M.M. Kumar, J. - (1.) The short issue raised in this petition filed under Article 226 of the Constitution is whether a secured creditor like the petitioner would have preferential right on account of registered charge created on the property of the company for recovery of its dues over the dues of the Central Excise being the crown debts. Brief facts of the case may first be noticed. The petitioner is a Government Corporation imparting financial assistance for setting up industry in the State of Punjab (PSIDC). On 6.1.1992, M/s Jay Enn Castings (respondent No. 4) secured a loan of Rs. Criminal Writ Petition No. 3875 of 2005 98,00,000/- from the PSIDC for setting up an industrial unit at Lalru (District Patiala). However, it availed a sum of Rs. 80,00,000/-. In order to secure repayment of loan, M/s Jay Enn Castings mortgaged its movable and immovable properties by executing hypothecation deed and equitable mortgage deed with the PSIDC on 23.1.1992 and 24.1.1992. The aforementioned course was adopted in pursuance to Article 4 of the Loan Agreement, which reads as under:- "Security for the loan: a) The loan together with interest, commitment charge, premium on pre-payment, costs, charges, expenses and other monies due and payable under this agreement shall be secured by:- i) a first mortgage over the borrowers' immoveable and moveable properties including its moveable machinery, spares tools and accessories, present and future; and ii) a first mortgage on all the remaining assests of the borrower, present and future (save and except book debts in case of hypothecation), subject to prior charges created and/or to be created in favour of the borrowers' bankers on the borrowers' stocks of raw materials, semi finished and finished goods, consumable stocks and book debts and such other moveables as may be agreed to by the lenders for securing borrowings for working capital requirements in the ordinary course of business. The mortgage and charge shall be in such form and manner as may be prescribed by the lenders. The mortgage and charge shall rank pari passu with the mortgage and charges created and/or to be created in favour of PFC for their respective financial in terms of approved financial plan as given in Schedule II hereto."
(2.) A memorandum of entry showing the deposit of title deed and creating equitable mortgage on the properties of M/s Jay Enn Castings was made between the parties on 24.1.1992 (P-1). On account of irregularities in repayment of loan, the PSIDC invoked Section 29 of the State Financial Corporations Act, 1951 (SFC Act) and ordered taking over the assets of M/s Jay Enn Castings on 10.8.1999 (P-2). Accordingly, the PSIDC came in possession of the moveable and immoveable properties of M/s Jay Enn Castings.
(3.) The Superintendent, Central Excise, Derabassi, addressed a letter to the PSIDC on 7.9.1999 (P-3) requesting that while taking action for the recovery of its dues by the PSIDC, the outstanding dues of Central Excise against M/s Jay Enn Castings may also be taken into account. The correspondence between the PSIDC and the Superintendent, Central Excise (respondent No. 3) shows that both were claiming preference for recovery of their respective dues over the properties of M/s Jay Enn Castings. The stand of the PSIDC in its letter dated 2.8.2004 (P-5) has been that it being secured creditor, was entitled to settle its account from the proceeds of the mortgaged property of M/s Jay Enn Castings and the question of adjusting the dues of Central Excise Department would arise only thereafter. On 14.10.2004, the Superintendent, Central Excise, intimated the PSIDC that the property belonging to M/s Jay Enn Castings was being attached under Section 142 of the Customs Act, 1962 and that the PSIDC was to refrain from disposing of the said property. In response thereto the PSIDC sent a detailed reply on 17.11.2004 (P-7), inter alia, stating that the property belonging to M/s Jay Enn Castings was mortgaged with the PSIDC as a security for recovery of loan which had already been taken over under Section 29 of the SFC Act. It was suggested that the Central Excise could not proceed with attachment of property under Section 142 of the Customs Act as the PSIDC had the preferential right for the sale of mortgaged assets including the property in question. Thereafter, the Central Excise Department proceeded to issue advertisement for disposing of the property on 25.1.2005. The open auction was fixed for 22.2.2005, which could not materialise. Another advertisement again was issued on 3.3.2005 and the date of auction was fixed for 15.3.2005 (P-8). Feeling aggrieved, the PSIDC has approached this Court asserting that it has preferential right being mortgagee, for quashing the order of attachment, dated 14.10.2004, issued under Section 142 of the Customs Act and has also prayed for issuance of direction restraining the Department of Central Excise (respondent Nos. 1, 2 and 3) from proceeding further for auction or in any manner dealing with the property in question.;