Once a charge is created upon a property then no further notices for attachment will be valid in any other recovery proceedings.

The Supreme Court in the case of M/s. Connectwell Industries Pvt. Ltd. vs. Union of India
(Civil Appeal No. 1919 of 2010) on 06.03.2020 stated that if a charge is created upon a property then no further notices or attachment will be valid under any other recovery proceeding.

Facts :
Biowin Pharma India Ltd. (hereinafter referred to as ‘BPIL’) obtained loan from the Union Bank of India against which BPIL mortgaged Plot no. D-11 as security. Thereafter, the bank proceeded before DRT for recovery of loan amount.
DRT allowed OA filed by the bank and directed BPIL to pay Rs. 4,76,14,943.20/- along with interest 17.34% p.a. Thereafter, a recovery certificate was issued and recovery proceedings were initiated against BPIL and property was attached on 29.11.2002. Further, the Appellant purchased the subject property vide auction dated 28.09.2004 and got the same registered in the year 2006.

In the year 2006 Maharashtra Industrial Development Corporation (hereinafter referred as ‘MIDC’) informed the Bank that they have received a letter from Income Tax recovery officer stating that the subject property is attached with them for income tax dues on 17.06.2003.

Thereafter, the Appellant filed a writ petition before the High Court seeking direction for issuance of ‘No Objection’ in respect of the subject property, being the purchaser. The High Court dismissed the petition stating that after an order of attachment is made under Rule 16(2) no transfer or delivery of the property or any interest in the property can be made, contrary to such attachment. It was observed that notice was issued on 11.02.2003 and property was attached on 17.06.2003. Resulting, the present petition was filed.

Issue:
Once a charge over a property is created, can a notice of attachment regarding the same property can be issued in another recovery proceeding?

Ratio:
The Apex Court observed that the property in dispute was mortgaged by BPIL to the Union Bank of India in 2000 and the DRT passed an order of recovery against the BPIL in 2002. The recovery certificate was issued immediately, pursuant to which an attachment order was passed prior to the date on which notice was issued by the Tax Recovery Officer. It is true that the sale was conducted after the issuance of the notice as well as the attachment order passed by income tax recovery officer in 2003, but the fact remains that a ‘charge’ over the property was created much prior to the notice issued by income tax recovery officer i.e. on 16.11.2003.
The High Court failed to take into account the fact that the sale of the property was pursuant to the order passed by the DRT with regard to the property over which a ‘charge’ was already created prior to the issuance of notice. Appeal is allowed and MIDC was directed to issue a ‘No Objection” certificate to the Appellant.