Sarfasi act
vipul shah
(Querist) 13 February 2013
This query is : Resolved
ONE LISTED COMPANY HAVING PROPERTY MORTGAGE WITH BANK NOW THE LOAN BECOMES NPA BANK WANTS TO SELL THAT PROPERTY BUT ITAX DEPT.GIVEN NOTICE TO COMPANY REGARING ITS RIGHT TO SEIZE IT NOW WHOSE RIGHT FIRST BANK OR ITAX DEPT.?IF THE BANK HAS NOT REGD.CHARGE IN ROC THAN WHAT WILL HAPPEN?
Raj Kumar Makkad
(Expert) 13 February 2013
Income Tax department has first lien over such properties and the banker can recover its debts out of remainder.
R.K Nanda
(Expert) 13 February 2013
first right is of It.
ajay sethi
(Expert) 13 February 2013
what is the value of property . what are income tax dues and bank dues .
c.p.s. ramachary
(Expert) 14 February 2013
I differ with the opinion that Income Tax dues have priority over the bank's dues when the bank holds an enforceable mortgage in its favor of course subject to registration with ROC.
Supreme Court in Dena Bank Vs. Bikkam Bhai Prabhudas Parekh held that there must exist a provision in the relevant law to claim priority over others (i.e a crown debt). There is no such provision in 'income tax act' till this day. Whereas 'sales tax act' has such provision. P.F. Act has such provision. Central Excise Act has no such provision. Companies Act 1956 provides pari passu charge for workmen's dues during winding up of the company u/s 446. But the income tax act has no such provision. It is essential to note that,State Bank of India Act 1955, Banking Companies ACT 1956, Banking Companies(Acqisition) Act 1969/198O are silent about priority of dues. State Financial Corporation Act 1951 has a provision speaking its priority over others for recovery of debt. Whereas in the present query, it seems the notice is subsequent to creation of mortgage in favor of the bank.The income tax department cannot lay its hand on the mortgaged property. If income tax notice is served prior to creation of mortgage, then there will be a charge in favor of the income tax department by operation of law. Otherwise the income tax department is like any other unsecured creditor and has no priority in the absence of specific provision in income tax act.
Lien discussed above is quite different from mortgage charge or priority.
Non filing of particulars of charge with ROC u/s 125 of companies Act 1956 is entirely a different thing and such unregistered charge will be void against the official liquidator when the company goes into liquidation and in such case the bank will be treated as one of the unsecured creditors.
Raj Kumar Makkad
(Expert) 14 February 2013
Respected Ramachary! Perhaps the fact that the property was not mortgaged by banker and has not been registered with registrar has left to be read by you. The banker forgot to get the property mortgaged so income tax department has got first right to recover the dues over the properties of such persons and the referred citations is totally distinguishable in the given facts.
Anirudh
(Expert) 14 February 2013
Inasmuch as the I.T. Act does not say that the Department has first charge over the I.T.dues, the views of Mr. Ramachary are very correct.
Raj Kumar Makkad
(Expert) 14 February 2013
Where the mortgage is not with the banker and IT department has took the property in its possession, why should department f T should return that property to banker for its recovery of dues?
vipul shah
(Querist) 14 February 2013
property is mortgaged with bank charge is regd.in sub-registrar office but bank has not regd it in roc what will be the exact effect of it
c.p.s. ramachary
(Expert) 14 February 2013
Respected Rajkumar,
I have not left out any thing unread before answering the query. I have not stated that the bank has mortgaged the property. What I mentioned is that the bank is holding enforceable mortgage (that means the bank is mortgagee here). A careful re-reading of my statement above would make it clear to you that the company which borrowed the money failed to comply with Sec.125 of Company's Act. In that case the bank could get it filed now by the company by paying the penalties if any imposed by ROC to the company. Registration in this query here refers to the registration of charge with ROC u/s.125 of Companies Act and not that registration with Sub-Registrar. An unregistered charge u/s. 125 will not give any scope to IT dept to claim any priority against the mortgage held by the bank. The impact of non registration of the charge with ROC is that the same becomes void against the Official Liquidator in case the company goes into liquidation and not otherwise. IT Department does not derive any right by taking possession of the mortgaged property to recover their dues. I reiterate my stand above stated that IT Dept. has no priority whatsoever to recover its dues. I Hope it is clear to you now.
R.K Nanda
(Expert) 14 February 2013
as bank has not registered charge before ROC
IT has first right.
c.p.s. ramachary
(Expert) 14 February 2013
Mr. Vipul Shah,
Registration with Sub-registrar is altogether a different thing and that question arises only if the mortgage is other than 'equitable mortgage'. But it is not your query. Your query is as to whether the IT dept.has priority of charge over the property mortgaged by the company to the bank if the charge is not registered with ROC u/s 125 of Companies Act. My reply was an is "No'. Mere non compliance of Sec.125 of Companies Act by the company or the bank does not give any scope to IT Dept.to lay hand on the mortgaged property for recovery of its IT dues in preference to the bank. It is the bank which has priority. IT Act does not contain such priority provision as in Sales Tax Act and other Acts. Taking possession by the IT department is not tenable in law for simple reason of non compliance of Sec 125 of the Companies Act.
vipul shah
(Querist) 14 February 2013
Respected ramachariji,
Thanks i have read your answer and it seems absolutely right again thanks sir. GOOD BYE
VIPUL SHAH
Raj Kumar Makkad
(Expert) 14 February 2013
ramachary g! I have again gone through the entire law and found your opinion as accurate. Thanks for correcting me.
c.p.s. ramachary
(Expert) 14 February 2013
Dear Mr. Rajkumar,
You are welcome. I was Lawyer for a bank for about 7 years and joined services as Law Officer in Andhra Bank for 23 years and resigned as Asst.General Manager, Legal Department and joined as PO DRT-3 Chennai on my appointment by Ministry's Notification and retired after satisfactory service of 3 1/2 years, in 2011 and at present I am consultant in SARFAESI matters.You can take my help at any time for any query relating to the Act and the connected matters. It is pleasure to share knowledge on this grate platform.
Regards
ajay sethi
(Expert) 14 February 2013
great to have a seasoned expert well versed in DRT cases on LCI
vipul shah
(Querist) 29 March 2017
Respected sir,
one of the customer has made its loan a/c NPA in co operative bank who is not affiliated to SERFACI ACT so now what would be the exact procedure to take action against that party who has mortgaged its property and has given post dated cheques.kindly advise.
