1 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 13.10.2015 CORAM HONOURABLE MR. JUSTICE M.M.SUNDRESH W.P. No.17363 of 2015 R.S.Perumal ... Petitioner vs. 1. Sub Registrar, Office of Sub Registrar, Villivakkam, Chennai. 2. Tax Recovery Officer, Business Ward XIV (3) Chennai 34. ... Respondents Petition filed under Article 226 of Constitution of India for issuance of writ of mandamus, directing first respondent to release registered document of sale certificate dated 10.11.2014 registered and kept as pending document No.201400276 on file of Sub Registrar, Office of Sub Registrar, Villivakkam District. For Petitioner : Mr.S.Sethuraman For R1 : Mrs.P.Rajalakshmi, Government Advocate For R2 : Mr.T.Pramodkumar Chopda, SSC ORDER defaulter/borrower mortgaged property in favour of Bank while getting loan. This is registered mortgage. On his default, proceedings 2 were initiated by issuance of Notice under Section 13 (2) of Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act, on 23.01.2007. It was followed by sale notice. sale was effected on 30.10.2010. In mean while, second respondent attached property of defaulter for non-payment of income tax arrears. Though sale was confirmed in year 2010, sale certificate was issued on 10.04.2014. However, it was not registered on ground that there is order of attachment by second respondent dated 04.03.2008. Under those circumstances, petitioner has come forward with present writ petition. 2. learned counsel appearing for petitioner submitted that mortgage was effected in year 2003. Bank was secured creditor. order of attachment was passed by second respondent on 04.03.2008. Though sale certificate was issued on 10.11.2014 pursuant to confirmation of sale dated 30.10.2010 and as mortgage being earlier, first respondent cannot refuse to register same. In any case, first respondent cannot have any power to refuse registration by taking note of subsequent order of attachment dated 04.03.2008. In support of submission, reliance has been placed on Judgment of Apex Court in case of Stock Exchange, Bombay vs. V.S.Kandalgaonkar & Ors. in Civil Appeal No.4354 of 203 dated 25.09.2014. 3 3. Mr.T.Pramodkumar Chopda, learned counsel for second respondent submitted that attachment order was passed on 04.03.2008 and property was brought for auction on 30.10.2010; sale certificate was issued only on 10.11.2014; there is priority for debt recovery by second respondent; defaulter and Bank are not parties to this proceedings; defaulter has already initiated proceedings before Debt Recovery Tribunal in S.A.No.5 of 2015 and order was passed that issuance of sale certificate would be subject to further orders that can be passed. Therefore, no interference is required. 4. Admittedly, petitioner has purchased property from Bank in pursuant to proceedings initiated under SARFAESI Act. Thus, prima facie, he is bona fide purchaser for valid consideration. said consideration was also paid long time back. mortgage was effected in year 2003. There is nothing on record to show that even prior to mortgage, there was proceeding. It appears that proceedings have been initiated only on 24.03.2006. Even that date is subsequent to mortgage. Thus, it is clear that proceedings are subsequent. 4 5. Though Mr.T.Pdramodkumar Chopda, learned counsel appearing for second respondent placed reliance on Section 218 of Income Tax Act 1961, same does not have any adverse application. It is prospective in nature. It is also with respect to alienation at behest of assessee. Even such alienation has got its own exception. Thus, neither proviso nor main provision has any application to case on hand. Merely because, attachment order was passed on 04.03.2008 and prior to confirmation of sale and sale certificate, same would not nullify them. second respondent does not have any preferential treatment towards recovery of arrears as there is no crown debt as against secured creditor. There is difference between secured creditor and non-secured creditor. Admittedly, in case on hand, Bank became secured creditor. 6. In case of Dena Bank v. Bhikabhai Prabhudas Parekh Co., reported in 2000 (5) SCC 694, Apex Court has held as follows: 10. However, Crown's preferential right to recovery of debts over other creditors is confined to ordinary or unsecured creditors. common law of England or principles of equity and good conscience (as applicable to India) do not accord Crown preferential right for recovery of its debts over mortgagee or pledgee of goods or secured creditor. It is only in cases where Crown's right and that of 5 subject meet at one and same time that Crown is in general preferred. Where right of subject is complete and perfect before that of King commences, rule does not apply, for there is no point of time at which two rights are at conflict, nor can there be question which of two ought to prevail in case where one, that of subject, has prevailed already. In Giles v. Grover [(1832) 131 ER 563 : 9 Bing 128] it has been held that Crown has no precedence over pledgee of goods. In Bank of Bihar v. State of Bihar [(1972) 3 SCC 196 : AIR 1971 SC 1210] principle has been recognised by this Court holding that rights of pawnee who has parted with money in favour of pawnor on security of goods cannot be extinguished even by lawful seizure of goods by making money available to other creditors of pawnor without claim of pawnee being first fully satisfied. Rashbehary Ghose states in Law of Mortgage (TLL, 7th Edn. P.386) - It seems government debt in India is not entitled to precedence over prior secured debt. What has been argued before us is that moment Stock Exchange has lien over member's securities, it would have precedence over income tax dues. We find there is force in this submission. Following said ratio in decision referred supra by learned counsel for petitioner, it has been held in following manner: 24. first thing to be noticed is that Income Tax Act does not provide for any paramountcy of dues by way of income tax. This is why Court in Dena Bank's case (supra) held that Government dues only have priority over unsecured 6 debts and in so holding Court referred to judgment in Giles vs. Grover (1832) (131) English Reports 563 in which it has been held that Crown has no precedence over pledgee of goods. In present case, common law of England qua Crown debts became applicable by virtue of Article 372 of Constitution which states that all laws in force in territory of India immediately before commencement of Constitution shall continue in force until altered or repealed by competent legislature or other competent authority. In fact, in Collector of Aurangabad and Anr. vs. Central Bank of India and Anr. 1967 (3) SCR 855 after referring to various authorities held that claim of Government to priority for arrears of income tax dues stems from English common law doctrine of priority of Crown debts and has been given judicial recognition in British India prior to 1950 and was therefore law in force in territory of India before Constitution and was continued by Article 372 of Constitution. 25. In present case, as has been noted above, lien possessed by Stock Exchange makes it secured creditor. That being case, it is clear that whether lien under Rule 43 is statutory lien or is lien arising out of agreement does not make much of difference as Stock Exchange, being secured creditor, would have priority over Government dues. 7. Thus, petitioner has made out case both on facts and on law and ratio laid down would be applicable to facts involved herein. However, as submitted by Mr.T.Pramodkumar Chopda, learned counsel 7 appearing for second respondent, issuance of sale certificate would be subject to result of pending proceedings in S.A.No.5 of 2015 in which petitioner is also party. Accordingly, writ petition stands allowed by directing first respondent to register sale certificate presented by petitioner which is kept pending and return same subject to other compliance if any, within period of four weeks, from date of receipt of copy of this order. No costs. 13.10.2015 ogy To 1. Sub Registrar, Office of Sub Registrar, Villivakkam, Chennai. 2. Tax Recovery Officer, Business Ward XIV (3) Chennai 34. 8 M.M.SUNDRESH, J. ogy W.P. No.17363 of 2015 13.10.2015 R.S.Perumal v. Sub Registrar / Tax Recovery Officer Business Ward XIV (3) Chennai