UNION OF INDIA Vs. CHL LIMITED AND ORS.

JUDGEMENT

(1.) The present petition preferred by the Union of India (UOI) through the Customs Department seeks to question an order of the Debts Recovery Appellate Tribunal (DRAT) dated 01.04.2014 in Appeal No.403/2010. It was urged that the decision of the DRAT, leaving it to the concerned adjudicating authority to decide whether or not the third respondent (hereafter referred to as "the auction purchaser") is under a contractual duty or liability to pay the customs dues, is erroneous.

(2.) The brief facts are that the second respondent M/s. Paam Pharmaceuticals (Delhi) Ltd. was granted letter of approval for manufacturing and export of pharmaceutical products. The Customs Department alleged evasion of Customs Duty and initiated proceedings which crystallized in an adjudication order dated 06.09.2002. The dues were to the tune of Rs. 1,77,91,061/-. Apparently, the said second respondent also defaulted upon its contractual liabilities with banks which led to recovery proceedings before the DRT. These resulted in a decree against said borrower/second respondent. The sale of the second respondent's assets was ordered by the Recovery Officer (RO) under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 on 14.02.2008. In the course of the proceedings, the third respondent was successful as bidder and declared as auction purchaser. At that stage, the Customs Department had apparently issued an attachment notice. It sought to dispute the entitlement of the secured creditor bank, contending that it had an overriding claim over the property as well as the proceeds of the sale. The order dated 21.09.2010, ruled inter alia that the Customs Department could not be considered a secured creditor so far as the claim of primacy over and above the rights of the decree holders is concerned.

(3.) The Customs Department was not aggrieved by this order. The auction purchaser, however, impugned a portion of the said order, particularly the direction in para 42(iv), granting liberty to Customs Department to recover its amount in accordance with law under the Customs Act. The auction purchaser also challenged the order of the DRT which upset the finding of the RO that the auction purchaser was not under contractual obligation to pay customs duty, and granted consequential liberty to the former to pay the dues in accordance with the Customs Act. By the impugned order, the DRAT, after considering the submissions of the parties, substantively upheld the findings of the DRT vis-a-vis the lack of primacy of the Customs Department's claims. The DRAT allowed the auction purchaser's appeal, taking note of the prior attachment made by the Customs authorities and also recording the finding that such attachment notice was never served in the first instance either on the auction purchaser or borrower, in the following terms: