2021 (8) TMI 1075 - SC - Central Excise

Evasion of duty - levy of penalty - secured creditor and the debts were transferred to the respondent Bank - HELD THAT - It is not possible for the appellant to plead that they have crown debt which would take precedence over a secured liability and fairly, the learned Additional Solicitor General does not even seek to contend it - there is no need to go into other issues sought to be raised by either of the parties before us or through the impugned judgment but suffice to say that the respondent Bank cannot be prevented from exercising its rights as a secured creditor on the pretext that there is a debt to the Excise Department arising from the confiscation order dated 25.02.2006. On realization of the dues of the Bank, if amounts are still left, those amounts can be utilized to satisfy the dues of the Excise Department and naturally, if there are still amounts left, the debtor would be the beneficiary of the same - Appeal dismissed.

Summary

Issues Involved:
1. Transfer of secured debt to respondent Bank.
2. Implementation of debt recovery proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
3. Dispute over immovable property attachment.
4. Rights of the central government to recover dues.
5. Priority of secured creditor's rights over crown debt.
6. Utilization of realized dues to satisfy multiple debts.
7. Dismissal of appeals and Special Leave Petition.

Transfer of Secured Debt to Respondent Bank:
The case involves the transfer of a secured debt from the State Bank of India to the respondent Bank, originating on 24.06.1985. The debtor, M/s Amod Petrochem Private Limited, faced financial difficulties, leading to subsequent demands from the Excise Department for evasion of duty. The respondent Bank initiated proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, crystallizing the debt and taking steps for property attachment.

Implementation of Debt Recovery Proceedings:
The debt recovery proceedings focused on the attachment of movable and immovable properties. While the movable assets were sold without dispute, the question arose regarding the immovable property. The District Magistrate's non-implementation led to legal proceedings, including a direction sought by the Bank before the High Court. The Single Judge raised concerns over the Bank's rights conflicting with the central government's dues recovery, prompting a Letters Patent Appeal.

Dispute Over Immovable Property Attachment:
The core issue revolved around the immovable property attachment, with the Bank seeking to protect it for over a decade due to pending legal matters. The prolonged dispute resulted in additional costs for the Bank, highlighting the complexity and financial burden arising from the unresolved issue.

Rights of Central Government vs. Secured Creditor:
The judgment addressed the question of whether the Bank could override the central government's rights to recover dues. The court emphasized the significance of the original creation date of the security in favor of the State Bank of India, establishing the priority of secured liabilities over potential crown debts.

Utilization of Realized Dues for Debt Satisfaction:
The court clarified that upon realizing the Bank's dues, any remaining amounts could be used to settle the Excise Department's claims. The debtor would benefit from any surplus amounts, potentially leading to a resolution where real estate appreciation might satisfy all parties' claims, reflecting a positive aspect of the prolonged dispute.

Dismissal of Appeals and Special Leave Petition:
Ultimately, the appeals were dismissed, with each party bearing its own costs. The Special Leave Petition, associated with the same case, was also dismissed due to the alleged crown debt arising after the respondent's property purchase through auction for debt realization, emphasizing the parties' responsibility for costs incurred in the legal proceedings.