TMI Blog2013 (8) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... d Corporation and a Financial Institution governed by The State Financial Corporations Act, 1951 (for short, the SFC Act ) sanctioned a term loan of Rs.1,25,00,000/- to M/s. Veekay Developers Pvt. Ltd. to establish a Luxury Hotel at Sy. No.32-2A, Bangra Kulur Village, Mangalore City, on 13.09.1995, which term loan was transferred to V.K. Clubs and Homes Pvt. Ltd. By way of security, the borrower M/s. V.K. Clubs and Homes Pvt. Ltd., created an equitable mortgage by deposit of title deeds, the portions of land and building i.e., measuring about 4390 Sq. feet on the ground floor; 2100 Sq. feet on the first floor; 3515 Sq. feet and 1020 Sq. feet on the third floor; about 18,435 Sq. feet on the 4th, 5th and 6th floors of the Commercial building, together with common facilities thereof, situate at Sy. No.32/2A of Bangra Kulur Village, Mangalore. By way of further security, the said borrower created equitable mortgage over free hold rights in three shops measuring about, 325 Sq. feet; 115 Sq. feet and; 535 Sq. feet, respectively, in all, measuring 975 Sq. feet, with common facilities, in the building on land bearing Sy. No.32/2A, Bangra Kulur Village, Mangalore. The additional loan of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner to enforce the liability under Section 31(1)(a) and (aa) of the SFC Act for recovery of Rs.8,79,82,220/- together with interest at 22.5% per annum from 16.09.2007 until realization and further sum of Rs.4,62,75,763/- together with interest at 21% per annum from 16.09.2007 until realization. 6. It is the allegation of the petitioner that efforts to recover its dues by selling the assets and adjusting the proceeds, is thwarted by the Income-tax department in not issuing a no-objection certificate to the petitioner to go ahead with the sale of the said properties, on the premise, that expert legal opinion suggests that tax payable by the assessees is prior in point of time to the execution of the mortgage deeds in favour of the petitioner, followed by an order of attachment, the Income-tax department and hence a priority charge in the matter of recovery of debts as indicated in the letter dated 14th July 2011 Annexure 'J'. 7. Hence, this petition for the following reliefs: a) issue a Writ of Mandamus directing the Respondents to lift the attachment in respect of Properties bearing No.32/2A, Bangra Kulur Village, Mangalore. b) issue a Writ of Mandamus restr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest between a secured creditor and an unsecured creditor and not a question that arose for consideration in that petition, which reads thus: Whether realization of the duty under the Central Excise Act will have priority over the secured debts in terms of the State Financial Corporations Act, 1951 (for short the SFC Act )? In that view of the matter the decision in Somasundaram's case has no application, more so since the present case is not one of conflict with secured and unsecured creditor. 11. Learned counsel for the Revenue places reliance upon the decision of the Apex Court in Central Bank of India Vs. State of Kerala and Others (2009) 4 SCC 94, more appropriately, at paragraph 172 onwards. The question that arose for decision making in that case was: Whether Section 38-C of the Bombay Sales Tax Act, 1959 (the Bombay Act) and Section 26-B of the Kerala General Sales Tax Act, 1963 (the Kerala Act) and similar provisions contained in other State legislations by which a first charge was created on the property of the dealer or such other person, who was liable to pay sales tax, etc. were inconsistent with the provisions contained in the Recovery of Debts Due t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. It was further held that if Parliament intended to create first charge in favour of banks, financial institutions or other secured creditors on the property of the borrower, in priority, over the first charge created under State legislations, then it would have incorporated provisions similar to those contained in Section 14-A of the Workmen's Compensation Act, 1923, Section 11(2) of the EPF Act, Section 74(1) of the Estate Duty Act, 1953, Section 25(2) of the Mines and Minerals (Regulation and Development) Act, 1957, Section 30 of the Gift Tax Act and Section 529-A of the Companies Act, 1956 and ensure that notwithstanding series of judicial pronouncements, dues of banks, financial institutions and other secured creditors should have priority over the State's statutory first charge in the matter of recovery of the dues of sales tax, etc. There being no provision incorporated either in the DRT Act or Securitisation Act, it was held that it was not possible to read any conflict or inconsistency or overlapping between the provisions of the DRT Act and the Securitisation Act, on the one hand, and Section 38-C of the Bombay Act and Section 26-B of the Kerala Act, on the other, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eates a prior charge over the assets of the assessee even though there is a provisional attachment order issued under Section 281B of the Act. 17. Interestingly, it must be noticed that the Tax Recovery Officer in the letter dated 27.01.2006 Annexure 'F', by way of a reply to the notice dated 06.05.2005 of the petitioner through its learned counsel, conceded to the fact that petitioner had a prior charge over the immovable properties and that the Income-tax department be treated as the second mortgagor (to be read as mortgagee). Though the learned counsel for Revenue submits that the Tax Recovery Officer's opinion would not change the statutory provisions, I am not impressed by that submission in the light of the view supra. Tax Recovery Officer's opinion is valid and not the opinion of the Commissioner of Income Tax in his letter dated 14.07.2011 Annexure 'J'. 18. In the result, this petition is allowed in part. The order of the Tax Recovery Officer attaching property bearing No.32/2A of Bangra Kulur Village, Mangalore, mortgaged in favour of the petitioner is quashed and the respondent - Income-tax authorities are restrained from interfering with the process of sale of immo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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