TMI Blog1971 (10) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... y on various dates as agreed between the parties. In consideration of the above, on 27th April, 1962, a mortgage-deed (copy annexure A at page 47 of the paper-book) was executed by the company in favour of the corporation. This mortgage was an English mortgage as contemplated under clause (e) of section 58 of the Transfer of Property Act. The entire movable and immovable property of the company was conveyed and transferred to the corporation with the proviso that on the company complying with the terms of the mortgage and repaying the loan, as mentioned therein, the corporation would reconvey the property back to the company (see in this respect clause 2 at page 54). Between 21st November, 1966, and 20th December, 1968, the company committe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Excise and Taxation Officer, protested against the order of distraint and attachment. As the department was in no mood to recognise the prior rights of the corporation, the writ out of which the present appeal has arisen, was filed on 20th September, 1969, praying for quashing the aforesaid distraint and attachment in respect of the properties under mortgage and seeking a direction for restraining the State Government and the department concerned from disposing of the properties by sale or otherwise. This writ petition was dismissed by the learned Judge on 14th July, 1970, and the corporation has filed this appeal. Only two points were urged before this court, though some other points were also taken before the learned single judge. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause 3, according to which, if the company pays to the corporation all the said principal and interest secured by the debt, "then in such case the corporation shall at any time thereafter upon the request and at the cost of the company reconvey the land and buildings and the plant hereinbefore expressed to be hereby conveyed (hereinafter collectively called 'the mortgaged premises') unto the company or as it shall direct." A reading of clauses 2 and 3 of the mortgage-deed together, on the face of it, shows that the deed purports to convey the entire mortgaged property for ever and absolutely to the corporation. Later, after the company has repaid the entire loan and the interest, etc., the company has a right to ask the corporation to rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the entire property, which was the subject-matter of the mortgage, came to vest in the corporation and what was left with the company was only the equity of redemption. There cannot be any dispute so far as this is concerned. On behalf of the department reliance is mainly placed on section 11-B of the Punjab General Sales Tax Act, 1948, read with sections 67, 70 and 72 of the Punjab Land Revenue Act, 1887. Section 11-B of the Punjab General Sales Tax Act is as follows: "The amount of any tax and penalty imposed under this Act, which remains unpaid after the due date, shall be recoverable as arrears of land revenue." Thus, this section only provides procedure for the recovery of the arrears of sales tax and the procedure prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he land revenue over the secured creditors of the defaulter. As already indicated, the law on the point only provides speedy procedure for the recovery of the arrears from the property of the defaulter and, in case of a mortgage, the property as such does not vest in the defaulter but some rights in the property stand transferred to the mortgagee. The Supreme Court decision in M/s. Builders Supply Corporation v. The Union of India and Others[1965] 56 I.T.R. 91 (S.C.); A.I.R. 1965 S.C. 1061., on which reliance has been placed by the department, is not a case of a competition between the dues which could be recovered as arrears of land revenue-in that case the income-tax dues -and the secured debts of the defaulter. In that case, one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the decree of the trial court was restored. Grover, J., while delivering the judgment of the court, at page 593 observed as under: "The Cane Commissioner indisputably did not have any right of priority over the other creditors of defendant No. 2, and, in particular, the secured creditors." After quoting from Halsbury's Laws of England, as to what is "pawn" and what are the rights of a pawnee, the following statement from the same book was particularly noted: "On the bankruptcy of the pawnor the pawnee is a secured creditor in the bankruptcy with respect to things pledged before the date of the receiving order and without notice of a prior available act of bankruptcy." At page 595 of the report, his Lordship went on to observe as f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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