Alternative remedy declined and revenue recovery barred where transfer discharged a bank's prior charge without proof of fraud.

A writ challenge to revenue recovery was discussed in relation to alternative remedy, Rule 285N of the U.P. Z.A. & L.R. Rules, 1952, and section 34 of the U.P. Trade Tax Act, 1948. The commentary states that the alternative-remedy objection was declined because the dispute was purely legal and no statutory fact-finding was needed, while Rule 285N was treated as inapplicable because no confirmed sale under that rule had occurred. It further explains that a transfer made after release of a bank's charge to discharge secured dues was protected under section 34(2), which was treated as overriding section 34(1); absent proof of fraud, the revenue could not proceed against the transferee's property.

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Issues: (i) Whether the writ petition was liable to be rejected on the ground of alternative remedy and in view of Rule 285N of the U.P. Z. A. & L.R. Rules, 1952; (ii) Whether the transfer of the property, effected after release of the bank's charge, was protected from recovery action by the revenue under section 34 of the U.P. Trade Tax Act, 1948.

Issue (i): Whether the writ petition was liable to be rejected on the ground of alternative remedy and in view of Rule 285N of the U.P. Z. A. & L.R. Rules, 1952.

Analysis: The objection of alternative remedy was declined because the matter had already been pending for years, pleadings were complete, the dispute was purely legal, and no disputed facts required a statutory forum. Rule 285N was held inapplicable because the property had been attached after the petitioner's purchase and no confirmed sale under that rule had taken place.

Conclusion: The alternative-remedy objection and the reliance on Rule 285N were rejected.

Issue (ii): Whether the transfer of the property, effected after release of the bank's charge, was protected from recovery action by the revenue under section 34 of the U.P. Trade Tax Act, 1948.

Analysis: A charge had been created in favour of the bank long before the impugned sale deed, and the bank's letters and the registrar's certificate showed that the charge was released only upon payment made under the settlement. The Court held that section 34(2) overrides section 34(1), and that the expression "in favour of" in section 34(2) is wide enough to cover a transfer made for the sole benefit of the banking company to discharge its secured dues, even if title was not first taken in the bank's own name. The transfer was therefore insulated from the revenue's recovery proceedings. The Court further held that, in any event, the material did not establish fraud so as to justify treating the transaction as void ab initio, and the revenue could not proceed directly against the petitioner's property.

Conclusion: The petitioner's purchase was protected, and the revenue could not recover its dues from the petitioner or the property-in-dispute.

Final Conclusion: The writ petition succeeded, and the revenue authorities were restrained from proceeding against the petitioner's assets or the property purchased by it, while their remedy against the defaulting assessee remained unaffected in law.

Ratio Decidendi: Where a property is subject to a prior charge in favour of a banking company and the transfer is made to realise or discharge that secured debt, the statutory protection in favour of the banking company prevails over the revenue's claim, and the non obstante clause excludes the operation of the fraud-based exception meant for other creditors.

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