissed. There shall be no order as to<br \/>\n           cost.&#8221;\n<\/p>\n<p>            In view of settled position of law by the Division Bench of this<br \/>\n     Court, we find that the controversy involved in this case is squarely<br \/>\n     covered by the aforesaid judgment and in the light of aforesaid<br \/>\n     judgment, this petition is also dismissed.\n<\/p>\n<p>            No order as to costs.<\/p>\n<pre>\n\n\n     (Krishn Kumar Lahoti)                        (Smt.Sushma Shrivastava)\nC.          Judge                                          Judge\n <\/pre>\n","protected":false},"excerpt":{"rendered":"<p>Madhya Pradesh High Court State Bank Of Travancore vs The State Of Madhya Pradesh on 16 November, 2010 1 W.P.No.671\/08 State Bank of Travancore State of M.P. &amp; others 16.11.2010 Shri Rajesh Maindiretta, leaned counsel for petitioner. Shri Naman Nagrath, learned Additional Advocate General for respondents No.1, 2 &amp; 3. None for respondent No.4. Petitioner [&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-60613","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 v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>State Bank Of Travancore vs The State Of Madhya Pradesh on 16 November, 2010 - 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-travancore-vs-the-state-of-madhya-pradesh-on-16-november-2010\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"State Bank Of Travancore vs The State Of Madhya Pradesh on 16 November, 2010 - Free Judgements of Supreme Court &amp; 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