QAZI FAEZ ISA, J. This petition assails the judgment dated 23rd January, 2014 passed by a Division Bench of the High Court of Sindh, whereby the claim of the Collector of Customs seeking payment of government dues, determined vide Order-in-Original No, 25 of 2000 dated 15th February, 2000 passed under the Customs Act, 1969, was not given precedence over the claims of the National Development Finance Corporation (respondent No,3) and the National Bank of Pakistan (respondent No,4) that had been decreed on 16th August 2001 in Suit No,482 of 1998 and on 3rd May, 2000 in Suit No, 951 of 1997 respectively. The impugned judgment was passed in High Court Appeal No, 127 of 2009 wherein the order dated 27th January, 2009 passed by a learned Single Judge of the High Court in Execution Application No,232 of 2000 had been assailed, which had not given preference to the claim of the department.
2. It is the case of the petitioner that Naya Daur Motors (Pvt.) Ltd. (respondent No,1) was provided the facility of a private bonded warehouse wherein consignments of imported goods were kept and such goods could be removed therefrom as per applicable procedure and only after payment of requisite duties and taxes, however, a large number of consignments were taken away without filing of ex-bond Bills of Entry and payment of duties and taxes. Consequently, vide Order-in- Original dated 15th February, 2000 the respondent No,1 was directed to pay Rs,94,481,540 (ninety- four million, four hundred eighty one thousand, five hundred and forty rupees only) being the amount of the applicable duties and taxes. Penal surcharge in terms of section 98 of the Customs Act, 1969 and additional taxes in terms of section 86 of the Income Tax Ordinance 1979, were also imposed. The said Order-in-Original was passed on the basis of a Contravention Report dated 19th August 1992 which was transmitted to the Collector of Customs (Appraisement) by the Director General, Inspection and Training, and had called upon the Collector to take "timely action"; however, the petitioner took almost eight years in passing the said Order-in-Original and another five years in submitting the application under section 73 read with section 151 of the Code of Civil Procedure ("C.P.C.") being C.M.A. No, 922 of 2005 wherein the following amounts were claimed: RUPEES Adjudicated amount: 9,44,81,540 Penalty in terms of section 83-A of the Customs Act 19698,92,85,055 Total sum of rupees 18,37,66,595
3. Raja Muhammad Iqbal, the learned counsel for the petitioner, stated that the claim of the petitioner was required to be satisfied before the claims of respondents Nos. 3 and 4 and in this regard relied upon subsection (3) of section 73 of the C.P.C. And sections 201 and 202 of the Customs Act, 1969.
4. Mr. Qadir Bux Umrani, official assignee/official liquidator (respondent No,2) has submitted his reply wherein it is stated that the respondent No, 1 's plot No, F-8 and plot No, F-9/A, situated in the Sindh Industrial and Trading Estate, Karachi with plant, machinery and construction thereon was, put up for auction in respect whereof the highest offer received was Rs, 360,000,000 (three hundred and sixty million rupees only) which amount has been distributed amongst respondents Nos. 3 and 4 in partial settlement of their claims, and that no amount is left with him.
5. Mr. Abu Bakar Ismail Chundrigar, the learned counsel for respondents Nos. 3 and 4, supported the impugned order of the learned Single Judge and the impugned judgment of the Division Bench of the High Court. He contended that the properties of the respondent No,1 were mortgaged to respondents Nos. 3 and 4 in the year 1987 through registered mortgage deeds, therefore, the said respondents were secured creditors and the petitioner cannot have precedence to claim the sale proceeds of the mortgaged properties, which were sold to satisfy the decrees in favour of respondents Nos. 3 and 4. The learned counsel further stated that the nature of the claim of the petitioner did not encumber the said immoveable properties pursuant to any law, such as property tax leviable on immovable properties. He next contended that section 73 of the C.P.C. Sets out the manner in which the proceeds of sale are to be distributed amongst different decree holders, however, since the petitioner was not a decree holder section 73 is not attracted, whereas mortgages of immoveable properties are specially attended to by Order XXXIV, C.P.C., rule 13 whereof stipulates the manner in which sale proceeds are to be applied. The learned counsel maintained that sections 201 and 202 of the Customs Act have no relevance to the present controversy; reliance was placed upon the cases of Industrial Development Bank of Pakistan v.
Maida Ltd. (1994 SCM R 2248). And P.I.C.I.C. Ltd. v. Government of Pakistan (2002 SCM R 496).
6. We have heard the learned counsel for the parties and have gone through the contents of the petition. Section 201 of the Customs Act pertains to the sale of goods pursuant to the Customs Act, however, this case does not pertain to such a sale and therefore section 201 is not relevant for our purposes. Raja Muhammad Iqbal then referred to the proviso inserted after clause (b) of subsection (1) of section 202 of the Customs Act to contend that as it was a non obstante clause it would prevail and the Government dues would have precedence over the claims of respondents Nos. 3 and 4. To appreciate the contention it would be appropriate to reproduce section 202(1) and the said proviso: "202, Recovery of Government dues.---(1) When, under this Act or under any other law for the time being in force, which provides for any tax, duty or other levy being collected in the same manner as customs-duties are collected, a penalty is adjudged against, or notice or demand is served upon, any person calling for the payment of any amount unpaid which may be payable by way of penalty or by way of duty, tax or other levy or under any bond guarantee or other instrument executed under this Act or such other, law or the rules made thereunder, the appropriate officer-
(a) may deduct or require any other officer of Customs, Central Excise and Sales Tax to deduct such amount from any money owing to such person which may be under the control of the Customs, Central Excise or Sales Tax authorities; or
(b) if it cannot be so recovered, may recover, or may require any other officer of Customs, Central Excise or Sales Tax to recover, such amount by detaining and selling any goods belonging to such person which are under the control of the Customs, Central Excise or Sales Tax authorities: Provided that notwithstanding anything contained in any other law for the time being in force, if a defaulter sells or transfers ownership of his assets, the defaulted amount of duty and taxes shall be the first charge on the business so transferred."
The aforesaid proviso was inserted vide Finance Act, 2007, published in the Gazette of Pakistan, Extraordinary on 2nd July, 2007. ' 6.Respondent No,1 mortgaged the said properties with respondents Nos. 3 and 4 considerably before any action was initiated by the petitioner against respondent No,1; the mortgages were created in the year 1987 whereas show cause notice was issued to respondent No,1 on 14th September, 1992 which resulted in the Order-in-Original dated 15th February, 2000. Since the mortgagor did not repay the debt it owed to the respondents Nos. 3 and 4, they filed suits for recovery and sought the sale of the mortgaged properties and their suits 'were respectively decreed on 16th August, 2001 and 3rd May, 2000. The ambit of the proviso need not be considered for the determination of this case as it came into effect on 2nd July, 2007, and it does not apply retrospectively.
7. That section 73(3), C.P.C. Also does not assist the case of the Government since it does not create any priority in the Federal Government against the rights of respondents Nos. 3 and 4. Section 73 sets out the manner in which proceeds of sales in execution proceeding are to be distributed amongst decree-holders, and subsection (3) thereof stipulates that, "Nothing in this section affects any right of Government." The provision in itself does, not give preferential right to the Government.
It merely states that if the Government already has "any [preferential or prior] right" section 73 will not affect the same. In the absence of a specific law that may have given preference to the claims of the Government at the relevant time, priority will depend on which encumbrance is earlier in time. However, where the claim of the Government is contemporaneous with any other claimant, the claim of the Government will prevail; in this regard reference may be made to the case of Vassanbai Topandas v. Radhabai Tirath Das (AIR 1933 Sindh 368) and the following extract (at page 369) from the judgment delivered therein: "Now it is well settled that where the right of the Crown and that of the subject meet at one and the same time that of the Crown is in general preferred, the rule being detur digniori: Halsbury's Laws of England, Edn, 2, Vol. 6, para.
749. This preferential right of the Crown has been given effect to by the British Indian Courts from the earliest times: see Secretary of State v. Bombay Landing and Shipping Co. (1868, 5 BH COC 23).
It has also been recognized by the Indian Legislature in several statutes for instance S. 73, Civil P. C., which deals with rateable distribution of assets of a judgment debtor held by the Court declares in express terms that nothing in that section shall affect any right of the Government. In this case the rights of the two attaching creditors and of government were brought into existence at one and the same time, and by the same decree."
In Peoples Bank v. Secy. Of State (AIR 1935 Sindh 232) stocks were hypothecated in favour of the Bank as security for payment of a loan and the keys to the warehouse where the same were stored were handed to the Bank. The Crown however claimed that it was a preferential creditor in respect of dues that had accrued in respect of a license issued by the Government. The Court held (at page 234), that: "It is only in cases where the Crown's right and that of the subject meet at one and the same time that the Crown is in general preferred, the rule being "detur digniori", Halsbury's Laws of England, Vol. 11, para. 749: 1933 Sindh 368 (Vassanbai Topandas v. Radha Bai Tirath Das). But where the right of the subject is complete and perfect before that of the King commences, the rule does not apply, for there is no point of time at which the two rights are at conflict, nor can there be a question which of the two ought to prevail in a case where one, that of the subject, has prevailed already: Per Alderson, J., in 131 ER 563 (Giles v. Grover). In the above case it was pointed out by all the learned Lords that the Crown has no precedence over a pledge of goods, at p. 576 it is said: There is no doubt that a variety of authorities may be cited, establishing as clear law that the Crown must take subject to a special property created by the act of the party. In the case of the factor, 6 Price 369 (Rex v. Lee), it was held, that goods in his hand, on which he had a lien for his advances made before the teste of the extent, could only be taken by the Crown subject to that lien. So again in the case of goods pawned or pledged before the teste of the extent, Parker 112 (Rex v. Cotton), and in 1 M'Clell 19 (Rex v. Humphrey) the same law prevails. In 6 Price 411 (Ward v.
Casberd) an equitable mortgage created before the party creating it became a debtor to the Crown on record, was in like manner held to be valid against a subsequent extent."
In the above-mentioned case, reference was also made to Lord Macnaghten's judgment in the case of Kunwar Ragho Prasad v. Lala Mewa Lal (14 Born LR 212 at 219), as under: "It is only when claims of the Crown and claims of "common persons" (to use an old expression) "concur" or come into competition that the Crown is preferred. The Crown has no more right than a "common person" to seize 'A's' property and apply it in or towards that discharge of a debt due from B. That is not a question of law. It is a matter of common justice, and it may be added, of common honesty."
8. That in addition to having claims earlier in time to the Government's claim the respondents Nos.
3 and 4 were secured creditors as they held registered mortgages of the respondent No,1 's immovable properties. The claim of the Government also did not charge the said mortgaged properties, which may have created a priority of claim over that of the mortgages. There was also no statute giving priority to the Government's claim at the relevant time; the proviso to section 202(1) of the Customs Act was added in the year 2007, but it was not made to apply retrospectively to cover the claim of the Government to a time to when the respondent No,1 had executed mortgages in favour of respondents Nos. 3 and 4. The amount realized from the sale of the mortgaged properties was insufficient to satisfy the decrees held by the secured creditors, i,e, the respondents Nos. 3 and 4, let alone there being a surplus that could have been utilized towards settlement of the Government's claim. Therefore, for all the aforesaid reasons the Government had no entitlement to any amount realized from the sale of the mortgaged properties. The High Court thus had correctly disallowed the claim of the Government with regard to the amounts realized from the sale of the mortgaged properties.
9. That we had declined leave to appeal and dismissed this petition vide our short order dated 11th June, 2015 and the aforesaid are our reasons for doing so.