TaxTMI 
TaxTMI 
2022 (5) TMI 970
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.... No.4/2021 in Company Petition No.28/2003. 2. This Court finds that issue involved in the present two applications is identical, as such by this common order, both the applications are decided. 3. This Court also finds that the prayer made in both the applications by the applicant-Commercial Taxes Department (in short 'the applicant-department') is to seek priority and preference over other creditors and to release the amount said to be due in favour of the applicant-department. 4. This Court takes the Company Application No.24/2018 as a lead case for the purpose of narrating the facts. 5. The applicant-department has pleaded that the Company M/s.Punsumi India Ltd. is under liquidation and the Officer Liquidator (in short 'the OL') had invited claims with regard to outstanding dues against the said Company. The applicantdepartment had sent its claim vide communication dated 11.08.2004 and the OL communicated that claim was not in the prescribed format and the same was time barred and delay was to be condoned from the High Court. 6. The applicant-department has pleaded that an application was filed as Company Application No.17/2014 before this Court and this Court vid....
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....y for Rs.962 lakhs to M/s.Reliable Informations Private Limited and the sale was confirmed by the High Court vide order dated 01.12.2011 and the entire sale proceeds amounting to Rs.962 lakhs were lying with IFCI. The OL has further pleaded that the High Court vide order dated 10.05.2013 directed the OL to invite claim of the workers and creditors of the company-in- liquidation and in response to the aforesaid, the OL received 106 claims from the employees and other creditors including the applicant-department. 14. The OL has further pleaded that the claims were adjudicated by their CA and the Court directed the IFCI to deposit Rs.24,12,410/- towards claim of Employees Provident Fund and Rs.60,67,612/- towards claim of workmen for distribution of dividend amongst workmen on a pro-rata basis for their admitted amount of claims and the Court vide order dated 07.10.2016 permitted the OL to make payment of Rs.60,67,612/- to the Employees of the Company-in-liquidation and Rs.24,12,410/- towards EPF being full and final 100% dividend. 15. The OL has further pleaded that the claim of the applicant-department of Rs.8,48,285/- was rejected for the reasons that penalty levied and inter....
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....rity over all other debts and the claim of the State cannot be defeated and priority has to be given to the State's claim after satisfying workmen's dues. The claim of the State will be over and above the claim of other secured creditors. 18E. Section 529A of the Act of 1956 was inserted w.e.f 24.05.1985 and the object of the amendment of the Act was only to give preferential payment to the workmen's dues but other creditors were not deprived to claim their amount only on account of protecting rights of the workmen. 18F. The Act of 2003 has been enacted by the Legislature of the Rajasthan State, as per Article 246(3) of the Constitution of India, as they have exclusive power to make law for imposing Value Added Tax and the said power is conferred in the State by virtue of Entry-54 of List-II of the 7th Schedule of the Constitution of India, which is commonly known as 'the State List'. 18G. Section 47 of the Act of 2003 is a special law with non-obstante clause and as such, even if there is a general law like the Companies Act, 1956, enacted by the Union of India (Entry-43 of List-I [Union List] of the 7th Schedule of the Constitution of India), the law of....
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....ction 529A of the Act of 1956 and the priority of all other debts including all revenues, taxes, cesses and other dues from the company, will be paid as per the preference and priority given under Section 530 of the Act of 1956. 25. Counsel submitted that if the interpretation of the learned Advocate General appearing for the applicant-Department is accepted, then the provisions contained in sub-section (1) (a) of Section 530 of the Act of 1956 will have no meaning and this Court has been asked to add or read certain provisions which are not enacted by the Legislature for the purpose of giving preferential payment to different creditors. 26. Counsel appearing for the OL has placed reliance on the following judgments:- (i) 2013 SCC Online (Ker.) 23815 - The Ass.Comm. (Assessment) Special Circle, Kollam & Ors. Vs. OL High Court of Kerala & Anr. (ii) 2008 SCC Online (Guj.) 309 - State of Gujarat vs. OL of Kengold (India) Ltd. (iii) Judgment dt.17.09.2014 passed by the Patna High Court in Co.Petition No.11/1996 - M/s.Misrilall Jain (P) Ltd. Vs. M/s.Nacro Chemicals Ltd. (iv) (1991) 3 SCC 283 - Rajratha Naranbhai Mills Co. Ltd. Vs. Sales Tax Offi....
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.... realized or the amount of workmen's portion in his security is less, the same shall rank pari passu with the workmen's dues for the purposes of Section 529A of the Act of 1956. 31. This Court finds that Section 530 of the Act of 1956 provides for preferential payments in a winding up proceedings and the different preferential payments are to be made subject to the provisions of Section 529A of the Act of 1956 and as per clause (a) of sub-section (1) of Section 530 of the Act of 1956, all revenues, taxes, cesses and rates due from the Company to the Central or State Government or local authority, the same will be payable within the stipulated time. 32. The bare reading of the aforesaid two relevant provisions i.e. Section 529A and 530 of the Act of 1956 make it very clear that priority has to be given to the workmen's dues in winding up of a Company and further debts due to the secured creditor to the extent of debts under clause (c) of the proviso to sub-section (1) of Section 529 of the Act of 1956 are to be treated as pari passu with such dues. 33. This Court further finds that Section 530 of the Act of 1956 comes into play after priority is given to the dues of the wor....
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....re incidental encroachment would be ignored. But when the legislations are irreconcilable, the Constitution has accorded supremacy to the parliamentary legislation and parliamentary legislation will reign supreme. When the law is one made with reference to entries in the concurrent list, where both the Parliament and the State Legislature are sovereign powers in the matter of making laws, again in view of Article 254 of the Constitution unless it be a law made by the State, which is reserved for the assent of the President and the assent is received, the state law, would otherwise if it is repugnant to the law made by the Parliament, must make way whether the parliamentary legislation is before or after the legislation made by the State. 12. In this Constitutional perspective let us examine the effect of Section 26B and whether, in view of the provisions contained in Sections 529A and 530 of the Act, the State can contend that the priority to be observed under Section 529A will not prevail. Section 529A reads as follows: "529A. Overriding preferential payment.- Notwithstanding anything contained in any other provision of this Act or any other law for the ....
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....he judgment of the Apex Court in Central Bank of India's case (supra). It is true that in the Central Bank's case, the Apex Court was dealing with the question as to whether Section 26B of the Sales tax Act will prevail over the provisions of the Debts Due to Banks and Financial Institution Act 1993. It is in that context the Apex Court held that there is no provision akin to Section 529A of the Act in the DRT Act. In paragraph 129, it is held that if parliament intended to give priority to the amounts sought to be realised under the Debt Recovery Tribunal Act, it would have enacted provisions on the lines of Section 529A among other provisions. This is a case of clear indication that when the matter is to be decided between the claim under Section 529A and Section 26B, it is the claim under Section 529A which would prevail in view of the provisions of Section 530 of the Act as in no uncertain terms the claim of the State for payment towards taxes is made subject to Section 529A. This view of ours also finds support from the judgment of the Bombay High Court in State of Kerala v. Official Liquidator of Poysha Industrial Col Ltd. (2010 158 Comp. Case 582). The aforesaid j....
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....and at that point of time, they may say that in view of their preferential right, either under the Local Act or under Section 530 of the Companies Act, they be paid. The Court further held that in absence of Section 529-A, the answers certainly could be in favour of the E.S.I. Corporation. Since, after introduction of Section 529-A and amendment to Section 530 of the Companies Act, the legal position is changed. When the Official Liquidator acquires or possesses the securities mortgaged with the Secured Creditors, then the Official Liquidator would be obliged to serve the provisions of Section 529-A and Section 530 of the Companies Act. The question of equity would not arise because in a case where the securities / properties / assets are not sufficient to discharge the liability of the creditors described under Section 529-A of the Companies Act, the question of payment under Section 530 of the Act would not arise. Section 530 of the Companies Act would come into operation only after the liability under Section 529-A is discharged and some money is still left." 36-III. The High Court of Gujarat considered the issue of priority of Gujarat Value Added Tax, 2003 over SARFAESI Act,....
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....an be applied except to refer to the object and purpose of each of the two provisions, containing a non-obstante clause. Two provisions in same Act each containing a non-obstante clause, requires a harmonious interpretation of the two seemingly conflicting provisions in the same Act. In this difficult exercise, there are involved proper consideration of giving effect to the object and purpose of two provisions and the language employed in each. [See for relevant discussion in para 20 in Shri Swaran Singh & Anr. v. Shri Kasturi Lal; (1977) 1 SCC 750] 23. Normally the use of the phrase by the Legislature in a statutory provision like 'notwithstanding anything to the contrary contained in this Act' is equivalent to saying that the Act shall be no impediment to the measure [See Law Lexicon words 'notwithstanding anything in this Act to the contrary']. Use of such expression is another way of saying that the provision in which the non-obstante clause occurs usually would prevail over the other provisions in the Act. Thus, the non-obstante clauses are not always to be regarded as repealing clauses nor as clauses which expressly or completely supersede any other p....
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.... the time of enactment of the later statute, the legislature could be said to be aware of the earlier legislation and its non-obstante clause. If the legislature still confers the later enactment with a non-obstante clause, it means that the legislature wanted that enactment to prevail. 30. Let me clarify that in the case on hand there is no conflict between the two special statutes enacted by the Parliament. The conflict is with the State Act and the Central Act. I am trying to understand the true purport and effect of Section 26E of the SARFAESI Act which came to be enacted later in point of time and also the effect of Section 31B of the RDB Act which came to be enacted later in point of time. 31 to 33. XX XX XX 34. I am sure of one thing that there exists no repugnancy in the two legislations. The intention of the Parliament could not be said to nullify the State enactment providing the first charge on the property. The legislations have been made by the Central Government and the State respectively under Entries I and II of the Schedule and not of the Concurrent List. The amendment made by the Parliament is to give priority to the secured creditors vi....
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.... Value Added Tax, as per Himachal Pradesh Value Added Tax Act, 2005 in the case of Punjab National Bank & Ors. Vs. State of Himachal Pradesh & Ors. reported in 2021 (4) RCR (Civil) 837. The extract of the judgment, relevant for the present controversy, is reproduced as under:- "25. At this stage, it is necessary to quote the provisions of Section 38 of the Kerala Value Added Tax Act, 2003 (KVAT Act), which read as under: "Tax payable to be first charge on the property.-- Notwithstanding anything to the contrary contained in any other law for the time being in force, any amount of tax, penalty, interest and any other amount, if any, payable by a dealer or any other person under this Act, shall be the first charge on the property of the dealer, or such person." A perusal of the provisions of Section 38 of the KVAT Act and Section 26 of the HP VAT Act demonstrates that these provisions are almost pari materia. This Court concurs with the reasoning of the Hon'ble High Court of Kerala that after coming into force of Section 31B of the RDB Act read with Section 26E of the SARFAESI Act, the first charge is created by way of priority in favour of the Banks/Financ....
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....s of Section 31B of the RDB Act, 1993, the first charge shall be that of the Banks/Financial Institutions and not the Revenue. However, it is important to state at this stage that there is a slight difference in the statutory provisions of Section 26 of the HP VAT Act vis-a-vis Section 37 of the Maharashtra Value Added Tax Act, 2002, which Section expressly also contains that the first charge on the property of the dealer of the State shall be subject to any provision regarding creation of first charge in any Central Act for the time being in force. 33. Be that as it may, a perusal of the judgment of the Hon'ble High Court of Bombay demonstrates that it has taken into consideration the pronouncements of all other Hon'ble Courts with regard to their respective VAT Acts, which contained a non obstante Clause in favour of the State akin to Section 26 of the H.P. VAT Act, 2005 vis-a-vis the amendments contained in the SARFAESI Act and the RDB Act 34. Thus, from what has been discussed above, now there is no ambiguity that in view of the provisions of Section 26E of the SARFAESI Act 2002 and Section 31B of the Recovery of Debts and Bankruptcy Act, 1993, a secured credi....
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....charge under Section 47 of the Act of 2003 for recovering the amount due to the State under the earlier Sales Tax Act and now VAT, however, the same cannot have priority, when it comes in conflict with the mandate of Section 529A, then the Sections 529A and 530 of the Act of 1956 will prevail. 44. This Court in no way finds that the State had no competence to insert Section 47 in the Act of 2003 and the same law is in no way useless or redundant, however, if the Central Act, as enacted by the Parliament, provides for proceeds of the assets of a Company being wound up, to be given to the secured creditors and the workers, then the same has to be distributed pari passu among others, as per the priority given in Section 529A of the Act of 1956. 45. The submission of learned Advocate General that the Parliament by inserting Section 529A in the Act of 1956 has only given preferential treatment to the workmen's dues but other creditors like State Government cannot be deprived to claim their due amount, this Court finds that if the Parliament has made amendment in the Act of 1956 and only priority has been given to the claim of the workmen, no further inference can be drawn by the C....
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.... has relied on this judgment for the purpose of the words "to the extent" for considering the provisions contained in clause (b) of sub-section (1) of Section 529A of the Act of 1956. 51. This Court finds that the words used "to the extent" have already been considered by this Court while interpreting Sections 529 and 530 of the Act of 1956, as such, this judgment is of no assistance to the learned Advocate General. 52. Reliance is placed by the learned Advocate General on the judgment passed by the Apex Court in the case of Employees Provident Fund Commissioner Vs. OL of Esskay Pharmaceuticals Ltd. (supra), this Court finds the issue before the Apex Court was with regard to priority to the dues payable by employer under Section 11 of Employee's Provident Funds and Miscellaneous Provisions Act, 1952 and whether the same would be subject to Section 529A of the Act of 1956 and in terms of which the workmen's dues and debts due to the secured creditors, are required to be paid in priority to all other debts. 53. The Apex Court on interpretation of the Section 11 of the Employee's Provident Funds and Miscellaneous Provisions Act, 1952 and Sections 529, 529A and 530 of the Act ....