# In the matter of City Union Bank Limited vs. Tax Recovery Officer-2, Income Tax.

> HC judgment dated 2023-11-28. Citation: TCN-2023-HC-00012. The case involves a writ petition filed by City Union Bank Limited seeking to quash an attachment…

- **Court:** HC
- **Order date:** 28 Nov 2023
- **Citation:** TCN-2023-HC-00012
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/high-courts-new-delhi/city-union-bank-limited-vs-tax-recovery-officer-2-income-tax-c93fa8b1

## Summary

### Background

The case involves a writ petition filed by City Union Bank Limited seeking to quash an attachment order by the Income Tax Department on a property mortgaged to the bank by M/s. Vasan Medical Centre (India) Private Limited. The bank contends that it has priority over the Income Tax Department due to the mortgage predating the attachment. The Income Tax Department argues that assessment proceedings were pending when the mortgage was executed, rendering it void under Section 281 of the Income Tax Act. The petitioner bank is seeking the removal of the attachment to facilitate the sale of the mortgaged property through public auction.

## Facts

M/s. City Union Bank Limited (the petitioner) extended credit facilities to M/s. Vasan Medical Centre (India) Private Limited (3rd respondent). The Director of Vasan Medical Centre mortgaged properties to the bank, including a 33.43 cents vacant land at Chinthamani Village Salai, Trichy, via a memorandum of deposit of title deeds on 2009-04-02 and an extended equitable mortgage on 2009-04-17. The Director, who acted as a guarantor, passed away on 2020-11-16, with his legal heirs arrayed as respondents 4 to 7. Vasan Medical Centre defaulted on the loans, leading to the accounts being classified as non-performing assets on 2015-10-24. The bank initiated SARFAESI proceedings to recover the outstanding amount. Upon approaching the Registration Department, the bank

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## Issues and analysis

### Issue 1: Whether the mortgage created in favor of the petitioner bank has priority over the attachment by …

**Ratio:** Section 26E of the SARFAESI Act, which has a non-obstante clause, gives priority to

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**Reasoning:** The court relies on the principle that the SARFAESI Act, with its non-obstante clause, is

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**Interpretation:** The court interprets Section 26E of the SARFAESI Act as granting a clear

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**Application:** In this case, the mortgage was created in favor of the bank before the

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## Parties

- **Judges:** S.Srim…
- **Appellants:** City Union Bank…
- **Respondents:** Vasan Medical…; Tax Recovery…
- **Other parties:** Kohi…

## Timeline

- **2009-04-02 — Mortgage Cr…**: M/s. Vasan Medical Centre (India) Private Limited created a mortgage in favor of City…
- **2009-04-17 — Extended Equitable…**: Extended equitable…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 179 — Adjudicating Authority for individuals and…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-179)

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