ASSISTANT GENERAL MANAGER AND AUTHORISED OFFICER, STATE BANK OF INDIA vs THE ASSISTANT COMMISSIONER OF STATE TAX

C/SCA/12038/2026 JUDGMENT DATED: 12/10/2026
(GJHC240496372026)
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 12038 of 2026

FOR APPROVAL AND SIGNATURE:


HONOURABLE MR. JUSTICE PRANAV TRIVEDI

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Approved for Reporting Yes No
√
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ASSISTANT GENERAL MANAGER AND AUTHORISED OFFICER, STATE
BANK OF INDIA
Versus
THE ASSISTANT COMMISSIONER OF STATE TAX & ORS.
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Appearance:
MS DHARMISHTA RAVAL(707) for the Petitioner(s) No. 1
MR. PARTH PATEL, ASSISTANT GOVERNMENT PLEADER for the
Respondent(s) No. 1,3
NOTICE UNSERVED for the Respondent(s) No. 2
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CORAM: HONOURABLE MR. JUSTICE PRANAV TRIVEDI

Date : 12/10/2026
ORAL JUDGMENT
1 Heard Ms.Dharmishta Raval, learned advocate for the
petitioner and Mr.Parth Patel, learned Assistant Government
Pleader for the State respondents.
2 Rule returnable forthwith. Mr.Parth Patel, learned AGP,
waives service of rule on behalf of the respondents. By way of
present petition under Article 226 of the Constitution of India,
the petitioner has sought for the following reliefs:
“A. Issue an appropriate writ in the nature of mandamus, or any
other appropriate writ, order or direction, directing the
Respondent Nos. 1 and 3 to vacate the charge of the State Tax
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C/SCA/12038/2026 JUDGMENT DATED: 12/10/2026
(GJHC240496372026)
Department, over the properties of M/s. Labh Solvex LLP, being (I)
Survey No. 191, Plot No. 111, Maheshwari Society, Dhanera; (ii)
Survey No. 191, Plot No. 113, Maheshwari Society, Dhanera and
(iii) Revenue Survey No. 195, Plot No. 98 paiki, Shivaji Park
Society, Dhanera, District: Banaskantha;
B. Issue a writ of mandamus, or any other appropriate writ,
order or direction, quashing and setting aside the charge
attachment created by the Respondent Nos. 1 and 3 over the
properties of M/s. Labh Solvex LLP;
C. Be pleased to issue a writ of mandamus or any other
appropriate writ, order or directions granting ex parte ad interim
order in terms with Prayer (A) & (B) above;
D. Be pleased to pass such other and further order(s) as this
Hon’ble Court may deem fit and proper in the facts and
circumstances of the case and in the interest of justice.”
3 Brief facts leading to filing of the present writ petition is
that the petitioner is a Banking Corporation constituted under
the provisions of the State Bank of India Act, 1955
(hereinafter referred to as “the Act” for short), inter alia
carrying on the banking business.
3.1 It is the case of the petitioner that the petitioner-bank
had granted various credit facilities to the respondent No.2.
On 05.03.2022, the respondent No.2, created a mortgage by
deposit of title deeds in favour of the petitioner bank in
respect of the secured immovable properties as described in
the petition to secure the credit facilities sanctioned by the
petitioner bank. On the very same date, the petitioner bank
registered its security interest over the secured assets with
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C/SCA/12038/2026 JUDGMENT DATED: 12/10/2026
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the Central Registry of Securitisation Asset Reconstruction
and Security Interest of India (CERSAI).
3.2 On 14.09.2024, the loan account of respondent No.2,
was classified as Non-Performing Asset (NPA) by the bank.
The bank issued a demand notice under Section 13(2) of the
SARFAESI Act, calling upon the respondent No.2 and its
guarantors to repay the outstanding dues. But, as the
borrower i.e. respondent No.2 and the guarantors failed to
discharge their liabilities, the petitioner bank initiated
proceedings under Section 13(4) of the SARFAESI Act and
filed Criminal Misc.Application No. 1052 of 2025 before the
Chief Judicial Magistrate, Banaskantha at Palanpur under
Section 14 of the SARFAESI Act.
3.3 On 17.06.2025, the Chief Judicial Magistrate, Palanpur
allowed Criminal Misc. Application No. 1052 of 2025 and
appointed Court Commissioner to take possession of the
secured properties and hand over the same to the authorized
officer of the petitioner-bank. The petitioner bank, thereafter,
initiated steps for sale of the secured assets and issued a
public notice in newspapers for auction of the secured
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C/SCA/12038/2026 JUDGMENT DATED: 12/10/2026
(GJHC240496372026)
properties. It was during the scrutiny of the revenue records
that the petitioner bank came to know that respondent No.1-
State Tax Department had created and registered a charge of
Rs.1,21,40,961/- over the secured properties.
3.4 The petitioner bank addressed a representation to
respondent No.1 requesting removal of the charge from the
revenue records and drawing attention to the settled legal
position regarding the priority of secured creditors under the
SARFAESI Act and the Recovery of Debts and Bankruptcy Act.
Despite receipt of the aforesaid representation, respondent
Nos. 1 and 3, did not remove or withdrew the charge from the
revenue record.
3.5 Being aggrieved by such attachment made by the VAT
authorities, present petition is preferred by the petitioner-
bank.
4 At the outset, learned advocate Ms.Dharmishta Raval for
the petitioner-bank and learned AGP Mr.Parth Patel for the
respondent – State has submitted that the issue is no more res
integra. The issue with regard to first priority over the
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C/SCA/12038/2026 JUDGMENT DATED: 12/10/2026
(GJHC240496372026)
secured property would be of the bank by virtue of Section
26E of the SARFAESI Act and not of the State Government by
virtue of Section 48 of the VAT Act. This issue has been
categorically decided by this Court in Special Civil Application
No. 17891 of 2018. The operative part of the order reads as
under:
“32. Section 31B has been inserted in the Recovery of Debts and
Bankruptcy Act, 1993 (hereinafter referred to as “the RDB Act”) by
the Enforcement of Security Interest and Recovery of Debts Laws
and Miscellaneous Provisions (Amendment) Act, 2016, w.e. f
1.9.2016, which contains a non-obstante clause and which
expressly provides that the secured debts shall be paid in priority
over all other debts and Government dues including the State
taxes.
33. Apart from the fact that Section 31B of the RDB Act is a later
enactment, the language of the said provision also clearly indicates
the intention of the Parliament to give precedence even over the
Government dues notwithstanding anything to the contrary in any
other law.
34. We are sure of one thing that there exists no repugnancy in
the two legislations. The intention of the Parliament could not be
said to nullify the State enactment providing the first charge on the
property. The legislations have been made by the Central
Government and the State respectivey under Entries I and II of the
Schedule and not of the Concurrent List. The amendment made by
the Parliament is to give priority to the secured creditors vis-a-vis
the State dues without speaking about the first charge. This aspect
was duly considered by the Supreme Court in the case of Central
bank of India (supra). The amended provision, i.e. Section 26E of
the SARFAESI Act and Section 31B of the RDB Act, would have
been different as indicated by the Apex Court in the case of Central
Bank of India (supra).
*
51. Section 48 of the VAT Act would come into play only when the
liability is finally assessed and the amount becomes due and
payable. It is only thereafter if there is any charge, the same would
operate. The authority under the VAT Act passed the assessment
order later in point of time.
52. The language of Section 48 of the VAT Act is plain and simple
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C/SCA/12038/2026 JUDGMENT DATED: 12/10/2026
(GJHC240496372026)
and the phrase 'any amount payable by a dealer or any other
person on account of tax, interest or penalty' therein. assumes
significance. The amount could be said to be payable by a dealer on
account of tax, interest or penalty once the same is assessed in the
assessment proceedings and the amount is determined accordingly
by the authority concerned Without any assessment proceedings,
the amount cannot be determined, and if the amount is yet to be
determined, then prior to such determination there cannot be any
application of Section 48 of the VAT Act. We may also refer to
Section 47 of the VAT Act. Section 47 of the VAT Act is with
respect to transfer of property by the dealer to defraud the
Revenue. According to Section 47, if a dealer creates a charge over
his property by way of sale, mortgage, exchange or any other mode
of transfer after the tax has become due, then such transfer would
be a void transfer The reason why we are referring to Section 47 is
that the phrase therein 'after any tax has become due from him'
assumes significance. The same is suggestive of the fact that
before the assessment proceedings, or, to put it in other words,
before a particular amount is determined and becomes due to be
payable if there is any transfer of property of the dealer, such
transfer would not be a void transfer. Therefore, the condition
precedent is that the tax should become due and such tax which
has become due shall be payable by a dealer. Once this part is
over, then Section 48 of the VAT Act would come into play.
53. One of us, JB. Pardiwala, J., sitting as a Single Judge, had the
occasion to consider this issue in the case of Bank of Baroda,
Through its Assistant General Manager Prem Narayan Sharma vs.
State of Gujarat & Ors.. Special Civil Application No 12995 of
2018, decided on 16 09 2019. We may quote the relevant
observations made in the said judgment
"It is preposterous to suggest in the case on hand that as the
assessment year was 2012-13, Section 48 could be said to
apply from 2012-13 itself. Even in the absence of Section
26E of the SARFAESI Act or Section 31B of the RDB Act,
Section 48 of the VAT Act would come into play only after
the determination of the tax, interest or penalty liable to be
paid to the Government. Only thereafter it could be said that
the Government shall have the first charge on the property
of the dealer "
54. In view of the aforesaid discussion, We have no hesitation in
coming to the conclusion that the first priority over the secured
assets shall be of the Bank and not of the State Government by
virtue of Section 48 of the VAT Act, 2003.”
5 In view of the same, the present writ petition succeeds
and is hereby allowed. Respondents Nos. 1 and 3 are hereby
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C/SCA/12038/2026 JUDGMENT DATED: 12/10/2026
(GJHC240496372026)
directed to vacate the charge of the State Tax Department
over the properties of M/s.Labh Solvex LLP, being (I) Survey
No. 191, Plot No. 111, Maheshwari Society, Dhanera; (ii)
Survey No. 191, Plot No. 113, Maheshwari Society, Dhanera
and (iii) Revenue Survey No. 195, Plot No. 98 paiki, Shivaji
Park Society, Dhanera, District: Banaskantha. The entries of
charge / attachment created by respondent Nos. 1 and 3 are
hereby quashed and set aside. It is hereby declared that the
bank has first charge over the properties mortgaged from
respondent No.2 by virtue of Section 26E of the SARFAESI
Act.
6 It is further clarified that the excess, if any, shall be
adjusted towards the dues of the State under the VAT Act. It is
further declard that the respondents cannot proceed against
the purchasers of the properties sold under the SARFAESI
Act.
7 With the aforesaid direction, the writ petition is allowed
to the aforesaid extent. Rule is made absolute accordingly
with no order as to costs.
(PRANAV TRIVEDI,J)
BIMAL
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