State of Himachal Pradesh and Others vs M/s A.J. Infrastructures Pvt. Ltd and Anr.

HELD:1.1A law, which the State legislature had the competence to enact, has been outlawed by the High Court while hearing a writ petition which was rendered infructuous due to developments subsequent to its filing and prior to its disposal but such developments had not been brought to the notice of the High Court. For all intents and purposes, the High Court by its judgment and order dated 2nd January, 2008 decided an infructuous writ petition and, in the process, outlawed section 16-B of the HPGST Act when the same was not at all warranted.It was also a clear but inadvertent error on the part of this Court to dismiss only the special leave petition against PNB as infructuous; the appropriate course for this Court ought to have been to dismiss the writ petition of PNB itself as infructuous having regard to the clear stand taken by PNB in its aforesaid affidavit dated 30th September, 2010 that nothing survived for a decision on the writ petition on the date it was decided in view of release of the property from mortgage. In view of dismissal of the special leave petition qua PNB by the order dated 8th April, 2011, the judgment and order outlawing section 16-B of the HPGST Act can be examined.[Paras 29, 31 and 32][788-G-H; 789E-G] A.R. Antulay vs. R.S. Nayak (1988) 2 SCC 602 : [1988]

1 Suppl. SCR 1– referred to.

1.2 Since the writ petition had been rendered infructuous on the date it was decided, it was not necessary for the High Court to pronounce on the validity of section 16-B. A decision on the constitutional validity of a provision should be invited not in vacuum but when the justice of the case demands such a decision. Hence, it is held that the decision on an infructuous writ petition is inconsequential and can never be of any effect. The issue as to whether section 16-B of the HPGST Act is ultra vires any provision of law including the supreme law of the country is no longer res integra. What appears to be of significance in the light of the decision in Central Bank of India is that the findings in the judgments and orders disposing of the writ petitions impugned in two of the four civil appeals ~ the first dated 7th September, 2007 and the other dated 2nd January, 2008 ~ with regard to the scope, ambit and applicability of section 35 of the SARFAESI Act, more particularly the latter holding section 16-B of the HPGST Act as ultra vires the Constitution and the Banking Companies Act, loses its basis and can no longer be held to be legal and valid. Section 35 of the SARFAESI Act could not have been construed as conferring any right on a secured creditor to claim priority over dues of the State in the absence of a provision in that behalf which presently can now be claimed, subject to other conditions being fulfilled, in view of section 26E of the SARFAESI Act. Pertinently, the High Court while seized of the writ petition of PNB was not at all concerned with the SARFAESI Act as such. The matter had travelled to the High Court from proceedings under the DRT Act. There was, thus, no occasion for the High Court to pronounce on the validity of section 16-B of the HPGST Act based on what was held by its coordinate Bench in M/s A.J. Infrastructures Pvt. Ltd.. The High Courtwas therefore in clear error.Section 16-B of the HPGST Act is a perfectly valid piece of legislation and is not ultra vires the Constitution and/or the Banking Companies Act as erroneously held in the decision of the High Court dated 2nd January, 2008. Also, following the decision in Central Bank of India, any observation in the decision dated 7th September, 2007 touching upon section 16-B of the HPGST Act vis-à-vis section 35 of the SARFAESI Act is of no effect. [Paras35, 38-40][790-B-D; 793-C-H]

Central Bank of India vs. State of Kerala (2009) 4 SCC

94 : [2009] 3 SCR 735 – relied on.

M/s A.J. Infrastructures Pvt. Ltd. vs. State of H.P. and others CWP No. 306/2007 dated 7th September, 2007 – referred to.

1.3 From the excerpt of the impugned judgment and order of the High Court dated 2nd January, 2008 it is clear that proceedings were not initiated upon notice to the defaulters and the sum they owed to the department had not been finally determined 28 in accordance with law. In view thereof, question of the State resorting to the provisions contained in Chapter VI of the HPLR Act for recovering the dues, if at all, as arrears of land revenue did not arise.The State and its department either overlooked or were ignorant of the requirement of law that section 16-B would be attracted only after determination of the liability and upon any sum becoming due and payable; and that, it is only thereafter that the charge, if any, would operate. No relevant documentary evidence having been placed before the High Court, when CWP 306 of 2007 was being heard, to indicate that necessary steps under the HPGST Act had been initiated by the State and its officers, the third issue has to be answered by holding that the State not having taken steps as required by law for realization of its dues, there was no determination of liability, a fortiori, question of taking recourse to the HPLR Act for recovery of dues as arrears of land revenue did not arise. Without such determination of liability, no red entry marks could have been inserted in the revenue records and the High Court was right in holding that the State ought not to have refused mutation.The appellants (State and its officers) are not entitled to any relief except the declaration that section 16-B of the HPGST Act is not ultra vires any provision of law. In view of section 16-B having been outlawed by the High Court on 2nd January, 2008, this declaration shall not enure to the benefit of the State in respect of cases that are old and have been closed but would be effective once again from this ay. [Paras 48, 49 and 51][795-F-G; 796-B-E; 797-C-D] State Bank of Bikaner & Jaipur vs. National Iron & Steel Rolling Corporation and Ors. (1995) 2 SCC 19 : [1994] 6 Suppl. SCR 566 – referred to.