2023 (12) TMI 1506

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....g in substance sustaining the State's claim of priority in respect of dues under the Punjab Value Added Tax Act, 2005 (hereinafter called "the 2005 Act") of a corporate entity, M/S Sumit Engineering Pvt. Ltd., superseding the bank's claim based on a charge created over the immovable property of that entity (being respondent no.2 in this appeal). The said respondent, however, goes unrepresented before us when the appeal is taken up for hearing. The proceeding under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter called "the 2002 Act") was initiated on 06.09.2013 as the respondent no.2 had made default in repayment of borrowed amount, which was in principle....

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....h contained in any other law for the time being in force or any instrument having effect by virtue of any such law. 4. Notice under Section 13(2) of the 2002 Act was issued on 06.09.2013. The 2002 Act was subsequently amended with effect from 24.01.2020 upon introduction of Section 26E. This provision reads:­ "26E. 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. Explanation.­For the purposes of....

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....n 35 of the 2005 Act. The latter provision specifically deals with superiority of the State's claim over assets of a tax defaulter. The claim of the State, which is in the nature of crown debt stands statutorily recognised as superior claim under Section 35 of the 2005 Act, and is given precedence. Thus, the common law principle of priority of crown debt, which principle applies against unsecured creditors only would not apply in this case. Once we examine the aforesaid provisions, sans Section 26E of the 2002 Act, Section 35 of the 2005 Act would prevail. 7. We are supported in taking this view from an earlier judgment of a coordinate Bench of this Court in the case of Central Bank of India vs. State of Kerala & Ors., reported in 2009 (....