M/S. Kodai Automobiles Limited vs. The Authorized Officer

Held

The Court held that the communication dated 14.03.2022 from the Deputy Commissioner of CGST and Central Excise had become infructuous because the entire loan accounts of the petitioners with Axis Bank had been settled. The communication had only called upon Axis Bank not to pay the balance amount after adjustment of bank dues to the petitioner, and it did not create any charge over the properties offered as security. Since the loan was settled, the bank's hesitation to return the documents was unjustified. The Court accepted the petitioners' undertaking, through an affidavit, that one unencumbered property out of the five offered as security would be exclusively earmarked for satisfying the dues of the third respondent (CGST authority). Based on this undertaking, the Court directed respondents 1 and 2 (Axis Bank) to release the petition-mentioned documents to the petitioners. It was clarified that it remains open for the third respondent to issue appropriate proceedings for creating a charge over the specific property covered by document No.3465 of 2009.

Facts

The writ petitioners, M/s.Kodai Automobiles Limited and S.G.Jayaraj Nadar and Son, had availed loans from Axis Bank Limited (respondents 1 and 2). After clearing their loan dues, they sought the return of their property documents held by the bank as security. The bank refused to release the documents, citing a communication from the Deputy Commissioner of CGST and Central Excise, Tirunelveli Division (respondent 3). This communication, dated 14.03.2022, instructed the bank not to release any balance amount after adjusting its dues to the petitioners, but instead to credit it to the Central Government account. The petitioners filed a writ petition seeking a mandamus to release their property documents. The CGST authority was suo motu impleaded as the third respondent.

Key Issues

1. Whether the communication dated 14.03.2022 from the Deputy Commissioner of CGST and Central Excise, Tirunelveli Division, directing Axis Bank not to release any balance amount after adjusting bank dues to the petitioners, remains operative and legally binding, thereby justifying the bank's refusal to return the property documents, despite the loan accounts being settled? (Question of law turning on the interpretation of the CGST authority's communication and its effect on the bank's obligation to return securities). Contentions: Petitioner: Argued that since the loan accounts were settled, the communication from the CGST authority had become infructuous and did not create any charge over the properties. They sought the release of their title documents. Revenue (CGST Authority): The judgment records no specific argument from the revenue or the CGST authority regarding the operative nature of the communication or their claim over any balance amount. However, their prior communication indicated a claim on any surplus funds after the bank's dues were settled.