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2014 (10) TMI 368 - SUPREME COURT
Priority of Crown debts - Overriding effect - Declaration of member of stock exchange as defaulter - Income Tax Department claims that it has priority over all debts owed by the defaulter member, whereas the Stock Exchange, Bombay claims otherwise - Held that:- The first thing to be noticed is that the Income Tax Act does not provide for any paramountcy of dues by way of income tax. - In the present case, the common law of England qua Crown debts became applicable by virtue of Article 372 of the Constitution which states that all laws in force in the territory of India immediately before the commencement of the Constitution shall continue in force until altered or repealed by a competent legislature or other competent authority. In fact, in Collector of Aurangabad and Anr. v. Central Bank of India and Anr. [1967 (5) TMI 43 - SUPREME COURT] after referring to various authorities held that the claim of the Government to priority for arrears of income tax dues stems from the English common law doctrine of priority of 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
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. - Decided in favour of appellant.