TMI Blog2023 (12) TMI 1236X X X X Extracts X X X X X X X X Extracts X X X X ..... no longer res integra in view of the authoritative pronouncement of the Hon'ble Supreme Court in Punjab National Bank Vs. Union of India Ors. [ 2022 (2) TMI 1171 - SUPREME COURT] . The legal position has thereafter been reiterated in a recent judgment of this Court in Mankind Life Sciences Private Limited vs. The State of Himachal Pradesh Anr., [ 2023 (10) TMI 867 - HIMACHAL PRADESH HIGH COURT] , wherein it was held [ 2022 (2) TMI 1171 - SUPREME COURT] . This Court is left with no other option, but to allow the instant petition by directing respondents to remove the red entry qua the property in question made in the revenue record i.e. Rapat No. 459, dated 09.07.2015 and Rapat No. 173, dated 05.02.2018 forthwith. The instant petition is allowed. - Hon ble Mr. Justice Tarlok Singh Chauhan, Judge And Hon ble Mr. Justice Satyen Vaidya, Judge For the Petitioner : Mr. Arvind Sharma, Advocate For the Respondents : Mr. I. N. Mehta, Sr. Addl. A.G. with Ms. Sharmila Patial and Mr. Navlesh Verma, Addl. A.G. for respondents No. 1, 2 and 4. Mr. Devi Singh, Advocate, vice Ms. Vandana Kuthiala, Advocate, for respondent No. 3. ORDER Tarlok Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment in revenue documents Rapat No. 173, dated 05.02.2018 by respondent No. 3 over secured assets i.e. property comprise in Khata Khatoni No. 404/533, Khasra No. 1118 1119, Kita 2, measuring 02- 34-64 Hectares, situated at Mohal They, Tehsil Haroli, District Una, Himachal Pradesh as the same is illegal and wrong, as said property is secured asset of petitioner-Bank and as per Section 26-E of The Securitisation and Reconstructions of Financial Assets and Enforcement of Security Interest Act, 2002. 7. Respondents No. 1 and 2 i.e. State of Himachal Pradesh through Secretary State Taxes and Excise and Commissioner State Taxes Excise Department have filed their joint reply, wherein it has been averred that the Unit was registered under the Himachal Pradesh Value Added Tax Act, 2005 and Central Sales Tax Act, 1956 and a sum of Rs.21,37,47,875/- is recoverable from the Unit by the replying respondents. The Unit was called upon to pay the amount through several notices, but it failed to appear before the Assessing Authority. The Unit was assessed on ex-parte basis under both the aforesaid Acts by the appropriate Assessing Authority for the years 2010-11, 2011-12, 2012-13, 2013-14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner is a secured creditor and has moreover created the first charge over the property, then obviously, it has the first right to realise its dues and this question is no longer res integra in view of the authoritative pronouncement of the Hon'ble Supreme Court in Punjab National Bank Vs. Union of India Ors. (2022) 7 Supreme Court Cases 260. 12. The legal position has thereafter been reiterated in a recent judgment of this Court in CWP No. 4701/2023, titled as Mankind Life Sciences Private Limited vs. The State of Himachal Pradesh Anr., decided on 1.9.2023, wherein it was held as under:- 7(iii). While dealing with the issue as to whether the dues of secured creditor under SARFAESI Act shall have priority over the dues of Central Excise Department has been answered by the Hon ble Apex Court, in Punjab National Bank vs. Union of India Ors (2022) 7 SCC 260, by recording a finding that secured creditor will have a first charge on secured assets and the provisions of SARFAESI Act shall have overriding effect on the provisions of Central Excise Act 1944 or on all other laws, in view of Section 35 of the SARFAESI Act, which reads as under:- 42. Secondly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 12462/2008) against the above judgment of the Bombay High Court stands dismissed by this Court on 17.07.2009 by relying upon the judgement in the matter of Union of India vs SICOM Ltd. Anr. Reported in (2009) 2 SCC 121, wherein the question involved was Whether realization of the duty under the Central Excise Act will have priority over the secured debts in terms of the State Financial Corporation Act, 1951 and this Court held as under:- 9. Generally, the rights of the crown to recover the debt would prevail over the right of a subject. Crown debt means the debts due to the State or the king; debts which a prerogative entitles the Crown to claim priority for before all other creditors. [See Advanced Law Lexicon by P. Ramanatha Aiyear (3rd Edn.) p. 1147]. Such creditors, however, must be held to mean unsecured creditors. Principle of Crown debt as such pertains 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 principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . (Underlining Ours) 7(iv). LEGAL POSITION: PRECEDENTS OF THIS HIGH COURT ON OVERRIDING EFFECT OF SARFAESI ACT: While deciding an issue regarding the overriding effect of Section 26-E (came into force w.e.f. 1.9.2016) of the SARFAESI Act vis-a-vis the provision of Section 26 of the HP VAT Act 2005, this Court held in CWP No 1638 of 2017, titled as PNB Versus State of Himachal Pradesh and others, decided on 19.05.2021, that the provisions of Section 26 E of the Act shall override the rights of others to recover the outstanding liability of taxes dues etc on the mortgaged/charged property from the original owner etc. The relevant Paras are reproduced here-in-below :- 24. This entire aspect has been dealt with at length by the Hon ble High Court of Kerala while deciding an issue akin to the one involved in this petition in State Bank of India Vs. State of Kerala and others, WP (C) No. 28316 of 2016 and other connected matters, decided o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended 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 contained in Section 14 A of the Workmen s Compensation Act, 1923, Section11(2) of the EPF Act, Section 74(1) of the Estate Duty Act, 1953, Section 25(2) of the Mines and Minerals (Regulation and Development) Act, 1957, Section 30 of the Gift Tax Act, and Section 529 A of the Companies Act, 1956 would have been incorporated in the DRT Act and the Securitization Act. 130. Undisputedly, the two enactments do not contain provision similar to the Workmen s Compensation Act, etc. In the absence of any specific provision to that effect, it is not possible to read any conflict or inconsistency or overlapping between the provisions of the DRT Act and the Securitization Act on the one hand and Section 38 of the Bombay Act and Section 26B of the Kerala Act on the other and the non obstante clauses contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act cannot be invoked for declaring that the first charge created under the State legislation will not operate qua or affect the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 conceded to by the learned Additional Advocate General that the Banks /Financial Institutions have the First Right to have their debts extinguished; but, as has been recorded above, the Revenue merely claims that they have right to sell the property first. This argument again is flawed because the First Charge creating no right over the property, the Revenue cannot claim a First Right to proceed against it either in the face of the provisions of the SARFESI Act or RDB Act with which we are dealing in this case. In fact, on a closer look and in the ultimate analysis, the concept of First Charge and debt being paid in priority are fraternal twin provisions which virtually means the same- both giving the holder such rights, the benefit of selling the property and recovering their dues before any other. 42. A further test of the afore proposition, if so necessary, is not different because the principles of priority in payment of dues in the context of the Companies Act have been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 charge over secured assets of the petitioners belonging to the private respondent- Company, as the petitioners have first charge over the secured ssets in view of the provisions of the SARFAESI Act 2002 and Recovery of Debts and Bankruptcy Act, 1993, as amended from time to time. It is further held that the provisions of Section 26 of the H.P. VAT Act, 2005 shall have to give way to the provisions of Section 26E of the SARFAESI Act 2002 and Section 31B RDB Act, 1993 . 7(v). In addition to the above, this Court has decided a similar issue in the case of State of H.P. ors versus State Bank of India, in LPA No.156 of 2021, decided on 12.04.2023. The relevant paras of the judgment read as under: 2. Admittedly, the issue involved in the present appeals is as to whether the State (Excise Department) will have priority over the secured creditor s debt. 3. Learned counsel for the respondents have submitted that the issue involved in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 failed to controvert the factual aspect of the submissions made by learned counsel for the respondents. 6. Since the question involved in the present appeal is no longer res integra and has been settled by the Hon ble Supreme Court in Punjab National Bank s case supra, all the Letters Patent Appeals are dismissed . 7(vi). This Court in CWP No 678 of 2023, titled as M/s Nugenix Pharma Pvt. Ltd. Versus Indian Bank and others, decided on 05.07.2023, has directed the respondents to remove the red entry in the revenue records and to permit the petitioner-auction purchaser therein to exercise its rights on the property acquired by way of public auction for all intents and purposes. The relevant paras are reproduced here-in-below:- The moot question in this petition is as to whether the different departments of State including Excise Revenue will have priority over the secured creditor s debt? 2. The issue in q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 view of the legal position, set out here-inabove, this Court is left with no other option, but to allow this petition by directing respondents No.4 and 5 to attest mutation of sale deed dated 18.9.2021 (Annexure P-5) issued by the Indian Bank, in favour of the petitioners and further respondents No.4 and 5 are directed to enter the names of the petitioners as owner of the property in question in the revenue records having been purchased by them in an auction conducted by the Indian Bank under the provisions of SARFAESI Act and respondents No.2 to 5 are further directed to remove the red entries made in the revenue record/jamabandi of the property in question. Ordered accordingly. 7(vii). Recently, after taking note of the judgment passed by the Hon ble Apex Court in (2003) 3 SCC 210, titled as Kotak Mahindra Bank Ltd. Versus Girnar Corrugators Private Limited and Others, and the judgment in the case of Punjab ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
