Respondent necessarily have to submit claim of Income-tax Department for consideration as and when distribution of assets, in terms of Section 53(1) of Code, was taken up.

LEO EDIBLES & FATS LIMITED VS TAX RECOVERY OFFICER (CENTRAL)-(High Court)

Held On the above analysis, High court held that the first respondent cannot claim any priority merely because of the fact that the order of attachment dated 27.10.2016 issued by him was long prior to the initiation of liquidation proceedings under the Code against VNR Infrastructures Limited, Hyderabad. It may be noted that Section 36(3)(b) of the Code indicates in no uncertain terms that the liquidation estate assets may or may not be in possession of the corporate debtor, including but not limited to encumbered assets. Therefore, even if the order of attachment constitutes an encumbrance on the property, it still does not have the effect of taking it out of the purview of Section 36(3)(b) of the Code. The said order of attachment therefore cannot be taken to be a bar for completion of the sale effected by the fifth respondent under the provisions of the Code. The first respondent necessarily has to submit the claim of the Income-tax Department to the fifth respondent for consideration as and when the distribution of the assets, in terms of Section 53(1) of the Code, is taken up. The writ petition is accordingly allowed declaring the legal position as aforestated. The fourth respondent shall entertain and register the sale transaction effected by the fifth respondent in favour of the petitioner company, if not already done. The first respondent is at liberty to submit its claim before the fifth respondent, who shall duly consider the same in accordance with the priorities stipulated under Section 53(1) of the Code.

Aggrieved bv the action of the Sub-Registrar in refusing toe register a sale executed by the 5th respondent tiquidator appointed by the Nationat Company Law Tribunal, on the asis of an order of attachment passed by the lncome fax O{ficer, the petitioner has come up with the above writ petition.Heard Mr.S.Niranjan Reddy, tearned Senior Counsel appearing for the petitioner and Smt.M. Kiranmayee, learned Senior Standing Counsel for the '1't respondent, Smt.JVL Bharathi, learned counset for the 5th respondent and learned Government Pteader appearing for the 4th respondent.

A company by, name, VNR lnfrastructures Limited went into tiquidation and the National Company Law Tribunal appointed a Liquidator. The property of the company was brought to sate and the petitioner in the above writ petition became the highest bidder. He paid 25% of the bid amount immediatety after the auction.

But in the meantime, the Tax Recovery Officer notified the attachment of the property under Section 272. read with Rute 48 of the ll Schedute of the lncome Tax Act. lt appears that the order of attachment was prior in point of time to the appointment of the Liquidator, but subsequent in point of time to the creation of the mortgage.

ln other worCs, there is now a dispute between the liquidator and the lncome Tax Department about the right of each one of them. The ctaim of the liquidator is that the liquidator wi[[ have precedence in terms of the provisions of the lnsotvency and Bankruptcy code and atso in terms of Section 26 E of the Securitization Act,2002. But, the ctaim of the lncome Tax Department is that since the proceedings for liquidation commenced after the attachment, they witt have precedence.

Caught in the crossfire between the [iquidator and the Income tax Department, the petitioner came up with the above writ petition and sought two interim prayers, one in l.A. No.1 of 2018 to direct the 1't respondent Tax Recovery Officer to recatt his attachment notice and to direct tl-re Sub-Registrar to register the Sate Deed. The other apptication v/as in l.A.No.2 of 2018 for a direction to the liquidator not to insist upon the payment of the batance 75% of the sate consideration.

When the writ petition came up for orders as to admission, this Court passed an order in LA. No.2 of 2018 to the fottowing effect:

"We are not ln lnclined to grant ony interim order to the effect that the petitioner compony should nat deposit the bolance sole considerotion in respect of the ouction as it is bound to comply with its port ol the sale transaction. Howeyer, in the event such deposit is made, the fifth respondent shall not disburse ony of the omounts paid by the petitioner company pending further orders."

ORDBR Therefore, in order not to have the first instaltment forfeited by the liquidator, the petitioner deposited the batance amount. Thereafter, the petitioner has come up with a prayer to attow l.A. No.1 of 2018, The petitioner cannot lose on both ends. Either he shoutd not have been directed to pay the batance of sate consideration or he should at least have the benefit of the registration of sate deed. lf l.A .No.2 of 2018 had been attowed, the prayer in l.A. No.1 of 2018 could have been rejected but after having issued a positive direction in l.A No.2 of 7018, we cannot subject the petitioner to secondary victimization, first at the hands of the liquidator and then at the hands of this Court.

Therefore, there witt be an interim direction in l.A. No.1 of 2018 to the 4th respondent to register the sate deed. However, in view of the fact that the question raised in the writ petition is yet to be decided, we direct the Sub-Registrar also to record that the registration of the sale deed is subject to the finaI orders passed in the writ petition and that the order of attachment will continue titt the disposat of the writ petition irrespective of the registration of the sate deed. Post after Summer Vacation, 201 for hearing.

To For ASSISTANT REGISTRAR

1. The Tax Recovery Officer (Central), Income Tax Department, AaykarBhavan, Basheerbagh, Hyderabad.

2. The Special Chief Secretary, Revenue (Registration and Stamps), State ofTelangana, Secretariat Buildings, Saifabad, Hyderabad.

3. Inspector General of Registration and Stamps, H. No. 5-3-953, M.J. Road, Risala Abdullah Colony, Jam Bagh, Hyderabad - 500095.

4. The Sub-Registrar, 8-3-165/5/4, Deccan Chambers, Enagadda, Hyderabad.

5. The Liquidator, Representing \NR Infrastructures Limited (in Liquidation) ,8-2-3221D,Road No. 3, Banjara Hills, Hyderabad. having ofhce at, Plot No. 16 ( I 1-20-18), Shop-Cum-Flat, HUDA Complex, Hyderabad - 500035. (RR- 1 to 5 by RPAD )

6. One CC to SRI. RUBAINA S KHATOON Advocare [OPUC]

7. Two CCs to the GP for Revenue (TG), High Court ofJudicature at Hyderabad (OUT)

8, One spare copy

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Respondent necessarily have to submit claim of Income-tax Department for consideration as and when distribution of assets, in terms of Section 53(1) of Code, was taken up.

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Held

On the above analysis, High court held that the first respondent cannot claim any priority merely because of the fact that the order of attachment dated 27.10.2016 issued by him was long prior to the initiation of liquidation proceedings under the Code against VNR Infrastructures Limited, Hyderabad. It may be noted that Section 36(3)(b) of the Code indicates in no uncertain terms that the liquidation estate assets may or may not be in possession of the corporate debtor, including but not limited to encumbered assets. Therefore, even if the order of attachment constitutes an encumbrance on the property, it still does not have the effect of taking it out of the purview of Section 36(3)(b) of the Code. The said order of attachment therefore cannot be taken to be a bar for completion of the sale effected by the fifth respondent under the provisions of the Code. The first respondent necessarily has to submit the claim of the Income-tax Department to the fifth respondent for consideration as and when the distribution of the assets, in terms of Section 53(1) of the Code, is taken up.

The writ petition is accordingly allowed declaring the legal position as aforestated. The fourth respondent shall entertain and register the sale transaction effected by the fifth respondent in favour of the petitioner company, if not already done. The first respondent is at liberty to submit its claim before the fifth respondent, who shall duly consider the same in accordance with the priorities stipulated under Section 53(1) of the Code.

Aggrieved bv the action of the Sub-Registrar in refusing toe register a sale executed by the 5th respondent tiquidator appointed by the Nationat Company Law Tribunal, on the asis of an order of attachment passed by the lncome fax O{ficer, the petitioner has come up with the above writ petition.Heard Mr.S.Niranjan Reddy, tearned Senior Counsel appearing for the petitioner and Smt.M. Kiranmayee, learned Senior Standing Counsel for the '1't respondent, Smt.JVL Bharathi, learned counset for the 5th respondent and learned Government Pteader appearing for the 4th
respondent.
A company by, name, VNR lnfrastructures Limited went into tiquidation and the National Company Law Tribunal appointed a Liquidator. The property of the company was brought to sate and the petitioner in the above writ petition became the highest bidder. He paid 25% of
the bid amount immediatety after the auction.
But in the meantime, the Tax Recovery Officer notified the attachment of the property under Section 272. read with Rute 48 of the ll Schedute of the lncome Tax Act. lt appears that the order of attachment was prior in point of time to the appointment of the Liquidator, but subsequent in point of time to the creation of the mortgage.
ln other worCs, there is now a dispute between the liquidator and the lncome Tax Department about the right of each one of them. The ctaim of the liquidator is that the liquidator wi[[ have precedence in terms of the provisions of the lnsotvency and Bankruptcy code and atso in terms of Section 26 E of the Securitization Act,2002. But, the ctaim of the
lncome Tax Department is that since the proceedings for liquidation commenced after the attachment, they witt have precedence.
Caught in the crossfire between the [iquidator and the Income tax Department, the petitioner came up with the above writ petition and sought two interim prayers, one in l.A. No.1 of 2018 to direct the 1't respondent Tax Recovery Officer to recatt his attachment notice and to direct tl-re Sub-Registrar to register the Sate Deed. The other apptication v/as in l.A.No.2 of 2018 for a direction to the liquidator not to insist upon the payment of the batance 75% of the sate consideration.
When the writ petition came up for orders as to admission, this Court passed an order in LA. No.2 of 2018 to the fottowing effect: 
"We are not ln lnclined to grant ony interim order to the effect that the petitioner compony should nat deposit the bolance sole considerotion in respect of the ouction as it is bound to comply with its port ol the sale transaction. Howeyer, in the event such deposit is made, the
fifth respondent shall not disburse ony of the omounts paid by the petitioner company pending further orders." 
ORDBR

Therefore, in order not to have the first instaltment forfeited by the liquidator, the petitioner deposited the batance amount. Thereafter, the petitioner has come up with a prayer to attow l.A. No.1 of 2018,
The petitioner cannot lose on both ends. Either he shoutd not have been directed to pay the batance of sate consideration or he should at least have the benefit of the registration of sate deed. lf l.A .No.2 of 2018 had been attowed, the prayer in l.A. No.1 of 2018 could have
been rejected but after having issued a positive direction in l.A No.2 of 7018, we cannot subject the petitioner to secondary victimization, first at the hands of the liquidator and then at the hands of this Court.
Therefore, there witt be an interim direction in l.A. No.1 of 2018 to the 4th respondent to register the sate deed. However, in view of the fact that the question raised in the writ petition is yet to be decided, we direct the Sub-Registrar also to record that the registration
of the sale deed is subject to the finaI orders passed in the writ petition and that the order of attachment will continue titt the disposat of the writ petition irrespective of the registration
of the sate deed. Post after Summer Vacation, 201 for hearing. 
To

For ASSISTANT REGISTRAR

1. The Tax Recovery Officer (Central), Income Tax Department, AaykarBhavan, Basheerbagh, Hyderabad. 
2. The Special Chief Secretary, Revenue (Registration and Stamps), State ofTelangana, Secretariat Buildings, Saifabad, Hyderabad. 
3. Inspector General of Registration and Stamps, H. No. 5-3-953, M.J. Road, Risala Abdullah Colony, Jam Bagh, Hyderabad - 500095. 
4. The Sub-Registrar, 8-3-165/5/4, Deccan Chambers, Enagadda, Hyderabad. 
5. The Liquidator, Representing \NR Infrastructures Limited (in Liquidation) ,8-2-3221D,Road No. 3, Banjara Hills, Hyderabad. having ofhce at, Plot No. 16 ( I 1-20-18), Shop-Cum-Flat, HUDA Complex, Hyderabad - 500035. (RR- 1 to 5 by RPAD )

6. One CC to SRI. RUBAINA S KHATOON Advocare [OPUC] 
7. Two CCs to the GP for Revenue (TG), High Court ofJudicature at Hyderabad (OUT) 
8, One spare copy

For ASSISTANT REGISTRAR

6. One CC to SRI. RUBAINA S KHATOON Advocare [OPUC] 
7. Two CCs to the GP for Revenue (TG), High Court ofJudicature at Hyderabad (OUT) 
8, One spare copy

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Respondent necessarily have to submit claim of Income-tax Department for consideration as and when distribution of assets, in terms of Section 53(1) of Code, was taken up.