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

3. For the sake of convenience, we have taken notice of the facts of civil Appeal Nos. 95/2005 and 2811/2006 and the reasons contained in the orders passed by Kerala and Bombay High Courts, which are under challenge in these appeals.4. C.A. No. 95/2005 - Central Bank of India v. State of Kerala and Ors. (2009)4SCC94 - Central Bank of India, which is a nationalized bank, gave cash/ credit facility to the tune of Rs. 12 lakhs to Kerala Refineries (P) Ltd. The borrower executed mortgage of movable and immovable properties for securing repayment. As the borrower failed to repay the dues, the bank filed civil suit bearing O.S. No. 234/1996 in the Court of Sub-Judge at Mavelikara. Later on the suit was transferred to Ernakulam Bench of the Debts Recovery Tribunal (hereinafter referred to as the Tribunal). By an order dated 1.12.2000, the Tribunal decreed the suit for an amount of Rs. 55 lakhs with future interest. As a sequel to this, Recovery Certificate dated 1.11.2001 was issued in favour of the bank and the Recovery Officer issued notice for sale of the movable and immovable properties of the borrower. At that stage, Tehsildar, Mavelikara issued notice dated 26.11.2001 to the borrower for recovery of Rs. 40,38,481/- as arrears of sales tax stating therein that its moveable and immovable properties had been attached on 2.2.2000 and 4.9.2000 and that steps are being taken to sell the attached property by public auction. The Tehsildar claimed that by virtue of Section 26B of the Kerala Act, as amended by Act No. 23/1999, the State Government has got first charge over the attached properties. The bank challenged the notice of the Tehsildar by filing a petition under Article 226 of the Constitution of India, which was registered as O.P. No. 7835/2002(G). The bank relied on the decisions of this Court in A.P. State Financial Corporation v. Official Liquidator AIR2000SC2642 and Allahabad Bank v. Canara Bank and Anr. [2000]2SCR1102 , and pleaded that being a Central legislation, the DRT Act would prevail over the Kerala Act by which first charge was created in favour of the State. The learned Single Judge of the Kerala High Court negatived the banks challenge by observing that proceedings under the Kerala Act had been initiated before the issue of certificate by the Tribunal and that even if the Tribunal has got exclusive jurisdiction to recover the amount due to the bank, the Tehsildar was not obliged to approach it for recovery of the State dues. The learned Single Judge referred to Section 46 of the Kerala Revenue Recovery Act, 1968, which provides that within 14 days from the date of attachment of any immovable property any person other than the defaulter can lodge objection to the attachment of the whole or any portion of such property on the ground that such property was not liable for the arrears of public revenue, and held that as the bank had claimed first charge or prior charge over the attached property, it can file appropriate objections under Section 46 of the Kerala Revenue Recovery Act, 1968 and make a prayer that public revenue can be recovered after paying its dues. The learned Single Judge further observed that in terms of Section 47 of the Kerala Revenue Recovery Act, 1968 the petitioner can obtain release of the attached property by paying arrears of the public revenue. The appeal preferred against the order of the learned Single Judge was dismissed by the Division Bench which held that the bank can avail remedy by filing objections under Sections 46 to 48 of the Kerala Revenue Recovery Act, 1968.5. C.A. No. 2811/2006 - The Thane Janata Sahakari Bank Ltd. v. The Commissioner of Sales Tax and Ors. 2006(6)BomCR186 - Appellant - Thane Janata Sahakari Bank Ltd., which is a scheduled cooperative society incorporated under the Maharashtra Cooperative Society Act, 1960 granted credit facilities to M/s. Charisma Cosmetics Pvt. Ltd. Co. (for short `the Company). As on 30.6.2004, the company had availed credit facility to the tune of Rs. 2,32,00,000/- by creating equitable mortgage of its factory, land and building in favour of the bank. Due to the companys failure to repay the amount, its account was classified as non-performing asset and the bank initiated proceedings under the Securitisation Act by issuing notice under Section 13(2). The possession of movable and immovable properties of the company is said to have been taken by the bank on 15.2.2005 and the same were sold for a sum of Rs. 66,31,001/-. On 11.7.2005, Assistant Commissioner of Sales Tax informed the bank that sales tax dues amounting to Rs. 3,62,82,768/- constitute first charge against the company and, therefore, it could not have taken possession of the mortgaged assets and sold the same. After some correspondence, the Assistant Commissioner issued notice dated 16.8.2005 to the bank to show cause as to why action may not be taken against it under Section 39 of the Bombay Sales Tax Act, 1959 (for short the Bombay Act) for recovery of Rs. 49,68,614/- in addition to the auction proceeds. The bank unsuccessfully contested the notice and then filed writ petition for quashing the same. It was urged on behalf of the bank that in view of the conflict between Section 38C of the Bombay Act and Section 35 of the Securitisation Act, the latter being a Central legislation, the first charge created by the State Act cannot have priority over debts of the bank because while enacting the Securitisation Act the Parliament will be deemed to be aware of the provisions of the State legislation. It was also contended that under Section 169 of Maharashtra Land Revenue Code, 1966, the State Government can claim priority over unsecured dues, but being secured creditor, the bank has first and exclusive charge over the properties of the company and has priority over the sales tax dues of the State. The Division Bench of the High Court analysed the provisions of the Securitisation Act, the State Act and observed:...if any Central Act provides for first charge, the charge created under Section 38C of Bombay Sales Tax Act is overridden. Conversely, if the Central Act does not provide for first charge in respect of the liability under the said Act, the first charge created under Section 38C of Bombay Sales Tax Act shall hold the field.The Division Bench then noted that Section 13 of the Securitisation Act does not create first charge in favour of the banks; that it merely provides the machinery for realization by a secured creditor of the security interest without intervention of the Court or Tribunal; that it overrides the provisions contained in Sections 69 or 69A of the Transfer of Property Act which empower the mortgagee to sell or concur in selling the mortgaged property or any part thereof in default of payment of the mortgage money without intervention of the Court in the circumstances referred to in Section 69 and for payment of Court Receiver as provided in Section 69A and held:The Bombay Sales Tax Act and the Securitisation Act have been enacted by the competent legislatures for different purposes and operate in different fields. The Bombay Sales Tax Act is enacted by the State Legislature under Entry 54 of List II in the Seventh Schedule for levy of tax on the sale or purchase of certain goods in the State of Bombay (now State of Maharashtra). On the other hand, the Securitisation Act has been enacted by the Parliament under Entry 54 of List I for regulating the Securitisation and reconstruction of financial assets and for enforcement of security interest. There is neither any conflict in these two Acts nor Section 38C of the Bombay Sales Tax Act can be said to be inconsistent with Section 35 of the Securitisation Act. The area of operation is entirely different and there is no overlapping anywhere.Section 35 of the Securitisation Act may have had some bearing, if there was some provision in the Securitisation Act for first charge in favour of the banks and financial institutions. But neither Section 13 nor any other provision under the Securitisation Act makes a provision for first charge.There being no provision in the Securitisation Act providing for first charge in favour of the banks Section 35 of the Securitisation Act cannot be held to override Section 38C of the Bombay Sales Tax Act, 1959 that specifically provides that the liability under the said Act shall be the first charge. The overriding provision contained in Section 38C is only subject to the provision of the first charge in the Central Act holding the field. The case of the Bank is not covered by the expression, subject to any provision regarding first charge in any Central Act for the time being in force and that being the position, Section 38C is not overridden by Section 35 of the Securitisation Act.Indian Overseas Bank v. Kerala State and Ors. - Respondent No. 3 in this appeal, namely, Cheruvathur Brothers, Chalissery, Palakkad District availed various credit facilities from the appellant-bank and created mortgage in latters favour for securing repayment. On 11.2.1994, Deputy Tehsildar (RR), Ottapalam (Kerala) requested the bank to furnish details of the properties mortgaged by respondent No. 3 by stating that action was to be initiated under the Kerala General Sales Tax Act and the Kerala Revenue Recovery Act for recovery of the arrears of sales tax. The bank claimed that it was a secured creditor and had a prior charge over the mortgaged properties. Thereafter, recovery proceedings were initiated by Deputy Tehsildar. The bank filed suit for injunction bearing OS No. 133/1994 with the prayer that State of Kerala and Deputy Tehsildar (RR), Ottapalam be restrained from attaching and selling the mortgaged property as described in the schedule attached with the plaint. The bank filed another suit against respondent No. 3 and 4 for recovery of its dues. On the establishment of Chennai Bench of Tribunal, the second suit was transferred and numbered as T.A. No. 1284/1997. By an order dated 31.12.1998, the Tribunal allowed the application of the bank and issued recovery certificate for a sum of Rs. 23,80,430.95. Thereafter, Recovery Officer, DRT, Chennai issued notice dated 6.10.1999 to respondent Nos. 3 to 5 to pay the dues of bank in terms of the decree passed by the Tribunal.Bank of Baroda v. State of Kerala and Ors. -The appellant-bank extended the loan facilities to respondent No. 2 - M/s. Eastern Cashew Company. Respondent No. 3, Mrs. Meena Vasanth gave guarantee and mortgaged immovable property to secure the dues of the bank. On account of the borrowers failure to repay the loan amount, the bank filed O.S. No. 133/86 in the Court of Sub Judge, Kollam. The same was decreed on 23.3.1993. The judgment of the trial Court was challenged by the borrower in A.S. No. 229/1994. Notwithstanding this, the bank filed Execution Petition No. 159/1994 for execution of the decree. During the execution proceedings, Tehsildar, Kollam issued notice to respondent No. 3 under Section 49(2) of the Kerala Revenue Recovery Act for payment of arrears of sales tax amounting to Rs. 1,19,86,461/-. He also indicated that 41.80 acres of land in revenue survey No. 680/2 will be sold for realization of sales tax dues. The borrowers challenged the notice by filing writ petitions in the High Court, which were dismissed on 13.10.2005 and it was held that the State authorities were free to take action under the Kerala Act. Thereafter, the bank filed Writ Petition No. 7464/2006, questioning the notice issued by the Tehsildar under Kerala Revenue Recovery Act.-Ahmad Koya, Kollam v. The District Collector, Kolam and Ors. - In 1974, respondent No. 7, Thomas Stephen and Company, Kollam took loan from Canara Bank. The company mortgaged two of its properties by deposit of title deeds as a continuing collateral security. On 24.8.1992, the bank filed suit for recovery of its dues. On creation of bench of the Tribunal at Cochin, the suit was transferred to the Tribunal, which passed decree dated 17.2.2000 for a sum of Rs. 41,25,451.64 with interest at the rate of 15% per annum from 24.8.1992. On 24.8.2000, the bank obtained recovery certificate against the company. In the meanwhile, Tehsildar (Revenue Recovery) issued notice dated 18.7.2000 under Section 46 of the Kerala Revenue Recovery Act and attached the property of the company in lieu of the dues of sales tax. He then issued notice dated 13.2.2001 under Section 49 of the Kerala Revenue Recovery Act for sale of the property. The bank filed Writ Petition (OP No. 8845 of 2001) for quashing the sale notice. By an interim order, the High Court stayed all proceedings pursuant to the sale notice issued by the Tehsildar. Thereafter, the bank initiated proceedings for execution of decree dated 17.2.2000. As a sequel to this, the mortgaged properties were put to sale. In the auction held on 31.1.2003, the petitioner gave bid of Rs. 60,60,010/- for the first property admeasuring 40 cents with building thereon. The second property was not put to auction apparently because the bid given by the appellant satisfied the banks claim. On 14.2.2003, the petitioner deposited the bid amount. He was in possession of the auctioned property excluding the area of 8.50 cents which was in the possession of the 8th respondent, Sherry Jacob as licensee. At that stage, the State Government filed Writ Petition No. 26523 of 2003 for quashing the sale proceedings and also for issue of a direction to the auction purchaser to hand over the possession of the property to the revenue officer for conducting fresh auction for realization of the arrears of sales tax. The appellant also filed Writ Petition No. 27302 of 2003 for restraining the revenue officer from taking action against the auctioned property. During the pendency of the writ petition, the company was wound up. By an order dated 10.11.2004, the Division Bench of the High Court disposed of Writ Petition Nos. 26523 of 2003 and 27302 of 2003 along with Writ Appeal Nos. 1165 of 2003 and 1230 of 2003 filed by the company and licensee against dismissal of the writ petitions filed by them challenging the sale conducted by the recovery officer of the Tribunal. The Division Bench referred to Section 26B of the Kerala Act, judgments of this Court in State Bank of Bikaner and Jaipur v. National Iron and Steel Rolling Corporation and Ors. (supra) and State of M.P. v. State Bank of Indore (supra) and held that the sale conducted by the recovery officer of the Tribunal is illegal because no notice was given to the revenue officers despite the fact that the property which was subjected to auction had already been attached. The Division Bench further held that the State was entitled to enforce the first charge on the property of the company by conducting fresh auction. The Review Petition filed by the appellant was dismissed by another Division Bench by recording the following observations:We have already found that the various provisions of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 would not affect the statutory charge of the State Government. therefore the contention raised on the basis of the Second Schedule to the Income Tax Act, 1961 need not be examined. Since we have already found that State Government stands outside the purview of the DRT Act and that the State need not stand in the queue for claiming priority, the contention of the counsel for the review Petitioners that the sale effected by State is vitiated cannot be sustained.We therefore find no reason to accept the contention raised by senior counsel. We also find no substance in the arguments raised by the counsel for the Canara Bank. Contentions raised by the counsel are only to disturb the substantial right of the State which has already been recognized by the Division Bench holding that they have got first charge and the State can adopt its own procedure for enforcing the statutory charge. Procedural provision pointed out by the counsel have no relevance while the State is enforcing the statutory charge. Regarding the contention raised by senior counsel Sri N.N. Sugunapalan we are of the view, if any amount is due towards employees provident fund those matters could be taken up before the State Government. The power under Section 11(2) would not annul the statutory charge of the State. Under such circumstance review petitions would stand dismissed.64. C.A. No. 1288 of 2007 - UCO Bank v. State of Kerala and Ors. - Respondent No. 4, M/s. International Trade Links took loan from the appellant-bank but failed to repay the same. The appellant issued notice under Section 13(2) of the Securitisation Act and approached Tehsildar (Revenue Recovery) Kanayannur for rendering assistance to take possession of the mortgaged property. The latter declined the appellants request on the ground that action has already been initiated under the Kerala Revenue Recovery Act for recovery of sales tax under the Kerala Act. Thereupon, the appellant filed Writ Petition No. 4198 of 2005 for issue of a direction to the District Collector, Ernakulam and Tehsildar, Kanayannur to take vacant possession of the mortgaged property. It also prayed that Section 26A and 26B of the Kerala Act be declared unconstitutional and void being inconsistent with the provisions of the Securitisation Act. By an order dated 7.2.2005, the learned Single Judge directed the Tehsildar to sell mortgaged property and to permit the bank to coordinate in the sale. That order was modified on 22.9.2005 and the bank was allowed to sell the property subject to certain conditions. The bank applied for modification of order dated 22.9.2005 and prayed that it may be permitted to retain the money realized from sale of the mortgaged property. The learned Single Judge did not entertain the appellants prayer but directed that if the sale price is lower than the one mentioned by the government pleader then the sale shall be confirmed only after getting further order from the court. Liberty was also given to the borrower/guarantor to pay the arrears.65. C.A. No. 1318 of 2009 [arising out of S.L.P. (C) No. 24767 of 2005] - The South Indian Bank Ltd., Trichur -1 v. State of Kerala and Ors. - In the year 1984, the appellant-bank granted loan to respondent Nos. 3 to 5, who mortgaged their immovable properties as security for repayment. After 8 years, the bank filed O.S. No. 720 of 1992 for recovery of amount of loan with interest. The suit was decreed on 30.1.1995 for a sum of Rs. 3,51,36,973/-. After lapse of three years, the bank filed O.A. No. 1081 of 1998 for recovery of the amount in terms of decree dated 30.1.1995. On 26.7.2000, the Tribunal issued recovery certificate in favour of bank. In the meanwhile, Tehsildar, Ottapalam issued notice under Section 49(2) of the Kerala Revenue Recovery Act on 2.6.1999 for sale of the mortgaged properties for recovery of sales tax dues amounting to Rs. 85,45,276/-. The appellant challenged the proposed sale in Writ Petition (O.P. No. 17701 of 1999) and prayed that the State and its functionaries may be restrained from selling the property. The learned Single Judge, after noticing the judgment of this Court in State of M.P. v. State Bank of Indore (2002)10SCC441 held that even if there is first charge in favour of the bank, the same will not adversely affect the statutory first charge of the State. Accordingly, he refused to interfere with the proposed sale of the mortgaged properties but gave liberty to the bank to proceed to execute the decree passed in its favour in accordance with law.63. C.A. No. 4909 of 2006 - Central Bank of India v. The Deputy Tehsildar and Ors. -64. C.A. No. 1288 of 2007 - UCO Bank v. State of Kerala and Ors. --Ahmad Koya, Kollam v. The District Collector, Kolam and Ors.61. C.A. No. 3973 of 2006Bank of Baroda v. State of Kerala and Ors. -59. C.A. No. 3549/2006 -Indian Overseas Bank v. Kerala State and Ors.58. C.A. No. 2811/2006-57. C.A. No. 95/2005 Central Bank of India v. State of Kerala and Ors. (2009)4SCC94

Reasoning: 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.