BANK OF INDIA Vs. UNION OF INDIA

JUDGEMENT

(1.) Respondents 5 and 6 were indebted to the petitioner-Bank for the sum of Rs. 2,21,000.00 in respect of certain accounts opened by them in the Connaught Place Branch of the petitioner-Bank. Since respondent No. 6 had created an equitable mortgage in favour of the petitioner-Bank by deposit of title deeds of immovable property belonging to her situated at S-72, Greater Kailash, New Delhi, the Bank filed a suit against respondents 5 and 6 for realisation of the Bank's dues by sale of this property. This Court vide order dated 6th September, 1972 passed a preliminary decree against respondents 5 and 6 for payment of the mortgaged amount with interest thereon and costs of the suit within 6 months of the date of the decree. Since respondents 5 and 6 failed to pay the decretal amount within six months the Bank moved this Court for a final decree for the sale of the mortgaged property and this Court on 21st May, 1973 passed a final decree directing the mortgaged property to be sold and the sale proceeds to be applied for the payment of the decretal amount. An execution application was filed by the petitioner on 1st August, 1973 for execution of the final decree dated 21st May, 1973 by sale of the mortgaged property. In the meanwhile, on 4th December 1973 respondent No. 4 addressed a letter to the petitioner- Bank stating wherein that a huge demand of income-tax was outstanding against respondent No. 5 and, therefore, the property bearing No. S72, Greater Kailash, New Delhi was attached on 8th July, 1983 in Income-tax Certificate Proceedings Rules and that sale proclamation of the said property had been drawn up and an auction sale had been fixed for 31st December, 1973. The petitioner-Bank was, therefore, asked by the Income-tax Authorities to lodge its claim, if any, with respondent No. 4 with necessary evidence. The petitioner-Bank objected to this notice and asserted that the property in question exclusively belongs to respondent No. 6 and hence the property in question was not liable to be attached by the Income-tax Authorities for income-tax dues of respondent No. 5, however on llth December, 1973 by the impugned order, respondent No. 4 for the reasons stated therein, held that the Bank's objections were not maintainable because, the property though was in the name of respondent No. 6, it actually belonged to respondent No. 5 and respondent No.6 was only a Benamidar.

(2.) Learned counsel for the petitioner submitted that the petitioner who is a secured creditor had a first charge over this property because this property was mortgaged to the petitioner and it was further submitted that in any event the Tax Recovery Officer had wrongly held that the property belonged to respondent No. 5 and respondent No. 6 was only a Benamidar. Learned counsel further submitted that even otherwise it is held that the property was actually held by respondent No. 6 as a Benamidar from the Explanation inserted in the year 1975 to S. 222(1) of the Income-tax Act, 1961 it was clear that only transfer without consideration prior to 1st June, 1973 could be attached by the Tax Recovery Officer. Learned counsel also relied on the judgment of the Supreme Court in Kapur Chand v. Tax Recovery Officer, AIR 1969 SC 682.

(3.) On the other hand, learned counsel for respondents 3 and 4 asserted that the notice of demand was sent prior to the mortgage created by respondents 5 and 6 in favour of the Bank, and, therefore, the Explanation and the judgment of the Supreme Court in Kapur Chand's case (supra) was of no assistance to the petitioner. It was, however not disputed that the Tax Recovery Officer could only make the recovery from the assessee and no one else. Learned counsel, however stated that the Tax Recovery Officer could investigate and find out whether the property belonged to respondent No. 5 or 6 and if he found that in fact it belonged to respondent No. 5 and respondent No. 6 was only a Benamidar he could attach the property.