TaxTMI 
TaxTMI 
2016 (7) TMI 935
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....) (Respondent No. 2) in favour of the Petitioner transferring title of the ground floor of the property in question. In the alternative, the Petitioner has prayed for a direction to IDBI to refund the entire amount paid by the Petitioner as consideration for the ground floor of the property in question. 2. The background to the present petition is that one Mr. Shiv Sareen purchased the property in question on 25th January 2008. On 2nd March 2009, Mr. Sareen, through his proprietary concern M/s Krishna Designers, mortgaged the ground floor of the property in question to IDBI and sought a cash credit limit of Rs. 4.95 crores. Further on 28th May 2010, a credit limit enhancement was sought by additionally mortgaging the basement of the property in question, thereby taking the total loan exposure to Rs. 7.5 crores. 3. On the default of loan payments by M/s Krishna Designers, IDBI issued a notice dated 24th May 2012 to Mr. Sareen under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act"). 4. On 25th November 2013, the TRO issued the impugned order attaching the property in question in respect of arr....
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.... and Rs. 10,06,080 for the arrears of tax dues of Mr Sareen for Assessment Years (AYs) 2009-10 and 2010-11 respectively. On 13th April 2015 the balance sale consideration of 75% of the bid amount totalling Rs. 1,13,96,000 was credited by the Petitioner to the account of IDBI by RTGS. IDBI charged interest @ 15.25% amounting to Rs. 1,30,293 on account of the delay in payment. 11. On 21st April 2015 a sale certificate under the SARFAESI Act in respect of the ground floor of the property in question was issued by the IDBI in favour of the Petitioner. Physical possession of the property in question was handed over to the Petitioner on the execution of sale deed. Under the column "List of encumbrances" appearing in the sale certificate, it was stated: "Nil as per knowledge of the authorized officer". However, by this time the IDBI was aware of the attachment order of the Income Tax Department (ITD) but failed to mention it. 12. On 30th April 2015 the Petitioner was handed over the original chain documents in respect of the ground floor of the property in question by the IDBI. On 22nd May 2015 the Petitioner and a representative of the IDBI approached Respondent No. 3 for registration....
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....2016. With the numerous representations yielding no result, the Petitioner filed the present writ petition in which notice was issued on 25th April 2016. 16. No counter-affidavit was filed by the ITD despite four weeks" time being granted. At the request of learned counsel for Respondents 1, 4 and 5, a final opportunity was granted on 1st June 2016. A counter affidavit of the ITD was handed over at the time of hearing. 17. This Court has heard the submissions of Mr. Prasouk Jain, learned counsel for the Petitioner, Mr. Ashok K. Manchanda, learned Senior standing counsel for Respondent No. 1, Mr. Sanjay Bhatt, learned counsel for IDBI and Mr. Satyakam, learned Additional standing counsel for Respondent No. 3 respectively. 18. Mr. Prasouk Jain submitted that Section 35 of the SARFAESI Act was a non-obstante provision that would override anything to the contrary in any other law. This included Section 281 (1) of the Income Tax Act, 1961 ("IT Act"). He pointed out that notice under Section 13 (2) of the SARFAESI Act was issued on 24th May 2012 prior to the attachment order issued by the ITD. Relying on the decision in Transcore v. Union of India (2008) 1 SCC 125 he....
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....ch is res integra." 21. The short question is whether the notice issued under Section 13 (2) of the SARFAESI Act by IDBI on 24th May 2012 tantamounts to an attachment and would get precedence over the attachment of the property in question by the ITD by its order dated 25th November 2013. 22. Section 13 (2) and Section 35 of the SARFAESI Act read as under: "13(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-Section (4). xxxx xxxxx xxxxx 35. The Provisions of this Act to override other laws The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time be....
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....e assets of the MSL was under attachment of the ITD and that ITD had already filed an affidavit of proof of debt before the Official Liquidator ("OL") on 16th September 2009. The ITD claimed that its dues should be exhausted before the assets could be brought to sale by ARCIL. A writ petition was thereafter filed in the Gujarat High Court by ARCIL seeking a declaration that the claim of the ITD for priority of realization of the income tax dues was contrary to law. 24.3 To begin with, Gujarat High Court referred to an earlier decision of its Division Bench in Baroda City Cooperative Bank Limited v. State of Gujarat 2010 (3) GLR 2132 where after analysis of several decisions of the Supreme Court, the legal position was summarised as under: "16. From the judgments referred to above, it will be evident that - (a) The arrears of tax due to the State can claim priority over the unsecured debt. (b) If first charge by way of priority is not claimed under the statute, the said doctrine is not applicable. (c) Normally the doctrine of first charge/priority of State will prevail over the private debt which is an unsecured debt. (d) In normal course, the doctrine of first charge/priority....
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....ained the legal position as under: "39. The first thing to be noticed is that the Income Tax Act does not provide for any paramountcy of dues by way of income tax. This is why the Court in Dena Bank v. Bhikhubhai Prabludas Parekh and Co. (2000) 5 SCC 694 held that Government dues only have priority over unsecured debts and in so holding the Court referred to a judgment in Giles v. Grover (1832) 9 Bing 128 in which it has been held that the Crown has no precedence over a pledgee of goods. In the present case, the common law of England qua crown debts became applicable by virtue of Article 372 of the Constitution which states that all laws in force in the territory of India immediately before the commencement of the Constitution shall continue in force until altered or repealed by a competent legislature or other competent authority. In fact, Collector v. Central Bank of India AIR 1967 SC 1831 after referring to various authorities held that the claim of the Government to priority for arrears of income tax dues stems from the English common law doctrine of priority of Crown debts and has been given judicial recognition in British India prior to 1950 and was therefore, "law in force"....