A Division Bench of the Karnataka High Court, on Wednesday, upheld the single judge bench’s decision of refusing to interfere with the action initiated by the consortium of banks for taking possession of ‘Kingfisher House’, a prime property in Mumbai owned by Kingfisher Airlines Ltd. (KAL).
A Division Bench, comprising Justice Dilip B. Bhosale and Justice B. Manohar, passed the order while dismissing the appeal filed by KAL, questioning the December 11, 2013, order of a single judge bench.
The Bench said that the single judge had rightly held that the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 overrode the provisions of the Companies Act.
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The Bench also made it clear that the SARFAESI Act was not an alternative to the winding up petitions, and the banks could chose to stand outside the winding up process, in seeking to enforce the secured interests, and simultaneously prefer a company petition too seeking winding up of the company in respect of the balance of the debt not covered by such security.
KAL had challenged the application, filed by SBICAP Trustee Company Ltd., on behalf of the consortium, before the Chief Metropolitan Magistrate, Esplanade, in Mumbai, to take possession of Kingfisher House, which is pledged to the banks to raise loan.
Though the High Court’s orders have favoured the banks, the Income Tax authorities, who have attached this property as KAL failed to remit the TDS (tax deducted at source) amount worth crores of rupees to the government, have stated that the Department has ‘primary claim’ over this property as the amount due to the government under any statue and, in this case, under the provisions of the Income Tax Act, 1961, will have “priority over other debts.”
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