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2024 (2) TMI 322 - HC - CustomsRecovery of dues - Petitioner s right as a Financial Creditor is superior to the rights under the Customs Act, 1962 or not - sale of assets of Respondent No. 02 under the provisions of the SARFAESI Act 2002 - HELD THAT - The only source of power for the respondents in purporting to address the impugned letter can be traced to Section 142A of the Customs Act, being a provision which recognizes the first charge in regard to any duty, penalty, interest or any other sum payable by an assessee or any other person under the Customs Act and such first charge is notwithstanding anything to the contrary contained in any Central Act or State Act, and thereafter, saving the provisions under the SARFAESI Act. On a cumulative reading of Section 142A of the Customs Act and Section 35 of the SARFAESI Act, it would be clear that the recovery as initiated by the petitioner under the SARFAESI Act cannot be impeded by the respondents by taking recourse to Section 142A of the Customs Act. The reason being that Section 142A itself is a provision which saves the provisions of the SARFAESI Act under which the action was resorted by the petitioner to recover its dues from respondent No. 2. In any event, it is well settled that unless there is a preference given to a Crown debt by a statute, the dues of a secured creditor like the petitioner would have preference over Crown debts. It may also be observe that in the present case the impugned letter has been addressed at the stage of investigation. It is averred in the reply affidavit that a final order-in-original is passed against respondent No. 2. It is informed by the learned Counsel for the petitioner that such order is subject matter of challenge in independent proceedings. Thus, the impugned communication in any event would pale into insignificance. The impugned communication dated 2 November 2015 is quashed and set aside - petitioner is permitted to proceed further in regard to the actions against respondent No. 2 and the secured assets, as initiated under the SARFAESI Act - petition allowed.
Issues Involved:
1. Validity of the letter dated 02.11.2015 issued by Respondent No. 1. 2. Petitioner's right as a Financial Creditor under the SARFAESI Act, 2002. 3. Disclosure of investigation status and property attachment details by Respondent No. 1. Summary: 1. Validity of the letter dated 02.11.2015 issued by Respondent No. 1: The petitioner challenged the letter dated 02.11.2015 from Respondent No. 1, which instructed the petitioner not to take any decision on the property of Respondent No. 2 without consulting Respondent No. 1 due to ongoing investigations under the Customs Act, 1962. The court found that the letter acted as an embargo on the petitioner's actions under the SARFAESI Act. The court held that Section 142A of the Customs Act, which grants first charge to the customs authorities, does not impede the petitioner's rights under the SARFAESI Act due to the overriding effect of Section 35 of the SARFAESI Act. The court quashed and set aside the impugned communication, allowing the petitioner to proceed with actions against Respondent No. 2 under the SARFAESI Act. 2. Petitioner's right as a Financial Creditor under the SARFAESI Act, 2002: The petitioner argued that as a secured creditor, its rights to recover dues by selling mortgaged assets under the SARFAESI Act should not be restrained by the customs authorities. The court agreed, stating that the SARFAESI Act, being a special act, has an overriding effect over other laws, including the Customs Act. The court referenced several judgments affirming that secured creditors have preference over Crown debts unless explicitly stated otherwise by statute. The court permitted the petitioner to proceed with recovery actions under the SARFAESI Act. 3. Disclosure of investigation status and property attachment details by Respondent No. 1: The petitioner sought directions for Respondent No. 1 to disclose the status of the investigation and details of any property attachments of Respondent No. 2. The court noted that the impugned letter was issued during the investigation stage and that any final orders against Respondent No. 2 were subject to independent proceedings. The court kept open all contentions of Respondent No. 1 regarding recovery against the defaulters under the Customs Act but allowed the petitioner's actions under the SARFAESI Act to proceed. Order: 1. The impugned communication dated 2 November 2015 is quashed and set aside. 2. The petitioner is permitted to proceed further in regard to the actions against Respondent No. 2 and the secured assets, as initiated under the SARFAESI Act. 3. All contentions of Respondent No. 1 against the defaulters under the Customs Act are expressly kept open. Rule is made absolute in the above terms with no costs.
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