Allowed

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

Telangana HC21 Jul 2022WP/25737/2022

Case brief

AI extract

What is this about?

The High Court of Telangana allowed a writ petition seeking a direction to the Sub-Registrar to register a sale deed issued under the SARFAESI Act. The Court held that Income Tax recovery letters and prohibitory lists cannot impede the registration of properties auctioned under SARFAESI Act due to priority of secured creditors.

What did the court decide?

Directed the Sub-Registrar to receive and register the sale certificate submitted by the petitioner Bank.

State Bank of India Vs Union of India and 3 others — Cheque Dishonour | Telangana HC (2022)

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HIGH COURT FOR THE STATE OF TELANGANA^{AT HYDERABAD} (Special Original Jurisdiction)

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THURSDAY,THE TWENTY FIRST DAY OF JULY TWO THOUSAND AND TWENTY TWO

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PRESENT

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THE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURABLE MRS JUSTICE SUREPALLI NANDA

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WRIT PETITION NO: 25737 OF 2022

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Between:

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State Bank of lndia, Stressed Assets Management Branch-ll^(SAMB-Il), D.No.34-10131A, 1St Floor, Community Amenity Centre, TSRTC Bus Station, Kachiguda, Hyderabad, represented by its Assistant General Manager/ Authorised Officer.

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...PETITIONER

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AND

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1 Union of lndia, Ministry of Finance, Represented by its Secretary. Rajpath Marg, E-Block, Central Secretariat, New Delhi-1 10 011.

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2 The Sub Registrar, Chikkadpally, Hyderabad.

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The lncome Tax Recovery Officer - 2, Room No.610, 6th Floor, Signature Towers, Kondapur, Hyderabad-500 084.

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M/s.Good Health Agro Tech Private Limited, Rep. by its Managing Director, 1- 8-663, Azamabad lndustrial Area, Azamabad, Hyderabad.

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...RESPONDENTS

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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

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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 lncomeTax} Act, 1961 by the Respondent No.3 to the^{RespondentNo.2 and Letter} Lr.No.357/2002 dated 28.05.2022 addressed by the^{RespondentNo.2 to the} Petitioner Bank, as contrary to law and the^{provisionsof 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,holdingthat the said} proceedings are not binding the Petitioner Bank in transferring and registering the property viz. Residential Building consisting of Ground^(PLUS) 3 Upper^Floorson Plot No.A-9 (01d), new M.No.1-2-412112, admeasuring^{800Sq.Yards,situated at} Gagan Mahal Co-Operative Development^{Society Limited,Domalaguda,} Hyderabad, in favour of the^{AuctionPurchaseras per the proceedings of the} SARFAESI Act, 2OO2 in accordance^{with law in the interestof justice}

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IA NO: 1 OF 2022

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Petition under section^{151 CPC prayingthatin the circumstances statedin} theaffidavitfiledinsupportofthepetition,theHighCourtmaybepleasedtodirect RespondentNo.2toreceivethesalecertificatetobesubmittedbyPetitionerBank for transfer of^{property viz. Residential Building consistingof Ground (PLUS)3} Upper Floors^{on Plot No.A-9 (Old), new M'No1-2'412112'admeasuring800} Sq.Yards,^{situatedat Gagan Mahal Co-Operative Development SocietyLimited'} 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 LetterF'No'TRO/TRCNo'2O7t2O14-15 dated12'09'2016} addressed^{by the RespondentNo 3 and the prohibitorylist maintainedby the} Respondent^{No.2' on complyingwith the otherprovisionsof the Registration Act'} 1908, in the^{interest of} iustice'

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Counsel^{for the Petitioner:SRl' G PRABHAKAR SARMA}

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counser^{for the RespondentNo 1: MR D. MukherieeLearnedcounsel Rep'} NAMAVARAPU^{RAJESHWAR RAO(ASSGI)} Counsel^{for the RespondentNo 2 : SRI' PARSHA ANANTHA NAGESHWAR} RAO^{SPL.GPFOR GP FORSTAMPS ANDREGISTRATION}

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Counsel for the Respondent No 3 : Ms . K.Mamatha^Choudary, (SC for INCOME TAX)

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Counsel for the Respondent No 4 : NONE APPEARED The Court made the following: ORDER

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THE HON'BLE THE CHIEF JUSTICE UJJAL^BHUYAN AND

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THE HONOURABLE MRS JUSTICE SUREPALLI NANDA

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WRIT PETITION No.25737 of 2022

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ORDER:^(Per the Hon'ble the Chiel Jttstice^{UjictlBhultanl}

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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

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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.

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) ;/a^ji.:.'t / L']r'.1) .'9 -1...-1,']L,l .) !)-1.;

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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.

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Alleging del'ar.rlt b1 the 1t;1 respondent in payment of the loan amount, petitioner herein instituted

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3 HCJ & SNJ W.P.No.25737 of 2022

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O.A.No.602 of 2Ol4 under^{Section 19 of the 1993Act} before the Debts^{Recovery Tribunal-I, Hyderabad'} Subsequently the original^{applicationwas transferredto} the Debts Recovery Tribunal-ll,^{Hyderabadwhere it was} re-numbered as^{O.A.No'1578 of 2017.The O'A' was} decreed on 02.08.20^{19 by holdingthat 4th respondent and} associated parties^{were jointly and severall-' liable to pay} the petitioner a sum^{of Rs.144,28,29,854.69with future} interest etc., from the^{date of filing the original application} till the date of realization.

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Petitioner also initiated^{proceedingsagainst the} 4th respondent under the^{SARFAESI Act whereafter the} subject property was^{put up forauction sale on} 26.1O.2020. 4th^{respondent assailed the steps takenby the} petitioner under the^{SARFAESI Act by filing securitisation} application under^{Section17 of the SARFAESIAct before} the Debts Recovery^{Tribunal-I, Hyderabad which was} registered as S.A.No.128^{of2O2O' Subsequently'} tA.No.t28^{of 2O20 was dismissedon u'ithdrau'alby the}

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I i-1'CJ & .SN.,r tV.P.Nc.25737 of 2O22

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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-.

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At this sr.age, learned counsei ibr the petitioner ciarifies that income tax unpaid dues are of the 4rl respondent whereas the auctioned property was of the

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HaJ & S/{J W.P.No.25737 of 2022

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)

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guarantor of the 4th respondent^{and not of the4th} respondent himself.

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7 . Be that as it may, the^{issue raisedin this writ} petition is covered by a division bench^{decision of this} Court dated 27.O7.2021^{passed in W.P.No.2O646ol 2020,} State Bank of India v.^{Union of tndia. In the said writ} petition, this Court has^{heldas follows:}

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"2g. A Division tlench of this Court to^{which one of us} (Justice M.S. Ramachandra^{Rao) was a memberhad} held in the decision in^{State Bank of India (1 supra)} that after the advent of^{Section 26-E r/w Section35 of} the SARFAESI Act,^{2OO2and alsoSection31-B of the} Recoverv of Debts and^{Bankruptcy Act, 1993 (inserted} by Section 249 of^{Y Scheduleto the IBC, 2016),secured} creditors like the^{petitioner-Bankhave priority over the} dues of Central Government or^{StateGovernment} Authorities such as^{ServiceTax/IncomeTax duesand} that thc non obstante^{clausc therein will overridc the} provisions of the Finance^{nct' 1994 or the lncomeTa-x} Act, 1961.

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This^{legal positionis not disputedby Sri K'Raji} Recldl', learnecl^{SpecialStanding Counsel forthe} Commercia-l^{'l'a-'i Department (3'n respondcnt)or} Ms. Mamatha Choudary,^{learned SeniorStanding} counsel for the^{Income Tax Department(4th respondcnt)'}

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l/(r,/ a iil.. / W. P.No.25737 cf )A2-)

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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<l proceedings P'.No.TRO/TRC lIo.2O7 /2O14-tS dt.09.09.2O 16 issueci b;, r.he 4,i, rcsponcicnt eic b{)i 1r scr asicle; and a Writ of Manrlarmus rs issucd dirccting thr. 2nJ respondent to receive the sale dced submjttcd b-v rhc petidoner Bank for transfer of property viz., commercial unit bearing D.No.12- 10 with land adrneasuring Ac.0.25 gts in Sy.No.657 of Satamrai r.illa51e, Sharnsh:rbad Mandal, Ranga Redd1. llistr.;ct, rn favour of titr., zrrrcrxl.r purchaser as per the sale certificate issuecl undi:r the: pro,zisions of the SARFAESI Act, 2rJO2, rLnd register it within four (04) weeks of such presentation of sa.le deed by them, if it is otherwise in conlormity ..,vit l.r thr: Sramp Act, 1899 and rhe Registration Act,lg0rl lrr. r;ollccting thc applicable stamp duty and Rcgi_stratron c;harges, without raising a plee. that the land is agricr-rltural land, and without ref.erence to the letter Rc.No.3695O2l7l84/ 2016-17 dt.Os.lO.2Ol6 adclresscd b, 3,.i rcspondent to the 2^c respondent or arLachmcnt ordcr F.No..l.RO/.f R(No.2O7 /2014-15 dt.Oq_Og.2C l6 issued by ul,rl respondent, and the prohibitory list maintained by 2.a respondent. No costs."

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B. Accordingly ancl in the light of the .rbove. 2,rrr responcient is directed to take on board the sale certilicate dated 22.01.202 I issued by the petitioner and thereafter

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H(-U & .SNJ W.P.No.25737 of 2022

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take steps for its registration^{makingit clear that the letter} of the^q''r respondent dated^{12.O9.2O16would not come in} the way of such acceptance^{and registration.Petitioner} shall submit the sale certificate^{before the 2"d respondent} within seven days lrom today whereafter^{2"d respondent} shall do the needful within^{four (04) weeks thereafter in} accordance with law.

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I . Writ Petition is accordingly allowcd.^Hou'ever,

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there shall be no^{orderas to costs.}

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1n 10. Miscellaneous applications^{pending, if any'}

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this Writ Petition shall stand^closed.

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-.-

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SD/.T.KRISHNA KUMAR DEPUTY REGISTRAR