Revenue's customs lien does not have priority over secured creditor's claim in SARFAESI proceedings.

(Order of the Court was made by Dr.G.Jayachandran J.)

The Punjab National Bank is the writ petitioner seeking a writ of certiorari to quash the impugned letter of the Joint Director General of Foreign Trade issued on 22.04.2019, which was addressed to the Chief Manager, Asset Recovery Management Branch of Punjab National Bank informing that the custom duty is payable by M/s.V.R.Textiles Pvt.Ltd., Erode against the EPCG authorisation issued in its favour. It was further stated that, due to non- fulfilment of the export obligation, the Department has a lien over the land and, therefore, requested the Punjab National Bank to remit the amount recovered from the auction sale of the land owned by M/s. M/s.V.R.Textiles Pvt.Ltd., Erode.

2. The learned Counsel appearing for the writ petitioner submitted that the 2^nd respondent company went into liquidation, and, for the loan amount due and payable, the properties were brought for sale as per the provisions of the SARFAESI Act, and the same were sold in an auction sale in favour of M/s.Mahil Enterprises. The sale covers both land as well as the machinery of the company in liquidation.

3. Per contra, the learned Counsel for the 1^st respondent submitted that the machinery imported is subject to the lien created in favour of the Department and, therefore, the right of the 1^st respondent co-exists with the right of the bank and is not subservient to the right of the bank.

4. In view of Section 142 A of the Customs Act as well as the Judgment rendered by the Hon’ble Supreme Court in Industrial Development Bank of India Vs. Superintendent of Central excise and Customs and Others reported in (2023) INSC 746 and Punjab National Bank vs. Union of India & Ors., reported in (2022) SCC Online SC 227, the 1^st respondent cannot have any priority over the loan or claim over the sale proceeds unless the debt payable to the writ petitioner bank is fully discharged. On perusal of the above two judgments, it is clear that the revenue cannot have any priority over the debt in SARFAESI proceedings.

5. We find merit in the submissions made by the learned Counsel for the writ petitioner. Accordingly, the impugned letter dated 22.04.2019, issued by the 1^st respondent is quashed and the Writ petition stands allowed. No costs.