State Bank of India V. Union of India and 3 others

WP/25737/2022

AI Insights

The case involves the State Bank of India (petitioner) seeking a writ of mandamus to direct the Sub Registrar (second respondent) to register a sale certificate for a property auctioned due to default in loan repayment by M/s. Good Health Agro Tech Private Limited (fourth respondent). The property was auctioned under the SARFAESI Act, 2002, but registration was blocked due to a prohibitory list linked to income tax dues of the fourth respondent. The bank challenged this impediment, arguing it was contrary to the SARFAESI Act and the Recovery of Debts and Bankruptcy Act, 1993. The court referenced a similar case (W.P.No.20646 of 2020) where it was held that secured creditors have priority over government dues post the amendments to the SARFAESI Act and the Recovery of Debts and Bankruptcy Act.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 721524 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 21-07-2022
• Assessment Year: misc
• Other Referred Cases: State Bank of India v. Union of India
• Laws Referred To: Constitution of India, SARFAESI Act, 2002, Recovery of Debts and Bankruptcy Act, 1993, Income Tax Act, 1961, Registration Act, 1908
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: D MUKHERJEE; PARSA NAGESHWAR RAO; K CHOUDARY
• Assessee Lawyers: G SARMA
• Keywords: Auction Sale; Income Tax Dues; Prohibitory List; Sale certificate; Transfer of property; Writ of Mandamus
• Section: 226; 26(e); 31(b)

Judgement Text

"HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) THURSDAY,THE TWENTY FIRST DAY OF JULY TWO THOUSAND AND TWENTY TWO PRESENT THE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURABLE MRS JUSTICE SUREPALLI NANDA WRIT PETITION NO: 25737 OF 2022 Between: State Bank of lndia, Stressed Assets Management Branch-ll (SAMB-Il), D.No.3- 4-10131A, 1St Floor, Community Amenity Centre, TSRTC Bus Station, Kachiguda, Hyderabad, represented by its Assistant General Manager/ Authorised Officer. ...PETITIONER AND 1 Union of lndia, Ministry of Finance, Represented by its Secretary. Rajpath Marg, E-Block, Central Secretariat, New Delhi-1 10 011. The Sub Registrar, Chikkadpally, Hyderabad. 3. The lncome Tax Recovery Officer - 2, Room No.610, 6th Floor, Signature Towers, Kondapur, Hyderabad-500 084. 4. M/s.Good Health Agro Tech Private Limited, Rep. by its Managing Director, 1- 8-663, Azamabad lndustrial Area, Azamabad, Hyderabad. ...RESPONDENTS Petition under Article 226 of the constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High court may be pleased to issue an appropriate order, writ or direction more particularly one in the nature of writ of mandamus (a) directing the Respondent No.2 to receive the sare certificate to be submitted by the petitioner Bank for transfer of the property viz. Residential Building consisting of Ground (PLUS) 3 Upper Froors on prot No.A-9 (old), new M-No.1-2-412/12, admeasuring g00 sq.yards, situated at Gagan Mahar co-operative Deveropment society Limited, Domaraguda, Hyderabad, in favour of the auction purchaser as per the sare certificate issued under the provisions of SARFAESI Act, 2002, without reference to the Letter F. No. TRo/TRC .No.2o7 -2o 1 4-'r b dated 1 2.og.2o 1 6 addressed by the Respondent No'3 to the Respondent No.2 under rncome Tax Act, 1g61 and the prohibitory list 2 maintained by Respondent No.2, on complying with the other provisions of the Registration Act, 1908 and (b) declaring the Letter F.No.TRO/TRC.No-207-2014-15 dated 12.O9.2016 issued under lncome Tax Act, 1961 by the Respondent No.3 to the Respondent No.2 and Letter Lr.No.357/2002 dated 28.05.2022 addressed by the Respondent No.2 to the Petitioner Bank, as contrary to law and the provisions of Section 31-B of Recovery of Debts and Bankruptcy Act, 1993 and Section 26-E of the SARFAESI Acl' 2002 and consequently set aside the same, or in the alternative, holding that the said proceedings are not binding the Petitioner Bank in transferring and registering the property viz. Residential Building consisting of Ground (PLUS) 3 Upper Floors on Plot No.A-9 (01d), new M.No.1-2-412112, admeasuring 800 Sq.Yards, situated at Gagan Mahal Co-Operative Development Society Limited, Domalaguda, Hyderabad, in favour of the Auction Purchaser as per the proceedings of the SARFAESI Act, 2OO2 in accordance with law in the interest of justice IA NO: 1 OF 2022 Petition under section 151 CPC praying that in the circumstances stated in theaffidavitfiledinsupportofthepetition,theHighCourtmaybepleasedtodirect RespondentNo.2toreceivethesalecertificatetobesubmittedbyPetitionerBank for transfer of property viz. Residential Building consisting of Ground (PLUS) 3 Upper Floors on Plot No.A-9 (Old), new M'No1-2'412112' admeasuring 800 Sq.Yards, situated at Gagan Mahal Co-Operative Development Society Limited' Domalaguda, Hyderabad, in favour of the auction purchaser as per the sale certificate issued under the provisions of the SARFAESI Act' 2002' without reference to the Letter F'No'TRO/TRC No'2O7t2O14- 15 dated 12'09'2016 addressed by the Respondent No 3 and the prohibitory list maintained by the Respondent No.2' on complying with the other provisions of the Registration Act' 1908, in the interest of iustice' Counsel for the Petitioner:SRl' G PRABHAKAR SARMA counser for the Respondent No 1: MR D. Mukheriee Learned counsel Rep' NAMAVARAPU RAJESHWAR RAO(ASSGI) Counsel for the Respondent No 2 : SRI' PARSHA ANANTHA NAGESHWAR RAO SPL.GP FOR GP FOR STAMPS AND REGISTRATION Counsel for the Respondent No 3 : Ms . K.Mamatha Choudary, (SC for INCOME TAX) Counsel for the Respondent No 4 : NONE APPEARED The Court made the following: ORDER THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURABLE MRS JUSTICE SUREPALLI NANDA WRIT PETITION No.25737 of 2022 Heard Mr. G.Prabhakar Sarma, learned counsel for the petitioner; Mr. B. Mukherjee, learned counsel reprcsenting Mr. Namavarapu Rajeshwar Rao, learned Assistant Solicitor General of India for respondent No.1; Mr. Parsa Ananth Nageshwar Rao, learned Special Government Plcadcr for Stamps and Rcgistration for respondent No.2; and Ms. K.Mamata Choudary, learned Standing Counsel for Income Tax Department for respondent No.3 2. Considering the subject matter of the writ petition and the order which is proposed to be passed, issuance of notice to respondent No.4 is consjdered not neCe ssanr. ORDER: (Per the Hon'ble the Chiel Jttstice Ujictl Bhultanl ;/a ji.:.'t / L']r'.1) . '9 -1...-1,']L,l .) !)-1.; 3. By liling this petition under .irricle 226 ai titc Constitution of tndia, pcrtlior!cr. Sta:.e. B..urk oi India (SI]l), seeks a direction to the 2n,: res,yondeni :.o receive thc sale certificate of the petitioner for transie;- of the sub..l.cr propet't-v in favour of the au<;tion purcha._ser in lcrrns oI ihc sa-le certificate issued undci. thc Fi.ovisir.rns oi tlrr: Securitisation and Reconstruction of l.irr:;.:tcial Assets ani Enforcement of Security Ir.iteresi Acr. 2Ou2 (briei],y referred to hereinafter as the ,SARFAESI Act,). irr:rrtione i- funht:r seeks quashing of letter dated 12.09.20ie issiied by the f,.0 respondent under provisior-is of the Inccrme Ta.x Act, 1961 (briefly referred to hr:reinaiter as the ,Act,) ;lnd acidresseci io the 2,,9 respondent not to receive and register the sale certificate as illegal and contrary to rhe provisions of Section 3l -B of Reccvery of Debts aitcl Bankruptc-v Act. 1993 (briefly referred to hereinafter as rhe i1993 Act) and Section 26-E of the SARFAESI Act. 4. Alleging del'ar.rlt b1 the 1t;1 respondent in payment of the loan amount, petitioner herein instituted ) HCJ & SNJ W.P.No.25737 of 2022 O.A.No.602 of 2Ol4 under Section 19 of the 1993 Act before the Debts Recovery Tribunal-I, Hyderabad' Subsequently the original application was transferred to the Debts Recovery Tribunal-ll, Hyderabad where it was re-numbered as O.A.No' 1578 of 2017. The O'A' was decreed on 02.08.20 19 by holding that 4th respondent and associated parties were jointly and severall- ' liable to pay the petitioner a sum of Rs.144,28,29,854.69 with future interest etc., from the date of filing the original application till the date of realization. 5. Petitioner also initiated proceedings against the 4th respondent under the SARFAESI Act whereafter the subject property was put up for auction sale on 26.1O.2020. 4th respondent assailed the steps taken by the petitioner under the SARFAESI Act by filing securitisation application under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal-I, Hyderabad which was registered as S.A.No.128 of 2O2O' Subsequently' tA.No.t28 of 2O20 was dismissed on u'ithdrau'al by the 3 I i-1'CJ & .SN.,r tV.P.Nc.25737 of 2O22 Debts Recovery Tribunal-I. H-vderahad. Petitioner weht ahead vrith the auction sale rr-hereaJter tl.re subject property v.ras sold on 26.1O.2O2O ro one Sri Anrl R. Kanodia being the highest bidder for anr amouni of Rs.9.O4 crores, which amount has been paid by the auction purchaser. ?hereafter, petitioner issueci sale certificete on 22.01.2O2 in lavour of the auction purchaser. But r.r'hen steps for registration ol the sale certificate w-ere initiated, petitioner and the auction purchaser were informcd by the 2na respondent that 3.d responcient had informed the 2na responderrt on 12.09.2016 that for ciefault in payment of income tax dues, recovely proceedings u,er.e initiated by the Income Tax authorities against rl-le 4rh respondent. Therefore, the sale certificate of the subjecr property at the instance of the petitioner should not be registered-. 6. At this sr.age, learned counsei ibr the petitioner ciarifies that income tax unpaid dues are of the 4rl was of the I respondent whereas the auctioned property HaJ & S/{J W.P.No.25737 of 2022 guarantor of the 4th respondent and not of the 4th respondent himself. 7 . Be that as it may, the issue raised in this writ petition is covered by a division bench decision of this Court dated 27.O7.2021 passed in W.P.No.2O646 ol 2020, State Bank of India v. Union of tndia. In the said writ petition, this Court has held as follows: \"2g. A Division tlench of this Court to which one of us (Justice M.S. Ramachandra Rao) was a member had held in the decision in State Bank of India (1 supra) that after the advent of Section 26-E r/w Section 35 of the SARFAESI Act, 2OO2 and also Section 31-B of the Recoverv of Debts and Bankruptcy Act, 1993 (inserted by Section 249 of Y Schedule to the IBC, 2016), secured creditors like the petitioner-Bank have priority over the dues of Central Government or State Government Authorities such as Service Tax/Income Tax dues and that thc non obstante clausc therein will overridc the provisions of the Finance nct' 1994 or the lncome Ta-x Act, 1961. 30. This legal position is not disputed by Sri K'Raji Recldl', learnecl Special Standing Counsel for the Commercia-l 'l'a-'i Department (3'n respondcnt) or Ms. Mamatha Choudary, learned Senior Standing counsel for the Income Tax Department (4th respondcnt)' ) ,6 l/(r,/ a iil.. / W. P.No.25737 cf )A2-) 31. Accordingl_ ,, the Wrtt petition is ;rllowcri; procx.,eriings Rc.No.36950217 184 /20 16- tT dr.0S.lO.20i6 adcircssed by the 3d respondent to the 2^a respondent an