V ADINARAYANA Vs. ANDHRA BANK

JUDGEMENT

(1.) THE facts relevant for disposal of the present writ petition, as can be gathered from the pleadings of the respective parties hereto, briefly stated, are as under : One M/s. Sree Lekha Industries became the highest bidder at the public auction conducted by second respondent-Corporation, exercising the powers under Section 29 of the State Financial Corporations Act, 1951 for realisation of the dues payable by M/s. Kusumamba Agencies Workshop. Respondent No. 1 (Andhra Bank) sanctioned to the said M/s. Sree Lekha Industries, capital finance, and an amount of Rs. 10,00,000 was sanctioned as open cash credit. The said M/s. Sree Lekha Industries is said to have furnished security to the respondent-Bank by mortgaging the property purchased in the aforesaid auction conducted by second respondent (A. P. Industrial Infrastructure Corporation Ltd. ). As the said M/s. Sree Lekha Industries committed default, the account maintained by them was declared by the respondent-Bank as non-performing asset on August 22, 2001. In exercise of powers conferred under Section 13 (1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the SERFAESI Act"), possession notice was issued by the respondent-Bank on July 20, 2002 and physical possession was taken of the mortgaged properties by first respondent-Bank on October 9, 2002. Auction was conducted pursuant to notice dated February 14, 2004 said to have been published in the local newspapers stating that the date of auction would be March 20, 2004. Second petitioner participated in the auction through first petitioner and rights of the property in question were knocked down in favour of first petitioner on March 20, 2004 being the highest bidder by bidding an amount of Rs. 24,00,000. First respondent-Bank also communicated on July 23, 2004 to second respondent-Corporation that the leasehold rights of the said property have been knocked down in favour of the petitioners herein and since they (petitioners) have paid the entire amount, second respondent may proceed further in the matter and complete necessary formalities.

(2.) THE stand of second respondent-Corporation is that the title and ownership of the premises in question remained with second respondent-Corporation as no sale deed was executed in favour of the aforesaid M/s. Sree Lekha Industries. It is the further case of second respondent that respondent No. 1-bank is entitled to sell the leasehold rights over the premises only and thus the petitioners would be entitled to the leasehold rights of the premises and not to the ownership over the premises in question. We are not required in these proceedings to adjudicate on this aspect of the matter as no relief has been claimed against second respondent-Corporation. The reliefs claimed in the instant writ petition are with respect to the action of the respondent-sales tax authorities seeking to realise sales tax dues of the aforesaid dealer from the petitioners.

(3.) IT is the case of the fourth respondent-Deputy Commercial Tax Officer that the aforesaid M/s. Sree Lekha Industries were registered dealers under the Andhra Pradesh General Sales Tax Act (for short, "the APGST Act") and the Central Sales Tax Act (for short, "the CST Act") and were assessees on the rolls of third respondent (Commercial Tax Officer ). Third respondent being the assessing authority completed the assessment of the said dealer for the years 1999-2000 and 2000-2001. The said dealer was in arrears of tax in the said years as under : 1999-2000 Rs. 3,56,292 2000-2001 Rs. 4,01,994 A notice of demand was issued on July 29, 2004 under the Revenue Recovery Act and as the said notice sent by Registered Post Ack. Due on August 5, 2004 returned unserved, form 4 Notice was served by affixture under a panchanama. The date, however, of such affixation is not stated in the counter-affidavit. It is, however, stated that form 5 Notice was issued on August 17, 2004 attaching the property of the defaulting dealer ; both these dates being subsequent to the auction held on March 20, 2004 and much after the date on which the bank took physical possession of the property on October 9, 2002. It is, however, the contention of the respondent-sales tax authorities that the sales tax arrears due under the APGST Act have got priority by virtue of Section 16-C of the APGST Act and that the same prevails over the mortgage of the financial institutions including first respondent-Bank. It is further stated in the counter-affidavit of the fourth respondent that second respondent-Corporation was informed not to transfer the property in question unless a tax clearance certificate is received from the third respondent. However, second respondent-Corporation informed that the property had already been sold by first respondent-Bank in auction to the petitioners, and advised the sales tax department to approach the bank which is holding the sale proceeds of the property relating to the said dealer M/s. Sree Lekha Industries. On this aspect, the case of the respondent-tax authorities is that by virtue of Section 18 of the APGST Act, the petitioners are obliged to pay the entire arrears of sales tax due by the aforesaid M/s. Sree Lekha Industries.