Case Law Details
Section 35 of SARFAESI Act as referred earlier makes it clear that the provisions of this Act would override other laws and would have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. This non obstante clause shall not only prevail over any inconsistent instrument but also over other laws. Coupled with this, it is not disputed that Income Tax Act does not provide for any paramountcy of dues by way of income-tax as has been provided under other Acts like the ED Act, 1953, GT Act, 1958, Orissa Value Added Tax, 2004, Kerala General Sales Tax Act, 1963, Bombay Sales Tax, 1959 and Customs Act, 1962.
Full Text of the High Court Judgment / Order is as follows:-
The controversy in this case revolves around the primary or secured debt vis-a-vis Crown debt/State dues.
2. Opposite party no. 2, a public limited company was incorporated as such in the year 1995 under the Companies Act, 1956. Opposite party no. 3 is its chairman and opposite party no. 4 is its managing director and opposite party Nos. 5 to 7 are its directors. Opposite party no. 2 availed several credit facilities with effect from the year 1998 from State Bank of India as well as from other borrowers. It also took credit facilities from a consortium of banks consisting of State Bank of India, UCO Bank, State Bank of Bikaner and Jaipur, Oriental Bank of Commerce, Andhra Bank, Induslnd Bank and Allahabad Bank for carrying on its business. The total credit facilities availed by opposite party no. 2 from the consortium of lending banks at the time of filing of writ application stood at Rs. 602 crores out of which State Bank of India, for short, SBI alone had contributed Rs. 181.01 crores. In order to secure the abovenoted credit facilities, opposite party no. 2 from time to time duly created equitable mortgage of its immovable properties in favour of banks, the first of which was created on 10-7-1999 when title deeds in respect of Ac. 19.48 decimals of land belonging to opposite party no. 2 was deposited with SBI to secure Rs. 3.05 crores besides interest, costs and other charges. Such equitable mortgaged was further created/extended on 20-11-2003, 25-10-2008 & 8-12-2008 by deposit/constructive deposit of title deeds with SBI and on 8-4-2009 & 13-8-2010 by deposit/constructive deposit of title deeds with SBI as the leader of the consortium to secure credit facilities availed by opposite party no. 2 from time to time from SBI as well as other banks forming the consortium. The last of such deposit of title deeds for creating equitable mortgage was made on 28-3-2011 with SBI as the leader of consortium. According to petitioner no. 2, the abovenoted equitable mortgage covered a total area of Ac. 159.965 decimals of land. Memorandum of deposit of title deeds evidencing creation of equitable mortgage has been filed as part of Annexure 1 series to the writ application. However, opposite party nos. 2 to 7 failed to operate the loan accounts in terms of their contract with the lending banks, as a result of which, the said loan accounts were classified as NPA with effect from 22-10-2012. When there was no response to repeated requests and demand made by the consortium to regularise the loan accounts or to repay all the dues, majority of the consortium lenders including SBI recalled the advances by notice dated 5-2-2013 and called upon opposite party no. 2 to repay all their dues to the consortium by 16-2-2013 under Annexure 2 series. When again there was no response from the side of opposite party Nos. 2 to 7, SBI representing the consortium served demand notice dated 25-2-2013 under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, for short, SARFAESI Act, demanding payment of the entire dues with interest plus further interests and costs till payment within 60 days of receipt thereof. This notice dated 25-2-2013 has been filed as part of Annexure 2 Series to the writ application. Sometime thereafter, i.e., on 18-3-2013 vide Annexure 3, opposite party no. 1 served a notice on the Branch Manager of SBI, Panposh Branch calling upon him to appear in person at 4.30 PM. on 18-3-2013 and produce bank account details as well as details of land, building, factory building and other assets owned by opposite party Nos. 2 to 5 & 7 which might have been pledged with the bank in order to get loans. In response to Annexure 3, SBI immediately submitted the details of loan accounts, land and building standing in the name of the company (opposite party no. 2) and its directors as mortgaged to it vide Annexure 4, dated 18-3-2013. After getting the information under Annexure 4, opposite party no. 1 attached the immovable properties of opposite party no. 2 which stood mortgaged to the banks in order to secure the credit facilities availed from them and published the same in the daily Odia Newspaper Dharitri dated 30-3-2013 vide Annexure 5. A perusal of Annexure 5 would show that such attachment was done by the Income Tax Department since the assessee company (opposite party no. 2) failed to pay its income-tax dues to the extent of Rs. 12,13,59,877 plus interest. Such attachment order was passed prohibiting/restraining opposite party no. 2 from transferring or charging the above-mentioned properties in any way and it was made clear that no one can get any benefit under such transfer or charge. On coming to know about the attachment order under Annexure 5, SBI vide its letter dated 3-4-2013 under Annexure 6 informed opposite party no. 1 that the properties which have been attached by him on 30-3-2013 vide Annexure 5, have been mortgaged to SBI and other banks forming the consortium of which SBI is the leader in order to secure the credit facilities availed from them. Thus, consortium lenders have first charge over the said properties and such charge would continue to remain until all the dues are paid to the consortium banks. It was also made clear therein that the demand notice issued under section 13(2) of SARFAESI Act has already been served on 25-2-2013 and thus recovery process under SARFAESI Act has already been initiated. Since the banks forming the consortium have first charge over the mortgaged properties at least from 20-11-2003, the attachment of opposite party no. 1 under Annexure 5 should be subservient to the charge created in favour of the consortium of banks. According to petitioner no. 2, such information under Annexure 6 was submitted to opposite party no. 1 with a hope that the said authority would act in accordance with law, would realise the legal position and vacate the said illegal order of attachment suo motu. When opposite party no. 1 instead of withdrawing/vacating its illegal order of attachment dated 30-3-2013 under Annexure 5 tried to proceed further to realise the alleged income-tax dues of opposite party no. 2 by putting the abovenoted immovable properties mortgaged to the banks to auction, petitioner no. 1 filed the present writ application with the prayers to quash the attachment order under Annexure 5 and to direct opposite party no. 1 not to proceed against the secured assets of SBI and other consortium banks for recovery of income-tax dues of opposite party Nos. 2 to 7 in any manner whatsoever.
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