LexPUNJAB & SIND BANK versus THE STATE OF PUNJAB & ANR.
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[2023] 15 S.C.R. 903 : 2023 INSC 1079 CASE DETAILS PUNJAB & SIND BANK v. THE STATE OF PUNJAB & ANR. (Civil Appeal No. 6751 of 2023) DECEMBER 07, 2023 [ANIRUDDHA BOSE, SUDHANSHU DHULIA AND AUGUSTINE GEORGE MASIH, JJ.] HEADNOTES Issue for consideration: High Court whether justifi ed 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 fi rst 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 fi rst 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 specifi c mandate of s.35 of the 2005 Act – The latter provision specifi cally 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 903 SUPREME COURT REPORTS [2023] 15 S.C.R. 904 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 – Affi rmed – Principle of Priority of Crown Debt. [Paras 6, 9] 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 eff ect 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 CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6751 of 2023. From the Judgment and Order dated 24.04.2015 of the High Court of Punjab & Haryana at Chandigarh in CWP No.21583 of 2014. Appearances: Ms. Seema Gupta, Ms. Tina Garg, Advs. for the Appellant. 905 Shadan Farasat, AAG, Ms. Natasha Maheshwari, Karan Bharihoke, Rishabh Sharma, Advs. for the Respondents. 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 appeal is taken up for hearing. The proceeding under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter called “the 2002
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