Income Tax Department attach property prior to mortgage: Orissa HC directs to raise plea before DRT [Read Order]

Orissa High Court (HC) tried four Revision Petitions and among two from Income Tax Department (ITD) directed the ITD and parties to raise a plea before the Debt Recovery Tribunals (DRT).

The bench of Justice Jaswant Singh and Justice M.S. Raman clubbed all the review petitions together as they involved a common question of law and hence decided together.

All the review petitioners herein are aggrieved against the common judgment dated 29.06.2022 passed by this Court and therefore seek review of the same.

S.P. Mishra, Counsel for the Review Petitioner No.1 & 3 i.e. M/s. Maa Kalika Bhandar and M/s. Maa Dwarikamayee Bhandar contended that a challenge to the auction sale of the immovable properties mortgaged by M/s. Maa Kalika Bhandar was made by one Sidhant Narayan Singh Deo before DRT.

Further, it is pertinent to mention that originally the disputed/mortgaged property stood in the name of Hitendra Pratap Singh Deo and one of his sons Sourendra Narayan Singh Deo inherited the property. Subsequently sold the property to Mr. Jay Kumar Jajodia Review Petitioner No.3 (partner in the petitioner firm M/s. Maa Kalika Bhandar).

Sidhant Narayan Singh Deo, son of Sourendra Narayan Singh Deo (vendor of the partner of the petitioner) filed a case before the DRT to quash the entire securitization proceeding and the successful auction.

However, the common judgment wrongly mentions the petitioner M/s. Maa Kalika Bhandar to have moved before the DRT. Further contended that the common judgment wrongly mentioned that the mortgaged property M/s. Dwarikamayee Bhandar and Another  have been successfully auctioned.

The counsel further asserted that the properties in Writ Petitions were attached by the Income Tax Department prior to their mortgage in favour of the Bank and hence the mortgage is void in terms of the provisions under section 281 of the Income Tax Act, 1961. Hence, the findings in the common judgment needs to be revisited.

T.K. Satapathy, counsel for Income Tax Department in the revision petition filed also contended as same as the counsel of the M/s. Maa Kalika Bhandar and M/s. Maa Dwarikamayee Bhandar that the mortgage is void in terms of provisions under section 281 of Income Tax Act as it was attached prior to the mortgage.

After hearing all the contentions of the review applicants, the court observed that M/s. Maa Kalika Bhandar had not approached the DRT to challenge the action of the Secured Creditor/Bank, the validity of the order passed by the District Magistrate under Section 14 of the Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 (SARFAESI).

The HC rejected M/s. Dwarikamayee Bhandar’s contention that the applicant- petitioner’s independent right to approach the Tribunal is unaffected by whether or not the mortgaged property presented as a Collateral Security was sold.

The bench mentioned that the Secured Creditor/Bank would be equally free to stress the impact of Section 26(E) and Section 31(B) of the SARFAESI Act, 2002 as being the priority of the claim.

Support our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.