Law:

Section:

Customs Act (IV of 1969)--- ----S. 202(1)---Civil Procedure Code (V of 1908), S. 73(3)---Constitution of Pakistan, Art. 185(3)---Liquidation of company---Distribution of proceeds of sale---Preference to claim of secured creditors over claim of Government (i.e. customs authorities)---Properties of respondent-company were mortgaged with two banks---When the company was liquidated, its properties were put to auction, and the proceeds were paid to the Banks in partial settlement of their claim---Meanwhile customs authorities also passed an order-in-original against the company demanding certain unpaid duties and taxes on imported goods, however such demand could not be met as there was nothing left to pay customs authorities from the proceeds of sale---Contention of customs authorities that in terms of S. 73(3), C.P.C. and proviso to S. 202(1), of the Customs Act, 1969, Government dues (unpaid duties and taxes) would have precedence over the claims of the Banks---Validity---Properties of the company were mortgaged with the Banks considerably before any action was initiated against the company by customs authorities---Suits for recovery and sale of mortgaged properties filed by the Banks against the company were decreed (much) before the proviso to S.202(1), of the Customs Act, 1969, came into effect---Proviso to S. 202(1) of the Customs Act, 1969, was not made to apply retrospectively to cover the claim of the Government (i.e. customs authorities) to a time when the company had executed mortgages in favour of the Banks---Section 73(3), C.P.C. also did not assist the case of the customs authorities since it did not create any priority in the Federal Government against the rights of the Banks---Section 73, C.P.C. sets out the manner in which proceeds of sales in execution proceeding were to be distributed amongst decree-holders, and subsection (3) thereof stipulated that, "Nothing in this section affects any right of Government"---Said provision in itself did not give preferential right to the Government, but it merely stated that if the Government already had "any [preferential or prior] right" S. 73, C.P.C. would not affect the same---In the absence of a specific…

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