IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH FRIDAY, THE 2ND JANUARY 2009 / 12TH POUSHA 1930 WP(C).No. 23563 of 2008(E) --------------------------------------------- PETITIONER(S): ---------------------- M/S.INDUSIND BANK LTD., SHALOM TOWERS, 34/138D BYE-PASS NORTH END EDAPPALLY KOCHI-24, REP. BY ITS JUNIOR LEGAL EXECUTIVE. SHRI.R.UMASANKAR, AGED 35, S/O.LATE J.RADHAKRISHNA IYER. BY ADV. SRI.VARGHESE C.KURIAKOSE RESPONDENT(S): ------------------------- 1. STATE OF KERALA, REP. BY SECRETARY COMMERCIAL TAXES, SECRETARIAT TRIVANDRUM. 2. TAHSILDAR, TALUK OFFICE, THIRUVALLA. 3. M/S.UNITED TROPICAL VENEERS (P) LTD., KAVIYOOR PO., THIRUVALLA, REP. BY ITS MANAGING DIRECTOR. R1 & R2 BY GOVERNMENT PLEADER SHRI C.K. GOVINDAN THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 12.12.2008, THE COURT ON 02/01/2009 DELIVERED THE FOLLOWING: APPENDIX IN W.P.(C). NO. 23563 OF 2008 E PETITIONER'S EXHIBITS: EXT.P1TRUE PHOTO COPY OF SALE CERTIFICATE DATED 29.09.06. EXT.P2TRUE PHOTOCOPY OF THE INSURANCE CERTIFICATE PERTAINING TO THE VEHICLE. EXT.P3TRUE PHOTOCOPY OF THE SCHEDULE OF REPAYMENTS. EXT.P4TRUE PHOTOCOPY OF THE REGISTRATION PARTICULARS. EXT.P5TRUE PHOTOCOPY OF THE LETTER DATED 17.05.08 TO THE 2ND RESPONDENT. EXT.P6TRUE PHOTOCOPY OF THE LETTER DATED 23.06.08. RESPONDENTS' EXHIBITS: NIL. // True Copy // PS to Judge K. M. JOSEPH, J. -------------------------------------- W.P.C. NO. 23563 OF 2008 E -------------------------------------- Dated this the 2nd January, 2009 JUDGMENT Petitioner is a Banking Company. It has a Vehicle Finance Division. The third respondent availed a loan. The Bank parted with Rs.3,40,000/=. It was availed for purchasing a Jeep. Ext.P1 is the sale certificate. It shows, it is the subject matter of hypothecation agreement. Ext.P2 is the insurance certificate. The third respondent was to repay a total sum of Rs.4,61,680/= in fortyseven monthly instalments. There were no defaults in the Account and the Account was running well. While so, it was informed that the vehicle has been attached by the second respondent . Petitioner preferred Ext.P5 letter. Ext.P6 reply was given relying on Section 26B of the KGST Act (hereinafter referred to as “the Act”) and pointing out that there is preference and the proceedings for sale will go on. 2. I heard Shri C. Varghese Kuriakose, learned counsel appearing for the petitioner and the learned Government WPC.23563/08 E 2 Pleader. Learned counsel for the petitioner would raise only two contentions. Firstly, it is contended that Section 26B of the Act speaks about charge. According to him, the word “charge” is only defined in Section 100 of the Transfer of Property Act. The definition would make it clear, he submits, that “charge” is contemplated in connection with immovable property. The vehicle is a movable and, therefore, he would contend that there cannot be a charge over the movable. He would further contend that there are other properties and the official respondent can proceed against the other properties of the third respondent. 3. Per contra, the learned Government Pleader would contend that there is no limitation in Section 26B by which the charge thereunder is limited to immovable properties. It covers property, be it immovable or movable, he points out. Learned Government Pleader in this context relied on the decisions in State of Kerala v. Rajmohan Cashew (P) Ltd. (2005 (2) KLT 131 DB), Sherry Jacob v. Canara Bank (2004 (3) KLT 1089) and Hindustan Machine Tools Ltd. v. The Nedungadi Bank Ltd. and WPC.23563/08 E 3 another (AIR 1995 Karnataka 185). Undoubtedly, Section 100 defines “Charge” relating to immovable property 4. However, it may not be correct to say that there cannot be a charge over movables in law. In Hindustan Machine Tools Ltd. v. Nedungadi Bank Ltd. (AIR 1995 Karnataka 185) it has been held as follows: “The word 'charge' is described in S.100 of the Transfer of Property Act. I hasten to add here that the charge referred to in S.100 of the T.P.Act relates to immovable property. However, the definition of the word 'charge' given in S.100 of the T.P.Act will give an inkling as regards as to what exactly is meant by charge. Charge can be created in respect of immovable property and charge can be created also in respect of movables. A charge is nothing but a devise to create security which is enforceable in a court of law. In order to create a charge in respect of immovable property, it is necessary that the same is required to be embodied in document. However, in order to create a charge relating to movables it need not be in writing. Further in order to create a charge, it is not necessary to employ any technical or any WPC.23563/08 E 4 particular form of expression. All that is required is that there should be a clear intention to make a particular property as a security for the payment of money. In other words, creation of enforceable security is the essence of charge either in respect of immovable property or in respect of movables.” It was further held as follows: “Hypothecation is a specie of pledge. Hypothecation though not necessarily accompanied by possession of the property and though it may not create a title as such would indeed provide a security. Hypothecation does create a charge.” Therefore, juridically, there can be a charge over movables. 5. I would think that there is no merit in the contention of the petitioner. Section 26B was incorporated in the year 1999. It reads as follows: “26B. Tax payable to be first charge on the property:- Notwithstanding anything to the contrary contained in any other law for the time being in force, any amount of tax, penalty, interest and any other amount, if any, payable by a dealer or any other person under this Act, shall be the first charge on the property WPC.23563/08 E 5 of the dealer, or such person.” The Division Bench of this court in the decisions referred to by the learned Government Pleader has placed reliance on the decision of the Apex Court in State of Madhya Pradesh v. State Bank of Indore ((2002)10 KTR 366(SC)). In the said decision the Apex Court was considering Section 33C of the Madhya Pradesh General Sales Tax Act, 1958. It is identically worded as Section 26B of the KGST Act. Therein also the loanee had taken a loan in the year 1974 and two loans in 1979. Before the second loan was taken, with effect from January, 1979 Section 33C was incorporated. The State claimed first charge upon the machinery prior to the charge created by the Bank. The High Court took the view that the Bank's charge on the machinery was created on 5th September, 1974, which was prior to the enforcement of Section 33C and the subsequent loans taken on 23rd January, 1979 and 25th January, 1979 did not change the position in favour of the State as the charge remained operative till repayment of the loan borrowed. Allowing the WPC.23563/08 E 6 appeal filed by the State, the court proceeded to hold as follows: “Section 33c creates a statutory first charge that prevails over any charge that may be in existence. Therefore, the charge thereby created in favour of the State in respect of the sales tax dues of the second respondent prevailed over the charge created in favour of the bank in respect of the loan taken by the second respondent. There is no question of retrospectively here, as, on the date when it was introduced, section 33C operated in respect of all charges that were then in force and gave sales tax dues precedence over them. This position in law is discussed in detail in the judgment of this court in Dena Bank v. Bhikhabhai Prbhudas &Co. (2005) 5 SCC 694).” 6. In view of the above decision, I feel that there is no merit in the contention of the petitioner. Apart from stating that the second respondent can very well proceed against the Directors of the third respondent and it is not at all impossible for the first respondent to recover the amount from the Directors, there is no reference to any specific property available. Also, even if it is assumed that this court is to be persuaded to take the WPC.23563/08 E 7 view that though the first respondent is entitled to proceed against the vehicle, it may still be deflected from the said course in view of the availability of other assets, surely the petitioner cannot invoke the same as a matter of right at any rate. I do not see any merit in the writ petition. Accordingly, it is dismissed. Sd/= K. M. JOSEPH, JUDGE kbk.