COMMISSIONER OF INCOME TAX AND ORS. Vs. KARNATAKA STATE INDUSTRIAL INVESTMENT DEVELOPMENT CORPORATION LTD.

JUDGEMENT

(1.) The respondent is a State owned Corporation. It is a financial institution governed by the State Financial Corporations Act, 1951. The respondent sanctioned a term loan to M/s. Veekay Developers Private Limited ('Veekay Developers' for short) to establish a luxury hotel at Sy. No. 32-2A, Bangra Kulur village, Mangalore city on 13.9.1995. However, the said term loan was transferred to V.K. Clubs and Homes Private Limited ('V.K. Clubs' for short) on 26.3.1997. The borrower created an equitable mortgage in favour of the respondent by deposit of title deeds on 28.4.1998. The title deeds of the properties so mortgaged are relating to portions of the land and buildings measuring about 4,390 square feet on the ground floor, 2100 square feet on the first floor, 3,515 square feet and 1020 square feet on the third floor and about 18,435 square feet on the 4th, 5th and 6th floors of the commercial building, together with common facilities thereof. By way of further security, the said borrower created equitable mortgage over free hold right in three shops measuring 325 square feet, 115 square feet and 535 square feet respectively in the building on the land mentioned supra.

(2.) Heard Sri Jeevan J. Neeralagi, learned advocate appearing on behalf of the appellants and Smt. Jinita Chaterjee, learned advocate appearing on behalf of the respondent.

(3.) We do not find any ground to interfere in the impugned order. Section 281 of the Act declares certain transfers to be void. Section 281 of the Act states that where, during the pendency of any proceeding under the Act or after the completion thereof, but before the service of notice under rule 2 of Second Schedule, any assessee creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of, any of his assets in favour of any other person, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the said proceeding. Based on the wordings of Section 281 of the Act, Sri Neeralagi, learned advocate appearing on behalf of the appellant submits that the transfer by way of mortgage in favour of the respondent - Corporation by Veekay Developers is void ab initio and therefore the respondent - Corporation has no locus standi to question the order of attachment.