J.B.PARDIWALA

( 1. ) IN this writ petition under Article 226 of the Constitution, the petitioner, a company incorporated under the Companies Act, 1956 and registered as reconstruction and securitization company with Reserve Bank of INdia under Section 3 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security INterest Act, 2002 ("SARFAESI Act" for short), has prayed for the following reliefs:-

"A. Be pleased to issue a writ of declaration that impugned claim, by the first respondent INcome-tax Department, by way of attachment of assets covered by Section 13(2) notice, for priority over the petitioner for realization of income-tax dues, is contrary to law and thus illegal; B. Be pleased to issue a writ of mandamus or any other appropriate writ, order or declaration directing the first respondent, income-tax department to allow the petitioner to exercise its rights under the SARFAESI Act and the rules made thereunder unhampered without any regard for the attachment orders passed by it for realization of income-tax dues of the second respondent company; C. Pending admission and final hearing of the present petition, be pleased to stay the operation and implementation of the impugned attachment of the assets covered by Section 13(2) notice ordered by the first respondent, income-tax department; D. Be pleased to grant such other and further relief/s as may be deemed fit in the in the interest of justice;"

( 2. ) THE facts giving rise to this petition can be summarized as under:-

"Petitioner - Asset Reconstruction Company (India) Ltd. (hereinafter referred to as "ARCIL" for short) is a company incorporated under the Companies Act, 1956 and registered as reconstruction and securitization company with Reserve Bank of India under Section 3 of the SARFAESI Act. THE petitioner, in the normal course of business, takes over the debts of the companies from Banks and Financial institutions. In such an event, the Banks that have lend money to the borrowers assign such debts in favour of the petitioner, and the petitioner thereafter steps into the shoes of the lending Banks. Accordingly, in terms of the provisions of Section 5(4) of the SARFAESI Act, all rights and liabilities of the lending Banks with respect to the debts are assigned to the petitioner through a Trust formed for this purpose."

Second respondent is a company incorporated as a Public Limited Company under the Companies Act, 1956 and having its registered office at Ahmedabad. It is now a company in liquidation and its affairs are looked after by the Official Liquidator appointed by this Court.

"Second respondent - Mardia Steels Limited availed of financial assistance/loans under agreements by IFCI Limited, Bank of Rajasthan Limited, Axis Bank Limited, Bank of India and J.P Morgan Chase Bank N.A., ICICI Bank Limited, General Insurance Company Limited, LIC of India, Unit Trust of India, New India Assurance Company Limited and Oriental Insurance Company Limited for the purpose and on the terms stated in the agreements. THE said loan together with all underlying security interest and all right, title and interest thereon have been acquired by the petitioner ARCIL as a sole trustee of ARCIL/Mardia Steel Limited Trust-I, ARCIL-Mardia Steel Limited Trust-II, ARCIL-Mardia Steel Limited Trust-III, BIO-SBPS-017-1 Trust and ARCIL-Mardia Steel Limited Trust-IV under Assignment Agreements dated 31.3.2008, 11.7.2008 and 27.9.2008 respectively and in terms of Section 5 of the SARFAESI Act."

Second respondent and/or guarantors defaulted in payment of interest and principal instalments of the loans, and thereby have failed and neglected to clear the said over-dues. As a result, the loan amounts have been classified as Non Performing Assets in the Books of Account in accordance with the directives pertaining to asset classification issued by the Reserve Bank of India.

"Second respondent is in liquidation. THE second respondent having failed to repay the amount,