The Delhi High Court while ruling in favour of Fasttrack has held that it is impermissible for the department to keep the properties attached indefinitely without pursuing subsequent steps to resolve the matter.
The bench of Justice Sachin Datta has observed that Section 222 of the Income Tax Act n empowers the Tax Recovery Officer to proceed with the “attachment and sale of the assessee’s movable property” to recover the due taxes. However, while the department initiated attachment proceedings by issuing the prohibitory order, no further action has been taken by the department towards the recovery of the outstanding amount. It is impermissible to keep the properties attached indefinitely without pursuing subsequent steps to resolve the matter.
In 2008, Summit Aviation Private Limited obtained financial assistance from respondent no.3, Punjab National Bank, for the purchase of helicopters. This financial assistance was secured through a hypothecation agreement. As per the hypothecation agreement three helicopters were hypothecated, two existing helicopters and one proposed helicopter that was to be purchased by the original owner (Summit Aviation Private Limited), out of the fresh term loan.
Subsequently, when the borrower defaulted on repayment obligations and failed to maintain financial discipline, in terms of hypothecation agreement dated 12.05.2008, respondent no.3 decided to take over the assets of the original owner (Summit Aviation Private Limited) including two helicopters.
In the meantime the department issued a prohibitory order due to outstanding liabilities amounting to Rs. 2783.73 lacs owed by Summit Aviation Private Limited to department.
The department issued a communication to the Income Tax department expressing its intention to auction the two helicopters on account of it being classified as NPA and also stating that its charge over the assets had priority over the income tax dues.
Subsequently, the department published a notice in Financial Express and Jansatta newspapers, announcing the auction of two helicopters. The notice outlined the details of the auction, inviting interested bidders to participate.
A corrigendum was also issued by respondent to provide additional information to the bidders. The corrigendum highlighted applicable hangar charges on the helicopters and brought to the notice of prospective bidders the existence of a prohibitory order issued by the Income Tax Department.
The petitioner submits that the continued existence of the prohibitory order has prevented the DGCA, M/s Yathi Air Services and SAR Aviation Services from releasing the helicopters to the petitioner.
The court held that the dues of secured creditor takes precedence over the dues of department, the attachment order issued by department cannot be construed to be an impediment to the auction sale in favour of the petitioner.
Case Details
Case Title: Fasttrack Tieup Pvt. Ltd. Versus UOI
Case No.: W.P.(C) 15237/2023 and CM APPLs.60975/2023, 17044/2024
Date: 24.02.2025
Counsel For Petitioner: Rana Mukherjee
Counsel For Respondent: Nidhi Banga
