2022 (9) TMI 251

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...., vide order dated 14th May, 2018, the defendants no.2 to 4 were impleaded as parties in the suit. Vide order dated 6th May, 2019, the defendant no.3 was deleted from the array of parties. 3. The plaintiff company is engaged in the business of providing financial facilities to its clients and customers. The defendant no. 1 is a nationalized bank. The defendant no.2 company is engaged in the business of sub-distribution of computer hardware. The defendant no.3 is the Deputy Commissioner of Income Tax, Circle 12(1), New Delhi. 4. It is the case of the plaintiff company that the defendant no.2 had approached the plaintiff company to avail Domestic Sales Bill Factoring Facility in the year 2011. Subject to the defendant no.2 company adher....

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....d on behalf of the Income Tax Department under Section 226(3) of the Income Tax Act, 1961, to the defendant no.1 Bank. On 18th September, 2013, the defendant no.1 Bank wrote to the plaintiff company and informed the plaintiff company that the Bank will be in a position to make payment to the plaintiff company only after it obtains a No objection Certificate (NOC) from the Income Tax Department. 7. Accordingly, the present suit was filed seeking recovery of a sum of Rs.79,92,509/- along with the interest accrued till the realization of the payment. 8. In the written statement filed on behalf of the defendant no.1 Bank, it has been pleaded that the defendant no.1 Bank did not release the amount deposited in the said FDR to the plaintiff....

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....e to the defendant bank under Section 226(3) of the Income Tax Act ? OPD (iv) Whether the defendant is precluded from releasing the fixed deposit amount to the plaintiff even though the fixed deposit created for its benefit by the company known as H.M. Informatics Ltd. in order to secure repayment of the sums owed by the said company to the plaintiff had matured on 03.10.2013? OPD (v) Relief" 11. Vide order dated 6th May, 2019 passed by this Court, i) the defendant no.2 was proceeded ex parte and ii) the contention of the counsels for the parties was noted that no oral evidence would be required in the present matter. 12. The counsel for the plaintiff has made the following submissions:- i) The defendant no.....

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....s held in Dena Bank v. Bhikabhai Prabhudas Parekh Co. MANU/SC/0317/2000 : 2000 (5) SCC 694 as follows: 10. However, the Crown's preferential right to recovery of debts over other creditors is confined to ordinary or unsecured creditors. The common law of England or the principles of equity and good conscience (as applicable to India) do not accord the Crown a preferential right for recovery of its debts over a mortgagee or pledgee of goods or a secured creditor. It is only in cases where the Crown's right and that of the subject meet at one and the same time that the Crown is in general preferred. Where the right of the subject is complete and perfect before that of the King commences, the rule does not apply, for there is ....

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.... Security Interest Act, 2002 in Section 2(z)(f) defines "security interest" as follows: Section 2(zf) "security interest" means 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 17. We shall now examine what the word 'lien' means. The word 'lien' originally means "binding" from the Latin ligamen. Its lexical meaning is "right to retain". The word 'lien' is now variously described and used under different context such as 'contractual lien', 'equitable lien', 'specific lien', 'general lien', 'partners lien'....

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....Crown debts and has been given judicial recognition in British India prior to 1950 and was therefore "law in force" in the territory of India before the Constitution and was continued by Article 372 of the Constitution 25. In the present case, as has been noted above, the lien possessed by the Stock Exchange makes it a secured creditor. That being the case, it is clear that whether the lien under Rule 43 is a statutory lien or is a lien arising out of agreement does not make much of a difference as the Stock Exchange, being a secured creditor, would have priority over Government dues." 17. In light of the aforesaid legal position, the Income Tax Department's preferential right to recovery of debts over other creditors is confine....