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The Punjab National Bank (PNB) approved a term loan to M/s Superrugs (India) Pvt. Once the loan became irregular, a recovery suit was initiated by the PNB against its guarantors and borrowers. PNB later instituted execution proceedings, and during its pendency, the Assistant Excise and Taxation Commissioner, District Solan, issued a notice for auction of the mortgaged property for recovery of arrears of sales tax. PNB applied for the stay of the auction but wasn’t successful as its claim against the property had become secondary to the state. A writ petition was filed before the court, which claimed that Section 16-B of the HPGST Act was ultra vires the provisions of the Constitution and hence should be struck down. The high court allowed the petition and held that Section 16-B of the HPGST Act is against the Constitution and the Banking Companies Act. The present case is an appeal to the Supreme Court against the decision of the High Court.


The apex court held that the Special Leave Petition filed by the state was deemed to be infructuous. The bench stated that section 16-B of the HPGST Act is valid legislation, and it is neither unconstitutional nor against the Banking Companies Act. This section would only operate after the determination of liability or if any sum is due and payable. Only after that, the state's charges on the property would operate.

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