There is no specific provision either in Central Excise Act or Customs Act, claiming "first charge".

P. SATHASIVAM, J. :- The following question is referred to Full Bench for decision :-

'Whether the Crown's debts, for which there is no priority or charge is created under the statute, should have precedence over the secured creditors?'

2. Brief facts :

The petitioner, UTI Bank Ltd., has approached this Court to issue a writ of Mandamus forbearing the first respondent-Deputy Commissioner of Central Excise, Chennai II Division and the second respondent - Secretary, Ministry of Finance, Government of India from bringing the property situated at Plot No. 55, Ambattur Industrial Estate, Ambattur, Chennai 600 058 into auction for any alleged dues payable by the debtor company, namely M/s. Sumeet Research and Holdings Private Limited, since the said property has already been taken possession by the petitioner in pursuance to its statutory rights under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act 54 of 2002) (in short 'SARFAESI Act').

3. M/s. Sumeet Research and Holdings private limited, (hereinafter called 'the borrower company') sought financial assistance from the writ petitioner/UTI Bank, of a sum of Rs. 635 lakhs towards working capital besides term loan of Rs. 150 lakhs, which was sanctioned by the Bank, as per Sanction Letter No. Adv./1650/2002-03 dated 28-9-2002. For the total working capital provided and enjoyed by the borrower, the borrower company had created a mortgage by deposit of title deeds, in respect of various properties, including the factory land and building situate at Plot Nos. 54 and 55, Ambattur Industrial Estate, Ambattur, Chennai-58 (hereinafter referred to as Plot No. 54 and Plot No. 55 respectively).

4. The borrower company, despite requests and reminders, failed to repay the amount, which compelled the writ petitioner to take proceedings under the SARFAESI Act, and a notice issued under Section 13(2) of the SARFAESI Act on 17-4-2004. As there was no response from the borrower, after the lapse of time as provided under the statute, the petitioner Bank took constructive possession of the secured assets on 8-2-2005 as contemplated under the SARFAESI Act, and also took physical possession of the same on 29-3-2005.

5. In the meanwhile, the first respondent addressed a letter dated 28-3-2005 to the petitioner Bank informing that a sum of Rs. 41,17,246/- was due and payable by the borrower company to the Department of Central Excise, and requested the writ petitioner to hold the money or property with it, as dues to the Department. The borrower company sold Plot No. 54, and repaid a part of the amount due to the petitioner Bank and the property now available as secured asset, is the Unit at Plot No. 55.

6. Under the provisions of the Central Excise Act, 1944, the first respondent did not have any statutory first charge over the property secured by the petitioner Bank. Ignoring the said settled position, the first respondent is taking action to sell the property, which is in possession of the writ petitioner, as if the first respondent is having first charge over the property, for the dues payable by the borrower, which is legally incorrect. Under these circumstances, the petitioner is constrained to file the writ petition, seeking the relief referred to above.

7. In the counter-affidavit filed by the first respondent, it is alleged that the Central Excise Department can claim priority over the secured creditor/the petitioner Bank herein, who has exercised its powers under the provisions of the SARFAESI Act and this issue has already been settled by this Court and therefore, the writ petition is not maintainable and liable to be dismissed.

8. When the writ petition came up before M. Thanikachalam, J. the learned Judge, after hearing the arguments of both parties at length, and after noticing that two Division Bench decisions of this Court in ICICI Bank Ltd. v. The Official Liquidator (2005 (1) CTC 758) and Commissioner of Central Excise, Pondicherr