STATE BANK OF INDIA Vs. DRT
LAWS(DR)-2011-12-1
DEBTS RECOVERY APPELLATE TRIBUNAL
Decided on December 08,2011

STATE BANK OF INDIA Appellant
VERSUS
DRT And Ors. Respondents

JUDGEMENT

R.K. Gupta, J. (Chairperson) - (1.) THE Counsel for the appellant are heard. This is an appeal preferred by the appellant -Bank under Section 20 of the RDDBFI Act, 1993 challenging the order dated 27th August, 2009 passed by the Debts Recovery Tribunal by which the appeal preferred by the appellant -Bank had been dismissed. The objections raised by the appellant -Bank against the auction of the property to recover the dues of the tax has been rejected by the Recovery Officer by his order dated 18th April, 2006. The relevant facts of the present case are that the appellant -Bank filed a Regular Civil Suit before the Civil Judge, Sultanpur for recovery of a sum of Rs. 41,86,673.55 together with pendente lite and future interest along with the cost against the respondent Nos. 8 and 9 before the Debts Recovery Tribunal and the respondent Nos. 8 and 9 were duly impleaded as the defendant Nos. 2 and 3 being the Managing Director and the Director respectively in the said regular suit and ultimately the said suit was transferred to the Debts Recovery Tribunal, Jabalpur and, thereafter, the same was transferred to the Debts Recovery Tribunal, Allahabad and subsequently, the same was transferred to Debts Recovery Tribunal, Lucknow for its adjudication wherein it was registered at T.A. No. 53/2002 which had been finally disposed of by order dated 5th August, 2003. The Tribunal by this order directed to issue the Recovery Certificate against the respondent Nos. 7, 8 and 9 jointly and severally for a sum of Rs. 41,89,673.35 together with pendente lite and future interest at the contractual rate together with cost. It also directed that all the properties mortgaged/hypothecated with the Bank shall remain attached under the jurisdiction of the Tribunal and the defendants were restrained from selling, transferring or alienating any of the mortgaged/hypothecated by way of sale or transfer. The said Recovery Certificate was put to execution. The property was sold by the Sale -tax Department of the State Government for the purposes of realizing Trade -tax and the same was conducted by the District Collector, Meerut and the property was purchased by the contesting respondent No. 3. He participated in the auction and his bid was found to be highest and, therefore, he was declared as successful purchaser and the sale was also confirmed by the Commissioner. The Bank did not raise any objection by lodging objection with the Commissioner. The objection was raised by the contesting respondent before the Recovery Officer of Debts Recovery Tribunal, the purchaser of the property auctioned by the Trade -tax Department at the time when the Bank proceeded with execution for realizing its dues. The Recovery Officer accepted the objection by its order dated 18th April, 2006 against which the appeal was preferred by the appellant before the Debts Recovery Tribunal by invoking Section 30 of the RDDBFI Act, 1993 has been dismissed and against the same the present appeal has been preferred. The Debts Recovery Tribunal has dismissed the appeal on the ground that the State dues will have first priority over the dues of the secured creditor and also on the ground that the appellant has not filed any objection during the execution of the Recovery Certificate by the District Collector. For the aforesaid two reasons the appeal preferred by the appellant -Bank has been dismissed.
(2.) ON the basis of the aforesaid, the question in the present case for consideration is that the contesting respondent was highest bidder whose bid has been accepted in the auction which was conducted by the District Collector for the purposes of recovery of State dues in relation to the Sale -tax therefore, whether the Bank being secured creditor would have first charge over the State dues? There is no dispute in the present case that the Recovery Certificate was issued by the Trade -tax Commissioner for the purposes of realizing the State dues in relation to the Trade -tax and for the purpose of realizing the State dues the property which was under mortgage with the appellant -Bank was sold in the open auction conducted by the appellant -Bank was sold in the open auction conducted by the District Collector, Meerut and the same was purchased by the contesting respondent and the sale was confirmed by the Commissioner. Before the Sale an advertisement was published in the newspaper then the appellant -Bank has not raised any objection against the said sale by the District Collector and no objection of any nature was lodged before the Commissioner who has confirmed the sale. Thus, not only the sale by the District Collector but also its confirmation by the Divisional Commissioner in the absence of any objection on behalf of the appellant either before the District Collector or before the Divisional Commissioner, the appellant cannot challenge the right over the property.
(3.) APART from the aforesaid, there is no dispute that the property was put to auction by the District Collector, Meerut to recover the dues in relation to the Trade -tax under Recovery Certificate issued by Trade -tax Commissioner. On these facts the judgment so passed by the Apex Court in Central Bank of India v. State of Kerala, : I (2009) BC 705 (SC) : II (2009) SLT 247 : (2009) 4 SCC 94 will apply with the full force. The Apex Court in the said case has held that the State dues will get priority over the dues of the secured creditor and there is nothing in the RDDBFI Act, 1993 or the SARFAESI Act, 2002 that the rights of the secured creditors are recognized over the dues of the State. In the absence of such incorporation in the aforesaid two Acts, the priority is to be given to the State dues over the dues of the Secured Creditors.;


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