ORDER :

In all these cases, the petitioners are Banks and challenge orders encumbering properties that, according to them, have been offered to them as collateral by persons who have availed financial assistance. Memoranda of Deposit of Title Deeds (MOD) have been executed, under which the property in question was offered as security to the Bank by the borrowers/loanees.

2. There were defaults by the loanees, as a result that the Banks had initiated action under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short ‘SARFAESI Act’) and taken possession of the property thereafter under Section 13(4) thereof. Public notice for auction of the properties was issued and in all the cases sales have been concluded to successful bidders and certificates have been issued. The sales have been registered and sale certificates issued in all cases.

3. The loanees are assesses under the provisions of the Income Tax Act, 1961 (in short ‘Act’) and have defaulted in the payment of income tax arrears. It is the case of the Income tax department that, as result of the defaults, proceedings have been taken to attach the properties of the defaulters. It is the creation of conflicting charges upon the properties that has led to the lis in the present matters.

4. The above facts are common to all the Writ Petitioners except for specifics of the petitioner/financial institutions, the details of the loans extended, the dates of MOD and registration of same with the Sub-Registrar, the dates of creation of charge by the Income Tax Authorities, if any, and the details of sale by public auction. However, such differences do not change the overall fact pattern as is relevant for deciding the present issue, the issue being whether the banks would hold a priority of charge over that of the Income Tax Department qua the security interest created in the property held as collateral.

5. Let me refer to the specifics of the facts in W.P.No.1251 of 2018 for clarity in, and completion of narration. W.P.No.1251 of 2018 has been filed by the Union Bank of India arraying Sub-Registrar, Tiruppur as R1/SRO, the Tax Recovery Officer (TRO) as R2, Beetle Exports (company), the income tax assessee, as R3 and two individuals, who were erstwhile Directors in the R3 company, as R4 and R5. The directors of R3 company had executed a MOD in regard to the property at No.17, SRP Nagar, 2nd Street, Bharathi Park Road, Saibaba Colony, Coimbatore (property/property in question) in favour of Union Bank of India of 10.02.2014, registered on the same day.

6. On account of defaults in the repayment of financial accommodation, a demand notice was issued on 17.03.2016 and possession of the property was taken by the Bank on 12.07.2017. Public notice was issued on 18.07.2017 and the property brought to auction under notice dated 17.07.2017.The auction was conducted and the bid confirmed in favour of one Mr.Charles, successful purchaser, on 23.08.2017.

7. In the meanwhile, it appears that the company had suffered orders of assessment for Assessment Years (AY) 2012-13 and 2013-14 and an order of attachment of immovable property in Form No.I.T.C.P-16 under Rule 48 of the 2nd Schedule to the Income Tax Rules (in short Rules) was issued by the TRO on 27.03.2017 and duly communicated to the SRO. According to the learned Senior Standing Counsel for the Department, this would suffice to create a charge and an enforceable right over the property.

8. This has given rise to the conflicting claims between the bank and the Income Tax Department over the schedule property. Upon publication of auction notice, there has been exchange of correspondences between the TRO and the Bank in regard to the title to the property in question and while the correspondences continued, the auction came to be conducted as scheduled, resulting in the registration of the sale on 25.10.2017 and issuance of sales certificate in favour of the successful bidder on