2014 (11) TMI 623 - HC - Central Excise

Forbearance of second respondent from selling the properties owned by both the first respondent company - Payment of duty due on first Respondents - Held that - Dues payable to the Central Excise Department do not have any precedence over the right of a secured creditor. The secured creditor viz., the second respondent herein has come into the picture pursuant to various deeds of assignment executed in their favour. Therefore, the only remedy available to the petitioner / Central Excise Department is to approach the third respondent / Official Liquidator and place their claims before the Official Liquidator, so that the claim can be adjudicated and the Official Liquidator in turn can issue notice to the defaulters as well as to the second respondent and adjudicate the matter. In such circumstances, the petitioner cannot prevent the second respondent, the secured creditor, from proceeding further. - petitioner is directed to file claim petitions, before the Official Liquidator, which shall be adjudicated by the Official Liquidator, after issuing notice to the respondents - Decided against Revenue.

Summary

Issues:
1. Petition seeking a Writ of Mandamus to prevent the sale of properties by the second respondent without following due process of law.
2. Default in payment of Central Excise Duty by the first respondent companies.
3. Rights of the secured creditor under the SARFAESI Act in comparison to the claims of the Central Excise Department.
4. Adjudication of claims by the Official Liquidator.

Analysis:

1. The petitioner, the Commissioner of Central Excise, sought a Writ of Mandamus to restrain the second respondent from selling properties owned by two companies without following due process. The companies had defaulted on Central Excise Duty payments totaling significant amounts. The petitioner argued that proper valuation of the properties and notice to the Official Liquidator should precede any sale action by the second respondent.

2. The second respondent, a secured creditor under the SARFAESI Act, had acquired rights through deeds of assignment. They had issued notices to pay outstanding amounts, taken possession of assets, and abated proceedings before BIFR. The petitioner did not contest these actions, and the company did not challenge them either. The second respondent had sold a property but faced registration issues due to a court injunction.

3. The court emphasized that Central Excise Department dues do not take precedence over secured creditors' rights. The petitioner was directed to file claim petitions before the Official Liquidator for adjudication. The court clarified that the petitioner could not prevent the second respondent from proceeding further under the SARFAESI Act.

4. The judgment directed the petitioner to file claim petitions before the Official Liquidator for adjudication. In one case, where the second respondent had not yet moved to declare a reference abated, the matter was pending before BIFR. The court highlighted that the petitioner could approach BIFR for adjudication if needed. Both writ petitions were disposed of, and related miscellaneous petitions were closed without costs.