2016 (9) TMI 972 - HC - VAT and Sales Tax

Recovery of dues - priority of discharge of dues - lifting/shifting the stocks of paddy bags from the rice mill premises and godown premises - Andhra Pradesh Revenue Recovery Act, 1864 - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - delivery of 8085.95 quintals of rice leaving a balance of 4007.18 quintals of rice undelivered, which is equivalent to 5892.91 quintals of paddy - demand of sum of ₹ 1,04,23,732.78 ps., representing the cost of paddy - failure to pay the demanded amount - letter addressed by to initiate proceedings under the RR Act - Section 2 of the RR Act - possession of the rice mill including stocks taken over - Held that - first charge over the dues has primacy over the dues of the Banks, Financial Institutions and Secured Creditors. It is not in dispute that the dues payable treated as arrears of land (public) revenue. The dues claimed by Telangana State Civil Supplies Corporation are subject to the statutory charge under Section 2 of the RR Act and therefore, they have the precedence over the dues claimed by the petitioner. It is only after the satisfaction of the dues of Telangana State Civil Supplies Corporation that the petitioner can recover its dues from out of the balance sale proceeds. In the Telangana State Civil Supplies Corporation is unable to recover the dues to the full extent, from out of the sale of the balance paddy seized by it from Mill, Telangana State Civil Supplies Corporation is entitled to sell the immovable properties such as factory, building etc. It is only after the debt of Telangana State Civil Supplies Corporation is satisfied that the petitioner is entitled to recover its dues from out of the left over properties or balance sale proceeds. Petition dismissed - decided against petitioner.

Summary

Issues:
1. Interpretation of statutory provisions under the Andhra Pradesh Revenue Recovery Act, 1864 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
2. Priority of dues claimed by different parties against a common debtor.
3. Application of legal precedents in determining the precedence of statutory charges over other dues.

Analysis:
1. The judgment involved the interpretation of statutory provisions under the Andhra Pradesh Revenue Recovery Act, 1864 (RR Act) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (2002 Act). The Court examined the creation of a statutory security for public revenue under Section 2 of the RR Act, which considers land, buildings, and products as security for revenue. The Court also referred to a judgment of the Supreme Court regarding the overriding effect of certain Acts over others based on inconsistencies.

2. The Court deliberated on the priority of dues claimed by different parties against a common debtor. In this case, the Telangana State Civil Supplies Corporation (respondent No.1) sought to recover dues from a party (respondent No.5) who had failed to deliver a substantial part of the resultant rice. The Court considered the statutory charge created under the RR Act, giving precedence to the dues claimed by respondent No.1 over other creditors, including the petitioner (Karur Vysya Bank Limited). The judgment emphasized that respondent No.1's dues must be satisfied before other creditors can recover their dues.

3. The Court applied legal precedents to determine the precedence of statutory charges over other dues. Referring to a Supreme Court judgment, the Court highlighted that the statutory charge created under the RR Act takes precedence over other debts, including those of banks, financial institutions, and secured creditors. The Court concluded that the dues claimed by respondent No.1 were subject to the statutory charge under the RR Act, giving them priority over the petitioner's dues. Consequently, the Court set aside the order dated 21-07-2015 and allowed WP.No.5008 of 2016 while dismissing WP.No.39476 of 2016.

This detailed analysis of the judgment showcases the Court's thorough examination of statutory provisions, precedence of dues, and application of legal precedents in resolving the issues at hand.