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TMI Blog2019 (5) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... is a conflict between a Central and a State Legislation and the State Legislation being repugnant to the Central Legislation, the former would be inoperative. The Apex Court in its judgment titled as UCO Bank and anr. vs. Dipak Debbarma and ors., [ 2017 (1) TMI 742 - SUPREME COURT ] has held that in case of repugnancy or inconsistency between the provisions of Central and State enactment, the Central law would prevail. The proceedings under the SARFAESI Act would, without a doubt, hold primacy over the MPID Act. Whether the recovery of a secured debt would take precedence over a crown debt - HELD THAT:- The Supreme Court, time and again in its various pronouncements, has reiterated that the right of a secured creditor to recover its debts, will always be a prior right, even over the right of recovery of a crown debt or any other debt - Reliance placed in the case of M/s Rana Girders Ltd. vs. Union of India [ 2013 (8) TMI 540 - SUPREME COURT ] - thus it is evident that debt which is secured under the provisions of a Statute becomes the first charge over the property in question and has to give way to a crown debt, which is in the nature of an unsecured debt. A reading of Section 31- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case are being extracted from CWP No.12188 of 2018. 2. The instant writ petition has been filed under Articles 226/227 of the Constitution of India inter alia for quashing the order dated 14.03.2018 (Annexure P-12) passed by the Sub Registrar, UT, Chandigarh respondent No.2 and order dated 16.04.2018 (Annexure P-16) passed by the Deputy Commissioner-cum-Registrar, UT, Chandigarh-respondent No.1. 3. From the record, it is apparent that the earlier owner of the property in question i.e. M/s Rahul Sales Ltd., through its Directors, Late Onkar Anand, Rahul Anand and Renu Anand had availed of a loan facility in the amount of ₹ 13.15 crores from respondent No.3 Punjab National Bank against security by way of equitable mortgage of House No.1037, Plot No.3, Street No.E, Sector 27-B, Chandigarh on 17.12.2013. The respondent-bank had got the details of the secured asset registered with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India on 31.03.2014. The said loan account subsequently became irregular as the borrowers could not maintain financial discipline and hence, the same was classified as Non Performing Asset. Thereafter, the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9) in favour of the petitioners/auction purchasers were not only illegal and arbitrary but also more specifically violated the provisions of 1908 Act as well as the SARFAESI Act. Learned counsel further urged that the embargo sought to be enforced by respondent No.4 -Sr. Inspector of Police, Economic Offences Wing, Mumbai and respondent No.5 -Govt. of Maharashtra against the property in question by issuance of an attachment order was liable to be set aside as the provisions of the SARFAESI Act would have precedence over other laws when recovery of a secured debt is sought. Learned counsel for the petitioners urged that their rights could not be curtailed because of attachment under the MPID Act since they had made full and final payment of the bid amount. The petitioners also drew our attention to the fact that the attachment of property in question vide impugned Notification dated 22.06.2015 had still not become absolute (as per the provisions of MPID Act) as the designated Court had yet to pass an order under Section 7(6) of MPID Act. Learned counsel for the petitioners submitted that as per provisions of Section 35 of the SARFAESI Act, the Act would override any other law for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislation and State Legislation, the former would prevail. For facility of reference, Article 254 is reproduced as under: 254 Inconsistency between laws made by Parliament and laws made by the Legislatures of States - ( 1) If any provision of a law made by the Legislature of a State is repugnant to any provision of a law made by Parliament which Parliament is competent to enact, or to any provision of an existing law with respect to one of the matters enumerated in the Concurrent List, then, subject to the provisions of clause (2), the law made by Parliament, whether passed before or after the law made by the Legislature of such State, or, as the case may be, the existing law, shall prevail and the law made by the Legislature of the State shall, to the extent of the repugnancy, be void. ( 2) Where a law made by the Legislature of a State with respect to one of the matters enumerated in the Concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le that in the event of a conflict between a Union and a State law in the concurrent field, the former prevails over the latter. Clause (1) lays down that if a State law relating to a concurrent subject is repugnant to a Union law relating to that subject, then, whether the Union law is prior or later in time, the Union law will prevail and the State law shall, to the extent of such repugnancy, be void. To the general rule laid down in clause (1), clause (2) engrafts an exception viz., that if the President assents to a State law which has been reserved for his consideration, it will prevail notwithstanding its repugnancy to an earlier law of the Union, both laws dealing with a concurrent subject. In such a case, the Central Act, will give way to the State Act only to the extent of inconsistency between the two, and no more. In short, the result of obtaining the assent of the President to a State Act which is inconsistent with a previous Union law relating to a concurrent subject would be that the State Act will prevail in that State and override the provisions of the Central Act in their applicability to that State only. The predominance of the State law may however be taken away ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in SICOM Ltd.'s case (supra) was of the opinion that rights of the Crown to recover the dues would prevail over the right of the subject. The Crown debt means the debts due to the State or the King. Such creditors, however, must be held to mean unsecured creditors. The principle of Crown debt pertains to the common law principle. When Parliament or the State Legislature makes an enactment, the same would prevail over the common law and thus the common law principles which existed on the date of coming into force of the Constitution of India, must yield to a statutory provision. A debt, which is secured or which by reason of the provisions of a statute becomes the first charge over the property must be held to prevail over the Crown debt which is an unsecured one. On this reasoning, the debt payable to the secured creditor like the Financial Corporation was prioritised vis-a- vis the Central Excise Dues. 19. For this principle, the Court referred to its earlier judgment in Dena Bank vs. Bhikhabhai Prabhudas Parekh Co.'s case(supra) explaining the doctrine of priority to Crown Debts, thus:(SICOM Ltd.'s case) 13 ... 7. What is the common law doctrine of priority or prec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to other creditors of the pawnor without the claim of the pawnee being first fully satisfied. Rashbehary Ghose states in Law of Mortgage (TLL,7th Edn.,p.386) it seems a government debt in India is not entitled to precedence over a prior secured debt. 20.xxx 21.xxx 22.xxx 23. We may notice that in the first instance it was mentioned not only in the public notice but there is a specific clause inserted in the sale deed/agreement as well, to the effect that the properties in question are being sold free from all encumbrances. At the same time, there is also a stipulation that all the statutory liabilities arising out of the land shall be borne by the purchaser in the sale deed and all the statutory liabilities arising out of the said properties shall be borne by the vendee and the vendor shall not be held responsible in the agreement of sale. As per the High Court, these statutory liabilities would include excise dues. We find that the High Court has missed the true intent and purport of this clause. The expressions in the sale deed as well as in the agreement for purchase of plant and machinery talk of statutory liabilities arising out of the land or statutory liabilities arising o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esses and rates due to the Central Government, State Government or Local Authority. 9. Hence, it clearly emerges that the revenues, taxes, cesses and rates due to the Central Government, State Government or a Local Authority shall not have precedence or preference over the dues recoverable by a secured creditor by sale of secured asset. Moreover, it is an admitted fact herein that the respondent-bank had auctioned the property in question under the Act being a secured asset, duly mortgaged in their favour by the previous owner, to secure the credit facilities allowed by the respondent-bank. 17. Further, a reading of Section 31-B of Recovery of Debts and Bankruptcy Act, 1993 reproduced above, which starts with a non-obstante clause, makes it amply clear that the right of a secured creditor to realise a secured debt shall have priority over all debts and government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or Local Authority. 18. It cannot be over emphasised that the property in question was auctioned by the respondent-PNB Housing Finance Ltd. to recover its secured debts and the attachment order issued by Government of Maharasht ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such person is not within those territories. 21. Suffice it to say, a writ petition is entertainable in a High Court within the jurisdiction of which even a part of the cause of action may have arisen. The property in question is located at Chandigarh, auction of the property was held in Chandigarh and importantly, the branch of Punjab National Bank from which the loan was raised by the petitioners was also located at Chandigarh. Thus, there is no doubt that this Court has the jurisdiction to hear and decide the instant lis because not only the cause of action has arisen within the jurisdiction of this Court but as already noticed above, the property in question is also located within the territorial jurisdiction of this Court. 22. The Apex Court dealt at length on the issue of territorial jurisdiction of a Court to entertain writ petition in Nawal Kishore Sharma vs. Union of India and ors, 2014 (9) SCC 329 . The relevant observations recorded in the judgment are reproduced as under: 10. The interpretation given by this Court in the aforesaid decisions resulted in undue hardship and inconvenience to the citizens to invoke writ jurisdiction. As a result, Clause 1(A) was inserted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Special Court and finally the Calcutta High Court by filing a writ petition challenging the notification of acquisition. The matter ultimately came before this Court to answer a question as to whether the service of notice under Section 52(2)of the Act at the registered office of the Respondent in Calcutta was an integral part of cause of action and was it sufficient to invest the Calcutta High Court with a jurisdiction to entertain the petition challenging the impugned notification. Answering the question this Court held:- 7. xxxxx 8. The expression cause of action is tersely defined in Mulla s Code of Civil Procedure: The cause of action means every fact which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the court. In other words, it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. The mere service of notice under Section 52(2)of the Act on the respondents at their registered office at 18-B, Brabourne Road, Calcutta i.e. within the territorial limits of the State of West Bengal, could not give rise to a cause of action within that terr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire bundle of facts pleaded need not constitute a cause of action as what is necessary to be proved before the petitioner can obtain a decree is the material facts. The expression material facts is also known as integral facts. 10. Keeping in view the expressions used in clause (2) of Article 226 of the Constitution of India, indisputably even if a small fraction of cause of action accrues within the jurisdiction of the Court, the Court will have jurisdiction in the matter. Their Lordships further observed as under:- 29. In view of clause (2) of Article 226 of the Constitution of India, now if a part of cause of action arises outside the jurisdiction of the High Court, it would have jurisdiction to issue a writ. The decision in Khajoor Singh has, thus, no application. 30. We must, however, remind ourselves that even if a small part of cause of action arises within the territorial jurisdiction of the High Court, the same by itself may not be considered to be a determinative factor compelling the High Court to decide the matter on merit. In appropriate cases, the Court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum conveniens. 16. In the case ..... 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