Case: Central Bank of India  Vs. State of Kerala and Ors.

therefore, to say that the rights of the borrower would be defeated without adjudication would be erroneous. Rule 8 of the Security Interest (Enforcement) Rules, 2002 (2002 Rules) deals with the stage anterior to the issuance of sale certificate and delivery of possession under Rule 9. Till the time of issuance of sale certificate, the authorised officer is like a Court Receiver under Order 40 Rule 1 CPC. The Court Receiver can take symbolic possession and in appropriate cases where the Court Receiver finds that a third-party interest is likely to be created overnight, he can take actual possession even prior to the decree. The authorised officer under Rule 8 has greater powers than even a Court Receiver as security interest in the property is already created in favour of the banks/FIs. That interest needs to be protected. therefore, Rule 8 provides that till issuance of the sale certificate under Rule 9, the authorised officer shall take such steps as he deems fit to preserve the secured asset. It is well settled that third-party interests are created overnight and in very many cases those third parties take up the defence of being a bona fide purchaser for value without notice. It is these types of disputes which are sought to be avoided by Rule 8 read with Rule 9 of the 2002 Rules. In the circumstances, the drawing of dichotomy between symbolic and actual possession does not find place in the scheme of the NPA Act read with the 2002 Rules. The Court then considered three provisos inserted in Section 19(1) of the DRT Act by amending Act No. 30 of 2004 and held that withdrawal of the OA pending before Tribunal under the DRT Act is not a condition precedent for taking recourse to the Securitisation Act. 46. In Union of India v. SICOM Limited and Anr. (supra), this Court was called upon to decide whether realization of the duty under the Central Excise Act will have priority over the secured debts in terms of the SFC Act. The facts of that case were that respondent No. 2 borrowed a sum of Rs. 51 lakhs from the first respondent by an indenture of mortgage executed on 22.12.1986. Respondent No. 2 also owed Rs. 19 lakhs by way of central excise duty for the period April 1983 to May 1988. By a notification issued under Section 46(1) of the SFC Act, the Government extended the provisions of Sections 27, 29, 30, 31, 32A to 32F, 41 and 41A of the SFC Act in favour of the first respondent. Since respondent No. 2 defaulted in repayment of loan given by the first respondent, the latter invoked Section 29 of the SFC Act and took physical possession of the mortgaged assets. When the department expressed its intention to attach and seize the properties of respondent No. 2, the first respondent informed that it had first charge over the mortgaged properties. In August 2000, the first respondent issued a legal notice to the appellant and then filed a writ petition under Article 226 of the Constitution of India in the Aurangabad Bench of the Bombay High Court. The High Court considered the provisions of Rule 213(2) of the Central Excise Rules read with Section 32(g) and Section 151 of the Maharashtra Land Revenue Code, 1966 and held that as security of the corporation was prior in point of time, the dues claimed by it will have priority over the dues of customs. A two-Judge Bench of this Court referred to the non obstante clause contained in Section 46B of the SFC Act and provisions of priority contained in Section 529A of the Companies Act as also the provisions of EPF Act and the Employees State Insurance Act, the judgments in Builders Supply Corporation v. Union of India (supra), Bank of Bihar v. State of Bihar AIR1971SC1210 , Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. (supra), Central Bank of India v. Siriguppa Sugars & Chemicals Ltd. AIR2007SC2804 , State Bank of Bikaner & Jaipur v. National Iron & Steel Rolling Corporation and Ors. (supra), ICICI Bank Ltd. v. SIDCO Leathers Ltd. and Ors. (supra) and approved the view taken by the High Court. 47. In none of the afore-mentioned judgments this Court held that by virtue of the provisions contained in the DRT Act or Securitization Act, first charge has been created in favour of banks, financial institutions etc. Not only this, the Court was neither called upon nor it decided competing priorities of statutory first charge created under Central legislation(s) on the one hand and State legislation(s) on the other nor it ruled that statutory first charge created under a State legislation is subservient to the dues of banks, financial institutions etc. even though statutory first charge has not been created in their favour. The ratio of the judgment in Allahabad Banks case (supra) is that jurisdiction of adjudicatory mechanism established under the DRT Act is exclusive and no other court or authority created under any other law can interfere with the proceedings initiated by banks and financial institutions for recovery of their dues. The other proposition laid down in that case which appear to have been diluted by a co-ordinate bench in ICICI Banks case is that while distributing the money recovered by a bank or a financial institution, priority given to the workers dues in terms of Section 529A must be respected. Section 11 of the Central Excise Act, which was considered by the two-Judge Bench in SICOMs case, does not contain a provision similar to those in Central legislations like Section 14A of the Workmens Compensation Act, 1923, Section 11 of the EPF Act, Section 74(1) of the Estate Duty Act, 1953, Section 25(2) of the Mines and Minerals (Development and Regulation) Act, 1957, Section 30 of the Gift Tax Act, 1958 and Section 529A of the Companies Act, 1956, under which statutory first charge has been created in respect of the dues of workmen or gift tax etc.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 0

Reasoning from the judgment:
0[ds]14. The ratio of the above noted judgments is that Article 254 gets attracted only when both Central and State legislations have been enacted on any of the matters enumerated in List III in Seventh Schedule and there is conflict between two legislations. Though in State of West Bengal v. Kesoram Industries Ltd. (supra) some observations appear to have been made suggesting that Article 254 gets attracted even though legislations may have been enacted in different entries in Lists I and II, but the same have to be read in consonance with the plain language of the said Article and other judgments including the three-Judge Bench judgment in Hoechst Pharmaceuticals Ltd. and Ors. v. State of Bihar and Ors. (supra), which has been expressly approved by the Constitution Bench.15. Undisputedly, the DRT Act and Securitisation Act have been enacted by Parliament under Entry 45 in List I in the Seventh Schedule whereas Bombay and Kerala Acts have been enacted by the concerned State legislatures under Entry 54 in List II in the Seventh Schedule. To put it differently, two sets of legislations have been enacted with reference to entries in different lists in the Seventh Schedule. therefore, Article 254 cannot be invoked per se for striking down State legislations on the ground that the same are in conflict with the Central legislations. That apart, as will be seen hereafter, there is no ostensible overlapping between two sets of legislations. therefore, even if the observations contained in Kesoram Industries case (supra) are treated as law declared under Article 141 of the Constitution, the State legislations cannot be struck down on the ground that the same are in conflict with Central legislations.22. An analysis of the above noted provisions makes it clear that the primary object of the DRT Act was to facilitate creation of special machinery for speedy recovery of the dues of banks and financial institutions. This is the reason why the DRT Act not only provides for establishment of the Tribunals and Appellate Tribunals with the jurisdiction, powers and authority to make summary adjudication of applications made by banks or financial institutions and specifies the modes of recovery of the amount determined by the Tribunal or Appellate Tribunal but also bars the jurisdiction of all courts except the Supreme Court and High Courts in relation to the matters specified in Section 17. The Tribunals and Appellate Tribunals have also been freed from the shackles of procedure contained in the Code of civil Procedure. To put it differently, the DRT Act has not only brought into existence special procedural mechanism for speedy recovery of the dues of banks and financial institutions, but also made provision for ensuring that defaulting borrowers are not able to invoke the jurisdiction of civil courts for frustrating the proceedings initiated by the banks and financial institutions.23. The enactment of the Securitisation Act can be treated as one of the most radical legislative measures taken by the Government for ensuring that dues of secured creditors including banks, financial institutions are recovered from the defaulting borrowers without any obstruction. For the first time, the secured creditors have been empowered to take measures for recovery of their dues without the intervention of the Courts or Tribunals. The Securitisation Act has also brought into existence a new dispensation for registration and regulation of securitisation companies or reconstruction companies, facilitating securitisation of financial assets of banks and financial institutions, easy transferability of financial assets by the securitisation company or reconstruction company to acquire financial assets of banks and financial institutions by issue of debentures or bonds or any other security in the nature of debenture, empowering the securitisation companies or reconstruction companies to raise funds by issue of security receipts to qualified institutional buyers, facilitating reconstruction of financial assets acquired by exercising power of enforcement of securities or change of management, declaration of any securitisation company or reconstruction company as a public financial institution for the purpose of Section 4A of the Companies Act, defining `security interest as any type of security including mortgage and charge on immovable properties given for due payment of any financial assistance given by any bank or financial institution, classification of borrowers account as non-performing asset and above all empowering banks and financial institutions to take possession of securities given for financial assistance and sale or lease the same or take over management.25. As a prelude to the consideration of question relating to conflict between Central and State legislations and priority, if any, given to the dues of banks, financial institutions and other secured creditors under the DRT Act and Securitisation Act, it will be useful to notice some rules of interpretation of statutes, one of which is the rule of contextual interpretation. This rule requires that the court should examine every word of a statute in its context. In doing so, the Court has to keep in view preamble of the statute, other provisions thereof, pari materia statutes, if any, and the mischief intended to be remedied. Context often provides the key to the meaning of the word and the sense it carries. Its setting gives colour to it and provides a cue to the intention of the legislature in using it.39. If the provisions of the DRT Act and Securitisation Act are interpreted keeping in view the background and context in which these legislations were enacted and the purpose sought to be achieved by their enactment, it becomes clear that the two legislations, are intended to create a new dispensation for expeditious recovery of dues of banks, financial institutions and secured creditors and adjudication of the grievance made by any aggrieved person qua the procedure adopted by the banks, financial institutions and other secured creditors, but the provisions contained therein cannot be read as creating first charge in favour of banks, etc. If Parliament intended to give priority to the dues of banks, financial institutions and other secured creditors over the first charge created under State legislations then provisions similar to those contained in Section 14A of the Workmens Compensation Act, 1923, Section 11(2) of the EPF Act, Section 74(1) of the Estate Duty Act, 1953, Section 25(2) of the Mines and Minerals (Development and Regulation) Act, 1957, Section 30 of the Gift- Tax Act, and Section 529A of the Companies Act, 1956 would have been incorporated in the DRT Act and Securitisation Act. Undisputedly, the two enactments do not contain provision similar to Workmens Compensation Act, etc. In the absence of any specific provision to that effect, it is not possible to read any conflict or inconsistency or overlapping between the provisions of the DRT Act and Securitisation Act on the one hand and Section 38C of the Bombay Act and Section 26B of the Kerala Act on the other and the non obstante clauses contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act cannot be invoked for declaring that the first charge created under the State legislation will not operate qua or affect the proceedings initiated by banks, financial institutions and other secured creditors for recovery of their dues or enforcement of security interest, as the case may be. The Court could have given effect to the non obstante clauses contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act vis a vis Section 38C of the Bombay Act and Section 26B of the Kerala Act and similar other State legislations only if there was a specific provision in the two enactments creating first charge in favour of the banks, financial institutions and other secured creditors but as the Parliament has not made any such provision in either of the enactments, the first charge created by the State legislations on the property of the dealer or any other person, liable to pay sales tax etc., cannot be destroyed by implication or inference, notwithstanding the fact that banks, etc. fall in the category of secured creditors.The object of the amendment was to provide an appropriate remedy to expedite proceedings in court. That object must be borne in mind by adopting a purposive construction of the amended provisions. The legislative intention being the speedy disposal of cases with a view to relieving the litigants and the courts alike of the burden of mounting arrears, the word `parties must be so construed as to yield a beneficent result, so as to eliminate the mischief the legislature had in mind.There is no reason to assume that the legislature intended to curtail the implied authority of counsel, engaged in the thick of proceedings in court, to compromise or agree on matters relating to the parties, even if such matters exceed the subject matter of the suit. The relationship of counsel and his party or the recognised agent and his principal is a matter of contract; and with the freedom of contract generally, the legislature does not interfere except when warranted by public policy, and the legislative intent is expressly made manifest. There is no such declaration of policy or indication of intent in the present case. The legislature has not evinced any intention to change the well recognised and universally acclaimed common law tradition of an ever alert, independent and active bar with freedom to maneuver with force and drive for quick action in a battle of wits typical of the adversarial system of oral hearing which is in sharp contrast to the inquisitorial traditions of the `civil law of France and other European and Latin American countries where written submissions have the pride of place and oral arguments are considered relatively insignificant. (See Rene David, English Law and French LawTagore Law Lectures, 1980). `The civil law is indeed equally efficacious and even older, but it is the product of a different tradition, culture and language; and there is no indication, whatever, that Parliament was addressing itself to the task of assimilating or incorporating the rules and practices of that system into our own system of judicial administration.`The civil law is indeed equally efficacious and even older, but it is the product of a different tradition, culture and language; and there is no indication, whatever, that Parliament was addressing itself to the task of assimilating or incorporating the rules and practices of that system into our own system of judicial administration.So long as the system of judicial administration in India continues unaltered, and so long as Parliament has not evinced an intention to change its basic character, there is no reason to assume that Parliament has, though not expressly, but impliedly reduced counsels role or capacity to represent his client as effectively as in the past. On a matter of such vital importance, it is most unlikely that Parliament would have resorted to implied legislative alteration of counsels capacity or status or effectiveness.47. In none of the afore-mentioned judgments this Court held that by virtue of the provisions contained in the DRT Act or Securitization Act, first charge has been created in favour of banks, financial institutions etc. Not only this, the Court was neither called upon nor it decided competing priorities of statutory first charge created under Central legislation(s) on the one hand and State legislation(s) on the other nor it ruled that statutory first charge created under a State legislation is subservient to the dues of banks, financial institutions etc. even though statutory first charge has not been created in their favour. The ratio of the judgment in Allahabad Banks case (supra) is that jurisdiction of adjudicatory mechanism established under the DRT Act is exclusive and no other court or authority created under any other law can interfere with the proceedings initiated by banks and financial institutions for recovery of their dues. The other proposition laid down in that case which appear to have been diluted by a co-ordinate bench in ICICI Banks case is that while distributing the money recovered by a bank or a financial institution, priority given to the workers dues in terms of Section 529A must be respected. Section 11 of the Central Excise Act, which was considered by the two-Judge Bench in SICOMs case, does not contain a provision similar to those in Central legislations like Section 14A of the Workmens Compensation Act, 1923, Section 11 of the EPF Act, Section 74(1) of the Estate Duty Act, 1953, Section 25(2) of the Mines and Minerals (Development and Regulation) Act, 1957, Section 30 of the Gift Tax Act, 1958 and Section 529A of the Companies Act, 1956, under which statutory first charge has been created in respect of the dues of workmen or gift tax etc.51. We shall first refer to the judgment in Dattatreyas case. In that case, the three-Judge Bench considered the question of priority between a charge created by a decree and a subsequent simple mortgage. The appellants in that case filed suit for recovery of Rs. 1,34,000/- with interest from respondent Nos. 1 to 7. On March 31, 1941, a compromise decree was passed under which a charge was created for the decretal amount on three pieces of property belonging to respondent Nos. 1 to 7. The decree was registered on April 7, 1941, but due to inadvertence the charge on Kakakuva Mansion at Poona was not shown in the index of registration. On June 27, 1949, respondent Nos. 1 to 7 mortgaged Kakakuva Mansion to plaintiff-respondent No. 14 for a sum of Rs. 1,00,000/-. They also created a further charge on September 13, 1949 in favour of plaintiff-respondent No. 14 for Rs. 50,000/-. On July 7, 1951, a charge was created by a decree in favour of respondent No. 15 for a sum of Rs. 59,521/11/-. In the meantime, the appellants recovered some amount by execution of the decree. They sold the property at Shukrawar Peth at Poona and the chawl at Kalyan. Thereafter, they filed a darkhast in the Court of the 3rd Joint civil Judge, Senior Division, Poona for sale of Kakakuva Mansion. Notices were issued under Order 21 Rule 66 CPC to respondent No. 14 and others. Later on, the executing court held that presence of plaintiff-respondent No. 14 was not necessary. The latter challenged that order in First Appeal No. 668 of 1957 filed before the High Court of Bombay. He also filed a civil suit in the Court of Joint civil Judge, Senior Division, Poona for recovery of Rs. 2,18,564/- allegedly due to him under the two mortgages. During the pendency of that suit, the property was put up for sale on the darkhast of the appellants, who themselves purchased the property with the leave of the Court. As a sequel to this, respondent No. 14 impleaded the appellants as parties in suit No. 57 of 1958. The appellants contested the suit on the ground that they had a prior charge and the mortgage of respondent No. 14 was subject to that charge. The trial Judge decreed the suit in favour of respondent No. 14. In appeal, the High Court modified the decree of the trial Judge holding that as the mortgage in favour of the respondent was protected under proviso to Section 100, it is free from the charge created in favour of the appellants. The High Court also gave priority to respondent No. 15 for its dues, though it had not filed any appeal. The majority judgment of the Court was delivered by Jaganmohan Reddy, J. who, after noticing various provisions of the Transfer of Property Act, observed:A charge not being a transfer or a transfer of interest in property nonetheless creates a form of security in respect of immovable property. So far as mortgage is concerned, it being a transfer of interest in property the mortgagee has always a security in the property itself. Whether the mortgage is with possession or a simple mortgage, the interest in the property enures to the mortgagee so that any subsequent mortgage or sale always preserves the rights of the mortgagee whether the subsequent dealings in the property are with or without notice. The obvious reason for this is that in a mortgage there is always an equity of redemption vested in the owner so that the subsequent mortgagees or transferees will have, if they are not careful and cautious in examining the title before entering into a transaction, only the interest which the owner has at the time of the transaction.Insofar as competing mortgagees are concerned, Section 48 of the Act gives priority to the first in point of time in whose favour transfer of an interest in respect of the same immovable property is created, if the interest which he has taken and the interest acquired subsequently by other persons cannot all exist or be exercised to their full extent together. This section speaks of a person who purports to create by transfer at different times rights in or over the same immovable property, and since charge is not a transfer of an interest in or over the immovable property he gets no security as against mortgagees of the same property unless he can show that the subsequent mortgagee or mortgagees had notice of the existence of his prior charge.52. In State Bank of Bikaner & Jaipur v. National Iron & Steel Rolling Corporation and Ors. (supra), another Bench of three Judges considered the effect of Section 11-AAAA of the Rajasthan Sales Tax Act, 1954 by which first charge was created on the property of the dealer in lieu of the amount of tax, penalty etc. on an existing mortgage on the property of the dealer. It is borne out from the judgment that the appellant-bank had given cash credit facility to respondent No. 1. For securing repayment, respondent No. 1 mortgaged the factory premises in favour of the bank. In 1986, the appellant filed suit for recovery of Rs. 3,79,672/- with interest. In that suit, Commercial Taxes Officer got himself impleaded as party by asserting that State had a prior claim for recovery of Rs. 1,19,122/- as dues of sales tax. The mortgaged property was sold by auction under the orders of the Court. The Commercial Taxes Officer pleaded that the dues of sales tax should be paid first out of the sale proceeds and the claim of the bank could be satisfied only out of the balance amount. The trial Court upheld the claim of the Commercial Taxes Officer. The revision filed by the bank was dismissed by the High Court. Before this Court it was argued that the banks claim will have precedence over the claim of the sales tax authorities because mortgage in their favour was prior in point of time. After noticing Section 11-AAAA of the Rajasthan Sales Tax Act which is pari materia to Section 38C of the Bombay Act and Section 26B of the Kerala Act as also Section 100 of the Transfer of Property Act and the judgment in Dattatreyas case , the Court observed:Section 100 of the Transfer of Property Act deals with charges on an Immovable property which can be created either by an act of parties or by operation of law. It provides that where Immovable property of one person is made security for the payment of money to another, and the transaction does not amount to a mortgage, a charge is created on the property and all the provisions in the Transfer of Property Act which apply to a simple mortgage shall, so far as may be, apply to such charge. A mortgage on the other hand, is defined under Section 58 of the Transfer of Property Act as a transfer of an interest in specific Immovable property for the purpose of securing the payment of money advanced or to be advanced as set out therein. The distinction between a mortgage and a charge was considered by this Court in the case of Dattatreya Shanker Mote v. Anand Chintaman Datar [1975]2SCR224 . The Court has observed (at pages 806-807) that a charge is a wider term as it includes also a mortgage, in that, every mortgage is a charge, but every charge is not a mortgage. The Court has then considered the application of the second part of Section 100 of the Transfer of Property Act which inter alia deals with a charge not being enforceable against a bona fide transferee of the property for value without notice of the charge. It has held that the phrase transferee of property refers to the transferee of entire interest in the property and it does not cover the transfer of only an interest in the property by way of a mortgage.The Court then considered the argument made on behalf of the bank that its dues will have priority because at the time when the statutory first charge came into existence, there was already a mortgage in respect of the same property and held:The argument though ingenious, will have to be rejected. Where a mortgage is created in respect of any property, undoubtedly, an interest in the property is carved out in favour of the mortgagee. The mortgagor is entitled to redeem his property on payment of the mortgage dues. This does not, however, mean that the property ceases to be the property of the mortgagor. The title to the property remains with the mortgagor. therefore, when a statutory first charge is created on the property of the dealer, the property subjected to the first charge is the entire property of the dealer. The interest of the mortgagee is not excluded from the first charge. The first charge, therefore, which is created under Section 11-AAAA of the Rajasthan Sales Tax Act will operate on the property as a whole and not only on the equity of redemption as urged by Mr. Tarkunde.In the present case, the section creates a first charge on the property, thus clearly giving priority to the statutory charge over all other charges on the property including a mortgage. The submission, therefore, that the statutory first charge created under Section 11-AAAA of the Rajasthan Sales Tax Act can operate only over the equity of redemption, cannot be accepted. The charge operates on the entire property of the dealer including the interest of the mortgagee therein.Looked at a little differently, the statute has created a first charge on the property of the dealer. What is meant by a first charge? Does it have precedence over earlier mortgage? Now, as set out in Dattatreya Shankar Mote case a charge is a wider term than a mortgage. It would cover within its ambit a mortgage also. therefore, when a first charge is created by operation of law over any property, that charge will have precedence over an existing mortgage.(Emphasis added)53. In R.M. Arunachalam v. Commissioner of Income Tax, Madras (supra), the Court reiterated the distinction between a charge and a mortgage in the context of the provisions contained in Sections 53(1) and 74(1) of the Estate Duty Act, 1953, referred to the judgments in Dattatreyas case , State Bank of Bikaner & Jaipur v. National Iron & Steel Rolling Corporation and Ors. (supra) and observed:A charge differs from a mortgage in the sense that in a mortgage there is transfer of interest in the property mortgaged while in a charge no interest is created in the property charged so as to reduce the full ownership to a limited ownership. The creation of a charge under Section 74(1) of the Estate Duty Act cannot, therefore, be construed as creation of an interest in property that is the subject-matter of the charge. The creation of the charge under Section 74(1) only means that in the matter of recovery of estate duty from the property which is the subject-matter of the charge the amount recoverable by way of estate duty would have priority over the liabilities of the accountable person. In that sense the claim in respect of estate duty would have precedence over the claim of the mortgagee because a mortgage is also a charge. The High Court has, therefore, rightly held that as a result of the charge created under Section 74(1) of the Estate Duty Act, it could not be said that title of the assessee to the immovable properties received by him from Smt Umayal Achi was incomplete and imperfect in any way. In the context of the facts, the High Court has found that the assessee had admittedly become the full owner of the assets even before the payment of estate duty and on payment of the same he had not acquired a new right, tangible or intangible, in the assets. It cannot, therefore, be said that the amount proportionate to estate duty paid by the assessee on the properties that were transferred should be treated as cost of acquisition of the assets under Sections 48 and 49 read with Section 55(2) of the IT Act. Since the title of the assessee to the immovable properties acquired was not incomplete and imperfect in any way, it cannot also be said that as a result of the payment of the estate duty by the assessee there was an improvement in the title of the assessee and the said payment could be regarded as cost of improvement under Section 48 read with Section 55(1)(b) of the Act.54. In our opinion, the judgments in State Bank of Bikaner & Jaipur v. National Iron & Steel Rolling Corporation and Ors. (supra) and R.M. Arunachalam v. Commissioner of Income Tax, Madras (supra) are based on a correct reading of the ratio of the Dattatreyas case and the propositions laid down therein do not call for reconsideration. At the cost of repetition, we consider it appropriate to observe that in Dattatreyas case the Court was not dealing with the statutory first charge created in favour of the State.55. The argument of learned Counsel for the appellants that the State legislations creating first charge cannot be given retrospective effect deserves to be negatived in view of the judgment in State of M.P. and Anr. v. State Bank of Indore (supra). In that case, it was held that the charge created in favour of the State under Section 33C of the Madhya Pradesh General Sales Tax Act, 1958 in respect of the sales tax dues prevail over the charge created in favour of the bank in respect of the loan taken by 2nd respondent and the amendment made in the State operates in respect of charges that are in force on the date of introduction of Section 33C.57. C.A. No. 95/2005 Central Bank of India v. State of Kerala and Ors. (2009)4SCC94The facts of the case have been set out in the earlier part of the judgment. A recapitulation thereof shows that suit filed by the appellant bank in 1996 for recovery of its dues was, later on, transferred to the Tribunal and decreed on 1.12.2000. Before that the Tehsildar, Mavelikara had attached the properties of the borrower on 2.2.2000 and again on 4.9.2000 for recovery of the arrears of sales tax. The bank challenged the notice issued by Tehsildar for recovery of the arrears of sales tax but could not persuade the learned Single Judge who held that in view of Section 26B of the Kerala Act, dues of the State will have priority. The order of the learned Single Judge was approved by the Division Bench. In our opinion, the view taken by Kerala High Court is in consonance with what we have held in the earlier part of the judgment regarding primacy of the States first charge over the dues of banks, financial institutions and secured creditors. therefore, the impugned orders do not call for any interference.The Thane Janata Sahakari Bank Ltd. v. The Commissioner of Sales Tax and Ors. 2006(6)BomCR186 - In this case the bank had taken possession of the mortgaged assets on 15.2.2005 and sold the same. On 11.7.2005, the officers of the Commercial Tax Department informed the bank about outstanding dues of sales tax amounting to Rs. 3,62,82,768/-. The Assistant Commissioner issued notice under Section 39 of the Bombay Act for recovery of Rs. 48,48,614/-. The High Court negatived the banks claim of priority and held that Section 35 of the Securitisation Act does not have overriding effect over Section 33C of the Bombay Act. The view taken by the High Court is unexceptional and calls for no interference.59. C.A. No. 3549/2006 -60. The suit for injunction filed by the bank was dismissed by Sub Judge, Ottapalam vide judgment dated 21.12.1999. The trial Court held that the plaintiff has not produced any evidence to show that it had got a mortgage from defendant No. 3 and on that premise the banks plea for injunction was negated. Appeal Suit No. 177/2000 filed by the bank was dismissed by the learned Single Judge of the High Court vide judgment dated January 19, 2005. Further appeal preferred by the bank was dismissed by the Division Bench of the High Court on 12.7.2005 by relying upon the judgment of the Full Bench of the High Court in Kesava Pillai v. State of Kerala AIR2004Ker111 by observing that the appeal is not maintainable. In our opinion, the bank cannot claim priority over the dues of sales tax because statutory first charge had been created in favour of the State by Section 26B which was inserted in the Kerala Act with effect from 1.4.1999 and the courts below did not commit any error by refusing to decree the suit for injunction filed by the bank.61. C.A. No. 3973 of 2006Writ Appeal No. 538/2006 was dismissed by the Division Bench by placing reliance upon the judgment in South Indian Bank Limited v. State of Kerala 2006(1)KLT65 in which the following view was expressed:Right of the State to have priority in the matter of recovery of sales tax from the defaulters over the equitable mortgages created by them in favour of Banks and Financial Institutions is no more res integra. Dealing with the provisions parallel to Section 26B of the Kerala General Sales Tax Act by the various Sales Tax Laws of other States, Supreme Court has already recognized the statutory first charge in respect of sales tax arrears. Reference may be made to the decisions of the Apex Court in State Bank of Bikaner & Jaipur v. National Iron & Steel Rolling Corporation and Ors. (1995) 96 STC 612 , Delhi Auto and General Finance Pvt. Ltd. v. Tax Recovery Officer and Ors. [1999]236ITR325(SC) , Dattatreya Shanker Mote v. Anand Chintaman Datar, Dena Bank v. Bhikhabhai Prabhudas Prakash Co. and various other decisions. We may refer to the latest decision of the Apex Court in State of M.P. v. State Bank of Indore, wherein the court examined the charge created under Section 33C of the M.P. General Sales Tax Act, 1958 and held that Section 33C creates a statutory first charge that prevails over any charge that may be in existence. The Court held that the charge thereby created in favour of the State in respect of the sales tax dues of the second respondent prevailed over the charge created in favour of the Bank. Judicial pronouncements settled the law once for all stating that State has got priority in the matter of recovery of debts due and the specific statutory charge created under the Sales Tax Act notwithstanding the equitable mortgages created by the defaulters in favour of the Banks prior to the liability in favour of the State. A Division Bench of this Court in Sherry Jacob v. Canara Bank, held that revenue recovery authorities shall have the liberty to proceed against the property of the company under the Revenue Recovery Act on the strength of the first charge created over the property by virtue of Section 26B of the Kerala General Sales Tax Act. The Court held that the statutory first charge would prevail over any charge or right in favour of a mortgage or secured creditors and would get precedence over an existing mortgage right.We are in this case concerned with the question as to whether Section 26B of the K.G.S.T. Act would take away the efficacy of a decree passed by the civil court prior to the introduction of said section. We are of the view till the decree is executed through executing court title of the mortgaged property remains with the mortgagor. Decree passed by the civil court is the formal expression of an adjudication which conclusively determines the rights of parties, but unless and until the decree is executed the Bank would not procure the property and the States overriding rights would have precedence over that of the Bank. When a first charge created by the operation of law over any property, that charge will have precedence over an existing mortgage and the decree obtained by the bank against the mortgagor will not affect the State since State was not a party to the suit. Decree has only conclusively determined the rights between the mortgagor and mortgagee which would not affect the statutory rights of the State. The expression rights of parties used in Section 2(2) means rights of parties to the suit. State which has got a statutory first charge under Section 26B of the K.G.S.T. Act would prevail over the rights created in favour of the Bank by an unexecuted decree. We therefore hold that the decree obtained by the Bank will not have any precedence over the first charge created in favour of the State under Section 26B of the K.G.S.T. Act.In our opinion, the High Court has rightly held that the first charge created by Section 26B of the Kerala Act will have primacy over the banks dues.In our view, the High Court did not commit any illegality by nullifying the auction conducted by the recovery officer of the Tribunal, who, as per admitted factual matrix of the case, did not give notice to the revenue officer despite the fact that the property had been attached under Section 36 of the Kerala Revenue Recovery Act and the bank had challenged the notice issued under Section 49(2) of that Act in Writ Petition No. 8845 of 2001 and succeeded in persuading the High Court to stay that notice.63. C.A. No. 4909 of 2006 - Central Bank of India v. The Deputy Tehsildar and Ors. -The petitioner-bank extended financial facilities to the private respondents, who mortgaged immovable properties for securing repayment. In 1994, the bank filed suits for recovery of its dues. On establishment of the bench of the Tribunal at Ernakulam, all the suits were transferred to the Tribunal which passed decree dated 31.3.2000 in T.A. No. 1032/1997, 25.7.2001 in T.A. No. 1009/1997 and 9.8.2001 in T.A. No. 1015/1997. The bank also issued recovery certificate dated 1.12.2003. However, before the bank could execute the decrees, Tehsildar (Revenue Recovery), Kollam, initiated proceedings under the Kerala Revenue Recovery Act for sale of the mortgaged properties which was attached for recovery of the arrears of sales tax. The petitioner challenged the sale notices issued by Tehsildar in Writ Petition No. 13425 of 2004. The learned Single Judge by relying on the judgment of this Court in Dena Bank v. Bhikabhai Prabhudas Parekh & Co. (supra) and of the Division Bench of the High Court in Sherry Jacob v. Canara Bank AIR2005Ker50 dismissed the writ petition. The Division Bench dismissed the writ appeal. In our opinion, the High Court rightly held that the Tehsildar was entitled to give effect to the primacy of statutory first charge created on the property of the dealer under Section 26B of the Kerala Act.64. C.A. No. 1288 of 2007 -Writ appeal filed by the appellant-bank against the interim order was disposed of by the Division Bench with the following observations:Since the revenue authorities have already attached the property this Court will not be justified in directing respondents 2 and 3 to hand over possession of the property to the Bank. All the same it is entirely for the State and its officers to decide whether possession should be handed over to the Bank for taking further proceedings under the Securitisation Act. We leave it to the State to take a decision in this matter in accordance with law. Needless to say, since State has got prior charge it is open to the State to proceed in accordance with law. Let a decision be taken by the district Collector within one month from the date of receipt of a copy of this judgment. The appeal and the writ petition are disposed of as above. I.A. No. 14420 of 2005 would stand dismissed.Since we have already expressed the view that in terms of Section 26B of the Kerala Act, the State has got prior charge over the property of the dealer and the facts of the case show that the revenue authorities had already attached the property, there is no valid ground to interfere with the order passed by the Division Bench.65. C.A. No. 1318 of 2009 [arising out of S.L.P. (C) No. 24767 of 2005]Writ appeal filed by the bank was dismissed by the Division Bench making observations which have been extracted hereinabove.66. We are in complete agreement with the Division Bench that statutory first charge created in favour of the State under Section 26B of the Kerala Act has primacy over the right of the bank to recover its dues.