TaxTMI 
TaxTMI 
2009 (7) TMI 1154
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....hat the State Government has priority over the property as regards the owner having not paid the arrears of tax due to the Government, which is outstanding and the said action has been initiated under the Revenue Recovery Act for the purpose of recovering the arrears of tax. Similar matter, earlier, fell for consideration of a Division Bench and the issue raised has already been decided. Hence, it is not necessary to discuss all the facts except the relevant one. The second respondent, Tajura Leathers and Partnership Firm (hereinafter referred to as, "the company"), obtained credit facilities from the bank. As security for the dues, the company offered its following immovable properties by availing equitable mortgage, apart from hypothecation of plant and machinery, viz. (1) (i) Plot No. 97, SIDCO Industrial Estate; and (ii) Mukuntharayapuram-2548 sq.ft. S. No. 476/5B; and (2) S. Nos. 114/4 and 114/5 situated at Manthangal Village, Ranipet Town. In addition to the above, three immovable properties of the guarantors were also mortgaged with the bank. As the company defaulted, the bank filed O.A. No. 1275 of 1999 before the Debt Recovery Tribunal, Chennai, for recov....
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....reated on the property and therefore, SARFAESI Act can have no overriding effect over such statutory charge. They rely on the provisions of law and numerous decisions and after hearing the parties, the learned judge held that the first respondent has statutory charge which has priority over all other claims over the property and therefore, the bank cannot successfully challenge the proceedings of the first respondent and thereby, the court dismissed the writ petition. Similar plea was taken by the counsel for the bank who referred to one or other provisions. The learned Special Government Pleader appearing for the State also brought to our notice different provisions as was referred to by the learned single judge. But, as the matter stands decided by the Division Bench decision in M. Nagarajan v. Deputy Commercial Tax Officer, Tindivanam (W.P. No. 10246 of 2007 dated June 12, 2009- unreported Since reported in [2009] 25 VST 175 , we are not repeating such submission as was taken before the learned single judge. In the case of M. Nagarajan [2009] 25 VST 175 (Mad), the court noticed various decisions of the Supreme Court and this court. DRT Act and Securitisation Act do not cre....
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....the debts due to the State or the king; debts which as a prerogative entitles the crown to claim priority for before all other creditors. (See Advanced Law Lexicon by P. Ramanatha Aiyar (3rd edition) page 1147). Such creditors, however, must be held to mean unsecured creditors. The principle of crown debt as such pertains to the common law principle. A common law which is a law within the meaning of article 13 of the Constitution is saved in terms of article 372 thereof. Those principles of common law, thus, which were existing at the time of coming into force of the Constitution of India are saved by reason of the aforementioned provision. A debt which is secured or which by reason of the provisions of a statute becomes the first charge over the property having regard to the plain meaning of article 372 of the Constitution of India must be held to prevail over the crown debt which is an unsecured one. It is trite that when a Parliament or State Legislature makes an enactment, the same would prevail over the common law." In the said case, the Supreme Court further observed as under: (para 13, page 536 of Comp Cas) "12. To achieve the same purpose, the Parliament as also th....
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....e Government can claim priority over another person, whose debt is also a secured debt. In that case, it has not been considered whether the mortgage of the property is only under the general law or the secured creditor has any secured interest over the secured asset. It is not in dispute that the bank is a "secured creditor" within the meaning of section 2(zd) of the SARFAESI Act, 2002. It has "secured interest" over the secured asset. Section 2(zc) defines "secured asset" as property on which security interest is created. Security interest is defined under section 2(zf), as right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and includes any mortgage, charge, hypothecation, assignment other than those specified in section 31. Security agreement is already existing between the bank and borrower, as defined under section 2(zb) which means an agreement, instrument or any other document or arrangement under which security interest is created in favour of the secured creditor including the creation of mortgage by deposit of title deeds with the secured creditor. If the status of the State is looked into, it will be ....