Order of attachment by I-T department cannot affect sale by liquidator: High Court

The bench held that the I-T department cannot claim any priority because of the fact that the order of attachment issued by it was prior to the initiation of liquidation proceedings under the code.
Hyderabad High Court (File | EPS)
Hyderabad High Court (File | EPS)

HYDERABAD: A division bench of the Hyderabad High Court has made it clear that the order of attachment of the subject property by the Income Tax department cannot be a bar for completion of the sale effected by the liquidator concerned under the provisions of the Insolvency and Bankruptcy Code.

The bench held that the I-T department cannot claim any priority merely because of the fact that the order of attachment issued by it was long prior to the initiation of liquidation proceedings under the code.

The bench of Justice PV Sanjay Kumar and Justice T Amarnath Goud was allowing the petition filed by Leo edibles and fats limited challenging the action of the sub-registrar, Erragadda, Hyderabad, in refusing to register its purchase of immovable property in the liquidation proceedings relating to VNR Infrastructures Limited under the Insolvency and Bankruptcy Code, 2016.

The counsel for the petitioner company told the court that the company had participated in the said auction and was declared the highest bidder at Rs 11,55 crore for the commercial/residential building, along with the land situated at Banjara Hills.

The sub-registrar concerned had refused to entertain the company’s request for registration in relation to the subject property until and unless the attachment order was lifted. The council urged the court to issue a direction to the I-T department to recall the attachment and to direct the sub-registrar to register the sale. On the other hand, the standing counsel for IT department contended that the arrears of VNR Infrastructure limited amount to over Rs 100 crore and recovery of such arrears necessarily be given priority.

After hearing the case, the bench noted that Sec 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.

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