TMI Blog2009 (10) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... been sought. As an interim measure, the petitioner had also prayed for staying the auction fixed on 20.3.2009. 2. When the matter came up for motion hearing on 19.3.2009, a Division Bench, while issuing notice of motion, directed that the auction may be held but the same may not be confirmed without specific order in that regard from this Court. 3. For the disposal of the controversy raised it may first be necessary to notice skeleton facts. The petitioner-Bank had sanctioned a loan of ₹ 330 crores to M/s Jiwan Rice and General Mills, Jind Road, Kaithal respondent No. 3. In order to secure repayment of the loan, the petitioner- Bank had, inter alia, mortgaged the immoveable property of respondent No. 3, situated at Kaithal, on 20.1.1999. The detail of the property is Khewat No.497 Kila No.25/6 5 L-19M, 15 7K-8M, 16 6K 16 M Kila No.26/10 5K 11M 11 8K 0M 20 7K 15M total land 41 kanal 13 marla in the name of raj Kumar partner (1/2 share) Kaithal. 4. The aforesaid loan was not repaid by respondent No. 3 and an application for recovery of ₹ 3,12,65,884.95 paisa as on 12.4.2004 was filed before the Debt Recovery Tribunal. The petitioner-Bank has also claimed its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore, respondent No.2 did not have any prior charge on the aforesaid property. However, all in vain. 6. On 5.3.2009, respondent No.2 issued an advertisement, which appeared in the Hindi Daily Punjab Kesri advertising the aforesaid mortgaged property for sale on 20.3.2009 (Annexure P-4). The petitioner- Bank has claimed that a secured creditor like the petitioner-Bank has a prior charge over the property being mortgaged with it and respondent No.1 and 2 were illegally claiming to have charge over the property. 7. The stand of the respondents No.1 and 2 in the joint written statement is that passing of order of attachment and selling the property for recovery of the sales tax arrears was strictly in accordance with law. A detailed reference has been made to the assessment order framed in respect of M/s Jiwan Rice General Mills, Kaithal and M/s Jiwan Rice International (P) Ltd., Kaithal. Accordingly, a demand was raised in respect of both the firms amounting to ₹ 1,16,471,318.00 paisa. The demand having not been met, the respondents have claimed that they were entitled to recover the same by sale of the property in question as the government dues are automatical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its non-payment by respondent No.3 to the petitioner-Bank bas been denied want of knowledge. 10. In their separate written statement, respondent No.3 has raised a preliminary objection that filing of reply would not be possible since the entire record of respondent No.3 has been seized by the petitioner-Bank while taking possession of the property under the Securitization Act. They have also alleged that respondent No.3 used to dispose of paddy and rice after purchasing it from outside the State of Haryana as consignment sale against declaration Form F and other documents. It is claimed that there is no arrears of sales tax payable by respondent No.2. However, it is considered that respondent had earlier issued notices for recovery of some dues in respect of the assessment years 1988-89, 1993-94, 1998-99, 1999-2000 2002-03. The property which was already mortgaged to which petitioner- Bank belonging to respondent No.3 was attached by respondent No.2. The Excise and Sales Tax Department has raised its demand over ₹ 1.16 crores ex parte without any notice or hearing to respondent No.3. However, the receipt of loan has not been disputed but it is claimed that the demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard learned counsel for the parties and perusing the statutory provisions along with the pleadings, we are of the view that this petition deserves to succeed. The judgment of Supreme Court in Dena Bank s case (supra) lays down a principle of law that Crown s preferential right to recover its dues over other creditors is confined to ordinary or unsecured creditors. The aforesaid principle has been reiterated by Hon ble the Supreme Court in an earlier judgment rendered in the case of Bank of Bihar v. State of Bihar, (1972) 3 SCC 196. It has been held that the rights of a pawnee, who has parted with money in favour of pawnor on the security of the goods cannot be extinguished and even by lawful seizer of goods by making money available to other creditors of pawnor without the claim of the Pawnee being first fully satisfied. The observation made by their Lordships in para 10 of Dena Bank s case (supra) may be quoted in extenso, which are as under: - However, the Crowns 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of his right under Section 176 sells the goods the right of the pawner to redeem them is of course extinguished. But as aforesaid the pawnee is bound to apply the sale proceeds towards satisfaction of the debt and pay the surplus, if any, to the pawner. 16. Placing reliance on the aforesaid paragraph as well as on various judgments including the judgments rendered in the cases of Bank of Bihar (supra) and Dena Bank (supra), it has been concluded in para 17 of a recent judgment rendered in the case of Central Bank of India v. Siriguppa Sugars Chemicals Ltd., (2007) 8 SCC 353 as under:- 17. 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 Commissioner for disbursal to the cane growers and to the employees. There is no dispute that the sugar was pledged with the appellant bank for securing a loan of the first respondent and the loan had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be held that the respondents No.1 2 are entitled to priority for recovery of its dues over the mortgage charges created by the petitioner-Bank in the absence of any statutory provision in the HGST Act. There was, thus, lacuna in HGST Act. 19. The reliance of the respondents No.1 2 on Section 26 read with Section 61 of the VAT Act is wholly misplaced. Section 26 of the VAT Act is extracted below for ready reference: Section 26. Any amount due under this Act including the tax admitted to be due according to the returns filed, which remains unpaid after the last date specified for payment, shall be the first charge on the property of the defaulter and shall be recoverable from him as if the same were arrears of land revenue. 20. A perusal of the aforesaid section shows that any amount due under the VAT Act including the tax admitted to be due as before returns, which has remained unpaid after the last date specified for payment has to be considered first charge on the property of the defaulter which could be recovered as arrears of loan revenue. The VAT Act has repealed the HGST Act. The liability of respondent No.3 to pay tax has arisen only under the HGST Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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