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2019 Supreme(Ori) 598
IN THE HIGH COURT OF ORISSA AT CUTTACK
K.S. JHAVERI, KRUSHNA RAM MOHAPATRA, JJ.
Bank of India - Appellant
Versus
Union of India and Ors. - Respondents
O.J.C. No. 4336 of 2002
Decided On : 17-07-2019
The central legal point established in the judgment is the priority of bank dues over income tax dues, as determined by relevant legal provisions and judicial precedents.
Headnote:
Income Tax Department - Recovery of Bank Dues - DRT Act, Income Tax Act - Section 19 of DRT Act, Common Law of England - The court discussed the priority of bank dues over income tax dues, citing relevant legal provisions and judicial precedents. The court found the action of the Income Tax Department to be contrary to law and ordered the amount received by the department to be paid to the petitioner-Bank of India with interest.
Fact of the Case:
The petitioner, Bank of India, challenged a notice from the Income Tax Department asking for possession of a property due to unpaid dues from the loanee. The petitioner argued that it had the first charge over the property in question and that the department had acted arbitrarily.
Finding of the Court:
The court found the action of the Income Tax Department to be contrary to law and ordered the amount received by the department to be paid to the petitioner-Bank of India with interest.
Issues: The main issue was the priority of bank dues over income tax dues and the arbitrary action of the Income Tax Department.
Ratio Decidendi: The court relied on the DRT Act, Income Tax Act, and the common law of England to determine the priority of bank dues over income tax dues.
Final Decision: The writ petition was allowed, and the amount received by the Income Tax Department was ordered to be paid to the petitioner-Bank of India with interest.
ORDER :
1. Heard learned counsel for the parties.
2. By way of this writ petition, petitioner-Bank of India, has challenged the notice dated 5.3.2002 under Annexure-18 issued by the Income Tax Department asking to deliver possession of the property in question in favour of the auction purchaser-O.P. No. 6 as the entire dues of the petitioner-Bank is not recovered from O.P. No. 4.
3. Learned counsel for the petitioner-Bank contended that O.P. No. 4 (loanee) had taken loan from the petitioner-Bank for which suit for recovery of the loan dues was filed and ultimately execution case was filed before the DRT being Execution Case No. 64 of 1998 (O.A.) wherein on 16.08.1999 the DRT, while disposing of the said case, at paragraphs 11 & 13 of the order has observed as under:
"11. I have perused the written statement filed on behalf of the judgment debtor No. 4 which he had through sent through registered post. This written statement is neither verified nor supported with affidavit by defendant judgment debtor no. Then, in this written statement he has stated this fact that a mortgage was executed by the defendant No. 1 in favour of the applicant bank. And so many allegation have been made on the merit of the case which do not come within the jurisdiction of the Tribunal because it simply proposes to O.J.C. No. 4336 of 2002 dispose of the execution proceeding as execution court. And besides that, since the equitable mortgage was executed by defendant No. 1 in favour of the applicant-decree holder as a security for the loan granted to him by the applicant bank, the plea of the defendant-Judgment debtors No. 2 regarding priority of his income tax dues over the mortgage property is not sustainable at all
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13. Under the circumstances referred to above, execution petition filed U/s. 19 of the DRT Act is hereby allowed ex-parte only against defendant No. 1 who is liable to pay the claim made on behalf of the applicant-decree holder alongwith interest pendente lite and future @ 13% per annum. But, however, there shall not to any order as to cost for the proceeding because the defendant-judgment debtor has not contested the suit."
4. The decree was final and even till date it has not been challenged. Accordingly, the petitioner-Bank has the first charge over the property in question in view of the contract. But in spite of their objection vide their letter dated 16.04.2001 (Annexure-17) to the notice under Annexure-16 dated 17.03.2001, the Income Tax Department, ignoring the same, has disposed of the property. Therefore, it is contended that the Department has acted arbitrarily.
5. This matter was admitted on 3.4.2002 and an interim order was passed that the delivery of the property to opposite party No. 6 will be subject to the result of this writ petition. Since the O.P. No. 6 has died and the matter being very old, to meet the ends of justice to the parties, we have allowed the petition to proceed ex-parte since we are going to indicate that only the amount which is received by the Income Tax Department will be transferred to the petitioner-Bank with interest and we are not going to disturb the possession handed over to O.P. No. 6.
6. Learned counsel for the petitioner contended that in spite of several orders, no reply was filed, for which this Court on 17.11.2009 passed the following order:
"Counter affidavit has not been filed so far. Last opportunity of four weeks is granted to file the counter. In case the counter affidavit is not filed within four weeks, the right to file the same shall stand closed without further reference to the Bench."
7. Since no counter was filed within the time stipulated pursuant to the aforesaid order, the Dy. Registrar (Judl.) of this Court passed the order dated 2.7.2019 closing the right to file the counter and accordingly the right to file counter has been closed.
8. Reliance has been placed upon by the learned counsel on the judgment of the Supreme Court in the case of Bombay Stock Exchange Vs. V.S. Kandal
