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Issues: (i) Whether the petitioner corporation, as a secured creditor acting under section 29 of the State Financial Corporations Act, 1951, had priority over customs dues in respect of the defaulting unit's properties brought to sale; (ii) Whether the State Financial Corporations Act, 1951 prevailed over the Customs Act, 1962 by virtue of section 46-B.
Issue (i): Whether the petitioner corporation, as a secured creditor acting under section 29 of the State Financial Corporations Act, 1951, had priority over customs dues in respect of the defaulting unit's properties brought to sale.
Analysis: The claim of a secured creditor was held to prevail over ordinary or unsecured government dues. The principle of priority of crown debt was confined to unsecured creditors, and the petitioner, being a secured creditor, was entitled to priority in respect of the mortgaged and hypothecated assets generally. However, the imported goods which had been cleared under customs exemption were subject to the conditions of import, and on breach of those conditions the Customs Department could enforce recovery against such goods. The successor of the defaulting importer could also be fastened with liability in relation to those identified imported goods.
Conclusion: The petitioner succeeded in part. It had priority over customs dues generally, but not in respect of the imported goods liable to customs duty.
Issue (ii): Whether the State Financial Corporations Act, 1951 prevailed over the Customs Act, 1962 by virtue of section 46-B.
Analysis: Both enactments were treated as special statutes operating in their respective fields. In the absence of any direct conflict in enforcement, section 46-B did not displace the Customs Act, 1962. The statutes were held to be capable of co-existence, and the question of general precedence of one over the other did not arise on the facts.
Conclusion: The contention that the State Financial Corporations Act, 1951 prevailed over the Customs Act, 1962 was rejected.
Final Conclusion: The petitioner obtained only limited relief: its secured creditor claim was recognised for the general assets, while customs recovery was upheld for the imported goods attracting duty.
Ratio Decidendi: A secured creditor has priority over unsecured government dues, but where imported goods were conditionally exempted from customs duty, the Customs Department may recover duty from those identified goods and their successor notwithstanding the secured creditor's claim.
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