Insolvency vesting prevails over tax recovery absent statutory divestment; receiver's auction upheld despite objections to price and encumbrance.

Property vested in an official receiver by adjudication under insolvency law cannot be divested for tax recovery unless a specific statutory provision authorises divestment, and the revenue must pursue its remedy before the insolvency court. A tax recovery notice does not override completed vesting or the receiver's authority to administer and sell the asset. The auction conducted by the receiver was also upheld because the property was sold after due notice, bidders participated, and there was no showing of suppression, procedural unfairness, or a defect in the upset price sufficient to invalidate the sale. The revenue's challenge failed, and the appellate orders were maintained.

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Issues: (i) whether the auction sale conducted by the official receiver was liable to be set aside on the grounds of inadequate price, alleged irregularity in fixing the upset price, or alleged invalidity of the lease/encumbrance; (ii) whether the income-tax authorities could insist on divesting the insolvent estate and proceed with attachment and sale under the recovery provisions after the property had vested in the official receiver by adjudication.

Issue (i): whether the auction sale conducted by the official receiver was liable to be set aside on the grounds of inadequate price, alleged irregularity in fixing the upset price, or alleged invalidity of the lease/encumbrance.

Analysis: The property had been brought to sale after due notice and participation of bidders, and the record did not show any suppression or procedural unfairness sufficient to invalidate the auction. The court accepted the concurrent factual finding that the upset price and the bid fetched were reasonable in the circumstances. The existence of a lease or encumbrance, even if disputed, did not by itself justify setting aside the sale where the department had notice and did not seek timely restraint or challenge before the auction.

Conclusion: The sale was not liable to be set aside on the alleged grounds, and this issue was answered against the revenue.

Issue (ii): whether the income-tax authorities could insist on divesting the insolvent estate and proceed with attachment and sale under the recovery provisions after the property had vested in the official receiver by adjudication.

Analysis: On adjudication, the insolvent's property vested in the receiver by force of law, and the official receiver was empowered to administer and sell the property under the insolvency law. In the absence of any specific provision enabling divestment, the tax recovery notice could not override the vesting already completed. The department had notice of the insolvency proceedings and the proposed auction, yet did not obtain orders from the insolvency court before the sale. The statutory right, if any, could be worked out only through the competent insolvency court and not by insisting on unilateral divestment.

Conclusion: The income-tax authorities could not divest the estate or compel sale in their favour after vesting, and this issue was answered against the revenue.

Final Conclusion: The orders of the appellate court were upheld, the challenges to the auction sale and to the refusal of permission to proceed separately under tax recovery process failed, and the revisions were dismissed.

Ratio Decidendi: Property vested in an official receiver by adjudication under insolvency law cannot be divested for tax recovery in the absence of a specific statutory provision, and a timely notice under recovery proceedings does not override a completed vesting or a valid auction conducted under the insolvency court's authority.

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