Canara Bank, Madras vs Asstt. Commissioner (C.T.), Zone-III, Madras 1 and Others

Swamikkannu, J.—This petition is for the issue of writ of mandamus directing the first respondent, the Assistant Commissioner (Commercial

Taxes) Zone III, Madras-1, to forbear from selling the properties of the second respondent herein in pursuance of the notice of sale of movable

property in Form-3 Ref. No. 6281/81-C dated 25-4-1981.

It is inter alia contended in the affidavit filed in support of the writ petition and sworn to by the Manager of the petitioner Bank, that the second

respondent firm had been enjoying certain facilities from the petitioner Bank. On 11-7-1974 the second respondent was granted an open cash

credit facility to the tune of Rs. 50,000/- on hypothecation of its stock in trade etc. in favour of the Bank, thereby creating a charge over the said

goods in favour of the petitioner Bank. The said hypothecation is still in force. The second respondent had left certain arrears of sales-tax due to

the Government for the assessment years 1978-79 to 1980-81. The first respondent issued a distraint order on 8-12-1980 demanding immediate

payment of a sum of Rs. 78,739/- being the arrears of sales tax, surcharge and advance tax for the said assessment years due from the second

respondent-company. Non-payment of the said arrears by the second respondent resulted in the first respondent effecting attachment of the

movable properties of the second respondent which had earlier been hypothecated by the second respondent in favour of the petitioner Bank, as

early as on 11-7-1974. On coming to know of the attachment of the hypothecated movables, the petitioner addressed the Deputy Commercial

Tax Officer. Sow carpet Circle, to release the attachment as the properties had been hypothecated to the Bank earlier. Not only did the officer not

send any reply to the said letter, but the first respondent issued in Form No. 3 a notice of sale of movable property on 25-4-1981. According to

the petitioner Bank, the first respondent is not entitled to sell the goods as the petitioner Bank has a first charge over the same by virtue of the

hypothecation in its favour.

In the counter-affidavit, the first respondent averred that the second respondent company is in arrears of sales tax, surcharge, additional tax and

Central Sales tax to the tune of Rs. 82.453.36 p. for the three assessment years aforesaid and that in spite of several personal contacts for

clearance of the arrears, the second respondent was postponing payment on some pretext or other and when matters came to a crucial stage, the

second respondent moved the Government and obtained permission in G.O. Rt. No. 254 dated 4-8-1981 to pay 20% of the arrears in the first

instance and the balance in subsequent installments and even then, it failed to fulfill the several conditions of the Government Order regarding

payment of the current dues regularly. The second respondent had not even paid the tax due to be paid in the month of Feb. 1981 due to be paid

on 20-3-1981. The Deputy Commercial Tax Officer therefore took steps to proceed against the second respondent for recovery of arrears under

the provisions of the Revenue Recovery Act by issuing notice in Form I for the entire arrears of tax and distrained the movables that were available

in the place of business of the second respondent, and fixed the date of sale as 28-5-1981. It is this sale notice that is impugned by the petitioner

Bank in this writ petition by seeking a writ of mandamus directing the first respondent to forbear from proceeding with the sale of the goods

attached.

The point for consideration is whether there are any grounds for granting a prayer of the petitioner Bank.

The sale notice was issued on 25-4-1981 and the same is in accordance with the provisions of the Revenue Recovery Act. The hypothecation

in favour of the Bank is not a secured debt which could be treated in preference to the Government dues that can be recovered as a prior charge if

the goods hypothecated are available for being proceeded against and attached for tax arrears.

On a careful and anxious consideration of the arguments advanced on either side, it is seen that there are no grounds for granting the relief

prayed for in the writ petition. There being no merit in the writ petition, the same is dismissed. Under the circumstances, there will be no order as to

costs.