TMI Blog2023 (8) TMI 1364X X X X Extracts X X X X X X X X Extracts X X X X ..... authority. It is worth mentioning that respondent No.2, Excise Taxation Department cannot raise a priority claim over and above the Petitioner-Bank, when, as per Section 26E of SARFASEI Act introduced by amendment carried in 2016, the Petitioner-Bank has first charge over the properties being secured creditor in priority over all Other Debts, Revenues, Taxes, Cesses and Other Rates payable to the Central or State Government or Legal Authority and that too when, there is nothing on record to show (even by way of reply or by instructions) that the Respondent No.2 i.e. H.P. Excise and Taxation Department has resorted to assessment of liability; determination of liability and has issued notice of such determination/liability under the statute (i.e. under H.P. Vat Act or other corresponding statutes, if any). In absence of any assessment and the resultant determination of liability, the action of the Respondents in inserting red entry marks in Annexure P-4 and Annexure P-5, in revenue records and the resultant action of Respondent No.3, in refusing to register the Sale Certificate dated 15.01.2021, Annexure P-3, and to carry out the Mutation thereof, in favour of Respondent No. 6-A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents No. 1 to 3 whereby already mortgaged and sold property i.e. Flat having supper Area of 93.52 sq. meters situated on 6th Floor of Seven storied building known as Shankar House stand built on land comprised in Khewat/Khatauni No.15/36, Khasra No.247, total area 0-01-87 Hectare Mauja Totu, Shimla H.P. (Missal Haquiat 2002-2003) has been attached vide Report/Rapat No.68, dated 2.11.2020 thereby removing obstruction in the registration of Sale Certificate dated 15.01.2021 Annexure P-3 by respondent No.3. (iv) To quash and set aside revenue entry made vide Report-Rapt No. 68, dated 2.11.2020 Annexure P-4 and revenue entry made in red ink in Jamawandi for the years 2012-2013 Annexure P-5 thereby ordering removal of attachment of mortgaged property sole property i.e. Flat having supper Area of 93.52 sq. meters situated on 6th Floor of Seven storied building known as Shankar House stand built on land comprised in Khewat/Khatauni No. 15/36, Khasra No. 247, total area 0-01-87 Hectare Mauja Totu, Shimla, H.P. (Missal Haqiat 2002-2003) for recovery of Tax Dues from the borrowers No. 4 and 5 which will enable the petitioner Bank and Respondent No.6 to have the Sale Certificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Purchaser i.e. respondent No.6, for which the Bank as well as respondent No.6 requested the Respondent No.3 i.e. Sub-Registrar (Rural) Shimla and Tehsildar (Rural) Shimla to do the needful but the Respondent No.3 conveyed its inability as per the Rapat No. 68, and letter No. 8226 dated 2.11.2020, Annexure P-4, on the ground that the secured asset i.e. mortgaged property was attached in favour of H.P. State Excise and Taxation Department and, therefore, the property mentioned in Sale Certificate cannot be registered in favour of the Auction Purchaser i.e. Respondent No.6. 2(iii) Based on Annexure P-4 (supra), Respondent No.3 relied on Annexure P-5, to show that as per Rapat Entry No.68, dated 2.11.2020, a red ink entry has been made under the orders of Tehsildar (Rural) Shimla, in Jamabandi, for the relevant period to the effect that the secured asset-Flat was attached in favour of H.P. State Excise and Taxation Department. 2(iv) Feeling aggrieved, against refusal to register, the Sale Certificate, vide Annexure P-4 and Annexure P-5, (supra), the Petitioner-Bank has come up, in the instant petition, seeking quashing of these orders/entries, with the direction to the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for discussion before the Hon ble Supreme Court in Punjab National Bank vs. Union of India Ors (2022) 7 SCC 260 , which are reproduced hereinbelow:- 42. Secondly, coming to the issue of priority of secured creditor s debt over that of the Excise Department, the High Court in the impugned judgment has held that In view of the matter, the question of first charge or second charge over the properties would not arise . In this context, we are of the opinion that the High Court has misinterpreted the issue to state that the question of first charge or second charge over the properties, would not arise. 46. This Court, in Dena Bank vs Bhikhabhai Prabhu Dass Parikh Anr. [(2000) 5 SCC 694] , wherein the question raised was whether the recovery of sales tax dues (amounting to Crown debt) shall have precedence over the right of the bank to proceed against the property of the borrowers mortgaged in favour of the bank, observed as under: 10. However, the Crowns preferential right of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the common law principle. A common law which is a law within the meaning of Article 13 of the Constitution is saved in terms of Article 372 thereof. Those principles of common law, thus, which were existing at the time of coming into force of the Constitution of India are saved by reason of the aforementioned provision. A debt which is secured or which by reason of the provisions of a statute becomes the first charge over the property having regard to the plain meaning of Article 372 of the Constitution of India must be held to prevail over the Crown debt which is an unsecured one. 50. In view of the above, we are of the firm opinion that the arguments of the learned counsel for the Appellant, on the second issue, hold merit. Evidently, prior to insertion of Section 11E in the Central Excise Act, 1944 w.e.f. 08.04.2011, there was no provision in the Act of 1944 inter alia, providing for First Charge on the property of the Assessee or any person under the Act of 1944. Therefore, in the event like in the present case, where the land, building, plant machinery, etc. have creditor, having regard to the provisions contained in section 2(zc) to (zf) of SARFAESI Act, 2002, read wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the SARFAESI Act? The question is whether recovery proceedings / recoveries under the MSMED Act would prevail over the recoveries made / recovery proceedings under provisions of the SARFAESI Act? 27. It is the case on behalf of respondent No.1 that in view of Section 24 of the MSMED Act which provides that the provisions of Sections 15 to 23 of the MSMED Act would have overriding effect and shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force and in view of the fact that the MSMED Act being a later enactment, then the SARFAESI Act, the MSMED Act would prevail over the SARFAESI Act. 28. While appreciating the above submissions, it is required to be appreciated that Sections 15 to 23 of the MSMED Act only provide for special mechanism for adjudication of the dispute along with enforcing certain other contractual and business terms on the parties such as time limit for payments and interest in case of delayed payments. In the entire MSMED Act, there is no specific express provision giving 'priority' for payments under the MSMED Act over the dues of the secured creditors or over any taxes or cesses pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chanism / provision for the financial assets and security interest. It is a special legislation for enforcement of security interest which is created in favour of the secured creditor financial institution. Therefore, in absence of any specific provision for priority of the dues under MSMED Act, if the submission on behalf of respondent No.1 for the dues under MSMED Act would prevail over the SARFAESI Act, then in that case, not only the object and purpose of special enactment / SARFAESI Act would be frustrated, even the later enactment by way of insertion of Section 26E of the SARFAESI Act would be frustrated. If the submission on behalf of respondent No.1 is accepted, then in that case, Section 26E of the SARFAESI Act would become nugatory and would become otiose and/or redundant. Any other contrary view would be defeating the provision of Section 26E of the SARFAESI Act and also the object and purpose of the SARFAESI Act. 33. Even otherwise the Naib Tehsildar was not at all justified in not taking possession of the secured assets / properties as per order dated 24.09.2014 passed by the District Magistrate under Section 14 of the SARFAESI Act. The order passed by the Naib Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uritization and reconstruction of financial assets and enforcement of security interest and to provide for a Central database of security interest created on property rights, and for matters connected therewith or incidental thereto. Therefore, the SARFAESI Act has been enacted providing specific mechanism/provision for the financial assets and security interest. It is a special legislation for enforcement of security interest which is created in favour of the secured creditor-financial institution. Therefore, in absence of any specific provision for priority of the dues under the MSMED Act, if the submission on behalf of respondent No.1 for the dues under the MSMED Act would prevail over the SARFAESI Act, then it that case, not only the object and purpose of special enactment/the SARFAESI Act would be frustrated, even the later enactment by way of insertion of Section 26-E of the SARFAESI Act would be frustrated. If the submission on behalf of respondent 1 is accepted, then in that case, Section 26-E of the SARFAESI Act would become nugatory and would become otiose and/or redundant. Any other contrary view would be defeating the provision of Section 26-E of the SARFAESI Act and al ..... 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