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 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 has
incurred 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
earliest.
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
applicant 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)
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