Distinction Between "Attachment Of Property" And "Charge Over Property": Gujarat High Court Explains

The brief facts of the matter were that the Applicant had incurred a liability of INR 1,68,10,098 towards VAT under the provisions of the GVAT Act 2003. Even as the assessment order stating this liability was challenged before the first appellate authority, the Applicant challenged an entry made in the revenue record that a charge which had been created over the property owned by him on the ground that the first appellate authority had stayed the recovery.

Justice Pardiwala observed that the advocate on behalf of the Applicant was confused between "attachment of property" and "charge created over property". Further, there was a serious misconception that the Applicant's property had been attached. T 

The Bench ventured forth to explain that Section 44 of the GVAT Act provided for a special mode of recovery while Section 45 deal with provisional attachment. None of these provisions were applicable to the facts of the case. Meanwhile Section 46 conferred special powers on the tax authorities for recovery of tax as arrears of land revenue but the proceedings had not reached that stage yet. At the same time, Section 48 of the Act stated that tax due to the Government will be the first charge on the property.

Taking note of the impugned notice, the Bench averred that owing to the tax liability, the Government should have the first charge over the property to recover the said amount. While stating that the aforesaid charge "may be a bit uncomfortable" for the Applicant, the Bench advised the Applicant to approach the bank for problems with the overdraft facility but there was no good reason for the Court to interfere.

"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", the Court said. The concept of charge emanates from Section 100 of the Transfer of Property Act. Charge can be created by act of parties or by operation of law (like Section 48 GVAT).

Referring to Mulla's Civil Procedure Code and Moti Lal v. Karrabuldin (1897) I.L.R. 25 Cal. 179, the High Court remarked:

"Attachment, however, only prevents alienation, it does not confer title."

A further reference was made to Frederick Peacock v.Madan Gopal (1902) I.L.R. 29 Cal. 428:

"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."

Per contra, the term 'charge' was explained as follows:

"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."

By virtue of the assessment order, a charge over the immovable assets of the Applicant was created in favour of the State as under Section 48 of the Act. Per the Bench, the recovery of the property was stayed by the first appellate authority but if the first and second appeal were to be dismissed then the next step would be recovery of the requisite amount. Accordingly, while drawing distinction between recovery, attachment and charge, the Bench dismissed the writ application.

"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", the Bench stated.

Case Title: Shree Radhekrushna Ginning And Pressing Pvt. Ltd. Through Director Yash Pareshbhai Khachar Versus State Of Gujarat

Case No.: C/SCA/5413/2022

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