TMI Blog2020 (8) TMI 921X X X X Extracts X X X X X X X X Extracts X X X X ..... RT ] and NAHAR INDUSTRIAL ENTERPRISES LTD. AND OTHERS VERSUS HONG KONG SHANGHAI BANKING CORPORATION AND OTHERS [ 2009 (7) TMI 1193 - SUPREME COURT ], Recovery Act, 1993 has been noticed to be a procedural Act, since, it precisely lays down, the manner and procedure of recovery of debts due to Banks and Financial Institutions. Since both Recovery Act, 1993 and Securitisation Act, 1993 are procedural in nature and complimentary to each other, therefore, the ratio of law, with regard to the applicability of principle of retroactive operation of the provisions of the Securitisation Act, 2002 would apply with equal force to the amendment under the Recovery Act, 1993 as well, and the above judgments would apply with equal force, to the amendment brought under the Recovery Act, 1993 as well. There are no hesitation in concluding that the argument of the Central Excise, that the demands of Central Excise having been made/confirmed earlier than the aforesaid amendments under the aforesaid enactments which would have prospective operation in nature, and thus the demands under the Central Excise Act, 1944 would have precedence, is misplaced and hence is rejected. It is well sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights from the secured creditor. Thus, if the auction purchaser has purchased the property from the secured creditor, it is the secured creditor which has exercised its right of priority to sell the secured asset to recover and appropriate its dues and hence the auction purchaser cannot be called upon to pay the dues of the previous owner/borrower. While the banks proceed to sell the mortgaged property to recover the secured debts, it is noticed that due to attachments orders obtained by the agencies upon the secured asset/s, it does not get adequate buyers because of the encumbrance of attachment. If at all, it is able to sell it, the auction purchaser faces difficulty in getting the property transferred in its favour. Such attachments upon the property, which are obtained by the agencies or such other similarly placed entities, from the courts or arbitral tribunals are all unsecured attachments. Such unsecured debts/claims cannot have precedence over the secured debts by virtue of prior mortgage rights of having been created in favour of the secured creditor by the owner/mortgagor and consequently cannot be treated as an encumbrance either for the secured creditor or for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e -property in question, would also be payable by the auction purchaser, where the properties are being sold on as is where is basis . The issue is answered in negative and it is held petitioner being successful auction purchaser, pursuant to an auction conducted by DRT under Recovery Act, 1993 would not be liable to pay the dues being claimed by Central Excise originally payable by the erstwhile owner/assessee/borrower. Whether respondent No. 3 could have refused the transfer of the property in question in the name of the petitioner? - HELD THAT:- A perusal of the writ petition would reveal that petitioner submitted request letter dated 04.10.2019, vide diary No. 3921 to Respondent No. 3, pursuant to which, it issued the impugned letter dated 15.10.2019 (P-3), vide which transfer of property is sought to be resisted by Respondent No. 3 predominantly on five grounds. The first one being, that Urban Ceiling Officer Ludhiana vide letter dated 1275 dated 28.09.1987, has restricted the transfer of the property in question, and the decision in that regard is sought to be intimated to it. Petitioner has replied to the same, vide letter dated 16.10.2019 (P-4), stating that Urban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n money i.e. ₹ 6,00,10,000/- in case, if the aforesaid prayer is not to be granted. Factual Background 2. The brief facts of the case are that, Punjab National Bank - Respondent No. 1 (hereinafter referred to as Secured Creditor ) had initiated recovery proceedings against the borrower M/s. AIP industries and its guarantors, by filing of Original Application (OA) No. 502/2012 under section 19(1) of the Recovery of Debts and Bankruptcy Act, 1993 (hereinafter referred to as Recovery Act, 1993 ) before the Debts Recovery Tribunal - III, Chandigarh claiming an amount of ₹ 9,19,77,453 along with future and pendente lite interest oh the basis of mortgage of the secured asset effected in its favour. The said Original Application, was decreed in favour of the secured creditor-Punjab National Bank on 07.09.2014, and Recovery Certificate (RC) was issued under Section 19 of the Act, 1993 vide which PNB was held entitled to recover the aforesaid amount from the defendants/borrowers in the OA. 3. Since the Judgment Debtors/Borrowers, did not satisfy the RC/Decree, execution proceedings were carried out before the Recovery Officer, DRT -III, Chandigarh in Recovery Cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, with which the petitioner has no concern, as it has purchased the secured asset through an open e-auction conducted by the Debts Recovery Tribunal, Chandigarh. He further stated that as per Central Excise Act, 1944, as well as the provisions of the Recovery of Debts and Bankruptcy Act, 1993, the dues of the bank have prior charge over the dues of Central Excise and therefore the petitioner, having purchased the property from the secured creditor under the Act, 1993, was entitled to the transfer of the property in its favour. 7. Petitioner has also placed on record letter dated 06.12.2013 (Annexure P-5) and letter dated 31.12.2015 (Annexure P-7), issued by Department of Central Excise - Respondent No. 4 addressed to GLADA - Respondent No: 3, from where it is apparent that the dues under the Central Excise/Service Tax are pending in respect of the borrower entity M/s. AIP industries and not against the petitioner. 8. Having not received arty further response from Respondent No. 3, petitioner has filed the present petition seeking quashing of letter dated 15.10.2019 (P-3) with a direction to Respondent No. 3 to transfer the said property/secured asset in favour of the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets over and above the Crowns Debt. The said provision has been notified by virtue of notification dated 26.12.2019 and the amendment has been brought in force from 24.1.2020. 9.2. He has further relied upon the judgment of Hon'ble Supreme Court in Union of India v. SICOM Ltd. 2009 (2) SCC 121; Rana Girders Limited v. Union of India - 2013 (10) SCC 746; and Siddhi Sugar and Allied Industries Limited v. State of Maharashtra bearing Writ Petition No. 14248 of 2018, decided on 26/04/2019 by Division Bench of Bombay High Court to support his aforesaid argument. 10. Per contra. Sh. Sunish Bindlish, learned counsel for respondent Nos. 4 5 - Department of Central Excise, has submitted oral and as well as written submissions/arguments. On facts, he states that demand of ₹ 3139.70 Lakh was confirmed against M/s. AIP Industries for taking inadmissible CENVAT Credit in contravention of CEN VAT Credit Rules, 2004 and Central Excise Rules, 2002. Three Orders in Original dated 02.11.2010, 03.12.2012 and 21.01.2013 for ₹ 1956.63 Lacs, ₹ 1178.07 lacs and ₹ 5 lacs were passed against the above mentioned assessee. He further states that assessee filed an appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 as applicable to proceedings before Recovery Officer, on account of requirement of making pre-deposit. He further argues that petitioner, should have been aware of the claim of Respondent No. 4. He further states, there are similar matters pending consideration and hence, the adjudication of the present writ petition should be deferred. By concluding the arguments, it was contended that the claim of the petitioner lacks merit and requires rejection. 11. Sh. R.S. Bhatia, learned counsel appearing for respondent No. 1 -P NB (secured creditor) has supported the case of the petitioner and contended that it is the secured creditor, which has priority of charge upon the secured asset and the Recovery Officer had rightly put the property to auction, in the execution proceedings carried out under the Act, 1993 pursuant to Recovery Certificate issued by DRT in its favor and consequently, respondent No. 3 could not have refused to transfer the property in favour of the petitioner on account of dues being claimed by respondent Nos. 4 5 which are actually the dues recoverable from the erstwhile owner. Issues Involved 12. Having heard the rival arguments, as advanced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priority and shall be paid in priority over all other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority. Explanation. -For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016, in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code.] 34. Act to have overriding effect. - (1) Save as provided under sub-Section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. (2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the [Unit Trust of India Act, 1963(52 of 1963)], the Industrial Reconstruction Bank of India Act, 1984 (62 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , notwithstanding anything in consistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. 16. Now coming to the Central Excise Act, 1944, it would be interesting to note that even before the Recovery Act, 1993 and Securitisation-Act, 2002 were amended, it was the Act, 1944 which witnessed an amendment by virtue of Finance Act, 2011, whereby Section 11E was inserted into the Act, 1944, which came into force on 08.04.2011, thereby it recognized and saved the prior right of the secured creditor to recover their dues from the secured asset. Section 11E, reads as under:- 11E. Liability under Act to be first charge. -Notwithstanding anything to the contrary contained in any Central Act or State Act, any amount of duty, penalty, interest, or any other sum payable by an assessee or any other person under this Act or the rules made thereunder shall, save as otherwise provided in section 529A of the Companies Act, 1956, (1 of 1956) the Recovery of Debts Due to Banks and the Financial Institutions Act, 1993 (51 of 1993) [The Securitisation and Reconstruction of Financial Assets and the Enforcement of Security I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 35F of the Act, 1944. Thus, before the order could attain finality, the Act, 1944 got amended with the introduction of Section 11E on 08.04.2011. The remaining two Orders in Original have been passed on 03.12.12 and 21.01.2013, which are otherwise, after the amendment/insertion of Section 11E in the Act, 1944. In other words, by the time the first order was finalized and the second and third orders were passed, the amendment by way of insertion of section 11E in the Central Excise Act, 1944 was already in place and hence, even on factual aspect, the contention that the amendment was subsequent and hence not applicable, cannot be accepted. Therefore, Central Excise is not on a firm footing when it contends that dues payable to them had been crystallized prior to the amendments under the respective enactments, more particularly under the Act, 1944. The argument, thus fails. 19. In spite of the aforesaid findings, we still deem it appropriate to test the aforesaid argument in law. An identical issue came up before the Full Bench of Orissa High Court in Sarthak Builders Pvt. Ltd. v. Orissa Rural Development Corporation Limited 2014 AIR (Orissa) 83, wherein the question referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was advanced earlier. The view taken in Subash Chandra Panda is overruled. We express our agreement with the view taken in Unique Engineering Works and Pradeep Kumar Gupta. The matter may now be listed before the Division Bench for being dealt with on merits. [Emphasis supplied] 20. The aforesaid judgment was then considered and approved by the Hon'ble Supreme Court in M.D. Frozen Foods Exports Pvt. Ltd. v. Hero Fincorp Ltd. 2017 (16) SCC 741, and relevant extract of the judgment i.e. paras No. 38 to 41, reads as under:- 38. The Full Bench of the Orissa High Court in Sarthak Builders Pvt. Ltd. v. Orissa Rural Development Corporation Limited (supra) has, in fact, succinctly sets out this aspect. No doubt, till the respondent was not a 'financial institution' within the meaning of Section 2(1)(m)(iv) of the SARFAESI Act, it was not a 'secured creditor' as defined under Section 2(1)(zd) of the SARFAESI Act and, thus, could not invoke the provisions of the SARFAESI Act. However, the right to proceed under the SARFAESI Act accrued once the Notification was issued. The Full Bench referred to a Division Bench judgment of the Uttarakhand High Court in Uniq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, Such a construction was held not to make the Act retrospective in operation but merely effected the future existing rights under all leases whether executed before or after the date of that Act. (Discussed in Trimbak Damodhar Raipurkar v. Assaram Hiraman Patil Ors., 1962 Supp (1) SCR 700). 40. In a similar vein, are the observations made in the case of In re Athlumney. Ex parte Wilson, [1898] 2 Q.B. 547, where the question posed before the Queen's Division Bench was whether Section 23 of the Bankruptcy Act, 1890 was retrospective in its operation. In the aforementioned context. Wright, J., speaking for the Bench, illuminatingly opined: Perhaps no rule of construction is more firmly established than this that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards matter of procedure unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only... it is a general rule that when the Legislature alters the rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1993 (51 of 1993) or any other law for the time being in force. [Emphasis supplied] The same view, regarding both the enactments being complimentary to each other, has been taken by the Hon'ble Supreme Court in Transcore v. Union of India 2008 (1) SCC 125. The said view of then considered and reiterated by the Hon'ble Supreme Court in Mathew Varghese v. M. Amritha Kumar 2014(5) SCC 610 and the relevant para of the judgment reads as under:- 42. A close reading of Section 37 shows that the provisions of the SARFAESI Act or the rules framed thereunder will be in addition to the provisions of the RDDB Act. Section 35 of the SARFAESI Act states that the provisions of the SARFAESI Act will have overriding effect notwithstanding anything inconsistent contained in any other law for the time being in force. Therefore, reading Sections 35 and 37 together, it will have to be held that in the event of any of the provisions of RDDB Act not being inconsistent with the provisions of the SARFAESI Act, the application of both the Acts, namely, SARFAESI Act and RDDB Act, would be complementary to each other. In this context reliance can be placed upon the decision in Trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver been attached in any manner, much less in the manner and procedure provided under section 11 of the Central Excise Act, 1944. Section 11 of the Act, 1944 reads as under: 11. Recovery of sums due to Government. - In respect of duty and any other sums of any kind payable to the Central Government under any of the provisions of this Act or of the rules made thereunder, [including the amount required to be paid to the credit of the Central Government under section 11-D] the officer empowered by the [Central Board of Excise and Customs constituted under the Central. Boards of Revenue Act, 1963 (54 of 1963)] to levy such duty or require the payment of such sums may deduct the amount so payable from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control, or may recover the amount by attachment and sale of excisable goods belonging to such person; and if the amount payable is not so recovered he may prepare a certificate signed by him specifying the amount due from the person liable to pay the same and send it to the Collector of the district in which such person resides or conducts his business and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under:- 67. Processes for recovery of arrears. - Subject to the other provisions of this Act, an arrear of land-revenue may be recovered by any one or more of the following processes, namely:- (a) by service of writ of demand on the defaulter; (b) by arrest and detention of his person; (c) by distress and sale of his movable property and uncut or un-gathered crops; (d) by transfer of the holding in respect of which the arrear is due; (e) by attachment of the estate or holding in respect of which the arrear is due; (f) by annulment of the assessment of that estate or holding; (g) by sale of that estate or holding; (h) by proceedings against other immovable - property of the defaulter. 22.1. As per the conceded stand taken by the Central Excise, no such Certificate has been issued to the Collector concerned, certifying the arrears to be recovered as arrears of Land Revenue. Hence, there, is no question of attachment of the property in question. Thus, the letter of Central Excise dated 31.12.2015 (P-7) addressed to GLADA -Respondent No. 3 cannot even be assumed as attachment in terms of the aforesaid provisions of the Act, 1944 read with Act, 1887. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, as can be seen from the provisions of the Central Excise Act, 1944, there is no such charge created by the statute over the immovable property of the assessee. Therefore, the charge ought to have been created by the Respondent -Central Excise by the first mode provided under Section 100 of the Act, 1882 i.e. the act of the parties, by proceeding to issue a certificate to the Collector to enable him to proceed for attachment of property of the assessee, being one of the mode of recovery, which concededly has not been done by the Respondent - Central Excise. 22.3. It is well settled that, it is only when a charge is created by act of parties or exists by operation of law, upon the property, that question of priority arises to be determined. In the present case, the property in question had never been attached nor a charge was created by the Central Excise. Further, there is no provision which provides for creation of charge upon immovable property of assessee by operation of law. Therefore, Central Excise had no charge upon the property in question. Consequently, it had no locus to thwart/negate the entitlement of the secured creditor to sell the secured asset o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yable. In either of the cases, be it the secured creditor or the auction purchaser, they are forced to contest avoidable litigation to clear such charges being claimed on the property. He further argues that an auction purchaser invests money for purchasing the property to use it for a contemplated purpose. On account of such charges being claimed, it is a common sight to notice (like in the instant case), that such auction purchasers get involved in various litigations and during all this period it is not able to use the property for its designated purpose. Due to this delay which arises on account of contesting the various claims of its previous owner which is sought to be recovered from the property purchased by the auction purchaser, the interest payable to bank for loans availed by Auction Purchaser, keeps on mounting and the entire financial planning gets upset, leading to disastrous consequence (including their accounts being declared NPA) for an auction purchaser. Even the learned counsel for the Revenue has contended in his written submission that here is lot litigation pending on different issues of such nature. It is in these aforesaid circumstances, that the counsels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in Union of India v. SICOM Limited reported as 2009(2) SCC 121 , dealt with a similar issue and the relevant paras i.e. para 27-32, of the said judgment read as under:- 27. A bare perusal of the aforementioned provision clearly goes to show that the right to recover must start with the sale of excisable goods. It is only when the dues of the Central-Excise Department are not satisfied by sale of such excisable goods, proceedings may be initiated to recover the dues as land revenue. 28. We may notice that a Division Bench of Orissa High Court in Suburban Ply Panels Pvt. Ltd. v. Assistant Commissioner of Central Excise Customs, BBSR [2002 (144) ELT 257 (Ori)], despite noticing Dena Bank (supra) as also other decisions, relying on section 11 of the Central Excise Act and Rule 230(2) of the Central Excise Rules held as under: The rule is prima facie wide in its operation. There is no challenge to the validity of the rule in this proceeding. Going by Sub-Rule (2) of Rule 230, it appears to us that a change in ownership of the undertaking would not in any manner effect the obligation of the person liable to pay excise duty and authority concerned has the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-obstante clause shall not only prevail over the contract but also other laws. [See Periyar Pareekanni Rubber Ltd. v. State of Kerala (2008 (4) SCALE 125)] [Emphasis supplied] It was thus held, that since section 46B of the State Financial Corporations Act, 1951 had anon obstante clause, the dues of the secured creditor were to be paid in priority to the dues being claimed by Central Excise. Likewise, both Recovery Act, 1993 and Securitization Act, 2002 contain such non obstante clause i.e. Section 3IB read with Section 34 (overriding effect) of the Recovery Act, 1993 and Section 26E read with Section 35 (overriding effect) of the Securitization Act, 2002, and hence, the ratio of law as laid down in the above case would apply to the present case, not only with equal force, but on better footing in view of non obstante clause being further fortified by the overriding effect of the twin enactments. 26.2. The aforesaid decision was then considered and followed by the Hon'ble Supreme Court in M/s. Rana Girders Ltd. v. Union of India reported as 2013 (10) SCC 746, wherein the sale notice was issued by the secured creditor with the stipulation that all the statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Excise Department calling upon the appellant to pay the dues of the erstwhile owner of the unit in question also stands quashed. The appellant shall also be entitled to cost of this appeal. . [Emphasis supplied] In the aforesaid case, Hon'ble Supreme Court upheld the prior right of recovery in favor of the secured creditor on account of non obstante clause in the State Financial Corporation Act, 1951. As a necessary corollary, it was held that the auction purchaser who had purchased the property from the secured creditor in an auction under the Act, 1951 would not be liable to pay for the dues of the Central Excise not being statutory dues arising out land and building or plant and machinery of the of the erstwhile borrower/assessee. It further noticed that it is only the assets which have been purchased by the auction purchaser in the auction conducted by the secured creditor and not the entire business undertaking as a/whole and hence, the purchaser on this ground also would not be liable for the dues of Central Excise and likewise dues of the erstwhile owner. 26.3. The aforesaid judgment has been recently considered by a Division Bench of Bombay High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 to 4. Section 37 of the Securitization Act says that the provisions of the said Act shall be in addition to and not in derogation of the acts enumerated therein. The Central Excise Act does not find place in Section 37 of the Securitization Act. 14. Moreover, at the time the movable and immovable assets of the respondent No. 5 were put to auction by the respondent No. 6 and the petitioner purchased the same in auction till then, the respondent Nos. 2 to 4/Excise Department had not attached any of the movable or immovable property of the respondent No. 5. No charge was created over the assets of the respondent No. 5 of the excise dues. The Central Excise due's were also not crystallized as on the date the property was put to auction and-purchased by the petitioner. The order of recovery was passed by the Central Excise Department in the year 2012 that is after the sale of the assets of the respondent No. 5. For the aforesaid reason's we hold that the respondent Nos. 2 to 4 cannot demand the payment of excise dues of the respondent No. 5/Karkhana from the petitioner on the ground that the petitioner is purchaser of the movable and immovable assets of the respondent No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge in favor of Central Excise (concededly, there is no transferable charge over immovable property under the Central Excise Act, 1944 in the present case), it would still have to be seen that whether the petitioner/auction purchaser, to whom the property has been transferred for consideration had the notice of charge or not. This is because the second part of section 100 of the TP Act, 1882 creates an exception to the first part of the provision, in as much as, it is states that even if there is a charge, still it would not be enforceable in case, if the transfer of the property has taken place, without notice of charge upon the transferee who has purchased the property with consideration. It is therefore imperative, that in order to have an enforceable charge under section 100 of the TP Act, 1882, upon the property both the ingredients, ought to have been satisfied i.e. Firstly, there ought to be a charge and Secondly, there must be a notice of the same to the transferee, in such manner and mode, from where the transferee could reasonably attain knowledge (like revenue record etc.) of the existence of the said charge. Since in the present case, concededly Central Excise did not cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , rejected. This Court; held that while constructive notice was sufficient to satisfy the requirement of notice in the proviso to section 100 of the TP Act, whether the transferee had constructive notice of the charge had to be determined on the facts and circumstances of the case. In other words, this Court held that there could be no fixed presumption as to the transferee having constructive notice of the charge against the property. In fact, the principle laid down in Ahmedabad Municipal Corporation has been correctly applied in a sales tax case similar to the present case. 87 Ibid, at pp. 1207-1208 (Paragraph 8). Deputy Commercial Tax Officer, Thudiyalur Assessment Circle, Coimbatore and Anr. v. R.K. Steels, (1998) 108 STC 161 (Mad). [Emphasis supplied] The aforesaid view was then followed by a Division Bench of Bombay High Court in Krishna Lifestyle Technologies Ltd. v. Union of India 2008 (ELT 173 (BOM), It was thus, held that to claim a charge to be an enforceable charge, it would be mandatory to show by the authority concerned claiming such charge, that the transferee of the property had the notice of the charge. In case, it fails to do so, the result would be that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be adversely effected with the prior charge of the Central Excise. 26.7. Apart from above, we find that in many cases the Authorities concerned, after creating a charge, do not proceed further towards recovery. Thus, in a given case, it would also need examination regarding the enforceability of such charge on the touchstone of principles of Limitation, as well. A Division Bench of this Court in Municipal Committee v. Jaswant Rai; 1990 CCC 636 in para No. 23 held as under:- 23. Thus, in our considered view the answer to the question is that the period of limitation for issuance of bill for the amount as well as the demand notice would be three years and it is only after the respondents have failed to meet the demand that the arrears would become the arrears of tax on the property and would be a charge on the property. When the arrears become a charge on the property, the limitation gets enlarged and the recovery could be made within twelve years. Similarly for recovering any taxes which may include even the house tax from movable property would be three years from the time it fell due as the limitation would be governed by Article 113 of the Limitation Act. ' [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest due thereon together with such additional amount that may be sufficient to meet the contingencies or further cost, expenses and interest as may be determined by him. (8) On such deposit of money for discharge of the encumbrances, the authorized officer may issue or cause the purchaser to issue notices to the persons interested in or entitled to the money deposited with him and take steps to make the payment accordingly. (9) The authorized officer shall deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money as specified in sub-rule (7) above. (10) The certificate of sale issued under sub-rule (6) shall specifically mention that whether the purchaser has purchased, the immovable secured asset free from any encumbrances known to the secured creditor or not. A perusal of the above, would reveal that the said Rules, provide for a situation where the Authorised Officer of Secured Creditor in its discretion decides to sell the property subject to any encumbrances which are specifically mentioned in the sale notice. Rule 9(7), deals with a situation where the secured creditor in exercise of its discretion dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, in order to judge the nature and value of the property. [Emphasis supplied] Thus, in case, if the property is decided to be sold with encumbrances, Rule 53, would enable the Recovery Officer, to include such encumbrances as it may deem fit and in that eventuality the purchaser would be liable to clear such mentioned encumbrances. However, in Case if no such encumbrances are mentioned in the SALE NOTICE, the claims and charges upon the property shall be governed by the principles of priority of charge/encumbrance as have been laid down in the present case. 27. After having discussed the issue in hand, the stage is now set to examine the ancillary issues i.e. the other encumbrances which the secured creditor or the auction purchaser would deal with pertaining to the secured asset. In so far as, encumbrances depicted in Point (A) are concerned, these are claimed by way of act of attachment being effected upon the secured asset, either pursuant-to dues being claimed under various enactments, or through the process of recovery where attachment orders are passed by the courts/authorities, on the application of 'the claimants or by operation of law. These encumbrances sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... breach of milling agreement, it is commonly seen that these agencies proceed to attach the property of the defaulter miller/borrower to secure recovery of their dues and claims, either under Section 9 or Section 17 of the Arbitration and Conciliation Act, 1996 or during execution of the award against the defaulter miller/borrower. Incidentally, it is noticed that such millers have also availed credit facilities from Bank/Financial Institution and have already mortgaged the same property which has been attached by the agencies, and such credit facilities later on account of default committed by the miller are declared NPA by the banks. While the banks proceed to sell the mortgaged property to recover the secured debts, it is noticed that due to attachments orders obtained by the agencies upon the secured asset/s, it does not get adequate buyers because of the encumbrance of attachment. If at all, it is able to sell it, the auction purchaser faces difficulty in getting the property transferred in its favour. Such attachments upon the property, which are obtained by the agencies or such other similarly placed entities, from the courts or arbitral tribunals are all unsecured attachment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ems a Government debt in India is not entitled to precedence over a prior secured debt.' [Emphasis supplied] Thus, it is apparent that such attachments are unsecured claims over the property and such unsecured claims even by the Government or Semi Government agencies, would not have preference over the dues of the secured creditor which are to be recovered from sale of mortgaged/secured assets in whose favour prior mortgage rights have been created by the owner/borrower, The aforesaid judgment was then considered by the Hon'ble Supreme Court in Central Bank of India v. State of Kerala 2009 (4) SCC 94 and in para No. 33, it was held that the non obstante clause contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act give overriding effect to the provisions of those Acts only if there is anything inconsistent contained in any other law or instrument having effect by virtue of any other law. In other words, if there is no provision in the other enactments which are inconsistent with the DRT Act or Securitization Act, the provisions contained in those Acts cannot override other legislations. Still further in para 48 of the judgment it was furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person purports to create by transfer at different times rights in or over the same immovable property, and such rights cannot all exist or be exercised to their full extent together, each later created right-shall, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created. [Emphasis supplied] The aforesaid provision clearly lays down that where two rights have-been created upon the same immovable property at different times and they cannot co-exist together, then a right created prior in time, would have preference over a right created later point in time. We are examining a situation where the property is already mortgaged and thereafter it has been subsequently attached by a private claimant claiming dues from the borrower. In that eventuality Section 48 of the Act, 1882 would protect the right of the secured creditor and the also the subsequent rights created in favour of the auction purchaser purchasing the property from such secured creditor. 27.6. In so far as dues claimed by private individuals against the borrower are concerned, it is seen that the properties of the borrowers are got attached ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which have an overriding effect over anything which is inconsistent to the provisions of these twin Acts. Fourthly, it is the secured creditor which has advanced loan against the creation of security and hence, it is a transaction of creation of security against advancing of consideration from the creditor to the debtor, thereby specifically securing the asset for repayment of the dues. Hence, the rights of secured creditor would not be adversely effected by such later attachments by the court nor shall adversely effect the right and title of the auction purchaser purchasing the secured asset from such secured creditor. 27.8. We, therefore, conclude the discussion on Point A, by laying down the above principles which would provide guidance to the parties and to minimize the disputes involving the secured assets on its enforcement by the secured creditor. POINT-B 28. In so far as., the second kind of encumbrances are concerned, as depicted in Point (B), by their very nature are quite distinct from the ones discussed in Point (A), as they emanate and arise out of the utilization of property/secured asset itself hence remain attached to the property. Such dues would autom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larger, but the reserve price fixed was lower, and the actual sale consideration of the successful auctioneer was ₹ 9,18,65,000, which is approximately ₹ 10 lakh more than the minimum reserve price. Clause 24 reproduced aforesaid makes it clear that when the reference is to a sale on as is where is, what is there is and without any recourse basis , the same is in all respects and subject to statutory dues . This clause was further subject to another Clause 26, where the Authorised Officer carrying out the auction absolved himself of the liability for any charge, lien, encumbrance, property tax dues, electricity dues, etc. The purpose is to emphasise that a holistic reading of all these clauses left little in doubt that the auction notice provided for a reserve price, with a bid being made about ₹ 10 lakh over and above that, and certain nature of charges, lien, encumbrances, including electricity dues were clearly beyond the sale consideration paid. 4. We may next turn to the sale deed dated 29.9.2017 executed in pursuance of the auction, which provided for the sale made free from all encumbrances known to the Secured Creditor. An indemnity was provided b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be emphasized: A. That electricity dues, where they are statutory in character under the Electricity Act and as per the terms conditions of supply, cannot be waived in view of the provisions of the Act itself more specifically section 56 of the Electricity Act, 2003 (in pari materia with section 24 of the Electricity Act, 1910), and cannot partake the character of dues of purely contractual nature. B. Where, as in cases of the E-auction notice in question, the existence of electricity dues, whether quantified or not, has been specifically mentioned as a liability of the purchaser and the sale is on AS IS WHERE IS, WHATEVER THERE IS AMD WITHOUT RECOURSE BASIS , there can be no doubt that the liability to pay electricity dues exists on the respondent (purchaser). C. The debate over connection or reconnection would not exist in cases like the present one where both aspects are covered as per clause 8.4 of the General Terms Conditions of Supply. 16. In view of the aforesaid legal position, which has emerged, we are of the view that the impugned orders cannot be sustained and are accordingly set aside while opining that appellant No. 1 would be well within its r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and would be liable to be paid by the purchaser. An illustration would further clarify the above position. For example, a property has been allotted by the allotting agency or a builder, to an allottee and the purchase consideration is to be paid, in 4 equal annual installments. The allottee, obtains a credit facility to pay off the first installment to the allotting agency but the defaults in making the payment of the remaining. The bank puts the property to sale on as is where is basis . On purchase of the property from the bank, the auction purchaser cannot be permitted to claim that since he has purchased the property from the secured creditor, which has a priority of charge, therefore he would not pay the remaining amount to the allotting agency. Similarly, when a property is sold by the secured creditor and there are pending dues of Internal or External Development Charges or of like nature, it would be the duty of the auction purchaser to clear the said dues, even though they arose during the period when ownership of the secured asset vested with the erstwhile owner/borrower. The above findings are also based on the principle that no one can transfer a better title ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated to it. Petitioner has replied to the same, vide letter dated 16.10.2019 (P-4), stating that Urban Ceiling Law, is not applicable to the property in question. Since, Urban Land (Ceiling and Regulation) Act, 1976, was repealed by the Parliament by passing Urban Land (Ceiling and Regulation) Repeal Act, 1999 (Act No. 15 of 1999), therefore, the same cannot be an objection to resist the transfer of the property in favour of petitioner. 31. The second reason, is that Central Excise vide its letter dated 31.12.2015 has claimed outstanding recoverable against the previous owners. In view of findings given by us, in Issue No. 1 and 2, and since it has been held, that such dues cannot be claimed from the petitioner, even this ground would not sustain to resist transfer of the property. 32. The third reason, is that the certified copy of the partnership deed of M/s. Zodiac India, be provided by the petitioner. Petitioner in its reply dated 16.10.2019 (P-4) has stated that it is an auction purchaser and is not in possession of the said partnership deed. Suffice it to say, that the petitioner has purchased the property in an open auction conducted by DRT and is reasonably not expect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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