IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 01.12.2010 CORAM:- THE HON'BLE MR. JUSTICE R. SUDHAKAR W.P. NO. 13998 OF 2007 M/S. PUNJAB NATIONAL BANK ASSET RECOVERY MANAGEMENT BRANCH REP. BY ITS MANAGER KHIVRAJ BUILDINGS FIRST FLOOR THOUSAND LIGHTS 624 ANNA SALAI, CHENNAI 600 006 .. Petitioner Vs 1 THE TAX RECOVERY OFFICER XXVII . INCOME TAX DEPARTMENT, RANGE XIV ROOM NO. 609, 6TH FLOOR NEW BLOCK, 121 MAHATMA GANDHI ROAD, CHENANI600 034 2 G. PURUSHOTHAMAN PROPRIETOR M/S.G.P-. CONSTRUCTION NO. 16 DEWAN RAMA ROAD PURASAWALKAM CHENNAI ... Respondents Petition filed under Article 226 of the Constitution of India to issue a Writ of Mandamus forbearing the first respondent his men agents subordinates or anybody claiming through the first respondent from taking recovery proceedings in respect of the House property at No. 28 New No. 23 (Presently No. 35) Dewan Rama Iyengar Road purasawalkam, chennai 600 084 and allow this writ petition with costs. For Petitioner : Mr. A.P. Srinivas For Respondents : Mr. Senthilkumar - R1 SCGSC Mr. V. Chandrasekaran - R2 ORDER The lender bank has filed this writ petition to forbear the first respondent his men, agents, subordinates or anybody claiming through the first respondent from taking recovery proceedings in respect of the House property at No. 28 New No. 23 (Presently No. 35) Dewan Rama Iyengar Road purasawalkam, chennai 600 084 and allow this writ petition with costs. https://hcservices.ecourts.gov.in/hcservices/ 2. Tax Recovery Officer of the Income Tax Department issued a letter in TR No.76/TRO XXVII, dated 21.7.2006 to the petitioner bank, which reads as follows:- " Sub:-Recovery of arrears – in the case of Sri.M.G.Purushothaman, No.16 Dewan Rama Road, Kilpauk, Chennai.10 – Details called for – Reg. Sri. M.G.Purushothaman residing in the above address is a defaulter and the property owned by him at No.23, Dewan Rama Road, Kilpauk, Chennai.10 has been mortgaged with your bank. As I am to take action to recover the tax arrear, I request you to furnish the copy of mortgage deed immediately. The detail is required under Rule 83 of the second schedule of the Income Tax Act 1961, I request your co-operation in this regard. " 3. The present writ petition has been filed to forbear the first respondent from initiating recovery proceedings. 4. The admitted facts of the case are as follows:- The property of the income tax defaulter/ second respondent herein has been mortgaged to the petitioner Bank. The mortgage, as per the petitioner, was effected on 9.10.1989 by deposit of title deed. In response to the letter dated 21.7.2006, the petitioner-Bank submitted a reply to the Tax Recovery Officer/ first respondent on 10.2.2007 and it reads as follows:- " In this connection we wish to bring to your kind notice that the mortgage created in favour of the erstwhile New Bank of India (since amalagamated with our bank) was in the year 1987 which is prior to the assessment year for which demand has been made by you against Purushottaman which is dated 31.3.2005 and therefore we request you not to proceed against the properties mortgaged to us". 5. After submitting a reply, the writ petition has been filed for the above relief and the apprehension of the Bank is that the Income Tax Department may proceed against the property, which has been mortgaged to the petitioner-Bank, which has a priority right over the property. It is the petitioner's case that recovery proceedings were initiated and the bank has orders in its favour. https://hcservices.ecourts.gov.in/hcservices/ 6. Though the first respondent has been noticed, no counter has been filed so far. According to the counsel for the first respondent, the Tax sought to be recovered is based on a Block Assessment Order dated 31.3.2005 in respect of the period 1986-87 to 1996-97. 7. The learned counsel for the Income Tax Department states that no appeal has been filed against the assessment order, which statement is denied by the learned counsel for the second respondent- assessee stating that an appeal has been filed. Whatever be the fact, for the adjudication of the present issue, the only issue that has to be decided is whether the petitioner-Bank has priority over the claim of the Income Tax Department/first respondent. 8. In a case where the mortgage admittedly was made on 9.10.1989 and the Bank being a secured creditor and having initiated proceedings under Debts Recovery Act, the petitioner-Bank has a priority over the claim of the first respondent. That issue has been decided by the Apex Court in Dena Bank – Vs. - Bhikhabhai Prabhudas Parekh and Company reported in (2000, 5, SCC 694) wherein it has been clearly held that the claim of the secured creditor prevails over all other claims. This has been followed by the Division Bench of this Court in ICICI Bank Ltd., Chennai – Vs. - Official Liquidator Vibrant Investments and Properties Ltd.(in liquidation) Chennai, reported in (2005, 1, M.L.J. 434). The relevant portion of the said decision reads as follows:- " The revision petitioner is a secured creditor. M/s. Vibrant Investments and Properties Limited was a company which went into liquidation and the question is whether the claim of the petitioner will prevail over the claim of the Income Tax Department and the Karnataka Sales Tax Department. This issue is no longer res integra in view of the decision of the Supreme Court in Dena Bank – Vs. - Bhikhabhai Prabhudas Parekh and Company (2000, 5, SCC 694) vide para 10, where it has been held that the claim of a secured creditor will prevail over crown debts. " Therefore, the petitioner-Bank, who is the secured creditor is entitled to proceed against the mortgage property for recovery of its dues. 9. In such view of the matter, the first respondent can seek recovery of the amount towards tax dues out of the property under mortgage after the amount due to the petitioner-Bank is discharged and to that extent the first respondent interest is safeguarded. The first respondent/ Income Tax Department is at liberty to proceed against any other property of the second https://hcservices.ecourts.gov.in/hcservices/ respondent if available for recovery of its dues in accordance with law. This writ petition is ordered as above. Consequently, M.P.No. 1 of 2007 is closed. No costs. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar ra To 1 THE TAX RECOVERY OFFICER XXVII . INCOME TAX DEPARTMENT, RANGE XIV ROOM NO. 609, 6TH FLOOR NEW BLOCK, 121 MAHATMA GANDHI ROAD, CHENANI600 034 1 cc To Mr.V.Chandrasekaran, Advocate, SR.85852 1 cc To Mr.N.S.Sivakumar, Advocate, SR.85808 1 cc To Mr.J.Narayanaswamy, Advocate, SR.85592 WP No. 13998/2007 SJ (CO) RH (24.12.10) https://hcservices.ecourts.gov.in/hcservices/