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TMI Blog2022 (6) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... B.PARDIWALA And HONOURABLE MS. JUSTICE NISHA M. THAKORE For the Appellant : Megha Jani For the Respondents : Government Pleader/PP, Bhaskar Sharma and Juhi D. Chavda JUDGMENT ( PER : HONOURABLE MR. JUSTICE J. B. PARDIWALA ) 1. Since the issues raised in both the captioned writ-applications are the same and the parties are also the same, those were taken up for hearing analogously and are being disposed of by this common judgment and order. 2. For the sake of convenience, the Special Civil Application No. 16352 of 2021 is treated as the lead matter. 3. By this writ-application under Article 226 of the Constitution of India, the writ-applicant has prayed for the following reliefs:- 21(A) Be pleased to issue a writ of mandamus or any other appropriate writ, order or direction in the nature of mandamus, or any other appropriate writ, order or direction and hold and declare that the claim made by the respondents under section 48 of the VAT Act is illegal and ultra vires in view of the provisions contained in section 26E of the SARFEASI Act and therefore, the demand made by the respondents in the charge recorded in the revenue records in relation to block ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the tune of Rs. 37.54 crore from the respondent no. 5 - Bank of Baroda. 4.2 In pursuance of the sanction of the said facility, the Company mortgaged several properties owned by it by way of security in favour of the bank. The security included hypothecation of the current assets, mortgage of plant and machinery by depository of title, deeds of the immovable properties in favour of the bank. 4.3 M/s. Modern Tube Industries Ltd. defaulted in the repayment of the amount availed by it by way of cash credit facility over a period of time. The account of the company came to be declared as a non-performing asset (N.P.A.) on 12.12.2012. The bank initiated proceedings under the SARFEASI Act before the Debt Recovery Tribunal at Ahmedabad in the form of filing of the Original Application No. 374 of 2013 against the defaulting company. 4.4 The Debt Recovery Tribunal by its judgment and order dated 31.03.2017 directed the company to make payment of Rs. 55,48,75,761.79/-. 4.5 The Bank of Baroda, thereafter, initiated proceedings under the SARFEASI Act by issuing a notice under Sub-section (2) of Section-13 on 08.06.2013. 4.6 The bank ultimately took over the possession of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a vs. State of Gujarat and others [Special Civil Application No. 13863 of 2014; decided on 21st January 2020]. (2) Kalupur Commercial Co-operative Bank Ltd. vs. State of Gujarat [Special Civil Application No. 17891 of 2018; decided on 23rd September 2019]. 8. We quote the relevant paragraphs of the judgment rendered in Kalupur Commercial Co-operative Bank Ltd. (supra) as under: 54. In view of the aforesaid discussion, We have no hesitation in coming to the conclusion that the first priority over the secured assets shall be of the Bank and not of the State Government by virtue of Section 48 of the VAT Act, 2003. 55. In the result, this writ application succeeds and is hereby allowed. The impugned attachment notice dated 22.01.2018 (Annexure-A) and the impugned communication dated 19.04.2018 (Annexure-B) issued by the respondent No. 2 is hereby quashed and set aside. It is hereby declared that the Bank has the first charge over the properties mortgaged from M/s. M.M. Traders by virtue of Section 26E of the SARFAESI Act. 56. It is further clarified that the excess, if any, shall be adjusted towards the dues of the State under the VAT Act. It is further declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riority over the claim of others. (iii) Since there is no specific provision claiming first charge in the Central Excise Act and the Customs Act, the claim of the Central Excise Department cannot have precedence over the claim of secured creditor, viz., the petitioner Bank. (iv) In the absence of such specific provision in the Central Excise Act as well as in Customs Act, we hold that the claim of secured creditor will prevail over Crown's debts. In view of our above conclusion, the petitioner UTI Bank, being a secured creditor is entitled to have preference over the claim of the Deputy Commissioner of Central Excise, first respondent herein. (emphasis supplied) 42. This Court, while dismissing the Civil Appeal No. 3627 of 2007 filed against the judgment of the Full Bench, vide order dated 12.09.2009 held as under: Having gone through the provisions of the Securitization Act, 2002, in light of the judgment of the Division Bench of this court in the case of Union of India vs Sicom Ltd. Anr., reported in 2009 (1) SCALE 10, we find that under the provisions of the said 2002 Act, the appellants did not have any statutory first charge over the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in Krishna Lifestyle Technologies Ltd. Vs. Union of India Ors. wherein the issue for consideration was whether tax dues recoverable under the provisions of The Central Excise Act, 1944 have priority of claim over the claim of secured creditors under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 held that: Considering the language of Section 35 and the decided case law, in our opinion it would be of no effect, as the provisions of SARFAESI Act override the provisions of the Central Sales Tax Act and as such the priority given to a secured creditor would override Crown dues or the State dues. In so far as the SARFAESI Act is concerned a Full Bench of the Madras High Court in UTI Bank Ltd. v. Deputy Commissioner of C. Excise, Chennai-II has examined the issue in depth. The Court was pleased to hold that tax dues under the Customs Act and Central Excise Act, do not have priority of claim over the dues of a secured creditor as there is no specific provision either in the Central Excise Act or the Customs Act giving those dues first charge, and that the claims of the secured creditors will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions contained in section 2(zc) to (zf) of SARFAESI Act, 2002, read with provisions contained in Section 13 of the SARFAESI Act, 2002, the Secured Creditor will have a First Charge on the Secured Assets. Moreover, section 35 of the SARFAESI Act, 2002 inter alia, provides that the provisions of the SARFAESI Act, shall have overriding effect on all other laws. It is further pertinent to note that even the provisions contained in Section 11E of the Central Excise Act, 1944 are subject to the provisions contained in the SARFAESI Act, 2002. 49. Thus, as has been authoritatively established by the aforementioned cases in general, and Union of India vs SICOM Ltd.(supra) in particular, the provisions contained in the SARFAESI Act, 2002, even after insertion of Section 11E in the Central Excise Act, 1944 w.e.f. 08.04.2011, will have an overriding effect on the provisions of the Act of 1944. 50. Moreover, the submission that the validity of the confiscation order cannot be called into question merely on account of the Appellant being a secured creditor is misplaced and irrelevant to the issue at hand. The contention that a confiscation order cannot be quashed merely because a secur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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