Legal principle

Where an assignee of secured credit claims a statutory first charge under Section 142A of the Customs Act, 1962 read with Section 31B of the RDDB Act, 1993, the High Court may, on a prima facie case and balance of convenience, interim-restrain finalization of a customs auction pending adjudication.

Court decision

The Court issued notice returnable on 7 May 2018 (with service waived by the department's advocate and direct service permitted on respondent nos. 3 and 4) and directed that the auction in question shall not be finalized till the next date of hearing — an interim order in favour of the petitioner, based on a prima facie view; no final determination of the charge was made.

Facts

Edelweiss Asset Reconstruction Co. Ltd., an assignee of secured credit, approached the Gujarat High Court urgently because the Customs Authority of Gujarat had seized 63 containers of a company undergoing winding-up before the Bombay High Court and advertised their auction, with bids notified on the day of hearing. The containers were hypothecated to the predecessor of the petitioner's assignor. The petitioner claimed a statutory first charge over the containers under Section 142A of the Customs Act, 1962 read with Section 31B of the Recovery of Debts and Bankruptcy Act, 1993. The department opposed interim relief, pointing out that two earlier auction attempts had failed and that State revenue was at stake. The petitioner's application made before the Bombay High Court on 21 March 2018 was still pending.

Key provisions

• Section 142A, Customs Act, 1962 — Liability under Act to be first charge