AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2008 (1) TMI 836
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.... loan. The loan account of respondent No. 4 company became irregular in the year 1990 and was transferred to the protested account category on October 29, 1990 with a debit balance of Rs. N33.20 lakhs. A suit for recovery of Rs. 42.29 lakhs was filed on February 26, 1992 by the petitioner-bank against respondent Nos. 4 to 6. The suit was transferred to the Debt Recovery Tribunal, Jaipur and a consent decree was passed on November 12, 1998 in favour of the petitioner-bank and against respondent Nos. 4 to 6. Pursuant to the said decree, respondent No. 4 deposited Rs. 50,000 on August 13, 1998 but did not make the balance payment as per the decree. The bank proceeded with execution of recovery certificate for an amount of Rs. 2,65,97,162.50 before the Debt Recovery Tribunal, Jaipur on May 14, 1999, which execution of recovery certificate was transferred to Debt Recovery Tribunal, Chandigarh on November 2, 2000 and the proceedings are pending there. It was further alleged by the petitioner-bank that the loans of the petitioner-bank are secured by mortgage of the factory premises of respondent No. 4 situated at Industrial Area, Baddi. It was further alleged that a sum of Rs. 4....
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....pondent Nos. 1 and 2 be restrained from auctioning the mortgaged property of respondent No. 4 for recovery of sales tax dues and the provisions of section 16B of the Sales Tax Act be also struck down as invalid law. In reply filed by respondent Nos. 1 and 2, they pleaded that section 16B of the Sales Tax Act is having an overriding effect on the provisions of the Banking Act. It was pleaded that since respondent No. 4 had failed to discharge his liabilities, the outstanding amount was declared as arrear of land revenue by the Assistant Excise and Taxation Commissioner, Solan (respondent No. 2) who had proceeded to realise the outstanding arrears of land revenue by exercising the powers of Collector under the Himachal Pradesh Land Revenue Act. Thus, it was submitted that the Government has the first charge on the property of the defaulter as per the provisions of section 16B of the Sales Tax Act. It was entitled to sell the property and reliance was placed upon the decision of Dena Bank case [2000] 120 STC 610 (SC); [2000] 5 SCC 694 which shall be referred below. It was pleaded that section 16B of the Sales Tax Act, 1968 came into force on October 21, 1994, whereas the con....
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....to the common law about the priority of crown debts which was recognised by the Indian High Courts prior to 1950 and reference was made to various decisions in this regard. This question of doctrine of priority of crown debt was also discussed in detail by a single judge of the Punjab and Haryana High Court in Union of India v. Punjab Financial Corporation [2007] 1 ISJ (Banking) 258, wherein also the reference was also made to various decisions in this regard including under the English law and similar conclusions were also drawn in para 22 of the judgment as shall be referred below. It was finally concluded that the preferential right of the crown to recover debt is only against ordinary or unsecured creditors. This decision was again referred to by a Division Bench of this court in A.J. Infrastructures Pvt. Ltd. v. State of H. P. [2008] 15 VST 342 (C.W.P. No. 306 of 2007, decided on September 7, 2007) and the conclusions drawn in Dena Bank case [2000] 120 STC 610 (SC); [2000] 5 SCC 694 were summed up by the Division Bench of this court at page 355, which may be summarised as under: "1. There is a consensus of judicial opinion that the arrears of tax due to the State can ....
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....th any provision, which was in conflict with the Karnataka Sales Tax Act and was only deciding, based on the application and interpretation of section 15 of the Karnataka Sales Tax Act, 1957 whether the State had a preferential right of recovery over the lender or not." In referring to the effect of section 16B of the H.P. General Sales Tax Act and the Banking Companies Act, passed by the Parliament, Division Bench of this court had observed at page 361 as under (paras 41 and 42): "Undoubtedly, section 16B of the Tax Act also contains a non obstante clause, which makes the amount of tax payable by a dealer to be a first charge on the property of the dealer. There is, thus, obviously a conflict between the provisions of the two statutes. The powers are absolute and in view of the non obstante clause contained in section 35 of the Act, would have an overriding effect over all inconsistent provisions contained in any other law. The Act being a special statute, enacted later in point in time and that too by the Central Government, in our view, would override the inconsistent provisions contained in the Tax Act. This is in the scheme of constitutional provisions also. Therefore....