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)
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