Case Law Details
Standard Charted Bank Vs Tax Recovery Officer-3 (Madras High Court)
In a recent judgment by the Madras High Court, involving Standard Chartered Bank and the Tax Recovery Officer-3, a complex legal battle concerning property rights, auction procedures, and creditor priorities was meticulously examined. This case, marked by its writ petition filed against an order dated 28.06.2019, sought clarification on the lifting of an attachment order on property records, revealing intricate legal nuances governing financial and property disputes.
Case Overview: Standard Chartered Bank challenged an attachment order on a property auctioned by the Income Tax Department. The court’s intervention was sought to clarify the legal standing of the bank as the first charge holder against the property sold to recover tax dues. The property in question was auctioned, and subsequently, a dispute arose regarding the bank’s rights as the initial lienholder versus the Tax Recovery Officer’s actions.
Court’s Order and Reasoning: On 08.12.2023, the court directed Standard Chartered Bank to consider waiving interest on the amount mentioned in a demand notice to resolve the dispute amicably. The settlement involved the bank receiving payment and agreeing to issue a ‘No Due Certificate’, showcasing the court’s effort to mediate financial disputes efficiently.
Significantly, the court noted that the property was co-owned by a married couple, complicating the return of documents and necessitating an indemnity clause for further protection. This detail underscores the complexities involved in handling property owned by multiple parties, especially when entangled in legal and financial disputes.
Legal Implications and Outcome: The judgment clarified that upon settlement of the bank’s claim, the bank would have no rights over the property, enabling the Tax Recovery Officer to proceed with auctioning the property to recover tax dues. The court emphasized the orderly execution of such financial recoveries, ensuring that the primary creditor’s (the bank’s) dues are settled before the second charge holder (the Tax Recovery Officer) exercises rights over the property.
This case highlights the precedence of charge holders in asset liquidation processes, providing a precedent for handling similar disputes. It serves as a critical reminder of the legal framework governing secured transactions and the importance of adhering to procedural norms in executing recovery actions.
Conclusion: The Madras High Court’s decision in the Standard Chartered Bank vs. Tax Recovery Officer-3 case sets a significant precedent in property and financial law. It elucidates the hierarchy of rights among creditors and the procedural correctness required in auctioning properties to recover dues. This ruling not only resolves the immediate dispute but also offers guidance for future cases involving similar legal challenges, thereby contributing to the stability and predictability of financial and property rights jurisprudence.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This Writ Petition has been filed challenging the order passed by the 1st respondent dated 28.06.2019, seeking a direction to the 4th respondent (The Sub Registrar) to raise the order of attachment in the revenue records on the file of the 4th respondent.
2. When this matter was taken up for hearing on 08.12.2023, this Court passed the following order:
“……………
6. Considering the submissions made by learned counsel appearing on either side, in order to give quietus to the matter, this Court directs the Petitioner-Bank to consider the request of the 6th respondent, with regard to waiver of interest and to accept the amount mentioned in the demand notice dated 29.04.2023. The 6th respondent shall make the payment mentioned in the aforesaid notice, to the petitioner-bank, on or before 20.12.2023.”
3. Today, learned Senior Counsel for the 6th respondent (C.G.Sripriya) would submit that the amount has been quantified and the entire amount has been settled and the petitioner-bank is also inclined to issue ‘No Due Certificate’ and also ready to handover the documents.
4. However, it is pertinent to note that the 5th and the 6th respondents are husband and wife and the properties are in the name of both the 5th and the 6th respondent. This Court issued a notice to the 5th respondent (Srinivasan Mahesh) but it was returned with an endorsement as ‘left’. Therefore, learned Senior Counsel for the 6th respondent submitted that the 5th respondent may be directed to file an indemnity to the bank, in the event, if the 5th respondent not make claim with regard to the return of the documents to the 6th respondent.
5. The 6th respondent/wife purchased the property in the auction conducted by the Income Tax Department. Initially, the bank has questioned about the conduct of the auction by the 2nd (The Tax Recovery Officer-2) and 3rd respondent (The Tax Recovery Officer -1) stating that the first charge holder is only the petitioner and if at all, there is anything over and above available than to the petitioner, then the Income Tax Department will have the rights to recover their dues from and out of the balance amount. In the present case, initially, without settling the dues of the bank, the property was auctioned and the 6th respondent/wife purchased it. However, he would submit that the petitioner’s claim has also been settled. Thus, all the title deeds requires to be handed over only to the 6th respondent by the petitioner-bank.
6. Accordingly, this Court is inclined to direct the petitioner-bank to handover all the title deeds to the 6th respondent which were mortgaged by the 5th respondent, who failed to settle the Income Tax dues and therefore, the property was sold by way of auction sale by the Income Tax Department to recover the dues of the 5th respondent.
7. Now, the claim of the petitioner-bank has been settled. There is no dispute on the aspect that the petitioner is the first charge holder and the contesting respondent/Income Tax Department is the second charge holder. As on date, the dues of the petitioner-bank have been settled and the property has been sold in public auction conducted by the Income Tax Department in order to recover the dues of income tax payable by the 5th respondent. Since, the dues of the petitioner-bank have been settled, now the petitioner-bank will have no right over the property as on date of passing of this order. Certainly, the Income Tax Department can recover its dues by virtue of bringing the property for sale.
7.1 But what was happened in the present case was that before settling the dues of the petitioner-bank, the property was auctioned by the Income Tax Department as a second charge holder. No doubt, the petitioner-bank is the first charge holder. However, the Income Tax Department as a second charge holder can bring the property for sale in order to recover their
7.2 In the present case, there is no challenge made by the petitioner- bank, since the dues of the first charge holder have already been settled. Hence, as there is no challenge made by the petitioner-bank, the auction conducted by the respondent/Income Tax Department cannot be invalidated. At any cost, the 5th respondent cannot challenge the auction conducted by the respondent/Income Tax Department on the ground of deprival of right to the first charge holder.
In as much as the petitioner’s claim has been settled, no further orders are necessary in the present Writ Petition. Accordingly, the Writ Petition stands disposed of. No costs. Consequently, connected miscellaneous petitions are closed.
Author Bio
Whether thee same stand exists in the case of recovery of EPF ,ESI and Gratuity settlement due to labours.