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TMI Blog2023 (12) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... een reiterated in a recent judgment of this Court in Mankind Life Sciences Private Limited vs. The State of Himachal Pradesh Anr., [ 2023 (10) TMI 867 - HIMACHAL PRADESH HIGH COURT ], wherein it was held that Once the petitioner has only purchased the Industrial Plots-Immovable Properties, which had been leased out to the Original Lessee by department of industries and the petitioner has never purchased the past or ongoing business of the original lessee therefore, the petitioner-auction purchaser cannot be fastened with the liability of State taxes, which had accrued and were connected with and were solely attributable to the business of the original lessee only. In view of the settled legal position, this Court is left with no other option, but to allow the instant petition by directing respondents No. 1 and 2 to remove the red entry qua the property in question made in the revenue record i.e. rapat No. 484 , dated 27.5.2017 forthwith - petition allowed. - The Hon ble Mr. Justice Tarlok Singh Chauhan , Judge And The Hon ble Mr. Justice Satyen Vaidya , Judge For the Petitioner : Mr. Arvind Sharma. , Advocate For the Respondents : Mr. I. N. Mehta , Mr. Y. W. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of writ, direction to respondents to remove Rapat No. 484 dated 27-05-2017 against property measuring 195-27 sq. mts. out of land comprised in Khata Khatauni No. 541/1277, Khasra Nos. 655 656, situate at Up Mohal Galua, Mohalla Prem Nagar, Ward No 1, Tehsil Distt Una as the same is illegal and wrong, as said property is Secured Asset of petitioner bank and as per Section 26 E of The Securitisation and Reconstructions of Financial Assets and Enforcement of Security Interest Act 2002. (ii) Respondents be directed to Register the sale certificate dated 02-11-2022 issued by petitioner bank in respect of public auction date 25-10-2022 issued by petitioner bank in favor of Performa respondent. (iii) Respondent No 3 be directed to enter / attest mutation in respect of sale certificate dated 02-11-2022 issued by petitioner bank shown Performa respondent as absolute owner in possession of auctioned property free from all encumbrances. 8 Respondent No.3- Deputy Commissioner has filed its reply, wherein the Department has acknowledged that the Excise Department had got entered rapat rapat No. 484 dated 27.5.2017 in the revenue record to safeguard the interest of the Excise Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Himachal Pradesh Anr., decided on 1.9.2023, wherein it was held as under:- 7(iii). While dealing with the issue as to whether the dues of secured creditor under SARFAESI Act shall have priority over the dues of Central Excise Department has been answered by the Hon ble Apex Court, in Punjab National Bank vs. Union of India Ors (2022) 7 SCC 260, by recording a finding that secured creditor will have a first charge on secured assets and the provisions of SARFAESI Act shall have overriding effect on the provisions of Central Excise Act 1944 or on all other laws, in view of Section 35 of the SARFAESI Act, which reads as under:- 42. Secondly, coming to the issue of priority of secured creditor s debt over that of the Excise Department, the High Court in the impugned judgment has held that In view of the matter, the question of first charge or second charge over the properties would not arise. In this context, we are of the opinion that the High Court has misinterpreted the issue to state that the question of first charge or second charge over the properties, would not arise. 46. This Court, in Dena Bank vs Bhikhabhai Prabhu Dass Parikh Anr. [(2000) 5 SCC 694 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Corporation Act, 1951 and this Court held as under:- 9. Generally, the rights of the crown to recover the debt would prevail over the right of a subject. Crown debt means the debts due to the State or the king; debts which a prerogative entitles the Crown to claim priority for before all other creditors. [See Advanced Law Lexicon by P. Ramanatha Aiyear (3rd Edn.) p. 1147]. Such creditors, however, must be held to mean unsecured creditors. Principle of Crown debt as such pertains to the common law principle. A common law which is a law within the meaning of Article 13 of the Constitution is saved in terms of Article 372 thereof. Those principles of common law, thus, which were existing at the time of coming into force of the Constitution of India are saved by reason of the aforementioned provision. A debt which is secured or which by reason of the provisions of a statute becomes the first charge over the property having regard to the plain meaning of Article 372 of the Constitution of India must be held to prevail over the Crown debt which is an unsecured one. 50. In view of the above, we are of the firm opinion that the arguments of the learned counsel for the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 2005, this Court held in CWP No 1638 of 2017, titled as PNB Versus State of Himachal Pradesh and others, decided on 19.05.2021, that the provisions of Section 26 E of the Act shall override the rights of others to recover the outstanding liability of taxes dues etc on the mortgaged/charged property from the original owner etc. The relevant Paras are reproduced here-inbelow :- 24. This entire aspect has been dealt with at length by the Hon ble High Court of Kerala while deciding an issue akin to the one involved in this petition in State Bank of India Vs. State of Kerala and others, WP (C) No. 28316 of 2016 and other connected matters, decided on 30th July, 2019, relevant portions of which judgment are quoted herein below in extensio: 37. That so said, the next question that arises is whether Section 26E of the SARFAESI Act and Section 31B of the RDB Act create an overriding and first right in favour of the Banks/Financial Institutions to recover their dues, over and above the rights of the Revenue created through the KGST Act/KVAT Act. In fact, this enquiry has been rendered relatively easy for this Court because, in Central Bank of India v. State of Kerala and Othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritization Act. 130. Undisputedly, the two enactments do not contain provision similar to the Workmen s Compensation Act, etc. In the absence of any specific provision to that effect, it is not possible to read any conflict or inconsistency or overlapping between the provisions of the DRT Act and the Securitization Act on the one hand and Section 38 of the Bombay Act and Section 26B of the Kerala Act on the other and the non obstante clauses contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act cannot be invoked for declaring that the first charge created under the State legislation will not operate qua or affect the proceedings initiated by banks, financial institutions and other secured creditors for recovery of their dues or enforcement of security interest, as the case may be. 38. When one reads the afore opinion of the Honble Supreme Court, it is left without any doubt that, but for Section 26E of the SARFAESI Act and Section 31B of the RDB Act, such Statutes do not, in any manner, operate to create a better right for recovery in favour of the Banks/Financial Institutions over that of the Revenue. However, these provisions were brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property, the Revenue cannot claim a First Right to proceed against it either in the face of the provisions of the SARFESI Act or RDB Act with which we are dealing in this case. In fact, on a closer look and in the ultimate analysis, the concept of First Charge and debt being paid in priority are fraternal twin provisions which virtually means the same- both giving the holder such rights, the benefit of selling the property and recovering their dues before any other. 42. A further test of the afore proposition, if so necessary, is not different because the principles of priority in payment of dues in the context of the Companies Act have been considered by the Hon ble Supreme Court in several judgments and many of them have been cited by the learned counsel for the respondents Banks /Financial Institutions. I will briefly deal with a few of them solely to confirm that my view as afore do not suffer from error. 47. The above cited judgments certainly support my views as afore and it axiomatically becomes justified for me to hold that Section 26E of the SARFAESI Act and Section 31B of the RDB Act create a First Charge by way of a priority to the Banks/Financial Institut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of Section 26 of the H.P. VAT Act, 2005 shall have to give way to the provisions of Section 26E of the SARFAESI Act 2002 and Section 31B RDB Act, 1993 . 7(v). In addition to the above, this Court has decided a similar issue in the case of State of H.P. ors versus State Bank of India, in LPA No.156 of 2021, decided on 12.04.2023. The relevant paras of the judgment read as under: 2. Admittedly, the issue involved in the present appeals is as to whether the State (Excise Department) will have priority over the secured creditor s debt. 3. Learned counsel for the respondents have submitted that the issue involved in the present appeals is no longer res integra and has been settled by the Hon ble Supreme Court in Civil Appeal No. 2196 of 2012, titled Punjab National Bank vs. Union of India and others, decided on 24th February, 2022. 4. The relevant portion of the order dated 24th February, 2022 reads as under:- 37. Secondly, coming to the issue of priority of secured creditor s debt over that of the Excise Department, the High court in the impugned judgment has held that In view of the matter, the question of first charge of second charge over th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters Patent Appeals are dismissed . 7(vi). This Court in CWP No 678 of 2023, titled as M/s Nugenix Pharma Pvt. Ltd. Versus Indian Bank and others, decided on 05.07.2023, has directed the respondents to remove the red entry in the revenue records and to permit the petitioner-auction purchaser therein to exercise its rights on the property acquired by way of public auction for all intents and purposes. The relevant paras are reproduced here-in-below:- The moot question in this petition is as to whether the different departments of State including Excise Revenue will have priority over the secured creditor s debt? 2. The issue in question is no longer res-integra in view of the authoritative judgment of the Hon ble Supreme Court reported in (2022) 7 Supreme Court Cases 260, titled as, Punjab National Bank Vs. Union of India Ors. decided on 24.02.2022. It will be apt to reproduce the relevant paras of the judgment, which read as under: 37. Coming to the issue of priority of secured creditor s debt over that of the Excise Department, the High court in the impugned judgment has held that In view of the matter, the question of first charge or second charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and further respondents No.4 and 5 are directed to enter the names of the petitioners as owner of the property in question in the revenue records having been purchased by them in an auction conducted by the Indian Bank under the provisions of SARFAESI Act and respondents No.2 to 5 are further directed to remove the red entries made in the revenue record/jamabandi of the property in question. Ordered accordingly. 7(vii). Recently, after taking note of the judgment passed by the Hon ble Apex Court in (2003) 3 SCC 210, titled as Kotak Mahindra Bank Ltd. Versus Girnar Corrugators Private Limited and Others, and the judgment in the case of Punjab National Bank vs. Union of India Ors (2022) 7 SCC 260, this Court has decided a similar issue in CWP No.4751 of 2023, titled as Central Bank of India Versus State of Himachal Pradesh Ors., decided on 16.08.2023 and the operative Para reads as under:- 4(vi). It is worth mentioning that respondent No.2, Excise Taxation Department cannot raise a priority claim over and above the Petitioner-Bank, when, as per Section 26E of SARFASEI Act introduced by amendment carried in 2016, the Petitioner-Bank has first charge over the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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