JUDGMENT 1. Heard Mr. B.B. Naik, learned Senior Counsel with Mr. Desai, learned advocate for the petitioner, Mr. Baiju Joshi, learned advocate for the respondent and Mr. Niraj Ashar, learned AGP. 1.1 At the time of hearing learned advocate for the petitioner as well as respondents jointly submitted that notice for final disposal is issued. Therefore the petition may be heard and decided finally today. However, formal order of Rule is hereby passed so that any technical difficulty or objection may not arise. 1.2 Mr. Ashar, learned AGP has waived service of notice of Rule for respondent no.1 and Mr. Joshi, learned advocate has waived service of notice of Rule for the respondent no.2. At the joint request and with consent of learned advocates for the parties, the matter is heard finally. 2. In present petition the petitioner has challenged the order dated 29.11.2012 passed by the respondent liquidator whereby the respondent liquidator has determined order of preference/priority for the purpose of payment to the creditors as part of liquidation process. 3. The relief prayed for by the petitioner reads thus:- “6(B) The Hon'ble Court may be pleased to issue writ of mandamus or writ in the nature of mandamus or wit of certiorari or writ in the nature of certiorari or any other appropriate writ, order or direction quashing and setting aside the order dated 29.11.2012 passed by the respondent No.2 at annexure-A to this petition. (C) The Hon'ble Court may be pleased to issue writ of mandamus or writ in the nature of mandamus or any other appropriate writ, order or direction directing the respondent no.2 to re-fix the priority of secure creditors by placing the petitioner at sr. No.1 in the priority list. (D) Pending final hearing and final disposal of the application, the Hon'ble Court be pleased to stay execution, operation and implementation of the order dated 29.11.2012 at Annexure-A to this petition. (E) Pending hearing and final disposal of the petition, the Hon'ble Court may be pleased to restrain the respondent no.2 from disbursing the amount of sale proceeds that may be realized from sale of movable and immovable properties of Una Taluka Khedut Sahakari Khand Udhyog Mandali Ltd. (in liquidation).” 4. The relevant facts leading to submission of present petition are thus. The relevant facts leading to submission of present petition are thus. 4.1 A Co-operative society functioning in the name and style of Shri Una Taluka Sahkari Khand Udhyog Mandali Ltd. (hereinafter referred to as the “society”) was conducting its operation within its designated area of operation. The said society had availed financial assistance from the petitioner bank. The said society committed default in repayment of the loan availed by it. Therefore, the bank preferred Suit No. 121 of 2010 for recovery of Rs.5,57,46,070/- with running interest at the agreed rate. The said Suit No. 121 of 2010 was decreed by the board of nominees and award dated 1.4.2011 came to be passed. By the said award the board of nominees held that the petitioner bank is entitled to recover Rs. 5,57,46,070/- with running interest @ 17%, till realization. The Board of Nominees also held that the petitioner bank is entitled to recover said amount from the assets mortgaged with the bank. It appears that besides above mentioned financial assistance the petitioner bank had also advanced some other loan to the said society. The said society failed to repay the said loan as well and that therefore the petitioner bank had instituted Lavad Suits No. 122 of 2010 to 126 of 2010. The said Lavad Suits were also decreed by the Board of Nominees in favour of the petitioner bank and award dated 1.4.2011 came to be passed holding inter alia, that the bank is entitled to recover amount claimed in the respective suits. According to the petitioner bank the total principal amount advanced to the said society is to the tune of Rs.10,00,00,000/- and the said amount is not repaid by the said society. 4.2 The petitioner bank has claimed that for availing financial assistance said society had mortgaged land bearing survey no.337A 362, 632A situate at Una. According to the petitioner bank in addition to the said mortgage the society had also mortgaged building and godown and for that purpose mortgage deed dated 24.5.1997 was executed. 4.3 According to the petitioner bank its charge over the said land of the society was duly registered in the revenue record. It appears that considering financial position and its difficulties the District Registrar, vide his communication dated 16.11.2011, recommended that the society be taken under liquidation. 4.3 According to the petitioner bank its charge over the said land of the society was duly registered in the revenue record. It appears that considering financial position and its difficulties the District Registrar, vide his communication dated 16.11.2011, recommended that the society be taken under liquidation. The factory came to be closed vide order dated 21.2.2012 and the competent authority passed interim order of liquidation in exercise of power under Section 107 of the Gujarat Cooperative Societies Act (hereinafter referred to as the “Act”). The said order has attained finality since it was never challenged by the society or any other party. 4.4 Subsequently on 7.5.2012 the Director of Sugar passed final order of liquidation of said society and appointed District Registrar Co-operative Society Junagadh as well as the petitioner bank as joint liquidators. 4.5 It appears that at the time when the Director of Sugar passed said final order dated 7.5.2012 the workers of sugar factory also raised claims against society since their dues were also not paid and that therefore workers had also taken out different proceedings before High Court and other Courts and Tribunals. 4.6 During pendency of the said proceedings Misc. Civil Application No. 1450 of 2012 was preferred and in the said application this Court passed order dated 9.11.2012 and directed that the property of the society/factory (mentioned in that order) may be disposed by constituting sale committee which shall include liquidator as the Chairman and Nominee of the Registrar as well as nominee of the workers and nominee of land the development bank as well. The petitioner bank has claimed that it has to recover Rs.26,55,84,934/- from the society as its dues. 4.7 After submitting its claim the bank also requested the District Registrar to give first priority to its claim considering the fact that it (i.e. the petitioner bank) is “secured creditor”. 4.8 According to the petitioner the District Registrar did not accept said submission of the bank and instead passed the order dated 19.11.2012 (which is impugned in present petition) whereby the order of preference in which the amounts are proposed to be disbursed is decided. After said order the petitioner bank again requested to the District Registrar vide its letter dated 31.12.2012 to refix the priority on the ground that the petitioner bank, being secured creditor, should be at the top of the priority list. After said order the petitioner bank again requested to the District Registrar vide its letter dated 31.12.2012 to refix the priority on the ground that the petitioner bank, being secured creditor, should be at the top of the priority list. 4.9 The District Registrar, upon receipt of the said communication from the bank, the District Registrar informed the petitioner bank, vide his letter dated 2.1.2013, that charge of the petitioner is not registered in response to the said letter dated 2.1.2013. On the other hand, the petitioner, vide its letter dated 4.1.2013, asserted that the charge is registered in the revenue record. 4.10 According to the impugned order dated 29.11.2012 the respondent liquidator has placed the petitioner bank at Sr. No.4 in the priority list. The petitioner is aggrieved by said decision. Hence, this petition. 4.11 The replying respondents have further submitted and contended that though the State Government is a shareholder, however, in strict sense the “share-holding” of the State Government is not share holding in general sense but actually it is a loan. The replying respondents have made attempt to go behind the State Government's intention for holding shares in the society and it is claimed that the State Government may hold share of the society to see that the society can grow in the initial stage without any financial hardships. The respondents have also claimed that the State Government's share holding is in form of term loan and it is required to be withdrawn in phased manner to be repaid by the society or withdrawn by the government. In paragraph No. 13 of the reply affidavit by the respondent No. 1 State, it is specifically mentioned that “it is submitted that in view of the above it is clear that the shareholding on the part of the State Government is in fact in form of term loan.” Thus, the amount paid by the respondent State is for purchasing and holding shares of the society (now in liquidation) and the “contribution” by the State to the society (now in liquidation) is only in form of and by way of its shareholding. What is pertinent is the fact that it is not even the case of the respondent State that its shareholding is secured by creation of charge over property of the society in liquidation or in any other manner. 5. What is pertinent is the fact that it is not even the case of the respondent State that its shareholding is secured by creation of charge over property of the society in liquidation or in any other manner. 5. Learned Senior Counsel for the petitioner society submitted that the respondent liquidator has committed material and substantial error in determining “order of preference or priority” for payment of dues to the creditors, including secured creditors, of the society in liquidation. The learned Senior Counsel for the petitioner society submitted that the respondent State is not secured creditor and the claim of the respondent State is not secured claim whereas the petitioner society is secured creditor and its claim is secured claim and that therefore the petitioner society could not have been ranked after the State Government in the list/order of preference. Learned Senior Counsel for the petitioner society also submitted that actually the respondent government is merely a shareholder and that shareholders are not entitled for payment of share amount, when payment is made by the liquidator for discharging the debts of the society in liquidation and that therefore also the impugned order passed by the respondent liquidator determining order of preference and priority in the matter of payment of the society's dues is unsustainable. 6. The petition is opposed by the respondents. Learned Counsel for the respondent liquidator and the learned AGP submitted that the petitioner society is not right in contending that the government's claim is not secured claim and / or that the government is not secured creditor. Learned Counsel for the respondent and the learned AGP submitted that the government's claim and dues are deemed to be secured claim and should be paid in preference over other dues and claims and that therefore impugned order is just and legal and proper. 6.1 The respondent no.2 i.e. District Registrar has filed affidavit and claimed that alternative remedy under Section 153 of the Act is available to the petitioner. One of the grounds, other than alternative remedy, on which the respondent no.2 has opposed the petition is that the petition suffers from vice of non-joinder of necessary party. Besides said objection the respondent no.2 has claimed that the petitioner had issued No Due Certificate in February 1993 in respect of certain parcel of land in question. One of the grounds, other than alternative remedy, on which the respondent no.2 has opposed the petition is that the petition suffers from vice of non-joinder of necessary party. Besides said objection the respondent no.2 has claimed that the petitioner had issued No Due Certificate in February 1993 in respect of certain parcel of land in question. The respondent no.2 has also relied on Government Resolution according to which the land was allotted to the society by government and according to the terms of allotment the society could not have sold or mortgaged the land. According to the respondent no.2 disputed question of facts are involved in this petition. The respondent No. 2 has raised the objection on the ground that before mortgaging the land any permission from the State was not taken. In light of such objection the respondent No. 2 has urged that since such disputed question of facts are involved in the matter the petition may not be entertained. Mr. Joshi, learned advocate for the respondent no.2 submitted that the dues of the government would rank higher than the dues of the bank and that therefore the respondent no.2 liquidator has not committed any error in determining order of preference/priority amongst creditors, vide order dated 29.11.2012. 6.2 The respondent no.1 has of course filed separate affidavit opposing the petition however, the contentions raised by respondent no.1 are almost similar to the contentions raised by respondent no.2. 7. I have heard learned Senior Counsel for the petitioner and respondents at length and also considered the material available on record of the petition. 8. Before dealing with substantive and major contentions by the contesting parties with reference to the principal issue involved in the matter, it would be appropriate to deal with some of the preliminary objections against the maintainability of the petition. A-1 The objection against maintainability of the petition on the ground of alternative remedy in light of section 153 of the Act, does not deserve to be considered at this stage in view of the fact that the Court has, vide order dated 24.1.2013 issued notice for final disposal. Besides this the petition is pending before this Court since 2013 and pleadings are completed by both the sides and on various occasions the petition has been heard for final decision. Besides this the petition is pending before this Court since 2013 and pleadings are completed by both the sides and on various occasions the petition has been heard for final decision. In view of the fact that the Court issued Notice for final decision and when the Court has thereafter, entertained the petition for almost two years and when respondents have also filed response and completed the pleadings the Court is not persuaded to dismiss the petition on the ground that alternative remedy is available. A-2 Second objection is on the ground that disputed questions are involved in this petition. Actually, the singular issue which arises in this petition is about the order of preference and priority (for the purpose of payment of dues payable by the society in liquidation) determined by the liquidator inasmuch as what is claimed by the petitioner is that the claim of the secured creditors cannot be placed after the claim of government and the secured creditors would rank higher in order of preference. The said contention raised by the petitioner against impugned order is purely legal issue and the said contention is not such which cannot be considered and decided without adverting to and/or without adjudicating the factual aspects. A-3 Besides this all that the Court has to decide in present petition is whether the order of preference determined by the liquidator is legal and proper and whether the claim of the secured creditors would rank higher and above the claim of the State Government in order of priority and preference in matter of payment of dues. Once the said fundamental aspect is decided then it is the liquidator who will decide other issues including the issue related to inter se seniority of the secured creditors and the issues whether the creditor who claim to be secured creditors are actually secured creditors or not and whether their claim and charge are duly registered in accordance with or not and whether any of the claims by the State Government is in the category of secured claim or not and/or whether the society could have mortgaged the property in question or not and/or whether the petitioner bank had issued No Due Certificate and/or whether the charge in respect of the property of society in liquidation said to have been mortgaged to the petitioner bank was duly registered or not. The said and other contentions involving factual background and factual aspects will be decided by the liquidator in light of and on the basis of evidence available on record before him and accordingly the order of preference and priority may be prepared. Therefore, it would not be necessary to enter into any factual aspects or details (for deciding said legal contention) and the Court does not propose to enter into and decide the disputed issues. There is, thus, no justification to dismiss the petition at threshold on such ground. B-1 The respondents have also opposed the petition on the ground that the petition suffers from vice of acquiescence. The said objection is raised on the ground that the replying respondent i.e. liquidator is already appointed and the petitioner has participated in the meeting held by the liquidator and that therefore now the petitioner cannot raise objection against the decision by the liquidator. B-2 In the facts of this case, the objection deserves to be rejected. It is necessary to note that the petitioner has not challenged appointment of liquidator and / or the order taking the society in liquidation. Besides this merely because the appointment of liquidator is not opposed that does not mean that the decision and / or action taken by the liquidator after his appointment, cannot be challenged by the person concerned and affected by such decision and / or action. If the decision taken by the liquidator is contrary to the provisions under the Act or contrary to the settled legal position or in violation of principal of natural justice or perverse or arbitrary or unjust, then the aggrieved and affected person can raise objection against such decision and / or action in accordance with law and avail legal remedy. Thus, the contention is misconceived and is not sustainable. Thus, the contention is misconceived and is not sustainable. C-1 So far as the objection raised on the ground that the society could not have mortgaged the land allotted – granted to it by the government and / or the ground that the bank had issued a “No Due Certificate” for some parcels of land and / or the ground that the society had not taken consent before mortgaging the land with the bank for availing the loan are concerned, the said issues are not relevant at this stage when the issue under consideration is restricted to the decision – order by the respondent liquidator who has, vide impugned order, fixed the order of priority / preference for repayment of the debts / dues of the creditor. C-2 The said issues would become relevant when the claims of each of the creditors including the petitioner, are taken up for consideration and payment by the liquidator. It is at that stage that the liquidator would enter into the issue as to whether the mortgage of the property of society was permissible or not and / or whether the mortgage was in accordance with law or not or whether mortgage is enforcible at law or not or whether cognizance of the mortgage deserves to be taken or not. C-3 However at the stage when the Court is examining merely the order of priority / preference fixed by the liquidator the said issues do not arise for consideration at this stage in this petition. Therefore, the objection that when such disputed issues are involved, the petition may not be entertained is not sustainable. 8.1 It is clarified that the Court has not entered into said factual aspects and in present case the Court has addressed only one and limited issue viz. as to whether the order of priority / preference determined by the respondent liquidator is legal, proper and in accordance with law or not and it would be for the liquidator to examine such factual aspects at relevant stage in accordance with law and in light of the material available on record. 9. Now, after considering the objections by the respondents, I may turn to main issue viz. in the liquidation process of a co-operative society whether dues of government would rank before - higher than the claims of secured creditors. 10. 9. Now, after considering the objections by the respondents, I may turn to main issue viz. in the liquidation process of a co-operative society whether dues of government would rank before - higher than the claims of secured creditors. 10. At this stage it is relevant to take into account relevant provisions under the Act. Chapter X of the Act contains provisions with regard to liquidation of a society. 10.1 Section 107 under the said chapter prescribes the circumstances in which an order to take a society in liquidation can be passed and the said section also specifies the authority who can pass such order. It also provides the procedure to be followed before passing such order. 10.2 Section 108 of the Act makes provision for the appointment of the person – officer who will initiate and complete the procedure of liquidation – viz. the liquidator and section 110 prescribes the powers the liquidator can exercise, of course, subject to control and direction of the Registrar. Section 109 prescribes the remedy against the order passed under Section 107. The said section 108 and Section 110 read thus:- “108. Appointment of liquidator.- (1) When an interim or final order is made under Section 107 for the winding up of a society, the Registrar may, in accordance with the rules appoint a person to be the liquidator of the society, and fix his remuneration. (2) Where an interim order is made the officers of the society shall hand over to he liquidator the custody and control of all the property, effects and actionable claims to which the society is or appears to be entitled, and of all books, records and other documents pertaining to the business of the society and, shall have no access to any of them. (3) when a final order is made confirming the interim order, the officers of the society- (a) shall handover to the liquidator the custody and control of any property, effects and actionable claims and any books, records, and other documents pertaining to the business of the society, which for any reason are not handed over to the liquidator under sub-section (2) at the time when an interim order was made. (b) ........... (4) ........... (b) ........... (4) ........... (5) the whole of the assets of the society shall on the appointment of the liquidator vest in him and notwithstanding anything contained in any law for the time being force, if any immovable property is held by him on behalf of the society, the title over the land shall be complete as soon as the mutation of the name of his office is effected, and no Court shall question the title on the ground of dispossession, want of possession or physical delivery of possession. (6) In the event of the interim order being vacated, the liquidator shall hand over the property, effects, actionable claims, books, records and other documents of the society to the officers who had delivered the same to him. The acts done, and the proceedings taken by the liquidator, shall be binding on the society, and such proceedings shall, after the interim order has been vacated under Section 107 be continued by the officers of the society. 110. Powers of Liquidator.- The Liquidator appointed under Section 108 shall have power, subject to the rules and the general supervision, control and direction of the Registrar.- (a) ........... (b) ........... (c) to sell the immovable and movable property and actionable claims of the society by public auction or private contract, with power to transfer the whole or part thereof to any person or body corporate, or sell the same in parcels; (d) ........... (e) to investigate all claims against the society and, subject to the provisions of the Act, to decide question of priority arising out of such claims and to pay any class or classes of creditors in full or ratably according to the amount of such debts, the surplus being applied in payment of interest from the date of liquidation at a rate approved by the Registrar, but not exceeding the contract rates, (f) ........... (g) ........... (h) ........... (i) ........... (j) ........... (k) to determine by what persons an in what proportion the costs of the liquidation shall be borne; (l) to fix the time or times within which the creditors shall prove their debts and claims or be included for the benefits of any distribution made before those debts or claims are proved; (m) ........... (h) ........... (i) ........... (j) ........... (k) to determine by what persons an in what proportion the costs of the liquidation shall be borne; (l) to fix the time or times within which the creditors shall prove their debts and claims or be included for the benefits of any distribution made before those debts or claims are proved; (m) ........... (n) to do all acts, and to execute in the name and on behalf of the society, all deeds, receipts and other documents, as may be necessary to such winding up; (o) ...........” 11. According to sub-section (2) of Section 108 the liquidator may be appointed when interim or final order for winding up of a society is passed under Section 107 of the Act. 11.1 By virtue of the Gujarat Co-operative Societies Act 1961, (hereinafter referred to as the “Act”) the liquidator is entrusted with the task of conducting and completing the process of liquidation of a co-operative society after an order taking a society in liquidation is passed by the competent authority. 11.2 In view of the provision under sub-section (2) of Section 108 when an interim order is made, and when liquidator is appointed the society / its officers are obliged to handover, to the liquidator, the custody and control of all properties and effects of the society and actionable claims to which the society is entitled, along with books and records and documents pertaining to business of the society. Sub-section (3) of section 108 imposes similar objection on the officers when final order is passed. 11.3 According to subsection (5) of Section 108, on appointment of the liquidator, unless the order directing the society be taken in liquidation is vacated, the section 110 will come in play after the liquidator takes charges under Section 108 and the assets, actionable claims etc. of the society shall vest in the liquidator. 11.4 By virtue of section 110 the liquidator (appointed under section 108 of the Act) is empowered, subject to the supervision, control and direction of the Registrar and subject to the Rules, to perform any or all the functions and duties mentioned under sub-clause (A) to (O) of Section 110 of the Act. 11.4 By virtue of section 110 the liquidator (appointed under section 108 of the Act) is empowered, subject to the supervision, control and direction of the Registrar and subject to the Rules, to perform any or all the functions and duties mentioned under sub-clause (A) to (O) of Section 110 of the Act. 11.5 For the purpose of completing the liquidation process the liquidator is obliged to discharge the debt of the society (in liquidation) by paying the debt payable by the society to different categories of the creditors. 11.6 The liquidator would raise funds for discharging the debts of the society (in liquidation) from the proceeds received upon sale of the property of the society and other amount, if any, available with the society (in liquidation). 11.7 The clause (C) of Section 110 empowers and authorizes the liquidator to sell immovable and movable property and actionable claims “of the society”. 11.8 The clause (e) of section 110 empowers and authorizes the liquidator to investigate all claims against the society and the liquidator is authorized to decide the question of priority arising out of various claims received by its from different classes and categories of creditors, in full or ratably. Of course, the liquidator's discretion is subject to other provisions of the Act. 11.9 It can be seen from the said provisions that the Act, particularly Section 110, does not prescribe the order of preference/priority in which the payments of the debt/dues should be made to the creditors and which category – class of creditor will be paid first – i.e. in priority and in preference over other creditors and who will be next in line and who will be paid last & in what ratio/proportion the debts will be discharged. The clause (k) and clause (l) are the provision which confer further or enabling discretion or power to the liquidator in the matter of payment of dues to the creditors. 11.10 Neither the petitioner nor the respondents have relied on, or brought to the Notice of the Court, any provision under the Act which either prescribes order of priority in which payment to the creditors should be made or any particular category of creditor whose debt should be discharged in priority under preference over other creditors. 11.10 Neither the petitioner nor the respondents have relied on, or brought to the Notice of the Court, any provision under the Act which either prescribes order of priority in which payment to the creditors should be made or any particular category of creditor whose debt should be discharged in priority under preference over other creditors. 11.11 On plain reading of Section 110 it emerges that the said section is silent so far as order of preference for payment is concerned and it does not prescribe the order of priority and preference which the liquidator should fallow while making payment to the different classes and categories of creditors and thereby discharging debt of the society. Consequently, in light of section 110 and its clause (c) it emerges that the discretion in the matter determining order of preference and priority remains with the liquidator. 12. It also emerges from the said provision that upon his appointment the assets “of the society” shall vest in the liquidator and the liquidator can sale and dispose those immovable and movable properties, assets, effects and actionable claims which are “of the society”. 12.1 It is pertinent that those properties – movable or immovable – or actionable claims or assets of the society would be available to the liquidator which are “freehold properties” of the society. Those properties, assets and actionable claims can be said to be “freehold properties” in respect of which any right or charge or lien of third party is not created and does not exist or prevail over the title and ownership of the property. The assets or the property, (movable or immovable) including actionable claims, which is mortgaged by the society and charge or lien is created thereon, cannot be considered freehold property (or actionable claim of the society) of the society (in liquidation). The property and assets would be available to the liquidator only to the extent of the interest which are clear and unencumbered. Differently put, the liquidator cannot dispose of any immovable or movable property or actionable claims which are “Not freehold properties of the society” i.e. which are not free of any encumbrances. 12.2 Before proceeding further it is relevant to mention that the terms mortgage, mortgagor, mortgagee, mortgage-money and mortgage-deed are not defined under the Act but are defined under Section 58 of Transfer of Property Act. 12.2 Before proceeding further it is relevant to mention that the terms mortgage, mortgagor, mortgagee, mortgage-money and mortgage-deed are not defined under the Act but are defined under Section 58 of Transfer of Property Act. The term “charge” is also not defined under the Act. The said term is found under Transfer of Properties Act and Section 100 thereof explains what charge is created or can be said to have been created. The said Section 58 reads thus:- "(a) A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage-money, and the instrument (if any) by which the transfer is effected is called a mortgage-deed.” 12.3 Section 100 of Transfer of Property Act reads thus:- “100. Charges.—Where immoveable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge. Nothing in this section applies to the charge of a trustee on the trust-property for expenses properly incurred in the execution of his trust, and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge.” 12.4 Thus, the person who holds charge or lien over property (of the debtor) would be secured creditor as against those debtors who do not hold such mortgage or charge or lien and in contradiction such creditors would be “unsecured creditor”. 12.5 Thus, in respect of a society which is in liquidation there would be, broadly speaking, at least two classes or categories of creditors viz. 12.5 Thus, in respect of a society which is in liquidation there would be, broadly speaking, at least two classes or categories of creditors viz. (a) those creditors whose dues are protected or supported by mortgage, or such other security i.e. who hold charge or lien over properties, assets and actionable claims of the society; and (b) those creditors who do not hold such or any security and their dues are not protected or secured. In common parlance these two categories of creditors are known as (a) secured creditors, and (b) unsecured creditors. 12.6 The terms “creditor” and “secured creditor” are not defined under the Act but the said terms are defined under Section 2(a) and 2(e) of the Provincial of Insolvency Act, 1920 (hereinafter referred to as “Insolvency Act”). The said section 2(a) and 2(e) read thus:- “2(a) “creditor” includes a decree-holder, “debt” includes a judgment-debt, and “debtor” includes a judgment-debtor. 2(e) “secured creditor” means a person holding a mortgage, charge or lien on the property of the debtor or any part thereof as a security for a debt due to him from the debtor. 12.7 When the time/stage of payments of dues to these creditors arrives, first question which arises is about priority or preference in the matter of payment i.e. which creditor should be paid first and who will be paid next and who will be paid last and second question which arises is who will decide such order of priority and about the criteria to be applied to determine order of preference. 12.8 The sub-clause (c) of section 110 clarifies that the power to determine the order of preference is conferred to the liquidator. Thus the first aspect or question stands answered. 12.9 So far as second aspect is concerned, as mentioned earlier the section 110 which confers discretion to the liquidator, is silent so far as order of preference for payment is concerned and the section does not prescribe order of priority which the liquidator should follow or the criteria or factors which shall be considered and applied for determining the order of preference. The section merely prescribes that the power and discretion is conferred to the liquidator. The section merely prescribes that the power and discretion is conferred to the liquidator. 12.10 Though this is the position with reference to liquidator's power and discretion, in view of the fact that the liquidator is entrusted with statutory duty and is obliged to discharge statutory function, it is obvious that the liquidator is obliged judicious in all respect of and on all counts and in all actions and is obliged to take decisions and to act judiciously and he, for the purpose of making payment to the creditors cannot pick and choose the creditors in the matter of making payment according to his whims and fancy and he cannot arbitrarily pick and select the creditor who will be paid first and who will be paid next and who will be paid last and he cannot make payment in an arbitrary and unreasonable order of preference. Though the Act confers discretion to the liquidator, however, this power and the discretion is not unbridled. The order of preference/priority for the purpose of payment must be determined in accordance with law and by following procedure prescribed under the Act in consonance with prescribed guidelines or according to recognized and settled principles. 12.11 If in respect of any property or assets or actionable claim etc. mortgage is created then, the rights of the original owner of the property are, subject to and in accordance with Transfer of Property Act, to the extent of the mortgage, conferred to and vest in the mortgagee, of course subject to the terms of mortgage and other relevant and applicable provisions of the Transfer of Property Act. Ordinarily, the right of mortgagee would prevail over the mortgaged property or assets in terms of the contract – deed of mortgage and to the extent the property is mortgaged, until the mortgage is exhausted or redeemed or discharged in accordance with law. 13. In the decision in case of Dena Bank vs. Bhikhabhai Prabhudas Parekh (2000 [5] SCC 694) it is observed, inter alia, that:- “8. The principle of priority of Government debts is founded on the rule of necessity and of public policy. 13. In the decision in case of Dena Bank vs. Bhikhabhai Prabhudas Parekh (2000 [5] SCC 694) it is observed, inter alia, that:- “8. The principle of priority of Government debts is founded on the rule of necessity and of public policy. The basic justification for the claim for priority of State debts rests on the well recognised principle that the State is entitled to raise money by taxation because unless adequate revenue is received by the State, it would not be able to function as a sovereign government at all. It is essential that as a sovereign, the State should be able to discharge its primary governmental functions and in order to be able to discharge such functions efficiently, it must be in possession of necessary funds and this consideration emphasises the necessity and the wisdom of conceding to the State, the right to claim priority in respect of its tax dues.(See Builders Supply Corpn) .In the same case the Constitution Bench has noticed a consensus of judicial opinion that the arrears of tax due to the State can claim priority over private debts and that this rule of common law amounts to law in force in the territory of British India at the relevant time within the meaning of Article 372 (1) of the Constitution of India and therefore continues to be inforce thereafter. On the very principle on which the rule is founded, the priority would be available only to such debts as are incurred by the subjects of the Crown by reference to the State's sovereign power of compulsory exaction and would not extend to charges for commercial services or obligation incurred by the subjects to the State pursuant to commercial transactions. Having reviewed the available judicial pronouncements Their Lordships have summed up the law as under :- 1. There is a consensus of judicial opinion that the arrears of tax due to the State can claim priority over private debts. 2. The common law doctrine about priority of crown debts which was recongnised by the Indian High Courts prior to 1950 constitutes "law in force" within the meaning of Article 372 (1) and continues to be in force. 3. The basic justification for the claim for priority of State debts is the rule of necessity and the wisdom of conceding to the State the right to claim priority in respect of its tax dues. 4. 3. The basic justification for the claim for priority of State debts is the rule of necessity and the wisdom of conceding to the State the right to claim priority in respect of its tax dues. 4. The doctrine may not apply in respect of debts due to the State if they are contracted by citizens in relation to commercial activities which may be undertaken by the State for achieving socio-economic good. In other words, where welfare State enters into commercial fields which cannot be regarded as an essential and integral part of the basic government functions of the State and seeks to recover debts from debtors arising out of such commercial activities the applicability of the doctrine of priority shall be open for consideration. 10. However, the Crowns preferential right to recovery of debts over other creditors is confined to ordinary or unsecured creditors. The Common Law of England or the principles of equity and good conscience (as applicable to India) do not accord the Crown a preferential right for recovery of its debts over a mortgage or pledgee of goods or a secured creditors. 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. 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. In Giles v. Grover it has been held that the Crown has no precedence over a pledgee of goods. In Bank of Bihar v. State of Bihar, AIR 1971 SC 1210 , the principle has been recognised by this Court holding that the rights of the pawnee who has parted with money in favour of the pawnor on the security of the goods cannot be extinguished even by lawful seizure of goods by making money available to other creditors of the pawnor without the claim of the pawnee being first fully satisfied. Rashbehary Ghose states in Law of Mortgage (T.L.L., 7th Edn., P. 386) - 'It seems a Government debt in India is not entitled to precedence over a prior secured debt'.” (emphasis supplied) 13.1 From the decisions and judicial pronouncements on this issue it emerges that the arrears of debts payable to the State will enjoy priority over unsecured debts and that if first charge by way of priority is not claimed under the statute, the common law doctrine about priority of crown debt will not be available or applicable. The Crown's right will prevail when the debt of the crown and debt of the subject are of equal degree and the principle – doctrine with regard to crown's debt will apply wherein the debts are of equal degree. Ordinarily the doctrine of priority of crown debt will prevail over private debt which is unsecured (debt). However, said doctrine of first / priority charge of the State cannot prevail over secured debts unless priority is conferred in favour of State's debt, by law. 14. Thus, the liquidator, so as to get in his hands the mortgaged properties and / or to use the sale proceeds from such encumbered properties and assets and actionable claims of the society for purpose of distribution to the creditors, shall have to get the mortgage lifted or exhausted by complying the condition of mortgage and in accordance with law and until the mortgage is exhausted or the mortgagee lifts his right as mortgagee such property and / or proceeds from such property cannot be used by the liquidator for purpose of distribution or payment of debt of other creditors i.e. creditors other then the mortgagee, not even the State. 14.1 Therefore, the liquidator appointed under the Act for the purpose of completing the process of liquidation of a society, cannot, in respect of the mortgaged property (i.e. the property of the society which is mortgaged to third party, claim that in view of the power and discretion conferred on him by virtue of section 110 of the Act he can dispose of all assets (i.e. even those property or assets or actionable claim in respect of which charge or lien is created in favour of the mortgagee) and use the sale proceeds for distribution to the creditors of the society in such order of reference and priority which he considers appropriate, though the mortgage is not exhausted or lifted and though the claims and rights of mortgagee are alive. 14.2 Such claim and assertion of liquidator's right has its place in law so far as freehold property i.e. the property which are not encumbered in any manner in favour of third party, are concerned, however such assertion and claim is not good and sustainable in law so far as mortgaged property are concerned and the liquidator will have no authority in law or power to exercise his discretion in respect of the property which are mortgaged in favour of third party until mortgage is exhausted or discharged in accordance with law. 14.3 It is possible that the mortgaged property might be in possession or occupation of the society however if mortgage is created in favour of such property then to the extent of the mortgage such property i.e. whole of the property would not be available in the hands of liquidator, but it would be available subject to the right of mortgagee. 14.4 In present case the liquidator has ranked the debt payable to the Government above the dues payable to other creditors including the mortgagee/s. While doing so the liquidator has overlooked the fact that the principle or doctrine that the right of crown to recover its debt prevails over right of subject to recover his dues pertains to common law principle would be applicable in respect of the unsecured debts. The principle of common law must yield to special statute. A debt which is secured for a debt which on strength of any provision in a statute acquires the status of first charge over the property must prevail over unsecured crown debt. The principle of common law must yield to special statute. A debt which is secured for a debt which on strength of any provision in a statute acquires the status of first charge over the property must prevail over unsecured crown debt. 14.5 As mentioned above, the liquidator has ranked government dues above the dues payable over the other secured creditors including mortgagee/secured creditors. In present case the claim of the petitioner bank is based on the premise that it holds mortgage in respect of properties of the society and being a mortgagee it is secured creditor. The question which arises for consideration is whether the order of preference and priority determined by the liquidator is legal, proper and just or not. 14.6 The first, direct and immediate consequence of the order of preference determined by the liquidator (i.e. the impugned order dated 29.11.2012) is that the right and claims of mortgagee and/or secured creditors are shunted lower in rank or after the claim of government and the claim of the respondent government is given higher priority and preference over the rights and claims and dues of the secured creditors and mortgagee. 14.7 In light of the Section 110(e) of the Act, which confers discretion to the liquidator, it becomes clear that so long as the liquidator follows any recognized and settled principle or guideline for determining the order of preference and if such determination is not arbitrary or irrational or biased or unjust or contrary to law, then such determination ought not be interfered by the Court merely because some other view is possible and the Court believes that such other view or different order of preference would be better alternative in the facts of the case. Thus, the issue required to be considered is whether the liquidator is justified in (a) not determining the nature and character and status of claims and claimant before determining the order of preference; and (b) ranking the respondent – government's dues – claims higher or above the claims – dues of all creditors without determining whether other creditors are mortgagee and / or secured creditors and whether government's dues – claims can be ranked higher and can be discharged in priority though it may not be secured debt-claims. 15. 15. So as to examine these aspects it would be appropriate to consider the order of priority fixed by the liquidator in its descending order. The issue raised by the petitioner obliges the Court to consider priorities at Sr. No. 1 to 4 in the impugned order. 15.1 From the impugned order it has emerged that the liquidator has given first priority to the dues of workmen (i.e. claim by the provident fund commissioner for the amount payable to the workmen towards provident fund). 15.2 Second priority is given to the workmen's claim for amount payable towards gratuity. 15.3 Third priority is given to the shareholding of the Government i.e. Government’s claim for the amount contributed by it towards share capital of the society. 15.4 The liquidator has placed the claim of the petitioner bank – and other creditors (who claim to be mortgagee and thereby secured creditor) at fourth stage. 16. The first priority given to the claim by Provident Fund Commissioner viz. workmen's dues towards provident fund. The said ranking or categorization of said claim – dues does not warrant any interference because by virtue of Section 11 of Employees Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as “P.F. Act”), the said dues are granted statutory priority and preference over all other dues of employer. In this context it is appropriate to take into account the decision by Apex Court in case of Employees Provident Fund Commissioner vs. O.L. of Esskay Pharmaceuticals Ltd. ( AIR 2012 SC 11 ), wherein Hon'ble Apex Court observed, inter alia, that:- “42. It is also important to bear in mind that even before the insertion of proviso to Sections 529(1), 529(3) and Section 529A and amendment of Section 530(1), all sums due to any employee from a provident fund, a pension fund, a gratuity fund or any other fund established for welfare of the employees were payable in priority to all other debts in a winding up proceedings [Section 530(1)(f)]. Even the wages, salary and other dues payable to the workers and employees were payable in priority to all other debts. What Parliament has done by these amendments is to define the term "workmen's dues" and to place them at par with debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to Section 529(1). What Parliament has done by these amendments is to define the term "workmen's dues" and to place them at par with debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to Section 529(1). However, these amendments, though subsequent in point of time, cannot be interpreted in a manner which would result in diluting the mandate of Section 11 of the EPF Act, sub-section (2) whereof declares that the amount due from an employer shall be the first charge on the assets of the establishment and shall be paid in priority to all other debts. The words "all other debts" used in Section 11(2) would necessarily include the debts due to secured creditors like banks, financial institutions etc. The mere ranking of the dues of workers at par with debts due to secured creditors cannot lead to an inference that Parliament intended to create first charge in favour of the secured creditors and give priority to the debts due to secured creditors over the amount due from the employer under the EPF Act. 43. ............However, while inserting Section 529A in the Companies Act by Act No.35 of 1985 Parliament, in its wisdom, did not declare the workmen's dues (this expression includes various dues including provident fund) as first charge. The effect of the amendment made in the Companies Act in 1985 is only to expand the scope of the dues of workmen and place them at par with the debts due to secured creditors and there is no reason to interpret this amendment as giving priority to the debts due to secured creditor over the dues of provident fund payable by an employer. Of course, after the amount due from an employer under the EPF Act is paid, the other dues of the workers will be treated at par with the debts due to secured creditors and payment thereof will be regulated by the provisions contained in Section 529(1) read with Sections 529(3), 529A and 530 of the Companies Act.” 16.1 The Apex Court even prior to the said decision in case of Employees Provident Fund Commissioner (supra) considered the issue related to priority in matter of payment of Provident Fund Dues, in case of Maharashtra State Co-operative Bank Ltd. vs. Employees Provident Fund Organization ( AIR 2010 SC 868 ). In the said decision Apex Court observed, inter alia, that:- “20. In the said decision Apex Court observed, inter alia, that:- “20. We shall now consider the question whether the provision contained in Section 11(2) of the Act operates against other debts like mortgage, pledge, etc. answer to this question is clearly discernible from the plain language of Section 11. The priority given to the dues of provident fund etc. in Section 11 is not hedged with any limitation or condition. Rather, a bare reading of the Section makes it clear that the amount due is required to be paid in priority to all other debts. Any doubt on the width and scope of Section 11 qua other debts is removed by the use of expression 'all other debts' in both the subsections. This would mean that the priority Clause enshrined in Section 11 will operate against statutory as well as non-statutory and secured as well as unsecured debts including a mortgage or pledge. Sub-section (2) was designedly inserted in the Act for ensuring that the provident fund dues of the workers are not defeated by prior claims of secured or unsecured creditors. This is the reason why the legislature took care to declare that irrespective of time when a debt is created in respect of the assets of the establishment, the dues payable under the Act would always remain first charge and shall be paid first out of the assets of the establishment notwithstanding anything contained in any other law for the time being in force. It is, therefore, reasonable to take the view that the statutory first charge created on the assets of the establishment by subsection (2) of Section 11 and priority given to the payment of any amount due from an employer will operate against all types of debts.” 16.2 It is pertinent that in the said cases the rival claims were examined by Hon’ble Apex Court in light of provision under P.F. Act and Section 529-A of Companies Act whereas in present case statutory priority is not granted under the Act in favour of creditors of any class or category. In this view of the matter when the impugned determination of priority and impugned order are examined then what exists is statutory preference and priority granted by P.F. Act. In this view of the matter when the impugned determination of priority and impugned order are examined then what exists is statutory preference and priority granted by P.F. Act. Therefore, the priority and preference granted to P.F. dues does not warrant any interference more particularly in light of vital fact that by virtue of section 11 of P.F. Act, the P.F. dues enjoy protection and position of priority and preference even under Insolvency Act. 17. So far as the said second rank in order of preference is concerned, the liquidator has given preference to worker's claim for payment towards gratuity. The said payment is a statutory benefit. However, the relevant statute i.e. the Payment of Gratuity Act 1972 itself, as the Provident Fund Act does in respect of P.F. dues, does not create preferential status for gratuity dues and does not provide for priority in matter of payment of gratuity over rights of secured creditors in the event the employer turns insolvent. On this count it would be appropriate to take into account the observations in case of Textile Labour Association vs. Official Liquidator of Jubilee Mills (2000 [4] GLR 2923) wherein it is observed and held that:- 16.3 This Court is of the view that since the Payment of Gratuity Act casts a statutory duty on the employers governed by the said Act to pay gratuity to the eligible employees and non-payment of gratuity can be visited not only by prosecution and payment of interest but there is also a statutory remedy provided by Section 8 of the Act under which the amount of gratuity can be recovered through the Collector as arrears of land revenue and the provisions of the Land Revenue Code empower the Collector to attach the property of the Company and the dues can be recovered by selling the assets of the Company, it would not make any difference in principle whether the amount of gratuity is deposited as a gratuity fund in the bank accounts of the Company or the amount of gratuity payable to the workmen is mixed up with the assets of the Company generally without any separate entity of the gratuity amount. Hence, the claim of the secured creditors on the assets of the Company must be subjected to all the charges in favour of the workmen which are statutorily imposed on the assets of the Company either in the form of a direct charge or in the form of a liability to be charged to the provisions of the Land Revenue Code. Hence, the claim for gratuity is also covered by the statutory priority under Sections 529, 529A and 530 of the Companies Act. 17.1 It is pertinent that in the said case also the matter was examined in light of sections 529-A and 530 of Companies Act wherein Hon'ble Court observed that the said benefit, being statutory benefit, would rank pari passu with claims and rights of secured creditors. 17.2 On this count it is also relevant to note that under the Act there is no provision like in nature and effect of Section 529/A of Companies Act. Differently put, there is absence of any provision under the Act which creates “first charge” in favour of the dues of workman. Similarly under the Act there is absence of provision like in the nature and effect of Section 11 under P.F. Act. 17.3 The liquidator has exercised his authority and discretion under Section 110 of the Act while determining said second priority. Therefore, unless the exercise of authority and discretion are found to be arbitrary or contrary to law or irrational or biased or unjust, the Court would be loath or very cautious and slow to interfere with such exercise of discretion, unless ex-facie injustice is shown. 17.4 Therefore, the question which would arise is as to whether, in absence of provision similar to Section 11 of P.F. Act and/or Section 529/A of Companies Act, under the Act and / or under Gratuity Act, the liquidator can grant priority or preference to government dues. As mention earlier Section 110 of the Act confers discretion to the liquidator. 17.4 Therefore, the question which would arise is as to whether, in absence of provision similar to Section 11 of P.F. Act and/or Section 529/A of Companies Act, under the Act and / or under Gratuity Act, the liquidator can grant priority or preference to government dues. As mention earlier Section 110 of the Act confers discretion to the liquidator. True it is that while granting preference or priority to payment of gratuity dues the liquidator has exercised his discretion conferred under Section 110 of the Act however, the liquidator's decision must pass the litmus test i.e. it should be (a) sans arbitrariness and must not be irrational and unjust; and (b) should not be contrary to law and it should be in consonance with rights of mortgagee and in consonance with legal position with regard to secured debt/claims and secured creditors. 17.5 Ordinarily when the liquidator has granted priority to gratuity dues (which is statutory benefit) of workmen, the Court would be reluctant to disturb such determination. However, exercise of discretion should not be at the cost of legal rights of any other person e.g. secured creditors. 17.6 This Court, in case of Jubilee Mills, while examining the position in light of Section 529/A held that the claim to receive gratuity dues will rank, at the highest, pari-passu with the claim of secured creditors. The said position is settled by this Court in case where special status is conferred to the claims of workmen. However under the Act (or even under Gratuity Act) such special status is not conferred to the dues of workmen – even in respect of gratuity dues. Under the circumstances it emerges that in ordinary situation the claim for gratuity dues and its status – in absence of provision similar to Section 11 of P.F. Act and / or Section 529-A of Companies Act, cannot have absolute and complete priority over dues of secured creditors and / or government dues and in any case it should not be higher than pari-passu with claims of secured creditors. 17.7 Thus, the second priority could not have been determined before deciding whether the petitioner and other creditors are mortgagees or secured creditors or not and whether their claims – dues are secured claims / dues or not. 17.7 Thus, the second priority could not have been determined before deciding whether the petitioner and other creditors are mortgagees or secured creditors or not and whether their claims – dues are secured claims / dues or not. If the liquidator finds that the petitioner and other creditors are not secured creditor/s and their claims / dues are not secured dues then the decision by liquidator in exercise of his authority and discretion under Section 110 of the Act may be justified and may withstand, and even pass, the challenge by the creditors and such decision and discretion may operate as it is but not otherwise. However, if it is found, on physical examination, that the claim of the petitioner or other secured creditors is secured debt then the gratuity dues shall, at the most rank pari passu with the secured debt / secured creditors. 17.8 While determining the said priority the liquidator has failed to take into account the above quoted observation whereby the Court has held that the workers’ claim towards gratuity would rank pari passu with the claim of secured creditor and the liquidator has not considered the issue from the perspective of comparative rights of worker and secured creditors and / or from the perspective of workers' right versus government dues and inter se priority. However, the liquidator has ignored the said aspect and legal position. 18. Now, so far as third and fourth priorities determined by the liquidator are concerned it is pertinent to keep in focus that the amount claimed by the respondent State are the amount which the respondent State paid for purchasing the shares of the society i.e. the amount which it contributed towards the share capital. 18.1 The respondent State is a shareholder in the society. Ordinarily shareholders will be last in the list to receive the amount contributed by them towards share capital and would get the payment if there is any residue available in the hands of liquidator after making payment to the creditors of all categories and classes. Ordinary shareholders cannot get their claim in priority over other creditors. 18.2 However the respondent State claims that the amount paid by it is actually in nature of loan. Ordinary shareholders cannot get their claim in priority over other creditors. 18.2 However the respondent State claims that the amount paid by it is actually in nature of loan. Whether the amount paid by the respondent State is contribution toward share capital (i.e. paid for purchasing share) or it is “loan”, will have to be decided by liquidator in light of and on strength of cogent evidence. 18.3 Even if it is assumed that the amount paid by the respondent State (for holding shares of the society) is “loan” as claimed by the respondent State, then also it is not in dispute that the “loan” is “unsecured loan” and thus it is not a secured claim / debt. It is not even the case of the respondent State that the “loan” is a secured loan i.e. it is secured debt against any asset or property of the society. 18.4 More important and relevant fact is that the amount claimed by the respondent State are not tax dues i.e. dues payable by the society towards any tax liability. 18.5 Despite this position the respondent State claims that it is entitled for priority over the claim of its subject. 18.6 As mentioned earlier, ordinarily the right of the crown to recover its dues would prevail over the rights of its subject however the said principle or doctrine is restricted to and would be applicable to the debts which are unsecured debts. Differently put the crown's debt or government's debt will have priority or preference over the claims of unsecured creditors but the dues or debts which are protected or secured in accordance with law would not be affected by the said principle or doctrine. 18.7 The foregoing discussion brings out that if government's dues are not secured against any security it cannot claim priority or preference over secured dues protected and secured by mortgage and/or charge or lien (in any manner) over the property, then the government cannot enforce its claim in priority or in preference. 18.8. On this count it would be appropriate to take into account the observations by Apex Court in case of Union of India Vs. SICOM Limited (2009 [2] SCC 121):- 9. Generally, the rights of the crown to recover the debt would prevail over the right of a subject. 18.8. On this count it would be appropriate to take into account the observations by Apex Court in case of Union of India Vs. SICOM Limited (2009 [2] SCC 121):- 9. Generally, the rights of the crown to recover the debt would prevail over the right of a subject. Crown debt means the debts due to the State or the king; debts which a prerogative entitles the Crown to claim priority for before all other creditors. [See Advanced Law Lexicon by P. Ramanatha Aiyear (3rd Edn.) p. 1147]. Such creditors, however, must be held to mean unsecured creditors. Principle of Crown debt as such pertains to the common law principle. A common law which is a law within the meaning of Article 13 of the Constitution is saved in terms of Article 372 thereof. Those principles of common law, thus, which were existing at the time of coming into force of the Constitution of India are saved by reason of the aforementioned provision. A debt which is secured or which by reason of the provisions of a statute becomes the first charge over the property having regard to the plain meaning of Article 372 of the Constitution of India must be held to prevail over the Crown debt which is an unsecured one. 10. It is trite that when a Parliament or State Legislature makes an enactment, the same would prevail over the common law. Thus, the common law principle which was existing on the date of coming into force of the Constitution of India must yield to a statutory provision. To achieve the same purpose, the Parliament as also the State Legislatures inserted provisions in various statutes, some of which have been referred to hereinbefore providing that the statutory dues shall be the first charge over the properties of the tax-payer. This aspect of the matter has been considered by this Court in a series of judgments. 11. In M/s. Builders Supply Corporation v. The Union of India & Ors. this Court construing Section 46(2) of the Income Tax Act, 1922 which enabled the Income Tax Officer to forward to the Collector a certificate specifying the amount of arrears due from an assessee and requiring the Collector, on receipt of such certificate, to proceed to recover from the assessee in question the amount specified as if it were an arrear of land revenue, held : “28.... Section 46(2) does not deal with the doctrine of the priority of Crown debts at all; it merely provides for the recovery of the arrears of tax due from an assessee as it were an arrear of land revenue. This provision cannot be said to convert arrears of tax into arrears of land revenue either; all that it purports to do is to indicate that after receiving the certificate from the Income-tax Officer, the Collector has to proceed to recover the arrears in question as if the said arrears were arrears of land revenue. We have already seen that other alternative remedies for the recovery of arrears of land revenue are prescribed by sub-section (3) and (5) of section 46. In making a provision for recovery of arrears of tax, it cannot be said that section 46 deals with or provides for the principal of priority of tax dues at all; and so, it is impossible to accede to the argument that section 46 in terms displaces the application of the said doctrine in the present proceedings." (See also Superintendent and Remembrancer of Legal Affairs, West Bengal v. Corporation of Calcutta) 12. Yet again in Bank of Bihar v. State of Bihar & Ors. it was laid down : "4. Now it is common ground that the plaintiff (which is the appellant before us) held the sugar which was seized from its custody as security for payment of the debts or advances made to Defendant 2 in its cash credit account. There were arrears of certain cess due from Defendant 2. As stated before, the Cane Commissioner took proceedings under the Public Demands Recovery Act and attached the price of the sugar which had been deposited by the appropriate authorities in the Government Treasury instead of being paid to the plaintiff. The Cane Commissioner indisputably did not have any right of priority over the other creditors of Defendant 2 and, in particular, the secured creditors. Section 172 of the Contract Act defines a pledge to mean the bailment of goods as security for payment of debt or performance of a promise." 19. The Cane Commissioner indisputably did not have any right of priority over the other creditors of Defendant 2 and, in particular, the secured creditors. Section 172 of the Contract Act defines a pledge to mean the bailment of goods as security for payment of debt or performance of a promise." 19. On plain reading of the impugned order it appears that while placing the claim of the respondent State for amount paid by it towards share capital before and higher than the claim of the petitioner bank the liquidator failed to take into account the above discussed aspects with regard to the rights of mortgagee and rights of secured creditors. When the decision and order of liquidator impugned in present case is examined, it becomes clear and apparent that the liquidator has failed to consider that the property which is mortgaged and is under charge or lien of the secured creditors (in whose favour the property is mortgaged) would not be available for sale and the government dues cannot be paid and discharged from such property (i.e. such mortgaged property cannot be used for paying dues of the government) and such dues can be paid only from freehold property of the society. 20. Since, in present case the petitioner bank has claimed that certain properties of the society are mortgaged with it for the purpose of loan availed by the society. It is also claimed by the bank that charge is created in its favour in respect of immovable properties. It is also claimed by the bank that it has got the charge (created by the society in its favour) duly registered in the revenue record. The petitioner Bank claims that it still holds mortgage and has not lifted or released the mortgage. On the other hand the respondent has disputed such assertion. Therefore, the said factual aspect is yet to be proved before the liquidator. Under the circumstances, the Court would refrain from making any observation as to the status of the petitioner bank and would also refrain from making any observation as to whether the petitioner bank is secured creditor or not. The said aspect will have to be decided by the liquidator after examining relevant documents at the time when the claims by the creditors are scrutinized. The said aspect will have to be decided by the liquidator after examining relevant documents at the time when the claims by the creditors are scrutinized. If on factual aspect mortgage is proved i.e. if the petitioner establishes that certain properties of the society are mortgaged with it and in respect of the said property it has registered its charge and it holds lien over such property and it has not waived or relinquished its right as mortgagee and its rights as mortgagee are still intact and alive in accordance with law then in that event the liquidator, shall be obliged to pay the dues of the mortgagee/secured creditor first and in priority over and in preference to unsecured claim/debt or dues of government. The said decision, therefore deserves to be set aside and is accordingly set aside and the matter is remitted to the respondent liquidator for fresh consideration. 20.1 So far as other two creditors who have been ranked at serial no. 4 by the respondent liquidator in the order of preference and priority determined are concerned, the said creditors have not raised any dispute with regard to their rank. Therefore, they are not considered as necessary and affected party in present petition. Besides this, by virtue of this decision the said creditors are not adversely affected and therefore also they have not been considered as necessary or affected party. Moreover, in view of the directions under this order including the direction to the liquidator to decide all factual issues after hearing all creditors, secured creditors as well as unsecured creditors and even sundry creditors, the interest of the said 3 creditors is not adversely affected in any manner. It is however clarified that so far as inter se priority and preference is concerned, that will be decided by the respondent liquidator at the relevant time after hearing all creditors – secured creditors as well as unsecured creditors and also all sundry and miscellaneous creditors of the society and after considering the basis and date of the creation of debt and charge by all creditors. 21. As mentioned above the matter requires to be remanded to the respondent liquidator for fresh decision in light of the foregoing discussion. Therefore, below mentioned order is passed:- The petition is accepted. 21. As mentioned above the matter requires to be remanded to the respondent liquidator for fresh decision in light of the foregoing discussion. Therefore, below mentioned order is passed:- The petition is accepted. The impugned order dated 29.11.2012 passed by respondent liquidator is partly set aside and for that part the matter is remanded to the respondent liquidator who will take fresh decision and pass fresh order with regard to the order of preference and priority in matter of payment. With the aforesaid clarifications the petition is disposed of.