TaxTMI 
TaxTMI 
2022 (6) TMI 1471
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...."E", for the reasons stated in the Memo of Petition and in the interest of justice; (B) During the Pendency and till final disposal of this petition, YOUR LORDSHIP be further pleased stay the operation and implementation of the impugned attachment order and charge recorded in the revenue record vide Revenue Entry no. 6995, 6996 and 7594 by the respondent no.2 at ANNEXURE- E (C) This Hon'ble Court may be pleased to hold that the Petitioner have first charge over the properties mortgaged by the Respondent no.4 to 7 under section 26E of the SARFAESI Act, which would override the charge of the Respondent no.2 under Section 48 of the VAT Act. (D) Pending admission, hearing and final disposal of this Special Civil Application, Your Lordships may be pleased to restrain the respondent no. 2 from taking any further steps in relation to the properties mortgaged by the Respondent no.4 to 7 as security with the petitioner bank, and in view of the provisions under Section 26-E of the SARFAESI Act, 2002 coupled with the fact that the petitioner is in possession of the property in question from 23.0192020, and for the reasons stated in the Memo of Petition and in th....
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....essful auction purchaser i.e. PRA Realities LLP. 3.6 In view of above, the writ-applicant Bank alongwith successful auction purchaser approach the Sub Registrar Office, Bavla for the purpose of registration of sale deed in favour of said successful auction purchaser i.e. PRA Realities LLP and it came to the knowledge of the writ-applicant Bank that the respondent no.2 has to recover the value added tax from the respondent no.3 borrower to the tune of Rs.11 crores, Rs.10 crores and Rs.2,68,33,24,210/and the charge of the same has been duly recorded vide Revenue Entry Nos.6995, 6996 and 7594 dated 14.12.2015 and 09.05.2018, hence refuse to register the conveyance deed. 3.7 The successful auction purchaser i.e. PRA Realities LLP issued the letter dated 19.4.2021 to the writ-applicant Bank and informed to take steps for removing the said revenue entries, failing which they will take steps against the writapplicant Bank. 3.8 The writ-applicant Bank duly replied to the said communication dated 19.4.2021 informing the auction purchaser about the terms and conditions of the sale notice and also informed that the Bank will consider the request of the auction purchaser in accordance....
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....f the bank and the bank in exercise of its powers under the SARFAESI Act, put the subject property to auction. 10. The view taken by this High Court in the above referred two decisions now stands fortified by a recent pronouncement of the Supreme Court in the case of Punjab National Bank Vs. Union of India and Others reported in 2022 SCC OnLine SC 227. We quote the relevant observations as under:- 40. Secondly, coming to the issue of priority of secured creditor's debt over that of the Excise Department, the High Court in the impugned judgment has held that "In view of the matter, the question of first charge or second charge over the properties would not arise." In this context, we are of the opinion that the High Court has misinterpreted the issue to state that the question of first charge or second charge over the properties, would not arise. 41. A Full Bench of the Madras High Court in the case of UTI Bank Ltd. Vs. Dy. Commissioner Central Excise [2006 SCC Online Madras 1182], while dealing with a similar issue, has held that: "25. In the case on hand, the petitioner Bank which took possession of the property under Section 13 of the SARFAESI ....
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....was whether the recovery of sales tax dues (amounting to Crown debt) shall have precedence over the right of the bank to proceed against the property of the borrowers mortgaged in favour of the bank, observed as under: "10. However, the Crowns preferential right of 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 of recovery of its debts over a mortgagee or pledgee of goods or a Secured Creditor." (emphasis supplied) 45. Further, in Central Bank of India Vs. Siriguppa Sugars & Chemicals Ltd. & Ors. [(2007) 8 SCC 353], while adjudicating a similar matter, this Court has held as under: "18. Thus, going by the principles governing the matter, propounded by this Court there cannot be any doubt that the rights of the appellant-bank over the pawned sugar had precedence over the claims of the Cane Commissioner and that of the workmen. The High Court was, therefore, in error in passing an interim order to pay parts of the proceeds to the Cane Commissioner and to the Labour Co....
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..... An SLP (No.12462/2008) against the above judgement of the Bombay High Court stands dismissed by this Court on 17.07.2009 by relying upon the judgement in the matter of Union of India vs SICOM Ltd. & Anr. Reported in [(2009) 2 SCC 121], wherein the question involved was "Whether realization of the duty under the Central Excise Act will have priority over the secured debts in terms of the State Financial Corporation Act, 1951" and this Court held as under: "9. Generally, the rights of the crown to recover the debt would prevail over the right of a subject. Crown debt means the debts due to the State or the king; debts which a prerogative entitles the Crown to claim priority for before all other creditors. See Advanced Law Lexicon by P. Ramanatha Aiyear (3rd Edn.) p.1147]. Such creditors, however, must be held to mean unsecured creditors. 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 a....
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....y. On the contrary, the confiscation orders, in the present case, deserve to be quashed because the confiscation orders themselves lack any statutory backing, as they were rooted in a provision that stood omitted on the day of the passing of the orders. Hence, it is this inherent defect in the confiscation orders that paves way for its quashing and not merely the fact that a security interest is created in respect of the very same property that the confiscation orders dealt with. 51. Further, the contention that in the present case, the confiscation proceedings were initiated almost 8-9 years prior to the charge being created in respect of the very same properties in favour of the bank is also inconsequential. The fact that the charge has been created after some time period has lapsed post the initiation of the confiscation proceedings, will not provide legitimacy to a confiscation order that is not rooted in any valid and existing statutory provision. 51. To conclude, the Commissioner of Customs and Central Excise could not have invoked the powers under Rule 173Q(2) of the Central Excise Rules, 1944 on 26.03.2007 and 29.03.2007 for confiscation of land, buildings....
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....of the of the SARFEASI Act reads thus :- "SECTION 26-E : Priority to secured creditors Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority." 7. In view of above, the aforesaid decision, as referred above, read with the provisions of SARFAESI Act shall prevail over the dues of the crown. 8. The writ-applicant Bank undisputedly auctioned the subject property on 25.2.2021 and PRA Realities LLP being the highest bidder submitted the bid of Rs.3,41,00,000/- and in accordance with the sale notice has deposited the entire amount as per the Rules. The writ-applicant Bank is the secured creditor and having auctioned the subject property under the SARFEASI Act, the writ-applicant would have first charge over the subject property. 9. The ratio as laid down in the aforesaid judgment squarely covers the present issue. The dues of the secured creditor i.e. writ-applicant Bank shall have priority over th....