Registration of property sale cannot be refused by sub-registrars over income tax dues of original borrowers: Karnataka High Court

By: Admin
June 01, 2024
Categories: Income Tax|Income Tax News
4 Min Read

The Karnataka High Court has observed that income tax dues of the original borrowers of a property cannot bar the registration of the sale of that property by a sub-registrar. The order was passed on May 28 by a single-judge bench of Justice M Nagaprasanna based on a petition filed by the buyer of one such property.

In this case, the original owners of a property in Bengaluru’s Wilson Garden locality had taken out a mortgage against their property. When the loan defaulted, proceedings were initiated under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act and the property was auctioned to recover the amount.

The bank had then issued a sale certificate in favour of the buyer. According to the petitioner/ property buyer, the sale was not registered by the sub-registrar on account of income tax dues of the previous owners.

The counsel of the buyer argued that SARFAESI proceedings had precedence over other laws and rights of secured creditor would override those of the original borrower.

It was argued that the sub-registrar could not refuse to register a sale when all requirements were complied with and income tax dues of the original borrowers could not be cited as a reason.

The government counsel on the other hand argued that these were statutory dues which were encumbering the property, and without clearing them, the sub-registrar could not register the sale certificate.

In the context of a previous judgment of the Supreme Court, the bench observed, “The Apex Court considering the entire spectrum of law holds that dues of the secured creditor, the Bank or any other financial institution will have priority over the dues of the Central Excise Department under the Central Excise Act…. The Sub-Registrar, though not in writing, orally refused to register the document on the score that dues of the Income-Tax Department are pending against the borrowers, is a reason which is unavailable to the Sub-Registrar, even if it were to be in writing… The Sub-Registrar can act only within the four corners of the Registration Act and the Registration Rules framed by the State.”

The bench passed an order directing the sub-registrar to immediately register the document on receipt of the court order and for the state government to issue a circular regarding this order to avoid court cases such as this.

The bench noted, “Scores and scores of cases are filed before this Court where the Sub-Registrars refuse to register the documents – the documents could be sale certificates or documents creating charge over the property. The Sub-Registrars, on grounds that are not available to them, refuse to register the documents, sometimes on the score that the software in the Registration Department or the Sub-Registrar’s office is not made to be in tune with the necessities of registration of documents of the Banks and therefore, it is not registered and in certain cases, it is the statutory dues by the borrower or the holder of the document, which are not cleared and therefore, would not be registered. All these are reasons beyond the statute.”

Source from: https://indianexpress.com/article/cities/bangalore/registration-of-property-sale-income-tax-due-karnataka-high-court-9362051/