Summary
The Court restored the validity of Himachal Pradesh’s statutory first charge for sales-tax dues, holding that the former recovery statutes’ overriding clauses did not themselves give banks priority. Nevertheless, the State obtained no recovery or mutation relief because lawful determination and recovery steps were not established. The declaration was made effective prospectively without reopening old closed cases.
Issues
- Whether section 16-B’s first charge was invalid because of the banking recovery legislation.
- Whether the State had established the statutory prerequisites for enforcing its asserted charge.
- Whether the earlier disposal and recall proceedings prevented correction of the invalidity declaration.
Provisions considered
- Section 16-B, Himachal Pradesh General Sales Tax Act, 1968Upheld the statutory first charge but required liability to be lawfully determined and become due and payable before its operation. (¶¶ 35-40, 45, 49, 51)
- Section 35, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002Held that the overriding clause, under the law applicable to these transactions, did not itself create bank priority over the statutory State charge. (¶ 36-40)
- Section 151, Code of Civil Procedure, 1908Rejected recourse to inherent recall power in substitution for the available review remedy following a contested merits decision. (¶ 50)
Held
- The bank’s writ petition had already become infructuous through settlement and release of the mortgage before the High Court invalidated section 16-B. The Supreme Court corrected its own inadvertent earlier disposal to the extent necessary to examine and remove that unwarranted declaration, without reopening the long-concluded proceedings against the bank. (¶¶ 27-35, 42)
- Applying Central Bank of India, the former DRT and SARFAESI overriding clauses could operate only against inconsistent provisions; they did not themselves create a first charge for banks. Section 16-B was valid. The Court expressly distinguished later statutory priority amendments, whose detailed operation it did not decide in these earlier transactions. (¶ 36-40)
- A statutory first-charge provision did not dispense with assessment, determination and required recovery procedure. The State had not produced relevant evidence establishing those steps. Without liability becoming lawfully due and payable, red entries in the revenue record and refusal of mutation could not be sustained. (¶ 44-49)
- A contested merits judgment could not be reopened through an inherent-power recall application used instead of review. No apparent error or due-diligence explanation for withholding pre-existing documents justified review either. State authorities were not entitled to indulgence for those omissions. (¶ 50)
- The State obtained only the declaration preserving section 16-B, effective again from the judgment date. It could not use that declaration to reopen old closed cases; the other reliefs sought were refused. (¶¶ 51, 52)
Result
All appeals disposed of with parties bearing their own costs. Section 16-B was declared valid prospectively from the judgment date; no further relief was granted to the State.