In Brief
M/s Connectwell Industries purchased mortgaged industrial property through a Debt Recovery Tribunal auction sale in 2005. The Income Tax Department subsequently claimed the same property was attached for the original mortgagor's tax dues, with notice issued in 2003 (after the DRT mortgage but before the auction sale). The High Court had upheld the tax attachment, ruling the sale void. The Supreme Court reversed this, holding that a charge created before the tax notice takes priority over subsequent tax attachment under the Income Tax Act. The Court directed the property be transferred to the buyer, as prior secured debts rank ahead of Crown claims unless statute provides otherwise.
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