Chambers of Ishaan Garg
Ch. No. 217, Western Wing, District & Sessions Court, Tis Hazari, New Delhi, Delhi 110054
+91 8851742417, +91 8800386163
12 We take this opportunity to explain the effect of attachment and also the effect of charge. In Mulla's Civil Procedure Code, 8th Edn., the law as applicable in India is thus summarised (p. 187):
“Attachment creates no charge or
lien upon the attached property. It merely prevents and avoids private
alienations; it does not confer any title on the attaching creditors. There is
nothing in any of the provisions of the Code which in terms makes the attaching
creditor a secured creditor or creates any charge or Hen in his favour over the
property attached. But an attaching creditor acquires, by virtue of the
attachment, a right to have the attached property kept in custodia legis for
the satisfaction of his debt, and an unlawful interference with that right constitutes
an actionable wrong.”
13 The Privy Council in Moti Lal
v. Karrabuldin (1897) I.L.R. 25 Cal. 179, p.c. where Lord Hobhouse stated (p.
185): “Attachment, however, only prevents alienation, it does not confer
title.”
14 Similarly, in the Calcutta
Full Bench case of Frederick Peacock v. adan Gopal (1902) I.L.R. 29 Cal. 428,
F.B. Sir Francis Maclean, in delivering the judgment of the Full Bench, says
(p. 431): “I think, therefore, it must be taken that the attaching creditor
here did not obtain by his attachment any charge or lien upon the attached property,
and if so, no question as to the Official Assignee only taking the property of
the insolvent subject to any equities affecting it, can arise.”
And Mr. Justice Ghose says (p.
483): “I am clearly of opinion that the attaching creditor did not acquire any
title or charge upon the property by reason of the attachment in question.”
15 A charge on the other hand
under Section 48 of the GVAT Act creates no interest in or over a specific
immovable property, but is only a security for the payment of money. (See :
Dattatreya Shanker Mote vs. Anand Chintaman Datar and others (1974) 2 SCC 799).
16 The concept of charge emanates
from Section 100 of the Transfer of Property Act. Section 100 of the Transfer
of Property Act, 1882 defines “charge” as follows: “100. Charges.- Where
immoveable property of one person is by act of parties or operation of law made
security for the payment of money to another, and the transaction does not
amount to a mortgage, the latter person is said to have a charge on the
property; and all the provisions hereinbefore contained which apply to a simple
mortgage shall, so far as may be, apply to such charge. Nothing in this section
applies to the charge of a trustee on the trust- property for expenses properly
incurred in the execution of his trust, and, save as otherwise expressly
provided by any law for the time being in force, no charge shall be enforced
against any property in the hands of a person to whom such property has been
transferred for consideration and without notice of the charge.”
17 The above-mentioned Section
clearly indicates the following types of charges : 1) Charges created by act of
parties; and
2) Charges arising by operation
of law.
18 The words “by operation of
law” are more extensive than the words “by law” and a charge created by
operation of law includes a charge directly created by the provisions of an Act
(like Section 48 of the GVAT Act) as well as other charges created indirectly
as a legal consequence of certain conditions. The expression “operation of law”
only means working of the law.
19 A charge, as we have already
seen, is a right to receive a certain sum of money. If a dealer registered
under the GVAT Act incurs any liability towards payment of tax, then the State
has a right to receive a certain sum of money as crystallized in the form of
liability. This recovery of the money from the property can be by attaching the
assets of the defaulting dealer, and thereafter, putting those to auction. This
type of recovery would be governed by the provisions of Section 46 of the GVAT
Act.
20 In the case on hand, it could
be said that the day the assessment order came to be passed determining the
liability of the writ applicant under the provisions of the GVAT Act, a charge
over the immovable assets of the writ applicant could be said to have been
created in favour of the State by operation of law, as envisaged under Section
48 of the GVAT Act. Today, the recovery might have been stayed by the first
appellate authority, but, tomorrow, if the first appeal as well as the second
appeal that may be filed by the writ applicant is dismissed, then the next step
in the process would be the recovery of the requisite amount. What could be
said to have been done as on date is just to make one and all aware that by
operation of law, as envisaged under Section 48 of the GVAT Act, there is a
charge of the State Government over the immovable properties owned by the writ
applicant, as described above. How would all come to know about the same. It is
for this reason that an entry is ordinarily made in the revenue records.
21 We would like to clarify that
what has been done by the Talati-cum-Mantri does not amount to attachment of
the property. There is no attachment. We reiterate that there is a fine
distinction between attachment of property and a charge over the property by
operation of law.
IN THE HIGH COURT OF GUJARAT AT
AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO.
5413 of 2022
SHREE RADHEKRUSHNA GINNING AND
PRESSING PVT. LTD. Vs STATE OF GUJARAT
CORAM: MR. JUSTICE J.B.PARDIWALA
and MS. JUSTICE NISHA M. THAKORE
Date : 29/03/2022
(PER : HONOURABLE MR. JUSTICE
J.B.PARDIWALA)
1 By this writ application under
Article 226 of the Constitution of India, the writ applicant has prayed for the
following reliefs:
“(A) Your Lordships may be
pleased to admit and allow the present petition.
(B) Your Lordships may be pleased
to issue a writ of mandamus or any other appropriate writ, order and direction
and further be pleased to quash and set aside the impugned order dated
13.08.2020 passed by the Ld. Respondent No.2.
(C) Your Lordships may be pleased
to issue a writ of mandamus or any other appropriate writ, order and direction
and further be pleased to direct the Ld. Respondent No.2 to release the charge
on the property of the petitioner, being Revenue Survye No.252/2, Plot No.01,
village : Gomta, Taluka : Gondal, District : Rajkot.
(D) Such other and further
relief/s as may be deemed just and proper in the facts and circumstances of the
present case may kindly be granted.”
2 It appears from the materials
on record that the writ applicant hasincurred a liability of Rs.1,68,10,098/-
towards the VAT under the provisions of the GVAT Act, 2003. Such liability came
to be incurred by virtue of an assessment passed by the competent authority
order dated 23rd March 2020.
3 The assessment order dated 23rd
March 20202 is now a subject matter of challenge before the first appellate
authority. The appeal has been admitted by the first appellate authority and
the further proceedings towards the recovery have been stayed on the condition
of pre-deposit of Rs.7 Lakh. The writ applicant is here before this Court redressing
the grievance that since the first appellate authority has stayed the recovery,
the charge which has been created over the property owned by the writ applicant
in the form of land and factory building situated at the revenue survey
No.252/2, paiki - 1, village : Gomta, Taluka : Gondal, should now be released.
In other words, the charge which has been created in the revenue record should
no longer remain in operation.
4 We have heard Mr. Apurva N.
Mehta, the learned counsel appearing for the writ applicant and Mr. Utkarsh
Sharma, the learned A.G.P. appearing for the State respondents.
5 Mr. Mehta would submit that the
apprehension on the part of the department that in the absence of any charge,
the writ applicant may dispose of the land and factory building is absolutely
misconceived and not well-founded as Section 48 of the GVAT Act takes care of
the situation. We are not impressed with such a submission.
6 At one point of time, Mr.
Mehta, the learned counsel, during the course of his submissions, got confused
between an attachment of property and charge created over the property. Mr.
Mehta would also submit that the action on the part of the respondent No.2 is
nothing, but amounts to attachment of the property pending the appeal before
the first appellate authority. Mr. Mehta would submit that the same is not permissible
in law as there is no provision in the GVAT Act which permits attachment of a
property after the final assessment order is passed and the first appeal is
pending before the first appellate authority.
7 There appears to be a serious
misconception on the part of the writ applicant that its property referred to
above has been attached. The argument is that there cannot be any attachment of
property since against the assessment order, there is an appeal pending and the
appellant authority has stayed the recovery.
8 Section 44 of the GVAT Act
provides for a special mode of recovery. This provision has no application to
the facts of the present case. Section 45 is with respect to the provisional
attachment. Even this provision has no application to the facts of the present
case as the assessment order has already been passed. Section 46 confer special
powers to the Tax Authorities for recovery of tax as arrears of land revenue.
We have not reached even to this stage. Section 48 creates a charge by
operation of law. Section 48 reads thus:
“48. Tax to be first charge on
property. - Notwithstanding anything to the contrary contained in any law for
the time being in force, any amount payable by a dealer or any other person or
account of tax, interest or penalty for which he is liable to pay to the
Government shall be a first change on the property of such dealer, or as the
case may be, such person.”
9 The plain reading of the
aforesaid section would indicate that it starts with a non-obstante clause.
Section 48 clarifies that if any amount is payable by a dealer or any other
person on account of tax, interest or penalty for which he is liable to pay to
the Government, the same shall be a first charge on the property of such dealer
or as the case may be, such person. It appears that in the case on hand, the
State Tax Officer-
(3), Unit – 94, Gondal addressed
a letter dated 13th August 2020 to the Talati-cum-Mantri of village : Gomta,
Taluka : Gondal, which reads thus:
“No.:RVEA-3/U-94/GONDAL/2020-21/Ja.2154/55
DATE.13/8/2020
To,
The Talati Mantri
At Gomta, Ta. Gondal.
Subject:-To provide information
of property/making entry of encumbrance.
Name of the dealer firm:- Shri
Radhekrishna Ginning & Pressing
Pvt.Ltd., At Gomta, Ta. Gondal
Tin No.24092703943 PAN
No.-AARCS1948P
With due respect it is to state
that the government has to recover Rs.1,68,10,098/- + interest under the
assessment of Sales Tax/VAT Act of 2015/16 with the dealer shown in the subject
above. Information of the person/Company/Firm holding the interest/position in
it under your domain is as below.
Sr. No.
Name Constitution Address Remarks
1. Shri Radhekrihna Ginning &
Pressing Pvt. Ltd. at.-Gomta, Ta.Gondal
Dir.-
1. Dilipbhai Chhaganbhai Sakhiya and
others. Pvt. Ltd. R.S.No.252/2 Paiki 1 At.-Gomta, Ta.- Gondal
You are instructed to provide
that information of the above properties owned by the aforesaid
persons/Firm/Company to this office and in case it is found that the above the
property is owned by the dealer then make an entry of the charge with respect
to the government dues/debts along with the evidence and provide to this office
at the arliest.
Sd/-illegible State Tax
Officer-(3) Unit-94, Gondal.”
10 In response to the aforesaid,
the Talati-cum-Mantri has mutated an entry in the village form No.2 that the
owner of Radhakrishna Ginning and Pressing Private Limited Company – Shri
Dilipbhai Chhaganbhai Shakhiya has incurred tax liability. In such
circumstances, for the purpose of recovering the said amount, the first charge
over the property owned by the company shall be that of the Government.
11 The aforesaid charge may be a
bit uncomfortable to the writ pplicant as it appears that the bank from whom
the writ applicant has obtained overdraft facility is creating some problems.
It is for the writ\ applicant to sort it out with the bank. Today, there is no
good reason for this Court to interfere in the matter.
12 We take this opportunity to
explain the effect of attachment and also the effect of charge. In Mulla's
Civil Procedure Code, 8th Edn., the law as applicable in India is thus
summarised (p. 187): “Attachment creates no charge or lien upon the attached property.
It merely prevents and avoids private alienations; it does not confer any title
on the attaching creditors. There is nothing in any of the provisions of the
Code which in terms makes the attaching creditor a secured creditor or creates
any charge or Hen in his favour over the property attached. But an attaching
creditor acquires, by virtue of the attachment, a right to have the attached
property kept in custodia legis for the satisfaction of his debt, and an
unlawful interference with that right constitutes an actionable wrong.”
13 The Privy Council in Moti Lal
v. Karrabuldin (1897) I.L.R. 25 Cal. 179, p.c. where Lord Hobhouse stated (p.
185): “Attachment, however, only prevents alienation, it does not confer title.”
14 Similarly, in the Calcutta
Full Bench case of Frederick Peacock v. Madan Gopal (1902) I.L.R. 29 Cal. 428,
F.B. Sir Francis Maclean, in delivering the judgment of the Full Bench, says
(p. 431): “I think, therefore, it must be taken that the attaching creditor
here did not obtain by his attachment any charge or lien upon the attached property,
and if so, no question as to the Official Assignee only taking the property of
the insolvent subject to any equities affecting it, can arise.”
And Mr. Justice Ghose says (p. 483):
“I am clearly of opinion that the attaching creditor did not acquire any title
or charge upon the property by reason of the attachment in question.”
15 A charge on the other hand
under Section 48 of the GVAT Act creates no interest in or over a specific
immovable property, but is only a security for the payment of money. (See :
Dattatreya Shanker Mote vs. Anand Chintaman Datar and others (1974) 2 SCC 799).
16 The concept of charge emanates
from Section 100 of the Transfer of Property Act. Section 100 of the Transfer
of Property Act, 1882 defines “charge” as follows:
“100. Charges.- Where immoveable
property of one person is by act of parties or operation of law made security
for the payment of money to another, and the transaction does not amount to a
mortgage, the latter person is said to have a charge on the property; and all
the provisions hereinbefore contained which apply to a simple mortgage shall,
so far as may be, apply to such charge. Nothing in this section applies to the charge
of a trustee on the trust- property for expenses properly incurred in the
execution of his trust, and, save as otherwise expressly provided by any law
for the time being in force, no charge shall be enforced against any property
in the hands of a person to whom such property has been transferred for
consideration and without notice of the charge.”
17 The above-mentioned Section
clearly indicates the following types of charges :
1) Charges created by act of parties;
and
2) Charges arising by operation
of law.
18 The words “by operation of
law” are more extensive than the words “by law” and a charge created by
operation of law includes a charge directly created by the provisions of an Act
(like Section 48 of the GVAT Act) as well as other charges created indirectly
as a legal consequence of certain conditions. The expression “operation of law”
only means working of the law.
19 A charge, as we have already
seen, is a right to receive a certain sum of money. If a dealer registered
under the GVAT Act incurs any liability towards payment of tax, then the State
has a right to receive a certain sum of money as crystallized in the form of liability.
This recovery of the money from the property can be by attaching the assets of
the defaulting dealer, and thereafter, putting those to auction. This type of
recovery would be governed by the provisions of Section 46 of the GVAT Act.
20 In the case on hand, it could
be said that the day the assessment order came to be passed determining the
liability of the writ applicant under the provisions of the GVAT Act, a charge
over the immovable assets of the writ applicant could be said to have been
created in favour of the State by operation of law, as envisaged under Section
48 of the GVAT Act. Today, the recovery might have been stayed by the first appellate
authority, but, tomorrow, if the first appeal as well as the second appeal that
may be filed by the writ applicant is dismissed, then the next step in the
process would be the recovery of the requisite amount. What could be said to
have been done as on date is just to make one and all aware that by operation
of law, as envisaged under Section
48 of the GVAT Act, there is a
charge of the State Government over the immovable properties owned by the writ
applicant, as described above.
How would all come to know about
the same. It is for this reason that an entry is ordinarily made in the revenue
records.
21 We would like to clarify that
what has been done by the Talaticum-Mantri does not amount to attachment of the
property. There is no attachment. We reiterate that there is a fine distinction
between attachment of property and a charge over the property by operation of
law.
22 In the result, this writ
application fails and is hereby rejected.
(J. B. PARDIWALA, J)
(NISHA M. THAKORE,J)
