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TMI Blog2024 (3) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was moved on 22nd June, 2023. We reproduce below paragraph 4 from our order made that day. "4. Adjournment is granted to the parties and particularly opposite parties to demonstrate from impugned order that there has been a finding on date of creation of the equitable mortgage for the consequent finding that it was later." 4. Mr. Panigrahy hands up documents to demonstrate that equitable mortgage created by the borrower was on 29th March, 2016 duly registered. He relies on several judgments including of coordinate Bench. (i) Judgment of the Supreme Court in Tax Recovery Officer, Nagpur v. Gangadhar Vishwanath Ranade, reported in AIR 1999 SC 427. He relies on paragraph 9. (ii) Judgment of the Supreme Court in Connectwell Industries (P) Ltd. v. Union of India, reported in (2020) 5 SCC 373. He relies on paragraph 9. (iii) Order dated 2nd December, 2022 made by coordinate Bench in, inter alia, RVWPET no.156 of 2022, arising out of W.P.(C) no.26500 of 2021 (M/s. Maa Kalika Bhandar and others vs. the Collector and District Magistrate, Khordha and others). He relies on paragraph 9. 5. Mr. Panigrahy then relies on section 26-E of Securitization and Reconstruction of Financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n received from CERSAI under rule 83 of the Second Schedule. Such information carried date of creation of mortgage and hence, it cannot be said there was no finding regarding date of creation of mortgage in impugned order. Furthermore, rule 11 in the Second Schedule requires petitioner to prefer objection to the attachment made in execution of the certificate, for there to be investigation regarding the objection. He also relies sub-rule (6) in rule 11, which gives option to the objector to institute a suit in a civil Court to establish the right, on it rejected by the investigating officer. Mr. Panigrahy responds, by letter dated 26th April, 2022, objection was raised by his client pointing out that the certificate case was initiated on 23rd March, 2020. 9. Paragraph 9 from Gangadhar Vishwanath Ranade (supra) is reproduced below. "9. The Tax Recovery Officer, therefore, has to examine who is in possession of the property and in what capacity. He can only attach property in possession of the assessee in his own right, or in possession of a tenant or a third party on behalf of/for the benefit of the assessee. He cannot declare any transfer made by the assessee in favour of a thir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act and the corresponding relevant rules. It is his contention that the property was mortgaged in favour of the Bank on 28.06.2016 whereas the Income Tax Authorities had attached the same on 31.12.2015. Hence, the mortgaged transaction in favour of the Bank is void." (emphasis supplied) In above case, the borrower had moved the writ Court challenging enforcement for recovery by the mortgagee bank. Contention of the borrower was that the mortgage could not be enforced for recovery by the bank inasmuch as it was created after there was attachment under the Income Tax Act. Hence, by operation of provision in section 281, the mortgage was void. This challenge of the borrower was relegated to the Debts Recovery Tribunal (DRT), wherein the bank and the borrower had already initiated proceedings regarding recovery under the Act of 2002. However, petitioner here is the finance company, a secured creditor seeking interference as impugned order affects its interest of obtaining recovery under the mortgage. On query from Court, Mr. Panigrahy submits, recovery proceeding under the Act of 2002 had already been launched by his client. The borrower challenged the same in the DRT. Said chal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tood initiated by the Income Tax Department prior to the mortgage are serious questions of disputed facts, which cannot be decided in writ jurisdiction under Article 226. The Income Tax Department was well within its right to seek a declaration of transaction being void before the forum of appropriate jurisdiction before seeking its simple impleadment before this Court, which concededly has not been done till now. Therefore, relegating the parties to seek adjudication on this issue by our order cannot be faulted with by any stretch of reasoning. The Income Tax Department is also free to seek its remedy before the appropriate forum including DRT to establish by leading cogent evidence that the action had been initiated which constituted "proceedings" prior in time of creation of an equitable mortgage in favour of the Bank so as to seek a declaration of the mortgage being void or the attachment being prior in time so as to seek a priority of charge. 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 qua the priority of the claim. Accordingly, the adjudication before this Court in view of Section 281 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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