Tax assessed under Sales Tax Act will have priority over all other debts including prior mortgage.

P. Murugesen, J.

The unsuccessful appellant is the petitioner in W.P. No.4893 of 2004. The said writ peti­tion was filed by the appellant herein for the issuance of a writ of certiorarified mandamus to call for the entire records relating to the impugned notices dated 26.11.2004 and quash the same and forbear the first respondent or his men from claiming the properties under mort­gage with the appellant Bank.

2. The second respondent was sanctioned the cash credit facility to a sum of Rs.100 lakhs on 9.9.1997 by the Nedungadi Bank. The sec­ond respondent, represented by its directors, had executed a promissory note for Rs.1, 00,00, 000/- on 25.9.1997, promising to re­ pay the loan amount together with interest at the rate of 10.75% over the Bank rate with quarterly interest. The second respondent deposited the title deeds with the Bank on 29.9.1997 in respect of the properties comprised in R.S.Nos.271/2, 271/2B & C, 272, 273/9, 274/1, 274/2, 275/2, 266/2B, 267, 270/2, 265/5 & 270/1, Andipatti Taluk, Shanmugasundaram Village consisting of land and building thereon totally measuring 16.09 acres and created equitable mortgage for repayment of the loan.

3. The Nedungadi Bank was amalgamated with Punjab National Bank as per the Nedungadi Bank Limited (Amalgamation with Punjab National Bank) Scheme, 2002. The said scheme of Amalgamation has been confirmed as per the notification by the Ministry of Finance & Company Affairs, Department of Economic Affairs (Banking Division), Government of India as on 1.2.2003. All the assets and liabilities were taken over by the Punjab National Bank and they have stepped into the shoes of all rights to recover the amount from the debtors of Nedungadi Bank Limited.

4. As stated earlier, Shree Gayathri Cotton Mills (P) Ltd., (formerly Theni Periandavar Textile Mills (P) Ltd.,)/second respondent availed cash credit facilities for a sum of Rs.100 lakhs from Nedungadi Bank, Madurai and executed a cash credit agreement, evidencing the loan transaction. Since the second respondent defaulted in repayment of the loan, the Nedungadi Bank filed an original application before the - Debt Recovery Tribunal, Chennai in O.A.No.75 of 2000 for recovery of a sum of Rs.1,75,30,743.25 and which is still pending.

5. The second respondent has not paid the sales tax from the year 1991 to 2001, which is as follow:

The second respondent has not paid the above said arrears and for the tax due, a sale notice was issued on 26.11.2004 by the first respondent in Na.Ka.2460 of 2000. A3 for recovery of arrears of Rs.1,08,39,558/-.

6. Challenging the issuance of sale notice by the first respondent, the appellant Bank filed W.P.No. 4893 of 2004 for the issuance of a writ of certiorarified mandamus to call for the entire records of the first respondent in Na.Ka.2460 of 2003.A3, quash the notice dated 26.11.2004 made therein and direct the first respondent or his servants or his subordinates or anybody claiming through the first respondent to forbear from selling the properties under equitable mortgage with the appellant Bank.

7. The learned single Judge, on considering the rival submissions, dismissed the petition by his order dated 3.1.2005 filed by the appellant. Aggrieved over the order of the learned single Judge, the present appeal has been preferred by the appellant Bank.

8. Learned counsel for the appellant submitted that the appellant is the secured creditor and the charge under Section 24(2) of the TNGST Act is not the first charge. Hence, the appellant is having priority over the crown debts. To substantiate his claim, learned counsel for the appellant relied on the decision in ICIC1 Bank Ltd v. Official Liquidator, High Court, Madras (2005 (1) CTC 758). In the above said decision, this Court held that the claim of secured creditor will prevail over crown debts and the Income Tax Department cannot claim priority over the debts due to the second creditor.

9. The claim of the appellant was resisted by the learned Special G