Post-notice mortgage and tax recovery attachment: transfer is ineffective against revenue, but not void ab initio by the recovery officer.

After service of notice under Rule 2 of the Second Schedule, the defaulter could not lawfully encumber the property without permission, and a mortgage created thereafter was ineffective against the revenue's attachment. The Tax Recovery Officer, however, had no power to declare that mortgage void ab initio, because the recovery scheme does not confer jurisdiction to conclusively annul a third-party transfer. The attached immovable property remained available for attachment and sale to satisfy certified tax dues, and the sale proceeds could be applied under the Second Schedule, with any surplus dealt with according to the separate rights of the private parties.

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Issues: (i) Whether the Tax Recovery Officer could declare a mortgage created after service of notice under the Second Schedule as void ab initio. (ii) Whether a mortgage created after service of notice under Rule 2 of the Second Schedule was invalid and ineffective against the revenue, including any claim of bona fide mortgagee protection. (iii) Whether the revenue could proceed with attachment and sale of the immovable property and apply the sale proceeds in accordance with the Second Schedule.

Issue (i): Whether the Tax Recovery Officer could declare a mortgage created after service of notice under the Second Schedule as void ab initio.

Analysis: The statutory scheme distinguishes between the recovery machinery under the Second Schedule and adjudication of title. Section 281(1) operates only up to service of notice under Rule 2, and Rule 16(2) makes a private transfer void only as against claims enforceable under the attachment. The recovery officer may investigate objections to attachment, but the scheme does not confer power to conclusively pronounce a third-party transfer void ab initio. The earlier principle that a transfer cannot be declared void by the recovery officer continues to apply to the extent the statute does not expressly enlarge that jurisdiction.

Conclusion: The declaration that the mortgage was void ab initio was unsustainable and was set aside.

Issue (ii): Whether a mortgage created after service of notice under Rule 2 of the Second Schedule was invalid and ineffective against the revenue, including any claim of bona fide mortgagee protection.

Analysis: Once notice under Rule 2 is served, Rule 16(1) disables the defaulter or his representative in interest from mortgaging or otherwise dealing with the property without permission of the Tax Recovery Officer. The mortgage here was created after service of such notice, and no permission had been obtained. The proviso to Section 281(1), including protection for transfers for adequate consideration and without notice, was inapplicable because the transfer was post-notice. The mortgage therefore could not prevail against claims enforceable under the recovery attachment, although it was not treated as void in an absolute sense.

Conclusion: The mortgage was not protected against the revenue's recovery claims and could not be relied upon to defeat the attachment.

Issue (iii): Whether the revenue could proceed with attachment and sale of the immovable property and apply the sale proceeds in accordance with the Second Schedule.

Analysis: The Second Schedule authorises recovery by attachment and sale after service of notice and lapse of the prescribed period. Rule 51 gives attachment retrospective effect from the date of service of notice, and Rule 16(2) preserves the attachment against private transfers to the extent of enforceable claims. The property therefore remained available for recovery of tax arrears, while any surplus after satisfaction of the certificate was to be dealt with according to the final outcome of the independent dispute between the private parties.

Conclusion: The revenue was entitled to proceed with sale and appropriate the sale proceeds towards the certified dues, with any surplus to be dealt with as directed.

Final Conclusion: The impugned order was interfered with only to the limited extent of striking down the recovery officer's declaration that the mortgage was void ab initio, while the statutory recovery process against the attached property was otherwise sustained.

Ratio Decidendi: After service of notice under Rule 2 of the Second Schedule, the defaulter cannot validly encumber the property without permission, but the tax recovery officer has no power to declare the resulting transfer void ab initio; such transfer operates only subject to the claims enforceable under the recovery attachment.

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