2016 (6) TMI 242 - HC - Indian Laws

Court allows registration of Sale Certificate despite Income Tax Department's attachment order.

State Bank of India, Stressed Assets Management Branch, Chennai Versus The Tax Recovery Officer, Income Tax Department, Govt. of India, Pondicherry and The Sub-Registrar of Puducherry, and Smt. Devaki Thirunavakkarasu, Proprietrix of M/s. Devaki Agencies

State Bank of India, Stressed Assets Management Branch, Chennai Versus The Tax Recovery Officer, Income Tax Department, Govt. of India, Pondicherry and ... Issues Involved:1. Priority of charge between the Income Tax Department and the petitioner-Bank.2. Validity of the attachment order by the Income Tax Department in relation to the mortgage.3. Registration of the Sale Certificate by the Sub-Registrar.Detailed Analysis:1. Priority of Charge between the Income Tax Department and the Petitioner-Bank:The petitioner argued that as a secured creditor, the State Bank of India has a priority of charge on the property based on the mortgage created to secure the outstanding dues in the credit facilities availed. The petitioner relied on the judgment in W.P.No.36076 of 2015, dated 04.03.2016, which cited the Supreme Court decision in Balkrishan Gupta and others vs. Swadeshi Polytex Limited and another (1985) 2 SCC 167, stating that the sale of the subject property pending the order of attachment is void only as against the claims enforceable under the order of the said attachment and not in respect of other claims.The respondent (Income Tax Department) contended that since the effective date of attachment by the Income Tax Department precedes the date on which the property was mortgaged with the petitioner-Bank, the mortgage is void, and the Income Tax Department has priority over the Bank.2. Validity of the Attachment Order by the Income Tax Department in Relation to the Mortgage:The court referred to the unreported judgment of the Madurai Bench of Madras High Court in W.P.(MD) No.2635 of 2012, dated 13.03.2013, which also referenced the Supreme Court decision in Balkrishan Gupta and others vs. Swadeshi Polytex Limited and another. It was held that the order of attachment cannot be a bar to register the document and that the sale of any property pending the order of attachment is void only as against the claims enforceable under the order of said attachment and not in respect of other claims.The court also cited the unreported judgment in W.P.(MD) No.14388 of 2014, dated 01.09.2014, where it was held that merely because there is an order of attachment passed by a Civil Court, it cannot be a ground to refuse to register the Memorandum of Deposit of Title Deeds.3. Registration of the Sale Certificate by the Sub-Registrar:The petitioner presented the Sale Certificate for registration, but the Sub-Registrar refused, citing the attachment order by the Income Tax Department and the need for a No-Objection Certificate (NOC) from the Income Tax Department. The court emphasized that if a document is presented for registration in compliance with the provisions under the Registration Act, the Sub-Registrar cannot deny the registration of the same unless there is an interim order from a competent Court restraining him from registering the document. The grounds for denial should be within the frame of provisions of the Registration Act and Rules framed thereunder, particularly on the grounds enunciated under Rule 55, such as if the document is forged, impersonation by the parties, if the executing party is a minor or a lunatic, etc.Conclusion:The court concluded that the order of attachment cannot be a bar to register the document and allowed the writ petition. The Sub-Registrar, Puducherry, was directed to register the Sale Certificate dated 12.01.2016 issued by the petitioner and to release the registered document within a period of two weeks from the date of receipt of a copy of this order. Consequently, the connected Miscellaneous Petition was closed with no costs.