IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH 1. CIVIL WRIT PETITION NO.3413 OF 2005 DATE OF DECISION: DECEMBER ,2006 Union of India. .....Petitioner VERSUS Punjab Financial Corporation, Chandigarh and another ....Respondents 2. CIVIL WRIT PETITION NO.6788 OF 2005 Union of India. .....Petitioner VERSUS Punjab State Industrial Development Corporation Ltd., Chandigarh and another. ....Respondents 3. CIVIL WRIT PETITION NO.7260 OF 2005 Union of India. .....Petitioner VERSUS Punjab Financial Corporation, Chandigarh and others ....Respondents 4. CIVIL WRIT PETITION NO.3773 OF 2004 Union of India. .....Petitioner VERSUS Punjab Financial Corporation, Chandigarh and another ....Respondents C.W.P. No.3413 OF 2005 :{ 2 }: 5. CIVIL WRIT PETITION NO.2428 OF 2006 Union of India. .....Petitioner VERSUS Punjab National Bank, Ludhiana and others ....Respondents 6. CIVIL WRIT PETITION NO.10879 OF 2005 Union of India. .....Petitioner VERSUS Punjab State Financial Corporation, Chandigarh and others. ....Respondents 7. CIVIL WRIT PETITION NO.741 OF 2006 Union of India. .....Petitioner VERSUS Punjab State Financial Corporation, Chandigarh and another. ....Respondents 8. CIVIL WRIT PETITION NO.6752 OF 2005 Union of India. .....Petitioner VERSUS Punjab Financial Corporation, Chandigarh and another ....Respondents C.W.P. No.3413 OF 2005 :{ 3 }: 9. CIVIL WRIT PETITION NO.5685 OF 2005 Union of India. .....Petitioner VERSUS Punjab and Sind Bank, Ludhiana and others ....Respondents 10. CIVIL WRIT PETITION NO.3385 OF 2005 Union of India. .....Petitioner VERSUS Punjab Financial Corporation, Chandigarh and others ....Respondents 11. CIVIL WRIT PETITION NO.13618 OF 2005 Union of India. .....Petitioner VERSUS Union Bank of India and others ....Respondents 12. CIVIL WRIT PETITION NO.14310 OF 2004 Union of India. .....Petitioner VERSUS Punjab Financial Corporation, Chandigarh and others ....Respondents C.W.P. No.3413 OF 2005 :{ 4 }: 13 CIVIL WRIT PETITION NO.3140 OF 2005 Union of India. .....Petitioner VERSUS The Chief Manager, Oriental Bank of Commerce, Ludhiana and another ....Respondents 14 CIVIL WRIT PETITION NO.8502 OF 2005 Union of India. .....Petitioner VERSUS The State Bank of Bikaner and Jaipur and others ....Respondents 15 CIVIL WRIT PETITION NO.9587 OF 2005 Union of India. .....Petitioner VERSUS Oriental Bank of Commerce and others ....Respondents 16 CIVIL WRIT PETITION NO.2347 OF 2005 Union of India. .....Petitioner VERSUS Punjab Financial Corporation, Chandigarh and others ....Respondents C.W.P. No.3413 OF 2005 :{ 5 }: 17 CIVIL WRIT PETITION NO.7897 OF 2005 Union of India. .....Petitioner VERSUS Punjab Financial Corporation, Chandigarh and another ....Respondents 18 CIVIL WRIT PETITION NO.9189 OF 2005 Union of India. .....Petitioner VERSUS Punjab and Sind Bank and others ....Respondents 19 CIVIL WRIT PETITION NO.8503 OF 2005 Union of India. .....Petitioner VERSUS Punjab National Bank and another ....Respondents 20 CIVIL WRIT PETITION NO.6783 OF 2005 Union of India. .....Petitioner VERSUS State Bank of Patiala and others ....Respondents 21 CIVIL WRIT PETITION NO.3408 OF 2005 Union of India. .....Petitioner C.W.P. No.3413 OF 2005 :{ 6 }: VERSUS The General Manager, Distt.Industries Centre and others ....Respondents 22 CIVIL WRIT PETITION NO.7268 OF 2005 Union of India. .....Petitioner VERSUS Punjab National Bank, New Delhi and another ....Respondents 23 CIVIL WRIT PETITION NO.8141 OF 2004 Union of India. .....Petitioner VERSUS The Andhra Bank, Ludhiana and another ....Respondents 24 CIVIL WRIT PETITION NO.3317 OF 2005 Union of India. .....Petitioner VERSUS Punjab State Industrial Development Corporation, Chandigarh and others ....Respondents 25 CIVIL WRIT PETITION NO.11540 OF 2005 Punjab Financial Corporation, Chandigarh .....Petitioner VERSUS State of Punjab and others C.W.P. No.3413 OF 2005 :{ 7 }: ....Respondents 26 CIVIL WRIT PETITION NO.12351 OF 2004 Punjab Financial Corporation, Chandigarh .....Petitioner VERSUS State of Punjab and others ....Respondents 27 CIVIL WRIT PETITION NO.4124 Of 2005 Punjab Financial Corporation, Chandigarh .....Petitioner VERSUS Union of India and others ....Respondents 28 CIVIL WRIT PETITION NO.12362 OF 2004 Punjab Financial Corporation, Chandigarh .....Petitioner VERSUS Union of India and others ....Respondents 29 CIVIL WRIT PETITION NO.14572 OF 2004 Punjab Financial Corporation, Chandigarh .....Petitioner VERSUS Union of India and others ....Respondents C.W.P. No.3413 OF 2005 :{ 8 }: 30 CIVIL WRIT PETITION NO.4123 OF 2005 Punjab Financial Corporation, Chandigarh .....Petitioner VERSUS Union of India and others ....Respondents 31 CIVIL WRIT PETITION NO.6873 OF 2005 Haryana Financial Corporation, Chandigarh .....Petitioner VERSUS State of Haryana and others ....Respondents 32 CIVIL WRIT PETITION NO.11211 OF 2003 Haryana Financial Corporation, Chandigarh .....Petitioner VERSUS Union of India and others ....Respondents 33 CIVIL WRIT PETITION NO.8373 OF 2004 Haryana Financial Corporation, Chandigarh .....Petitioner VERSUS Union of India and others ....Respondents 34 CIVIL WRIT PETITION NO.14417 OF 2004 Punjab State Industrial Corporation Ltd., Chandigarh .....Petitioner C.W.P. No.3413 OF 2005 :{ 9 }: VERSUS Union of India and others ....Respondents 35 CIVIL WRIT PETITION NO.11507 OF 2005 Harbans Lal Mehta .....Petitioner VERSUS Union of India and others ....Respondents 36 CIVIL WRIT PETITION NO.844 OF 2005 Income-tax Officer, Mandi Gobindgarh .....Petitioner VERSUS The Debt Recovery Tribunal and another ....Respondents 37 CIVIL WRIT PETITION NO.11831 OF 2006 Centurian Bank of Punjab Ltd., Goa .....Petitioner VERSUS State of Haryana and others ....Respondents CORAM:- HON'BLE MR.JUSTICE RANJIT SINGH PRESENT: Ms. Ranjana Sahai, Advocate. Mr.G.S.Anand, Advocate, for Punjab Financial Corporation. C.W.P. No.3413 OF 2005 :{ 10 }: Mr.Yogesh Putney, Advocate. Mr.B.S.Bhatia, Advocate, for Mr.R.S.Bhatia, Advocate. Mr.Rakesh Nagpal, Advocate. Mr.Puneet Gupta, Advocate. Mr.P.D.Mehta, Advocate. Mr.M.S.Guglani, Advocate, Central Government Counsel. Mr.Susheel Gautam, Advocate, for Mr.Gurpreet Singh, Central Government Counsel. Mr.Deepak Jindal, AAG, Haryana. Mr.J.S.Chandail, AAG, Punjab. Mr.Mukand Gupta, Advocate. Mr.G.S.Sandhawalia, Advocate. Mr.Kulwinder Singh, Advocate, for Mr.B.R.Bansal, Advocate. Mr.Vikas Mohan Gupta, Advocate. Mr.Salil Sagar, Advocate. ***** RANJIT SINGH, J. A short, but interesting question of law, arises in the bunch of these writ petitions. The issue raised in these petitions relates to the doctrine of priority of crown debt due on account of arrears of tax/excise duty in favour of State over the secured or other creditors. In other words, Union of India has filed these petitions involving the doctrine of priority of crown debt while seeking priority of recovery of its taxes in the form of excise C.W.P. No.3413 OF 2005 :{ 11 }: duty/other taxes, over the rights of creditors like Financial Corporations. In all there are 37 writ petitions listed, out of which 25 petitions have been filed by Union of India against the Financial Corporations, seeking a writ of mandamus to the effect that the tax/excise duty payable to the Union of India would have a priority over the debts payable to the Financial Corporation.6 writ petitions have been filed by the Punjab Financial Corporation, 3 by the Haryana Financial Corporation, challenging the order passed against them in this regard whereas 3 writ petitions have been filed by the private individuals, challenging the auction proceedings. All the 37 writ petitions are being disposed of by this common judgement. Main submissions in this case made on behalf of Union of India were from Civil Writ Petition No.3413 of 2005 (Union of India, Ropar Vs. Punjab Financial Corporation, Chandigarh and another). Accordingly, the facts necessary to determine the legal issue raised have been taken from the said writ petition. It may require a mention at the outset that pleadings in this writ petition are lacking in detail, may be because of the fact that Union of India-petitioner was mainly concerned with the legal issue raised relating to crown debt priority only. The brief facts, as mentioned in this writ petition, are accordingly being taken note of. This writ petition has been filed on behalf of Central Excise Department. M/s Kishan Organics Private Limited, Chanalon, (hereinafter called “the Company”) is stated to be registered with the Central Excise Department for manufacture of excisable goods. This C.W.P. No.3413 OF 2005 :{ 12 }: concern was debtor of Punjab Financial Corporation Limited, Chandigarh (hereinafter called, “PFC”). The Company closed down its operation and now the whereabouts of its owners are also not known. Since the Company owed debt to PFC, the Unit was taken over in exercise of the powers given to Financial Corporation under the Punjab Financial Corporation Act. The Company was accordingly put to auction and was disposed of for Rs.15 lacs. Even after adjusting the sale proceeds so realised, a sum of Rs.34.41 lacs to PFC is still stated to be outstanding towards the Company. The Central Excise Department took up the matter with PFC vide their communication dated 26.10.2004 and 17.11.2004 and in response thereto, the intimation about the sale and sale proceeds, as afore- mentioned, were brought to the notice of the Central Excise Department by the PFC. PFC had further informed the Central Excise Department that they did not have any surplus deposit, which could be paid to satisfy the Central Excise dues towards the Company. Claiming that the Central Excise Department had been continuously asking for recovery of its due from PFC as it had taken over and sold the Unit, which faced a categorical refusal, the department was left with no option but to make the present approach by filing writ petitions for realisation of its dues from the PFC. In support of the stand in the writ petitions, reliance has been placed on number of judgements to say that the amount due to the department as taxes would have a priority over the claim of the Financial Corporation and hence, the Financial Corporation was not justified in law in declining to pay central excise dues before adjusting its debts. Notice of motion was issued and reply has been filed by C.W.P. No.3413 OF 2005 :{ 13 }: PFC. Preliminary objection has been raised about the maintainability of the writ petition on the ground that there is no cause for the Union of India to file this writ petition. It is stated that a writ can be maintained only if there is any violation of some legal or fundamental rights or violation of any provision of law. In this case, it was only a case of recovery of excise duty, which cannot be done by filing a writ petition, specially so when there is no averment of violation of any legal or fundamental rights. The objection in regard to delay has also been raised, claiming that the liability to pay excise duty by the Company relating to period which is 10 years back from the date of filing of the writ petition and hence the writ petitions suffered from delay and laches. The objection in regard to locus of the petitioner- Union of India on the ground that the answering respondent-PFC was a secured creditor has also been raised. In this regard, support has been sought from certain judgements of the Hon'ble Supreme Court. It has further been pleaded that the rule of priority in favour of crown as pleaded by the petitioner-Union of India cannot be enforced against the secured creditors like PFC. Otherwise, there is not much dispute between the parties so far as the facts pleaded in the case are concerned. PFC, in reply, has disclosed that even after selling the Unit, it has still to recover a sum of Rs.41,07,268/- from respondent No.2. It is, thus, submitted that the writ petition deserves to be dismissed. As already noticed, almost identical claim has been made by Union of India in 25 writ petitions filed on behalf of Central Excise Department. On the other hand Financial Corporations have filed the writ petitions impugning the notices or attachment orders issued by the C.W.P. No.3413 OF 2005 :{ 14 }: Collector-cum-Deputy Excise and Taxation Commissioner etc. for sale of immovable property to recover the arrears of tax etc. Since the property sought to be sold by way of auction had been mortgaged with the Corporation like PFC/HFC, they felt aggrieved against such notices/attachment orders and hence filed writ petitions. Since the issue involved in these writ petitions also related to the aspect of priority of recovery of the debt or taxes between the competing claims of Government and Corporation, these were ordered to be heard alongwith the writ petitions filed by Union of India. In some of the writ petitions filed by Haryana Financial Corporation, the order attaching the property mortgaged with the Corporation has been made the subject matter of challenge. Besides seeking quashing of the said order passed by Commissioner of Central Excise, directions for restraining Union of India from auctioning the said property have also been sought. It is urged that the Financial Corporation would have prior right to realise its debts than the tax dues to the respondent-Excise Department since the property stood mortgaged with the Corporation. Centurian Bank is also a writ petitioner in Civil Writ Petition No.11831 of 2006, seeking direction for quashing of the order of attachment in respect of M/s Sachdeva and sons Rice Mills Limited, on the ground that said concern was sold by the bank in a proper and legal manner and the sale proceed had been deposited with the petitioner-Bank. The Sub Registrar, however, refused to register the sale certificate. The Bank later learnt that this property has been illegally got attached. Since the purchaser was insisting upon registration of the sale certificate, the petitioner Bank deposited C.W.P. No.3413 OF 2005 :{ 15 }: a sum of Rs.42,69,887/- under protest on 30.3.2006. In the writ petition, order of attachment is impugned and refund of the abovesaid amount so deposited has been sought on the ground that the charge of the bank by way of mortgage would have priority over the recovery of sales tax. In Civil Writ Petition No.11507 of 2005, petitioner Harbans Lal, is aggrieved against the order of attachment of his property where he had constructed a residential house on the ground that this property had already been mortgaged with the Corporation and the said Corporation would have a preferential right over the said property than respondent No.2-Collector-cum-Deputy Excise and Taxation Commissioner, Ludhiana Range, Ludhiana. I have heard all the counsel appearing for respective parties in these writ petitions. As can be seen, the basic issue in these cases relate to the priority claimed by Union of India in recovering its dues like taxes or excise duty by invoking the doctrine of `crown priority debt'. This has been resisted by the PFC and other respondents like banks etc. on the ground that such priority would not be available against those who are secured creditors. Further submissions have also been made to the effect that this doctrine may not be available for its applicability in the present cases, not being a law of the land and in this regard certain judgements have also been referred to and relied upon. Both the parties have placed very strong reliance in the case of Dena Bank Vs. Bhikhabhai Prabhudas Parekh and Co. and others, AIR 2000 Supreme Court 3654 in support of their respective submissions. Accordingly, this case would require detailed analysis C.W.P. No.3413 OF 2005 :{ 16 }: to see if it can be said to be applicable to the facts and law involved in the present writ petitions. Since the issue relating to the crown debt priority has been addressed in detail, it may require some consideration to see the background and applicability of this doctrine to the cases in hand. Ms.Ranjna Shahi, appearing on behalf of Union of India in majority of the writ petitions, after referring to the provisions of Section 29 of the Financial Corporation Act, has submitted that on taking over of a sick unit, mortgaged with the Financial Corporation, it would become owner of the said concern by operation of law and as such, would be liable for all the dues that the concern taken over may owe to Government by way of taxes or excise duty etc. Referring to the doctrine of crown priority debt, counsel would contend that the excise duty due towards the Company taken over by Financial Corporation, would have a priority over any debt that may be due to the Financial Corporation. On the other hand, counsel appearing for the respondents, would controvert the submission of the counsel for Union of India and would submit that the doctrine of crown debt priority may not have any strict applicability in the present day and specially in the present cases and even if it was to apply or was applicable, it would not effect the right of Financial Corporations, who are the secured creditors. Judgements cited may now need a notice. Issue regarding the applicability of certain English common law rules or doctrine for their applicability to India after the advent of the Constitution of India arose before. Hon'ble Supreme Court in Director of Rationing and Distribution Versus C.W.P. No.3413 OF 2005 :{ 17 }: The Corporation of Calcutta, AIR 1960 Supreme Court 1355. In this case, English common law rules that Crown is not bound by any statute for its applicability in India was in issue before the Hon'ble Supreme Court. Government of West Bengal, through one of its officers, was ordered to be prosecuted for using certain premises for storing rice without licence. The Hon'ble Supreme Court, by majority, held that the rule of interpretation of statutes that the State is not bound by a statute, unless it is so provided in express terms or by necessary implication is still a good law. It was also held that the common law of England is that the King's prerogative is illustrated by the rule that the sovereign is not necessarily bound by a statutory law, which binds the subject. It was viewed that King is not bound by a statute unless he is expressly named or unless he is bound by necessary implication or unless the statute being for the public good, it would be absurd to exclude the King from it. Noticing this to be a law applicable to India, until the advent of the Constitution, the Hon'ble Supreme Court observed that the Constitution has also not made any change in that position. It was noticed that “there are no words in the Constitution, which can be cited in support of the proposition that the position has changed after the republican form of Government has been adumbrated by our Constitution. The immunity of Government from the operation of certain statutes, and particularly statutes creating offences, is based upon the fundamental concept that the Government or its officers cannot be a party to committing a crime-analogous to the `prerogative of perfection' that the King can do no wrong. Whatever may have been the historical reason of the rule, it has been adopted in our country C.W.P. No.3413 OF 2005 :{ 18 }: on grounds of public policy as a rule of interpretation of statutes”. In short, it was held that the State is not bound by a statute unless it is so provided in express terms or by necessary implication, which was stated to be a good law till then. In this case, Justice K.N.Wanchoo expressed a contrary view and did not subscribe to the view expressed by majority. Hon'ble Justice Wanchoo, while giving reasons in support of his differing opinion, came to conclude that there is neither justification nor necessity for continuing the rule of construction based on the royal prerogative. The learned Judge went on to say that “in our country it would be impossible now to point to one person or institution and to say that he or it is the sovereign under the Constitution. A further question may arise, if one is in search of a sovereign now, whether the State Government with which one is concerned here is sovereign in the same sense as the English King (though it may have plenary powers under the limits set under our Constitution). This to my mind is another reason why there being no King or sovereign as such now in our country, the rule of construction based on the royal prerogative can no longer be invoked.” This judgement came to be considered by a Constitution Bench of 9 Judges in the case of Superintendent and Remembrance of Legal Affairs, West Bengal Vs. Corporation of Calcutta, AIR 1967 Supreme Court 997. The Hon'ble Bench held that where the particular branch of Common Law became part of law of India or in any part thereof would be a question of fact. It was also held that common law doctrine that the crown is not bound by statute save by express provision or necessary implication was not the law of land. C.W.P. No.3413 OF 2005 :{ 19 }: This doctrine was held to be a rule of construction and not `law'. This was also found inconsistent with principle of equality enshrined in Constitution and was also stated to be incongruous in present setup. Accordingly, the Bench held that this should not be applied for construing statutes in India. It would be of benefit to note the observations of the Hon'ble Court in this case, which are as under:- “Some of the doctrines of common law of England were administered as the law in the Presidency Towns of Calcutta, Bombay and Madras. The Common Law of England was not adopted in the rest of India. Doubtless some of its principles were embodied in the statute law of our country. That apart, in the Muffasil, some principles of Common law were invoked by courts on the ground of justice, equity and good conscience it is, therefore, a question of fact in each case whether any particular branch of the Common Law became a part of the law of India or in any particular part thereof. The rule of construction that the, Crown is not bound by a statute save by express provision or necessary implication was not accepted as a rule of construction through out India and even in the Presidency towns it was not regarded as inflexible rule of construction. In short it had not become a law of the land. Even assuming that the rule had been accepted as a rule of construction, throughout India, the rule cannot be called the law of the land C.W.P. No.3413 OF 2005 :{ 20 }: after the Constitution came into force. It is true that the expression `law in force' in Art.372 of the Constitution includes not only enactments of the Indian Legislature but also the common law of the land which was being administered by the Courts in India. But it is not possible to hold that a mere rule of construction adopted by English Courts and also by some of the Indian Courts to ascertain the intention of the Legislature was a law in force within the meaning of this term. There is an essential distinction between a law and a canon of construction. A rule of construction is not a `law in force' within the meaning of Art.372 of the Constitution. The rule of construction that the king is not bound by a statute unless he is expressly named or brought in by necessary implication, which was accepted by the Privy Council in interpreting statutes vis-a-vis the Crown is inconsistent with and incongruous in the present set up. We have no Crown; the archaic rule based on the prerogative and perfection of the Crown has no relevance to a democratic republic; it is inconsistent with the rule of law based on the doctrine of equality. It introduces conflicts and discrimination. There is, no justification to accept the English canon of construction, for it brings about diverse results and C.W.P. No.3413 OF 2005 :{ 21 }: conflicting decisions. On the other hand, the normal construction namely, that the general Act applies to citizens as well as to State unless it expressly or by necessary implication excepts the State from its operation, steers clear of all the anomalies. It prima-facie applies to all States and subjects alike, a construction consistent with the philosophy of equality enshrined in our Constitution. The natural approach avoids the archaic rule and moves with the modern trends. This will not cause any hardship to the State. The State can make an Act, if it chooses, providing for its exemption from its operation. Though the State is not expressly exempted from the operation of an Act, under certain circumstances such an exemption may necessarily be implied. Such an Act, provided it does not infringe fundamental rights, will give the necessary relief to the State. The said canon of construction was not `the law in