1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1456 OF 2008 1.Subhash Arora Investments Pvt.Ltd. And another. ...Petitioners. vs. 1.Union of India & others. ...Respondents. --- Mr.V.V.Jogalekar with Sandip Bhimekar & Ms.Meghana Malavia i/b. M/s.Wadia Gandhi & Co., for Petitioners. Mr.K.R.Chaudhary, for Respondent nos.1 to 3. Mr.D.H.Mehta with Ms.Priya Agarwal i/b. Halai & Co., for Respondent no.4. CORAM: D.K.DESHMUKH & J.P.DEVADHAR, JJ. DATED: 16TH July, 2008. P.C.:- 1. The challenge in this petition is to the notices and the summons issued to the petitioner no.1 2 and its sister concern under Section 226(3) of the Income Tax Act,1961 and the order dated 23.11.2007 whereby the TRO has declined to lift the attachment levied on the petitioners-bankers and its depository participants or business associates. The attachment was levied because the Income Tax authorities were liable to recover a sum of Rs.4.63 crores from the tax defaulter Shri.Amit Jhaveri, and the petitioners were liable to pay certain amount to the said tax defaulter. 2. The contention of the petitioners is that although in the year 1991-92 an amount of Rs.1.25 crores was borrowed by the Director of the petitioner no.1 from Shri.Amit Jhaveri by pledging 2,64,000 shares of HCL Infosystem Ltd., the said Amit Jhaveri had not returned those shares, the value of which was much more than the amount payable by the petitioners to the tax defaulter. Thus, according to the petitioners, there was no amount due and payable by them to the tax defaulter. 3. It is further contended that Shri.Amit 3 Jhaveri had taken loan and overdraft facility from the Bank of Baroda and the proceedings initiated by the Bank, the shares pledged by the petitioners were seized from the said Shri.Amit Jhaveri. Ultimately in the proceedings initiated by the bank it was agreed in the year 1999 that the petitioners would pay Rs.1.70 crores on or before 10th June,1999 and the bank would release the share of the petitioners. According to the petitioners, the total loan amount repayable by the petitioners to Shri.Amit Jhaveri was fixed at Rs.1.70 crores. Thereafter, on the Debt Recovery Tribunal coming into force, the pending proceedings were transferred and by order dated 7.5.2004 the Debt Recovery Tribunal directed the petitioners to deposit Rs.1.70 crores with 15% interest per annum. Accordingly, the Directors of the petitioner no.1 deposed FDR for a sum of Rs.3,51,85,723/-. Challenging the order of D.R.T., the bank as well as Shri.Amit Jhaveri have filed writ petitions which are admitted and pending before this Court. In these circumstances, it is contended by the Counsel for the petitioners that since the liability of the petitioners has already been crystallized 4 prior to the attachment notice and since the entire amount payable to the tax defaulter has already been deposited with the D.R.T. for being paid to the bank for and on behalf of the tax defaulter, the TRO could not have treated the petitioners as the assessees in default. Reliance is also placed on a decision of the Apex Court in the case of “Dena bank Vs. Bhikhabhai Prabhudas Parekh and Co. and others, AIR 2000 Supreme Court 3654”. 4. We see no merit in the above contentions. In the present case, the attachment under Section 226(3) of the Act was levied on 14.1.2003. From the affidavit filed by the petitioners before the TRO on 19.9.2007 it is clear that Rs.3,51,85,723/- was deposited by the petitioners towards the principal loan amount and the interest after the attachment was levied. Thus, from the affidavit filed by the petitioners, it is evident that the petitioners were liable to pay to the tax defaulter an amount of Rs.3,51,85,723/- and the said liability was sought to be discharged after the attachment was levied. This action is in breach of the attachment levied under 5 Section 226(3) of the Income Tax Act. The fact that the tax defaulter and the bank had settled the claim at Rs.1.70 crores prior to the attachment would not bind the Income Tax department and therefore, the action of the petitioner in depositing the amount of Rs.3,51,85,723/- by way of FDR after the attachment would be in contravention of the attachment levied under Section 226 of the Income Tax Act. In these circumstances, the decision of the TRO in declining to lift the attachment cannot be faulted. 5. Reliance placed on the decision of the Apex Court in the case of “Dena Bank” (Supra) is also misplaced because in that case the issue related to the priority claim between the bank and sales tax authorities, whereas, in the present case there is no such issue relating to the priority. Since the Income tax authorities were not parties to the arrangement arrived at between the petitioners, the tax defaulter and the bank, in the facts of the present case, the order passed by the TRO in declining to lift the attachment would be in accordance with law. 6 6. In the result, the petition fails and the same is dismissed. 7. At this stage, the learned Counsel seeks continuation of ad-interim order granted on 30.6.2008 for two weeks. We see no reason to grant such extension. The application is rejected. (D.K.DESHMUKH, J.) (J.P.DEVADHAR, J.) ---