- (1.) The short issue raised in the present petition is whether the State shall have preferential right to recover its due over the rights of secured creditors like the petitioner in the present case . Brief facts of the case are that respondent nos. 4 and 5 are partnership firm and have taken loan from the petitioner Bank. The property styled as 40A, Ranjit Avenue, Amritsar had been equitably mortgaged with the respondent bank on 2.7.2004 as collateral security. A notice dated 4.1.2008 under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for brevity 'the SARFASI Act') was issued which was challenged in SA No. 113 of 2009 on 12.1.2008 by respondent no. 4. Respondent no. 4 in his application acknowledged the loan advanced to them and also the default committed in the repayment (United Automobiles). The Debt Recovery Tribunal vide order dated 19.11.2010 disposed of the application holding that the proceedings taken by the petitioner bank under the SARFASI Act were lawful (P. 1). The aforesaid order attained finality as no appeal was filed by respondent no. 4 or 5. On 18.12.2010 the mortgaged property situated at Ranjit Avenue, Amritsar was put up for auction by publication dated 18.12.2010 inviting tenders from the public and the last date of submission of the tender and opening thereof was 16.2.2011 (P.2). However, the auction was not proceeded with in compliance of orders dated 16.2.2011 passed in CWP No. 2876 of 2011. In the meanwhile, there was a claim of income tax liability made by the Tax Recovery Officer II, Amritsar against respondent nos. 4 and 5 and the Tax Recovery Officer has informed the petitioner bank that income tax dues were outstanding against respondent nos. 4 and 5 and the property situated at Ranjit Avenue was under their attachment vide order dated 26.9.2009 (P.4). They claimed that before taking any action regarding sale of the property situated at Ranjit Avenue, the total outstanding amount due including interest are required to be paid to the department. Feeling aggrieved, the petitioner bank has approached this Court with a prayer that it has a preferential right over the dues of Tax Recovery Officer being a secured creditor.
(2.) In response to notice of motion, reply has been filed. However, the question posed in the opening para of this judgment is no longer res-integra and has been answered in favour of the secured creditor and against the State. In that regard reliance may be placed on a judgment of Hon'ble the Supreme Court in the case of Dena Bank v. Bhikhabhai Prabhudas Parekh, 2000 5 SCC 694 and Division Bench judgements of this Court rendered in the cases of Punjab State Industrial Development Corporation v. Union of India (CWP No. 3875 of 2005 decided on 30.1.2007); Axis Bank Ltd v. The Commissioner of Income Tax, Ludhiana and another (CWP No. 2431 of 2009 decided on 2.12.2011) and Punjab National Bank v. Union of India and others (CWP No. 21826 of 2010 decided on 31.1.2012). It has been categorically held that secured creditors would have preferential right and the principle of equity and good conscience do not accord the State a preferential right of recovery of its debt over the right of the secured creditors. In view of the aforesaid settled principle the action of respondent no. 3 cannot be sustained and it must give way to the right of the petitioner to effect recovery of its dues being secured creditors. Therefore, the attachment order dated 10.2.2011 (P.3) is hereby quashed. The dues of respondent no. 3 may be effected after satisfying the dues of the petitioner. The writ petition is allowed in the above terms.;