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2021 (4) TMI 1368 - HC - Indian LawsRemoval of attachment - certain transfers to be void or not - first charge over the properties in view of Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - HELD THAT:- When it is established that the earliest demand notice under the IT Act with reference to the assessment years 2012-13 and 2013-14 was issued by the Income Tax Authorities on 31.03.2015 prior to the mortgage executed in favour of the petitioner-Bank on 27.01.2016 and 06.02.2016, the provisions of Section 281 of the IT Act would be applicable and the question of priority would not arise, in view of the fact that once the provision of Section 281 of the IT Act is applied, then the said transfer become void ab initio and the mortgage or transfer made thereafter is consequently void. Such transfers are to be construed as fraudulent transfers or mortgage and therefore, the mortgage in favour of the petitioner-Bank cannot be held as valid in the eye of law and since it is held as invalid, the question of invoking Section 26E of the SARFAESI Act would not arise at all. In view of the facts and circumstances that the earliest demand notice at the first instance issued by the Income tax Department on 31.03.2015 is not disputed, it is to be construed that the proceedings under the IT Act for recovery of tax dues were pending on the date, i.e., 31.03.2015 and therefore, any transfer made thereafter is hit by the provision of Section 281 of the IT Act and all such transfers are void and therefore, the subsequent mortgage became consequently invalid in the eye of law and therefore, the application of SARFAESI Act would not arise at all. Further, the scope of Section 26E of the SARFAESI Act is relatabe to the priority and the priority would arise only if more than one person could able to establish the right over the property and in the present case, when there is no right to mortgage was vested with the assessees, the question of priority would not arise at all. When the assessee has no right to mortgage the property purchased, then the Bank cannot accrue any right to deal with the mortgaged property or to claim priority based on the provision of Section 26E of the SARFAESI Act. The petitioner could not establish any right to deal with the property and even in such cases where such right are claimed, the persons aggrieved has to approach the Income Tax Authorities under Schedule 2 Rule 11 of the IT Act and in the present case, the question does not arise as the transfer itself became void. Petition dismissed.
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