[Cites 16, Cited by 0]
Bombay High Court
Pridhvi Asset Reconstruction And ... vs Additional Commissioner ... on 14 January, 2026
Author: R.I. Chagla
Bench: R.I. Chagla
2026:BHC-OS:1024-DB
RJ-WP 5240.2022.doc
Kavita S.J.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.5240 OF 2022
Pridhvi Asset Reconstruction & Securitisation ...Petitioner
Company Limited (PARAS)
Versus
Additional Commissioner (Recovery) Central ...Respondents
Excise Department, Mumbai-I & Anr.,
----------
Mr. Anshul Anjarlekar a/w Ms. Manshi Thakkar i/b Raval-Shah & Co.
for Petitioner.
Mr. Subir Kumar i/b Mr. Saket R. Ketkar for Respondent No.1.
----------
CORAM : R.I. CHAGLA AND
ADVAIT M. SETHNA, JJ.
RESERVED ON : 7th JANUARY, 2026.
PRONOUNCED ON : 14th JANUARY, 2026.
JUDGMENT:
(Per R.I. Chagla, J.)
1. By this Writ Petition, the Petitioner is seeking quashing
and setting aside of the impugned Letters dated 15 th February, 2010;
KAVITA
SUSHIL
JADHAV 25th April, 2012; 23rd January, 2014 and 26th August, 2015 which had
been issued by the Deputy Commissioner (Recovery) of Central
RJ-WP 5240.2022.doc
Excise Department, Mumbai - I and which are being enforced by
Respondent No.1 - Additional Commissioner (Recovery) Central
Excise Department, Mumbai-I.
2. The Petitioner is an Asset Reconstruction Company
incorporated under the Companies Act, 1956 and registered under
Section 3 of the Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 ("SARFAESI Act").
The Respondent No.1 as aforementioned is enforcing the impugned
Letters which were intimated to Respondent No.2 i.e. a Co-operative
Housing Society under the Maharashtra Co-operative Housing
Societies Act, 1960, directing the Respondent No.2 - Society not to
permit any transfer or sale of (i) residential Flat No.11-A, 11 th Floor,
admeasuring 1631 Sq. yards, in Vidya Apartments, Vidya Nivas Co-
operative Housing Society Limited, Plot No.2, Siri Road, bearing C.S.
No.392 and 1/391 of Malabar and Cumballa Hill Division and
S.No.:7298; and (ii) basement property admeasuring 6274 Sq.ft., in
Vidya Apartments, Vidya Nivas Co-operative Housing Society Limited,
Plot No.2, Siri Road, bearing C.S. No.392 and 1/391 of Malabar and
Cumballa Hill Division and S.No.:7298 (hereinafter referred to as
"the said premises").
RJ-WP 5240.2022.doc
3. The relevant facts are as under:
(i) The impugned Letters dated 15th February, 2010;
25th April, 2012; 23rd January, 2014 and 26th August,
2015 were issued by the aforementioned Central Excise
Department Authority under the Central Excise & Salt
Act, 1944 to the Respondent No.2 - Society, directing
them not to permit any transfer or sale of the said
premises;
(ii) The erstwhile Dena Bank had granted financial
facilities to M/s Vikas Exim Private Limited and Appetax
Fabrics & Garments Limited ("the said companies"), for
which guarantees were given by one Ramesh Chandra
Agarwal who is in control of the aforementioned
companies and who personally stood as Guarantor for
the said financial facilities. The HUF formed by the said
Ramesh Chandra Agarwal viz. Ramesh Chandra Agarwal,
HUF was also Guarantor of the aforementioned facilities
availed by said companies from erstwhile Dena Bank.
(iii) In view of the said companies having defaulted in
RJ-WP 5240.2022.doc
repaying their dues, their accounts were classified as
Non-performing Asset ("NPA")in accordance with the
directions / guidelines issued by the Reserve Bank of
India.
(iv) The erstwhile Dena Bank vide Deed of Assignment
Agreements dated 18th January, 2012 and 21st May, 2013,
assigned all its right, title and interest in various
documents alongwith security interest in the said
premises to the Petitioner;
(v) The Petitioner became entitled to initiate / adopt
the appropriate legal action and / or continue to pursue
any existing legal action in its own name against the said
companies and its Guarantors for recovery of the dues. It
is pertinent to note that pursuant to a Notice dated 7 th
February, 2007 issued by the erstwhile Dena Bank under
Section 13(2) of the SARFARSI Act to the borrowers as
well as the Guarantors / Mortgagors and which was
followed by Notice dated 25th April, 2007 issued under
Section 13(4) of the SARFAESI Act to the borrowers and
RJ-WP 5240.2022.doc
the Guarantors / Mortgagors, the erstwhile Dena Bank
took symbolic possession of the said premises;
(vi) The Petitioner filed an application under Section
14 of the SARFAESI Act being C.M.P. No.158/2017
before the Chief Metropolitan Magistrate Court
("CMM"), Mumbai seeking appointment of Advocate-
Commissioner to take physical possession of the said
premises;
(vii) The erstwhile Dena Bank had filed original
Application No.2/2010 before the DRT-I, Mumbai against
M/s Appletex Fabrics and Garments Limited for recovery
of an amount of Rs.420.89 Lakh and the same stood
posted to 21st January, 2022 for arguments. Similarly,
the erstwhile Dena Bank also filed an original
Application No.3/2010 before the DRT-I, Mumbai against
M/s Vikas Exim Private Limited for recovery of a sum of
Rs.1418.60 Lakh and the matter stood posted to 21 st
January, 2022 for arguments.
(viii) The Respondent No.2 had filed a Civil Suit - C.S.
RJ-WP 5240.2022.doc
No.215/2017 before this Court alleging that the
borrower had no right to mortgage the basement
property and the matter was last posted on 21 st
December, 2021;
(ix) The Chief Manager of the Petitioner visited the
office of the Respondent No.2 - Society for meeting with
the Secretary when the Petitioner was shocked to learn
that the Central Excise Department and its Officials being
Respondent No.1 and other officers holding different
posts had issued the demand notices to Respondent No.2
in respect of the excise dues;
(x) Pursuant to the said meeting, the Respondent No.2
- Society addressed a Letter dated 17th August, 2021 to
the Secretary of Respondent No.2 - Society seeking, inter
alia, certain information from Respondent No.1 and
other officials;
(xi) The Respondent No.2 - Society responded to the
Letter dated 17th August, 2021 and provided the
information relating to Recovery Certificate, Attachment
RJ-WP 5240.2022.doc
Notice, Invoice dated 4th January, 2021 and impugned
Letters;
(xii) The Petitioner had accordingly filed the present
Writ Petition impugning the Letters issued by the
Authorities of the Central Excise Department under the
Central Excise Act.
4. Mr. Anshul Anjarlekar, learned Counsel appearing for
the Petitioner has submitted that the issues regarding priority of
debts between secured creditor vis-a-vis claim of Central Excise is no
longer res integra. The claim of Central Excise has been held to be an
unsecured debt and a Crown debt which ranks below the category of
secured creditors who have registered their charge on the secured
asset with the Central Registry of Securitisation Asset Reconstruction
and Security Interest of India ("CERSAI").
5. Mr. Anjarlekar has referred to the registration of
Petitioner's charge on the said premises and which shows that the
Petitioner's charge has been registered with CERSAI on 14 th
September, 2012. He has submitted that as against the registered
charge of the Petitioner with CERSAI, the Respondent No.1 - Central
RJ-WP 5240.2022.doc
Excise Department, Mumbai - I has only issued the impugned
Demand Letters and this is not followed by any attachment order and
/ or issuance of proclamation. He has placed reliance upon decision
of this Court in Cholamandalam Investment & Finance Company
Limited Vs. State of Maharashtra & Anr .1 and The South Indian Bank
Limited Vs. Municipal Corporation for Greater Mumbai & Anr .2 which
have followed the Judgment of the Full Bench of this Court in
Jalgaon Janta Sahakari Bank Ltd. and Anr. Vs. Joint Commissioner of
Sales Tax Nodal 9, Mumbai and Anr .3. It has been held by the Full
Bench in Paragraph 150 of the said Judgment that use of the word
'priority' in Section 26E of the SARFAESI Act is that the rights
accorded to 'first charge' holders by Central as well as State
legislation would be subordinate to the dues of the Secured Creditor.
Further, it has been laid down that attachment orders issued post
24th January 2020, if not filed with the Central Registry, any
department of the Government to whom a person owes money on
account of unpaid tax has to wait till the Secured Creditor by sale of
the immovable property being the secured asset, mops up its secured
dues.
1 Writ Petition (L) No.19679 of 2024 dated 8th September, 2025
2 Writ Petition (L) No.32836 of 2024 dated 17th November, 2025
3 2022 SCC OnLine Bom 1767
RJ-WP 5240.2022.doc
6. Mr. Anjarlekar has further submitted that the Full Bench
in the aforementioned Judgment has held that attachment is required
to be followed by proclamation according to law and it is only then
that the 'priority' accorded by Section 26E of the SARFAESI Act, and
Section 31B of the Recovery of Debts and Bankruptcy Act, 1993
("RDDB Act"), would not get attracted. He has submitted that both
these requirements have not been met in the present case.
7. Mr. Anjarlekar has submitted that it has been held by the
Supreme Court in Punjab National Bank Vs. Union of India and Ors .4
that the dues of the secured creditors, will have priority over the dues
of the Central Excise Department, as even after insertion of Section
11-E of the Central Excise Act, 1944 the provisions contained in the
SARFAESI Act will have an overriding effect on the provisions of the
Central Excise Act.
8. Mr. Anjarlekar has accordingly submitted that the
impugned Letters which place a fetter on the Petitioner's right to
enforce its security measures, under the SARFAESI Act, requires to be
quashed and set aside.
4 (2022) 7 SCC 260
RJ-WP 5240.2022.doc
9. Mr. Subir Kumar, learned Counsel appearing for
Respondent No.1 has opposed the present Writ Petition. He has
relied upon Judgment of the Supreme Court in Builders Supply
Corporation Vs. Union of India & Ors .5. In the said Judgment, the
Supreme Court had referred to prior decision of this Court in Bank of
India Vs. John Bowman6, wherein this Court has observed that
priority given to the Crown is not on the basis of its debt being a
judgment-debt or a debt arising out of statute, but the principle is
that if the debts are of equal degree and the Crown and the subject
are equal, the Crown's right will prevail over that of the subject. He
has submitted that the Respondent No.1 - Central Excise Department
has issued the impugned letters in order to recover their central
excise dues and Respondent No.2 - Society has been directed to give
prior intimation in the event of any future transaction in respect of
the said premises. This is prior in point of time to the Petitioner's
charge on the said premises which they have registered with CERSAI.
10. Mr. Subir Kumar has submitted that by allowing the
Petitioner to enforce the security measures under the SARFAESI Act,
the central excise dues (dues of the Crown) stand frustrated and
5 (1965) 56 ITR 91
6 AIR 1955 Bom 305
RJ-WP 5240.2022.doc
accordingly, the impugned Letters ought not to be quashed and set
aside by this Court.
11. Having considered the submissions, I find much merit in
the submissions of the Petitioners that the issue regarding priority of
debts between secured creditor vis-a-vis claim of Central Excise is no
longer res integra. The Supreme Court in Punjab National Bank Vs.
Union of India and Ors .(Supra) has held that dues of the secured
creditors will have priority over the dues of the Central Excise
Department, as even after insertion of Section 11-E of the Central
Excise Act, 1944 the provisions contained in the SARFAESI Act will
have an overriding effect on the provisions of the Central Excise Act.
12. In the present case, the Petitioner - secured creditors has
registered its charge over the said premises with CERSAI on 14 th
September, 2012. The use of the word 'priority' in Section 26E of the
SARFAESI Act is that the rights accorded to 'first charge' holders by
Central as well as State legislation would be subordinate to the dues
of the Secured Creditor. This has been laid down by the Full Bench
in Jalgaon Janta Sahakari Bank Ltd. (Supra) and which has been
followed by this Court in Cholamandalam Investment & Finance
RJ-WP 5240.2022.doc
Company Limited (Supra) and The South Indian Bank Limited
(Supra). Further, the Full bench in the said Judgment has held that
where there are attachment orders issued post 24th January 2020, if
not filed with the Central Registry, any department of the
Government to whom a person owes money on account of unpaid tax
has to wait till the Secured Creditor by sale of the immovable
property being the secured asset mops up its secured dues.
13. It has been further held by the Full Bench in the Jalgaon
Janta Sahakari Bank Ltd. (Supra) that the attachment order is
required to be followed by a proclamation according to law and it is
only then that the 'priority' accorded by Section 26E of the SARFAESI
Act, and Section 31B of the RDDB Act, would not get attracted.
14. Considering that in the present case there is no
attachment order and / or proclamation according to law, the
Petitioner - secured creditor would have priority in respect of its dues
over and above any claim made by Respondent No.1 - Central Excise
Department.
15. The Judgment in Builders Supply Corporation Vs. Union
of India & Ors. (Supra) relied upon by the Respondent No.1 is not
RJ-WP 5240.2022.doc
applicable in the present case, given that the issue arising herein viz.
priority of debts between secured creditor vis-a-vis claim of Central
Excise is no longer res integra. The secured creditor would have
priority over the dues of the Central Excise Department in the given
facts and circumstances.
16. Accordingly, the Petition is made absolute in terms of
prayer Clause (a).
17. The impugned Letters dated 15th February, 2010; 25th
April, 2012; 23rd January, 2014 and 26th August, 2015 issued by the
Authorities of the Central Excise Department, are quashed and set
aside.
18. It is made clear that the dues of the Petitioner upon
being satisfied from the sale of the said premises / secured asset, any
surplus may be used to satisfy the dues of the Respondent No.1 -
Central Excise Department.
19. The Writ Petition is accordingly disposed of. There shall
be no orders as to costs.
[ADVAIT M. SETHNA, J.] [R.I. CHAGLA, J.]
