STATE BANK OF INDIA Vs. STATE OF KERALA

JUDGEMENT

(1.) Constitutional validity of Ss.26A and 26B of the Kerala General Sales Tax Act, 1963 is under challenge in both the appeals. Writ Appeal No 212 of 2007 is preferred by the State Bank of Travancore and Writ Appeal No 259 of 2007 by the State Bank of India. Both the Banks challenge the statutory first charge claimed by the State of Kerala towards sales tax over the claims made by the Bank on the strength of the mortgages created by the donees in their favour. Right of the State Government to get priority in the matter of recovery of sales tax from the defaulters over equitable mortgages created by them in favour of banks and financial institutions is no more res integra. Dealing with the provisions parallel to S.26 B of the Kerala General Sales Tax Act, 1963 by the various sales tax laws of other States, the Supreme Court has already recognised the statutory first charge in respect of sales tax arrears. Reference may be made to the decisions of the Apex Court in State Bank of Bikaner & Jaipur v. National Iron & Steel Rolling Corporation (1995) 96 STC 612), Delhi Auto and General Finance Pvt Ltd. v. Tax Recovery Officer & Ors. (1999) 114 STC 273), Dattatreya Shanker Mote v. Anand Chintamani Dattar (1974) 2 SCC 799), Dena Bank v. Bhikhabhai Prabhudas Pareksh Co. (2000) 5 SCC 694), State of M.P. v. State Bank of Indore (2002) 10 SCC 441) etc. Scope of S.26B also came up for consideration before this Court in State of Kerala v. Rajmohan Cashew (P) Ltd. (2005 (2) KLT 131) and this Court upheld the first charge of the State under S.26B over the right created in favour of a banking institution. This Court took the view that the provisions of the RDB Act, 1993 have no overriding effect over S.26B of the Kerala General Sales Tax Act, 1963. Same is the view Java v. State of Kerala (2005 (2) KLT 543). This court took the view that the decree obtained by the Bank will not have precedence over the first charge created in favour of the State under S.26B of the Kerala General Sales Tax Act. This Court held as follows:

(2.) Sri P.V. Surendranath, counsel appearing for the appellant in W.A. No 259 of 2007, has also adopted the same argument and referred to the decision of the Apex Court in Allahabad Bank v. Canara Bank & Anr. (2000) 4 SCC 406) and submitted that the principle laid down by the Apex Court upholding the overriding effect in the RDB Act vis a vis the Companies Act would squarely apply to this case. Counsel referred to S.34 of the RDB Act and submitted that the provisions of the said Act shall have effect notwithstanding anything inconsistent therewith contained in any other law or in any instrument having effect by virtue of any law other than RDB Act.

(3.) Sri V.V. Asokan, Senior Government Pleader for Taxes, placed heavy reliance on the decision of the Apex Court in Dena Bank v. Bhikhabhai Prabhudas Parekh and Co. ((2000) 5 SCC 694) as well as various decisions of this Court cited above and submitted that both Ss.26A and 26B of the Act are consequently valid. Counsel submitted that Division Bench of this Court has held that the above mentioned provisions are constitutionally valid and overrides the provisions of the RDB Act. With regard to the contention that RDB Act has got overriding effect counsel placed reliance on the decision of the Bombay High Court in Thane Janata Sahakari Bank Limited v. Commissioner of Sales Tax & Ors. (2006) 148 STC 32) and submitted that in the absence of any specific provision in the RDB Act conferring first charge for the Bank, the first charge created under the Kerala General Sales Tax Act, will hold the field. Counsel submitted that RDB Act is a procedural Act and there is no question of any overriding effect over the Kerala General Sales Tax Act.