Janata Sahakari Bank Ltd. v. Tax Recovery Officer (2021) 204 DTR 401 / 322 CTR 162 (Mad.)(HC)

S. 281 : Certain transfers to be void-Transfer to defraud revenue-Mortgages-Pendency of recovery proceedings-Transaction or transfer became void-Doctrine of the priority of Crown debts-Disputed factors cannot be adjudicated by the High court in a writ petition. [S. 222, Schedule II Rule. 11, Recovery of Debts and Bankruptcy Act, 1983, S. 31B, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, S. 26E, Art. 226, 265, 268A]

The petitioner Bank challenged the recovery proceedings initiated by the Tax Recovery Officer under section 226 of the Act against the tax defaulter by filing the writ petition on the ground that the tax defaulter has  mortgaged the property to Bank and the Bank has the first charge on the mortgaged asset of the tax defaulter.  Dismissing the petition the Court held that the mortgages are made during the pendency of the income-tax proceedings hence transactions are  void under section 281 of the Act and any such mortgage or attachment made by Bank during pendency of the income tax proceedings, cannot be a ground to claim priority based on the provisions of the SAFAESI Act or DRT Act. Court also held that the disputed  facts cannot be adjudicated by the High Court under writ jurisdiction, and it is for the petitioner  Bank to establish the details regarding the mortgage and the pendency of income tax proceedings by filing an appropriate application under Schedule II Rule 11 of the Rules.

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