Allowing the petition against the tax recovery certificate issued by the Tax Recovery Officer, the Court held that since the mortgage to the bank was prior to the attachment of the property in question by the Department, the orders of attachment were quashed. The 1961 Act has not provided any first charge of its debts. But there is a first charge over the bank’s debt under the 2002 Act and the amendment of section 26 of the 2002 Act is applicable to pending lis. Therefore, even though it was a statutory duty to attach property by the Department, as and when the bank claimed and exercised its first charge over the property, the Department was liable to issue a no-objection certificate and also lift the attachment. Consequently, the Tax Recovery Officer was directed to lift the attachment and the Sub-Registrar was to strike the name of the Tax Recovery Officer from the encumbrance certificate with respect to the property in question. (AY. 2008-09 to 2012-13)
City Union Bank Ltd v. Tax Recovery Officer (2024)463 ITR 291 (Mad)(HC)
S. 226 : Collection and recovery-Modes of recovery-Attachment of property-Bank-Enforcement of security interest-Priority of debts-Property mortgaged to bank before attachment by Department Bank taking possession of property-Order for attachment of property is quashed-Tax Recovery Officer is directed to lift attachment and Sub-Registrar to strike name of Tax Recovery Officer from encumbrance certificate.[S. 281, Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002, S. 26, Art. 226]