TaxTMI 
TaxTMI 
2023 (12) TMI 296
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....alua, Mohalla Prem Nagar, Ward No.1, Tehsil and District Una, H.P. and charge thereupon was created and reflected in the revenue record vide rapat No. 598, dated 20.7.2008 and thereafter rapat No. 630, dated 3.8.2012. 3 Since the loanee had failed to repay the entire loan amount, its accounts were declared as Non Performing Assets (NPA) and recovery proceedings were initiated under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest 2002 (for short, SRFAESI Act). 4 In May-June-2016, notices under Sections 13(2) and 13(4) of the SRFAESI Act were issued, yet the loanee failed to repay the amount. 5 On 22.02.2017 vide Notification No. G.S.R. 159(E), the State Bank of Patiala was acquired by the State Bank of India (petitioner herein) under Section 35 of State Bank of India Act, 1955 on and with effect from 1.4.2017 with all the assets, liabilities, properties, employees etc. On 27.5.2017 respondent No.2-Excise Department entered its charge over the property in question vide rapat No. 484 dated 27.5.2017. 6 The petitioner-bank auctioned the property mortgaged with it and thereafter on 2.11.2022 issued a Sale Certificate i....
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....ear 2014-15, all the partners shall be jointly and severally liable to meet the liabilities accrued under the statute. 10 It is further averred that in order to meet the liability accrued under the statute for the year 2014-15, Anil Kumar Dogra had submitted five cheques, total amounting to Rs.3,68,52,921/- on account of payment of outstanding dues, licence fees etc., but when these cheques were sent for clearance to the petitioner-bank, the same were dishonored and received back in the Bank on 23.2.2016 due to insufficient funds. Thereafter a complaint was filed before the before the Magistrate. 11 It has been reiterated that the charge by way of red entry was created in the revenue record vide rapat No. 484, dated 27.5.2017 and likewise certain other entries were made in revenue record. 12 We have heard the learned counsel for the parties and have gone through material placed on record. 13 Apparently, the petitioner-Bank is the secured creditor and has created the first charge over the property in question as far as back in the year 2008 and thereafter in 2012 as against the charge created by the Excise Department in the year 2017 and, therefore, has the first right to realiz....
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.... 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 been repaid. The goods were forcibly taken possession of at the instance of the revenue recovery authority from the custody of the pawnee, the appellant bank. In view of the fact that the goods were validly pawned to the appellant bank, the rights of the appellant bank as pawnee cannot be affected by the orders of the Cane Commissioner or the demands made by him or the demands made on behalf ofthe workmen. Both the Cane Commissioner and the workmen in the absence of a liquidation, stand only as unsecured creditors and their rights cannot prevail over the rights of the pawnee of the goods." 49. An SLP (No. 12462/200....
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.... It is further pertinent to note that even the provisions contained in Section 11E of the Central Excise Act, 1944 are subject to the provisions contained in the SARFAESI Act, 2002. 51. Thus, as has been authoritatively established by the aforementioned cases in general and Union of India vs SICOM Ltd. (supra) in particular, the provisions contained in the SARFAESI Act, 2002, even after insertion of Section 11 E in the Central Excise Act, 1944 w.e.f. 08.04.2011, will have an overriding effect on the provisions of the Act of 1944. 54. To conclude, the Commissioner of Customs and Central Excise could not have invoked the powers under Rule 173Q (2) of the Central Excise Rules, 1944 on 26.03.2007 and 29.03.2007 for confiscation of land, buildings etc., when on such date, the said Rule 173Q(2) was not in the Statute books, having been omitted by a notification dated 12.05.2000. Secondly, the dues of the secured creditor, i.e. the Appellant bank, will have priority over the dues of the Central Excise Department, as even after insertion of Section 11E in the Central Excise Act, 1944 w.e.f. 08.04.2011, and the provisions contained in the SARFAESI Act, 2002 will have an overriding eff....
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....ourt wherein priority of the State dues was recognised. If parliament intended to create first charge in favour of banks, financial institutions or other secured creditors on the property of the borrower, then it would have incorporated a provision like Section 529 A of the Companies Act or Section 11(2) of the EPF Act and ensured that notwithstanding series of judicial pronouncements, dues of banks, financial institutions and other secured creditors should have priority over the States statutory first charge in the matter of recovery of the dues of sales tax, etc. However, the fact of the matter is that no such provision has been incorporated in either of these enactments despite conferment of extraordinary power upon the secured creditors to take possession and dispose of the secured assets without the intervention of the court or Tribunal. The reason for this omission appears to be that the new legal regime envisages transfer of secured assets to private companies. 129. If Parliament intended to give priority to the dues of banks, financial institutions and other secured creditors over the first charge created under State legislations then provisions similar to those containe....
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.... entitled to. Obviously, therefore, the contention of the Revenue built on a claim of right over properties fails, without any further requirement for expatiation; corollary, enjoining me to consider if the provisions of the KGST Act/KVAT Act would still grant to the Revenue the First Right to proceed against it for recovery of the tax arrears. 40. It is here that the specific provisions of Section 26E of the SARFAESI Act and Section 31B of the RDB Act become necessary for a detailed evaluation. 41. As has been extracted above, Section 26E of the SARFAESI Act provides that the debts due to any secured creditor shall be paid in priority over all other debts and all revenue, taxes, cesses and other rates payable to the Central Government or State Government or Local Authority. Section 31B of the RDB Act takes this one step forward and elevates the right of the secured creditors to realise their debts, by sale of the secured assets, to enjoy priority and then reaffirms that such debts will be paid in priority over the revenue, taxes, cesses and other rates payable to the Central Government or State Government or Local Authority. It is thus irrefragable and in fact, expressly con....
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.... Court of Kerala that after coming into force of Section 31B of the RDB Act read with Section 26E of the SARFAESI Act, the first charge is created by way of priority in favour of the Banks/ Financial Institutions to recover and satisfy their debts, notwithstanding any local statutory "first charge" in favour of the Revenue. 26. It is also necessary to take note of one fact that though Section 26E of the SARFAESI Act has come into force from 24.01.2020, yet the same will not have any effect on the issue of the Banks/Financial Institutions having first charge on the property of the dealer, as the provisions of Section 31B of the RDB Act shall override the provisions of Section 26 of the HP VAT Act, 2005, especially in view of the observations contained in the judgment of Hon'ble Supreme Court in Central Bank of India's case (supra). 36. Therefore, this Court has no hesitation in holding that the petitioners being "Secured Creditors" have preference over the respondent-State with regard to the debts due from respondent No. 4. Accordingly, this writ petition is allowed by quashing Annexure P-10, dated 24.06.2017 and by holding that the respondent Department cannot claim first cha....
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....of the SARFAESI ACT, 2002, the Secured Creditor will have a First Charge on the Secured Assets. Moreover, Section 35 of the SARFAESI Act, 2002 inter alia, provides that the provisions of the SARFAESI Act, shall have overriding effect on all other laws. It is further pertinent to note that even the provisions contained in Section 11E of the Central Excise Act, 1944 are subject to the provisions contained in the SARFAESI Act, 2002. 47. To conclude, the Commissioner of Customs and Central Excise could not have invoked the powers under Rule 173 Q(2) of the Central Excise Rules, 1944 on 26.03.2007 and 29.03.2007 for confiscation of land, buildings etc., when on such date, the said Rule 173Q(2) was not in the Statute books, having been omitted by a notification dated 12.05.2000. Secondly, the dues of the secured creditor, i.e. the Appellant-bank, will have priority over the dues of the Central Excise Department, as even after insertion of Section 11E in the Central Excise Act, 1944 w.e.f. 08.04.2011, and the provisions contained in the SARFAESI Act, 2002 will have an overriding effect on the provisions of the Central Excise Act of 1944. 5. Learned Additional Advocate General has fa....
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....ection 13 of the SARFAESI ACT, 2002, the Secured Creditor will have a First Charge on the Secured Assets. Moreover, Section 35 of the SARFAESI Act, 2002 inter alia, provides that the provisions of the SARFAESI Act, shall have overriding effect on all other laws. It is further pertinent to note that even the provisions contained in Section 11E of the Central Excise Act, 1944 are subject to the provisions contained in the SARFAESI Act, 2002. 44-46...xxx...xxx... 47. To conclude, the Commissioner of Customs and Central Excise could not have invoked the powers under Rule 173 Q(2) of the Central Excise Rules, 1944 on 26.03.2007 and 29.03.2007 for confiscation of land, buildings etc., when on such date, the said Rule 173Q(2) was not in the Statute books, having been omitted by a notification dated 12.05.2000. Secondly, the dues of the secured creditor, i.e. the Appellant bank, will have priority over the dues of the Central Excise Department, as even after insertion of Section 11E in the Central Excise Act, 1944 w.e.f. 08.04.2011, and the provisions contained in the SARFAESI Act, 2002 will have an overriding effect on the provisions of the Central Excise Act of 1944...." 3. In v....