9911796707
TMI Blog2008 (2) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... e manufactured goods, it transpires that there was a Detention Order issued by the Authorised Officer as on 9-11-2006 for recovery of the said arrears and a Notice of Demand followed by a proclaimed Order of Attachment was issued on 9-1-2007 in respect of the properties of the first respondent, namely, its factory building and other buildings situate at plot no. 2D, 2E and 2F of Block no. 89. The further order of attachment has been proclaimed on the very date in respect of land situate in plot no. 1/14, Block no. 96A belonging to respondent no. 1(a), who is the Executive Director of the first respondent-Company, as well as in respect of land in Block no. 675, measuring about 3 acres and 27 guntas belonging to one of the directors of the Company. 3. It further transpires that when these adjudication proceedings were in progress, the second respondent (hereinafter referred to as the Co-op bank) who had extended certain loans to the assessee-Company, on the mortgage of assets, had initiated proceedings against the assessee-Company and had taken possession of the same, by virtue of an attachment order pursuant to an Award by the Joint Registrar of Co-operative Societies as an Arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, with interest thereon, the petitioner-department would have priority over other institutions and organisations, including the respondent-Banks in the matter of realising its dues from an assessee. 6. In this regard, the Counsel places reliance on the judgments of the Supreme Court in the case of Dena Bank supra and Macson Marbles Private Limited v. Union of India, 2003 (158) E.L.T. 424. It is contended that the Co-op bank seeking to claim under Section 71 of the Karnataka Co-operative Societies Act, 1951 and attachment before judgment under section 103 of the said Act, while SBM seeking to proceed under the provisions of the SARFAESI Act, are overriding the priority claim of the Central Excise Department. The said respondent-Banks are negating the demand of the petitioner which has been confirmed in all respects, in accordance with the provisions of the Central Excise Act and the Rules. 7. It is contended that by virtue of Section 11 of the Central Excise Act, 1944 read with section 142 of the Customs Act, 1962, the petitioner-department is empowered to recover excise duty by way of attachment and sale of immoveable properties. It is contended that the respondent-Banks seekin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t,1951, there was an Attachment Order by the Arbitration Court on 3-9-2005, a public notice was published in the Newspapers on 17-10-2004, a Public Auction Sale Notice was published on 8-1-2007 and a public auction was proposed to be held on 25-1-2007 and 31-1-2007. These admitted events would also indicate that even the Co-operative Bank has initiated proceedings subsequent to the charge and proceedings that are initiated by SBM. The respondent-Bank bring a secured creditor, who had no prior notice of any claim, either by the petitioner or by the Co-operative Bank, they are estopped in law from seeking to claim a right of priority over the assets of the first respondent-Company. 12. The Counsel would contend that a mortgage having been created in favour of the third respondent-Bank, the third respondent is a secured creditor on creation of such a right, the Bank would claim that under section 35 of the SARFAESI Act, the power of SBM cannot be curtailed by the alleged preferential right of priority of the petitioner which is not supported by any statutory provision. The petitioner does not disclose or urge any such statutory provision which confers such a preferential priority ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank of Bihar v. State of Bihar and Others, AIR 1971 SC 1210, (vii) Sitani Textiles and Fabrics Private Limited v. Collector of Customs and Central Excise, 1998-ALT-5-249, (viii) Union of India v. Metherukunju Moosakutty and Others, AIR 1980 KER 182, (ix) ICICI Bank Limited v. SIDCO Leather Limited, AIR 2006 SC 2088. 15. The Counsel for the second respondent would also urge similar contentions while emphasizing the fact that on account of the said respondent not being in a position to recover moneys, it has affected its business and its very functioning has come to a stand-still inviting action by the Reserve Bank of India under section 35 of the Banking Regulation Act, 1949. 16. The question that arises for consideration in the present case on hand, is whether the petitioner can claim a priority in seeking to recover dues as against the respondent-Company over the claims of the respondent-Banks. In so far as the legal provisions, under which the petitioner claims to have a right to recover the amounts are concerned, are extracted hereunder for a ready reference "The Central Excise Act, 1944 "Section 11. Recovery of sums due to Government In respect of duty and any oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals shall, with such modifications arid alterations as it may consider necessary or desirable to adapt them to the circumstances, be applicable in regard to like matters in respect of the duties imposed by Section 3. The Customs Act, 1962 "Section 142. Recovery of Burns doe to Government :- (1) [where any sum payable by any person] under this Act (including the amount required to be paid to the credit of the Central Government under Section 2KB] is not paid- (a) the proper officer may deduct or may require any other officer of customs to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or such other officer of customs; or (b) the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] may recover or may require any other officer of customs to recover the amount so payable by detaining and selling any goods belonging to such person which are under the control of the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] or such other officer of customs; or [(c) if the amount cannot be recovered from such person in the manner provided in clause (a) or clause (b) (i) the [Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent-State Bank of Mysore claiming that it has initiated proceedings and has taken possession prior to the action initiated by the petitioner is concerned, are also extracted below: "Chapter 1 of the SARFAESI Act Definitions (zd) "secured creditor" means any bank or financial institution or any consortium or group of banks or financial institutions and includes (i) debenture trustee appointed by any bank or financial institution; or (ii) [securitisation company or reconstruction company, whether acting as such or managing a trust set up by such securitisation company or reconstruction company for the securitisation or reconstruction, as the case may be; or] (iii) any other trustee holding securities on behalf of a bank or financial institution, in whose favour security interest is created for due repayment by any borrower of any financial assistance; (zf) "security interest" means right, title and interest of arty kind whatsoever upon property, created in favour of any secured creditor and includes any mortgage, charge, hypothecation, assignment other than those specified in Section 31; Chapter 1 of the SARFAESI Act 13. Enforcement of Security Interest. - (1) Notwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been taken against a borrower under the provisions of sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interest." 18. Insofar as the doctrine of priority or precedence of State debts are concerned, the law has been succinctly laid down by the Supreme Court in Dena Bank's case supra, in holding that the principle of priority of Government debts is founded on the rule of necessity and of public policy. The basic justification for the claim for priority of State debts, rests on the recognised principle that the State is entitled to raise money by taxation because, unless adequate revenue is received by the State, it would not be able to function a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
