Case Details Punjab & Sind Bank vs The State of Punjab & Anr.

Court

Supreme Court of India

Date

7 December 2023

Case No.

Civil Appeal No. 6751 of 2023

Result

Dismissed

Bench

Aniruddha Bose, Sudhanshu Dhulia, Augustine George Masih

Citation

[2023] 15 S.C.R. 903 : 2023 INSC 1079

Issue for consideration

High Court whether justified in sustaining the State’s claim of priority in respect of dues under the Punjab Value Added Tax Act, 2005 of the Respondent no.2 (defaulting borrower), superseding the bank’s claim based on a charge created over its immovable property. Punjab Value Added Tax Act, 2005 – s.35 – Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – s.35 – Implication – Claim of primacy over the assets of the defaulting borrower – Bank relied on s.35, 2002 Act – s.35, 2005 Act however, creates first charge for State’s tax dues – Priority for secured creditors – Creation of charge/priority on tax dues of a defaulting borrower to the State, if there was any inconsistency between the 2005 Act and the 2002 Act at the material point of time: Held: The overriding provision of 2002 Act does not in any way eclipse the said provision creating first charge under the State Act – At the material point of time, there was no inconsistency between the 2005 Act and the 2002 Act, so far as the creation of charge or priority on tax dues of a defaulting borrower to the State is concerned – s.35 of the 2002 Act does not deal with the issue of creating priority for secured creditors, which is the specific mandate of s.35 of the 2005 Act – The latter provision specifically deals with superiority of the State’s claim over assets of a tax defaulter – The claim of the State, which is in the nature of crown debt stands statutorily recognised as superior claim u/s.35 of the 2005 Act, and is given precedence – Thus, the common law principle of priority of crown debt, which principle applies against unsecured creditors only would not apply in this case – Once the aforesaid provisions are examined, sans s.26E of the 2002 Act, s.35 of the 2005 Act would prevail – No error in the judgment under appeal – Affirmed – Principle of Priority of Crown Debt. [Paras 6, 9]

Headnote

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – s.26E – 2002 Act amended w.e.f 24.01.2020 upon introduction of s.26E – Operation of s.26E: Held: The operation of s.26E of the 2002 Act would be prospective – In the present case, as the State action had commenced in the year 2014, the provision of s.26E of the 2002 Act would not be applicable in this case – The said provision, having prospective effect cannot come to the aid of the bank – Punjab Value Added Tax Act, 2005. [Para 5] LIST OF CITATIONS AND OTHER REFERENCES

Central Bank of India v. State of Kerala & Ors., [2009] 3 SCR 735 : (2009) 4 SCC 94 – relied on.

Punjab National Bank v. Union of India & Ors., 2022 INSC 230 – distinguished.

Union of India & Ors. v. SICOM Ltd. & Anr., [2008] 17 SCR 120 : (2009) 2 SCC 121 – held inapplicable.

Jalgaon Janta Sahakari Bank Ltd. & Anr. v. Joint Commissioner of Sales Tax Nodal 9, Mumbai & Anr. 2022 (5) Maharashtra Law Journal

691 – referred to.

OTHER CASE DETAILS INCLUDING IMPUGNED

ORDER AND APPEARANCES

JUDGMENT / ORDER OF THE SUPREME COURT JUDGMENT The Punjab & Sind Bank is in appeal before us against a judgment of the Punjab & Haryana High Court delivered on 24.04.2015 holding in substance sustaining the State’s claim of priority in respect of dues under the Punjab Value Added Tax Act, 2005 (hereinafter called “the 2005 Act”) of a corporate entity, M/S Sumit Engineering Pvt. Ltd., superseding the bank’s claim based on a charge created over the immovable property of that entity (being respondent no.2 in this appeal). The said respondent, however, goes unrepresented before us when the appea

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