Jsr Infra Developers Pvt. Ltd.,Rep. By Authorised Signatory S.karthikeyan4[Th] Floor, New v. The Assistant Commissioner Of Income Tax Central Circle-2(4) Investigation Wing, Room

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE M.SUNDAR W.P.Nos.12272 , 12281, 12283 and 12284 of 2019&W.M.P.Nos.12559, 12568, 12570 and 12571 of 2019 JSR Infra Developers Pvt. Ltd.,Rep. By Authorised Signatory S.Karthikeyan4[th] Floor, New No.17, Old No.8Vijayaraghava Road, T.NagarChennai – 600 017.. Petitioner in all W.Ps Vs. 1. The Assistant Commissioner of Income Tax Central Circle-2(4) Investigation Wing, Room No.111, 1[st] Floor New No.46, M.G.Road, Chennai – 600 034 .. 1[st] Respondent in All WPs. 2. The Sub-Registrar Katpadi, 127, Chithoor Vellore Road Dharapadavedu, Katpadi- 632 007 .. 2[nd] Respondent in WP.12272 of 2019 The Sub Registrar, 3,156 Salt Road, Near State Highway 115, Cheyyur-603 302. .. 2[nd] Respondent in WP.12281 of 2019 The Sub Registrar, Chennai, Joint II, No.82, Bharati Salai Pycrafts Road, Royapettah, Chennai-600 014. The Sub Registrar, T.Nagar, 9 Jeenis Road, Saidapet, Chennai-600 015. 3. Indian Overseas Bank Represented by its Manager IV Main Road, V Block No.83, Plot No.4035 4[th] Main Road, Anna Nagar Chennai – 600 040 .. 3[rd] Respondent in all W.Ps Writ Petitions are filed under Article 226 of theConstitution of India, seeking for a Writ of Mandamus directingthe 1[st] respondent to lift the order of attachment of immovableproperty (Schedule mentioned) in ACIT-CC-2(4)/BCDPS4688G/281B/2017-18 under Section 281 B of the Income Tax Act, 1961 dated05.04.2018, 05.04.2018, 15.11.2017 and 04.04.2018 respectivelyand consequently direct the 2[nd] Respondent to remove theappropriate encumbrances in the concerned encumbrancecertificate reflecting the said attachment orders. For Petitioner : Mr.Nithyaesh Natraj for M/s.Nithyaesh and Vaibhav For Respondent : Mr.A.P.Srinivas for R1 Mr.T.M.Pappaiah Special Government Pleader for R2 (No appearance)O R D E R Mr.Nitheyesh Nataraj, learned counsel of M/s.Nithyaesh andVaibhav, on behalf of writ petitioner in all the four writpetitions and Mr.A.P.Srinivas, learned senior Standing Counselfor Income Tax on behalf of the first respondent are before thisCourt. 2. With regard to second respondent, Mr.T.M.Pappaiah,learned 'Special Government Pleader' (hereinafter 'StateCounsel' for brevity) has accepted notice and learned Statecounsel's name is shown in the cause list today, but noneappears today. With regard to third respondent i.e., IndianOverseas Bank, it has been duly served, name of the thirdrespondent bank with its full/complete address as in the causetitle of the writ petitions is shown in the cause list. ThisCourt is informed that no counsel has entered appearance onbehalf of third respondent Bank. Name of the third respondentBank called out aloud thrice in the Court and adjoiningcorridors, but there is no response. 3. Be that as it may, contest in the instant writ petitionis primarily between the writ petitioner and the firstrespondent Assistant Commissioner of Income Tax Department who https://hcservices.ecourts.gov.in/hcservices/ has passed four orders of provisional attachment, two dated05.04.2018, the other two dated 15.11.2017 and 04.04.2018, allbearingreferenceACIT-CC-2(4)/BCDPS4688G/281B/2017-18(hereinafter 'impugned orders' in plural and 'impugned order'in singular for the sake of brevity). With regard to the secondrespondent, it comes to light that the second respondent, who isthe jurisdictional Sub-Registrar, is only a formal party and hasno real say in the instant matter. 4. In the aforesaid backdrop, main writ petitions are takenup, heard out and are being disposed of with consent of learnedcounsel for writ petitioner and Revenue Counsel for firstrespondent. https://hcservices.ecourts.gov.in/hcservices/ has passed four orders of provisional attachment, two dated05.04.2018, the other two dated 15.11.2017 and 04.04.2018, allbearingreferenceACIT-CC-2(4)/BCDPS4688G/281B/2017-18(hereinafter 'impugned orders' in plural and 'impugned order'in singular for the sake of brevity). With regard to the secondrespondent, it comes to light that the second respondent, who isthe jurisdictional Sub-Registrar, is only a formal party and hasno real say in the instant matter. 4. In the aforesaid backdrop, main writ petitions are takenup, heard out and are being disposed of with consent of learnedcounsel for writ petitioner and Revenue Counsel for firstrespondent. 5. Impugned orders have been made under Section 281B of the'Income Tax Act, 1961' ('IT Act' for brevity). The impugnedorders are orders of provisional attachment of immovableproperties. 6. A perusal of the impugned orders reveal that immovableproperties belonging to an individual one J.Sekhar have beenmade subject matter of provisional attachment. 7. However, writ petitioner before this Court in these fourwrit petitions is not that natural person i.e., individualJ.Sekhar, but it is a juristic person. In other words, it is aprivate limited company, which goes by the name J.S.R InfraDevelopers Pvt. Limited. Therefore, in the previous hearing, aquestion arose as to the locus based on which the writpetitioner is assailing the impugned orders. Besides this, thesole and pivotal question that falls for consideration in thesewrit petitions was also projected. Capturing these two aspectsof the matter, this Court made proceedings dated 20.06.2019,which reads as follows: 'Subject matter of instant writ petition is anorder of attachment qua immovable properties. Legal issue is whether Income Tax Department canattach properties which have already been securitised. Be that as it may, on facts, Revenue Counsel pointsout that the interest of writ petitioner in theimmovable property, which is subject matter ofattachment, has not been articulated in the affidavitfiled in support of this writ petition. Faced with the above situation, learned counsel forwrit petitioner seeks time to file additional affidavit.List on 3.7.2019. 8. Today, notwithstanding various averments made in the affidavits filed in support of these writ petitions,notwithstanding the grounds raised, contentions urged in theaffidavits filed in support of the writ petitions and commoncounter affidavit of the first respondent, learned counsel onboth sides, submitted that the aforesaid lone issue captured in20.06.2019 proceedings of this Court is the lone and pivotalissue which falls for consideration in the instant writpetitions. 9. With regard to the natural person i.e., individualJ.Sekhar whose properties are subject matter of impugned ordersand the writ petitioner which is a juristic person viz., PrivateLimited Company, basis on which the writ petitioner, which is ajuristic person i.e., Private Limited Company, is questioningthe impugned orders is concerned, after the aforesaid 20.06.2019proceedings, writ petitioner has filed a common additionalaffidavit dated 25.04.2019 in all the four writ petitions andan attempt has been made to explain this aspect of the matteri.e., a natural person's immovable properties being attachedvide impugned orders and another juristic person questioning thesame as writ petitioners in the instant writ petitions. This isin Paragraphs 3 and 4 of the additional affidavit, which read asfollows: '3.I State that the petitioner – JSR InfraDevelopers Pvt. Ltd., was previously known as VaibhavInfrastructure, before its incorporation as a registeredcompany under the aegis of the Companies Act. '3.I State that the petitioner – JSR InfraDevelopers Pvt. Ltd., was previously known as VaibhavInfrastructure, before its incorporation as a registeredcompany under the aegis of the Companies Act. 4. I State that the petitioner is a borrower havingtaken credit facilities from the 3rd respondent- IndianOverseas bank, wherein certain properties have been givenas security to the 3rd respondent bank. The propertiesmortgaged with a 3rd respondent bank for the purpose ofthe loan availed by the petitioner primarily includeproperties that belongs to JSR infra developers privatelimited (previously) known as Vaibhav infrastructures),the petitioner herein and those properties that stand inthe name of the directors (including Mr.J.Sekar) of thepetitioner company,(Personal properties belonging to thedirectors of the petitioner's company have been mortgagedwith the 3rd respondent bank). It is further stated, thatthe attachment of some of these properties by the 1strespondent/income tax officials, more clearly mentionedin the scheduled provided in the earlier filedaffidavits, are the subject matter of challenge in thepresent writ petitions, as these properties have alreadybeen mortgaged with the third respondent bank andsecurity interest has been created as per law.' 10. The crux and gravamen of the first respondent's stand isarticulated in Paragraphs 6 of the counter affidavit, which reads as follows: '6. I submit that the details of amount of loansanctioned, value of the property, the payments made sofar and the present outstanding amount and any SARFEASIproceedings are initiated are not stated by the writpetitioner. The first charge in favour of the Bank isnot admitted this respondent. Any number ofattachments can be made on the properties and therelevance of first charge and subsequent charge comesonly at the time of sale. The petitioner cannotsubstitute itself in the place of the Bank and maintainthis writ petition. The question of first charge orsecond charge holder cannot be decided in the writpetition and mortgagee Bank can prove the same beforethe appropriate Court by letting in evidence. Thepetitioner has no locustandi to maintain the writpetition. There is no law prohibiting the subsequentcharge holders from attaching the properties and thefirst charge is relevant only when the property is putfor sale and further the after the discharge of thefirst charge holder, the remaining can be taken by theother charge holder and therefore, attachment can bemade. The attachment is necessary to prevent thefurther mortgages and increase in loan amount and anyother borrowals. Further the properties stands in thenames of the individuals and while so the companycannot maintain the writ petition. ' 11. Therefore, it comes out clearly that propertiesbelonging to an individual i.e., a natural person, who is one ofthe Directors in the writ petitioner company, are subject matterof provisional attachments qua impugned orders. Ideally thisCourt is of the considered view that the natural person i.e.,individual J.Sekhar whose immovable properties have beensubjected to provisional attachment by impugned orders, shouldhave come before this Court and assailed the impugned orders.The natural person i.e., individual J.Sekhar, being a Directorin the writ petitioner company may not be a sufficient reasonfor the writ petitioner company to assail the impugned orders.The reason is fair, simple and straight. No elucidation andelaboration is required for the principle that a company is ajuristic person and this juristic person is independent of thenatural persons/individuals, who are Directors on the Board ofthe said company. It is also to be noted that even according tothe writ petitions, the company has been represented by anAuthorised Signatory one Mr.S.Karthikeyan and who is thedeponent of the affidavits filed in support of these writpetitions. Therefore, in the considered view of this Court,this itself will put an end to the case of the writ petitionerin the instant writ petitions qua their campaign against the impugned orders. 12. However, in the light of the legal question that hasbeen raised, which has been captured in the aforesaidproceedings dated 20.06.2019, this Court considers itappropriate to embark upon the exercise of examining that legalpoint also as this is a generic legal principle. 13. As would be evident from 20.06.2019 proceedings, whichhas been extracted and reproduced supra, the legal issue iswhether immovable property which has already been securitisedcan be made subject matter of attachment by the Income TaxDepartment. To be noted, this is captured with specificity inParagraph 2 of the aforesaid proceedings dated 20.06.2019. Withregard to the aforesaid legal submission, learned counsel forwrit petitioner pressed into service a judgment made by aHon'ble Full Bench judgment of this Court reported in AIR 2017Mad 67 (FB) [The Assistant Commissioner (CT) Vs. The IndianOverseas Bank and another]. This Court deems it appropriate toextract Paragraphs 1 to 7 of the said order, which read asfollows: 'The writ petitions have been listed before the FullBench in pursuance to the reference order in W.P.No.6267of 2006 and W.P.No.253 of 2011, in respect of thefollowing issues:- ''a) As to whether the Financial Institution,which is a secured creditor, or the department ofthe government concerned, would have the 'Priorityof Charge' over the mortgaged property inquestion, with regard to the tax and other dues. b) As to the status and the rights of a thirdparty purchaser of the mortgaged property inquestion.'' 2.We are of the view that if there was at all anydoubt, the same stands resolved by view of theEnforcement of Security Interest and Recovery of DebtsLaws and Miscellaneous Provisions (Amendment) Act, 2016,Section 41 of the same seeking to introduce Section 31Bin the Principal Act, which reads as under:- ''31B. Notwithstanding anything contained inany other law for the time being in force, therights of secured creditors to realise secureddebts due and payable to them by sale of assetsover which security interest is created, shall havepriority and shall be paid in priority over allother debts and Government dues including revenues,taxes, cesses and rates due to the CentralGovernment, State Government or local authority. Explanation. - For the purposes of thissection, it is hereby clarified that on or after ''31B. Notwithstanding anything contained inany other law for the time being in force, therights of secured creditors to realise secureddebts due and payable to them by sale of assetsover which security interest is created, shall havepriority and shall be paid in priority over allother debts and Government dues including revenues,taxes, cesses and rates due to the CentralGovernment, State Government or local authority. Explanation. - For the purposes of thissection, it is hereby clarified that on or after the commencement of the Insolvency and BankruptcyCode, 2016, in cases where insolvency or bankruptcyproceedings are pending in respect of securedassets of the borrower, priority to securedcreditors in payment of debt shall be subject tothe provisions of that Code.'' 3.There is, thus, no doubt that the rights of asecured creditor to realise secured debts due and payableby sale of assets over which security interest iscreated, would have priority over all debts andGovernment dues including revenues, taxes, cesses andrates due to the Central Government, State Government orLocal Authority. This section introduced in the CentralAct is with ''notwithstanding'' clause and has come intoforce from 01.09.2016. 4.The law having now come into force, naturally itwould govern the rights of the parties in respect of evena lis pending. 5.The aforesaid would, thus, answer question (a) infavour of the financial institution, which is a securedcreditor having the benefit of the mortgaged property. 6.In so far as question (b) is concerned, the sameis stated to relate only to auction sales, which may becarried out in pursuance to the rights exercised by thesecured creditor having a mortgage of the property. Thisaspect is also covered by the introduction of Section31B, as it includes ''secured debts due and payable tothem by sale of assets over which security interest iscreated''. 7.We, thus, answer the aforesaid referenceaccordingly. ' 14. Learned Revenue counsel points out that order of Hon'bleFull Bench would only mean that attachment by Income TaxDepartment will be subject to securitisation if properties whichhave already been securitised are attached and it does not meanthat the Income Tax Department does not have the right to orderattachment of properties which are already securitised. 15. This Court, considering the order of the Hon'ble FullBench of this Court, has no difficulty in accepting thesubmission made by learned Revenue Counsel that it is clear thatorder of Hon'ble Full Bench does not place any fetters on therights of the Income Tax Department to attach a property whichhas already been securitised if the Income Tax Departmentchooses to attach a property which is already securitised. Postattachment, anything that is realized from the attachment byIncome Tax Department is subject to such securitisation and thecreditor thereunder. However, in the instant case, the third https://hcservices.ecourts.gov.in/hcservices/ 15. This Court, considering the order of the Hon'ble FullBench of this Court, has no difficulty in accepting thesubmission made by learned Revenue Counsel that it is clear thatorder of Hon'ble Full Bench does not place any fetters on therights of the Income Tax Department to attach a property whichhas already been securitised if the Income Tax Departmentchooses to attach a property which is already securitised. Postattachment, anything that is realized from the attachment byIncome Tax Department is subject to such securitisation and thecreditor thereunder. However, in the instant case, the third https://hcservices.ecourts.gov.in/hcservices/ respondent, which according to the writ petitioner company isthe creditor, who has secruitised the immovable properties, hasnot even chosen to come before this Court to assert its rightsand say that it has securitised immovable properties which aresubject matter of provisional attachment. Therefore, thequestion as to whether the immovable properties, which aresubject matter of provisional attachment qua impugned ordershave already been securitised with third respondent Bank as thecreditor, itself is not clear and even if that be so, thequestion of apportioning the monies realized from the attachedproperties, if such a scenario unfurls need to be gone into onlyat that stage. In other words, the issue as to the date ofsecuritisation and as to whether it is appropriate to passimpugned orders are the determinants which may govern thisapportionment aspect. However, it is not necessary to go intothese aspects in this order. Suffice to say that it is clearthat there are no fetters on the powers of the Income TaxDepartment with regard to original attachment. As this is thelast point that has been canvassed, this Court finds noinfirmity, more so at the instance of a writ petitioner companyqua the impugned orders. Therefore, this Court considers thatthis is not a fit case for interfering with impugned orders. 16. Be that as it may, as the individual J.Sekhar, whoseimmovable properties are subject matter of provisionalattachment qua impugned orders is not before this Court and asthe challenge to the same has been laid by a juristic person andas that juristic person has also been represented by a naturalperson (Authorised Signatory), who is other than the individualJ.Sekhar, it would be appropriate to make it clear that all therights and contentions of the individual i.e., J.Sekhar qua theimpugned orders will stand preserved and this order will notimpede or affect those rights. 17. In the light of the narrative thus far, all the writpetitions are held to be bereft of merits, they fail and thesame are dismissed. There shall be no order as to costs.Consequently, connected miscellaneous petitions are closed. Sd/- Assistant Registrar(Insp.Cell)//True Copy// Sub Assistant Registrar gpa To 1. The Assistant Commissioner of Income Tax Central Circle-2(4) Investigation Wing, Room No.111, 1[st] Floor New No.46, M.G.Road, Chennai – 600 034 2. The Sub-Registrar Katpadi, 127, Chithoor Vellore Road Dharapadavedu, Katpadi- 632 007 3. The Manager, Indian Overseas Bank, IV Main Road, V Block No.83, Plot No.4035 4[th] Main Road, Anna Nagar Chennai – 600 040. 4. The Sub Registrar, 3,156 Salt Road, Near State Highway 115, Cheyyur-603 302. 5. The Sub Registrar, Chennai, Joint II, No.82, Bharati Salai Pycrafts Road, Royapettah, Chennai-600 014. 6. The Sub Registrar, T.Nagar, 9 Jeenis Road, Saidapet, Chennai-600 015. +2cc to M/s.Nithyaesh and Vaibhav, Advocate, S.R.No.68013 +1cc to Mr.A.P.Srinivas, Advocate, S.R.No.67400 +1cc to the Government Pleader, S.R.No.68087 & 68088 W.P.No.12272 , 12281, 12283 and 12284 of 2019 RJI(CO)CS/30/09/2019 https://hcservices.ecourts.gov.in/hcservices/