Special Court Act priority is fixed on the notification date, with taxes excluding penalty and interest.

Priority under section 11 of the Special Court Act is fixed with reference to liabilities existing on the date of notification, because the statute requires a common crystallisation point for claims and not a later date of distribution. The term "taxes" does not extend to penalty or interest, as those liabilities remain conceptually distinct and the Act gives priority only to revenue, taxes, cesses and rates. Post-notification penalty or interest cannot be levied where the Act itself prevents performance of the underlying obligation, but liability may continue where no such legal disability exists.

---

---

Issues: (i) Whether the priority under section 11 of the Special Court Act applies to liabilities due on the date of notification or up to the date of distribution; (ii) whether the term "taxes" in section 11 includes penalty and interest; (iii) whether penalty and interest can be levied or charged on notified parties after the date of notification.

Issue (i): Whether the priority under section 11 of the Special Court Act applies to liabilities due on the date of notification or up to the date of distribution.

Analysis: The priority scheme in section 11 had to be read with the object of the Special Court Act, namely speedy distribution of attached assets and repayment of money diverted from banks, financial institutions, and revenue authorities. The Court held that the Legislature fixed a common point of time for crystallising priority claims and that the relevant date could not be the later date of distribution, because that would indefinitely postpone distribution and allow liabilities to keep mounting. The word "due" in sections 11(2)(a) and 11(2)(b) was construed as referring to liabilities existing on the date of notification, though actual quantification could occur later.

Conclusion: The priority under section 11 applies to liabilities due on the date of notification, not to liabilities arising up to the date of distribution.

Issue (ii): Whether the term "taxes" in section 11 includes penalty and interest.

Analysis: The Court held that the statutory language was clear and that "tax" is conceptually distinct from penalty and interest. The Income-tax Act itself separately deals with tax, penalty, and interest, and the Special Court Act gave priority only to "revenue, taxes, cesses and rates". The Court declined to widen that expression by interpretation.

Conclusion: The term "taxes" does not include penalty or interest.

Issue (iii): Whether penalty and interest can be levied or charged on notified parties after the date of notification.

Analysis: The Court held that notification creates a legal disability affecting a notified party's ability to deal with attached assets, and in cases where the Special Court Act prevents compliance with a statutory or contractual obligation, no penalty or interest can be levied for the resulting non-performance. However, where the Act does not disable performance of the obligation, the liability to penalty or interest continues. The question had to be answered case by case depending on whether there was a conflict between the Special Court Act and the other law or contract.

Conclusion: Penalty and interest cannot be levied where the Special Court Act prevents performance, but they may continue where no such legal disability exists.

Final Conclusion: The decision settled that priority under section 11 is fixed with reference to the date of notification, that penalty and interest are not included within "taxes", and that post-notification levy of penalty or interest depends on whether the notified party was legally disabled from performing the underlying obligation.

Ratio Decidendi: The priority scheme under the Special Court Act must be construed purposively as of the date of notification, while the expressions "tax", "penalty" and "interest" remain distinct unless the statute clearly merges them, and no penal consequence can follow from non-performance caused by the statutory restraint itself.

---