Income Tax Dues No Bar for Property Registration, Rules High Court

In a landmark ruling, the Karnataka High Court has decreed that sub-registrars cannot refuse to register a property document based on the pending Income Tax (IT) dues of borrowers. This decision came while adjudicating a petition filed by Bharath Gowda, the successful bidder of a property auctioned by Canara Bank.

Case Background

The dispute arose when Bharath Gowda, having successfully bid for a 6,000 sqft mortgaged property in Hombegowdanagar, Wilson Garden, Bengaluru, approached the JP Nagar sub-registrar office to register the sale certificate issued by Canara Bank. The sub-registrar’s office refused to register the document citing Gowda’s pending IT dues as the reason. After receiving no response to his representation submitted on February 12, 2024, Gowda approached the Karnataka High Court seeking redressal.

Legal Arguments

Petitioner’s Contention

Bharath Gowda argued that the auction proceedings were conducted under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), which supersedes other laws. He maintained that the pending IT dues were not a valid reason for denying the registration of the sale certificate, as the SARFAESI Act allows the sale of properties free from encumbrances following the proper legal process.

Government’s Position

The government contended that the pending Income Tax dues are statutory obligations that must be cleared to ensure the property is free from encumbrances. They argued that the sub-registrar has the right to refuse registration if the property is not encumbrance-free.

Court’s Ruling

The Karnataka High Court reviewed the provisions of the Registration Act and the associated Rules. It determined that sub-registrars do not have the jurisdiction to refuse the registration of a document unless there is a specific violation under Rule 171 of the Registration Rules.

Justice M. Nagaprasanna, delivering the judgment, stated, “The sub-registrar can act only within the four corners of the Registration Act and the Registration Rules framed by the state. If none of the circumstances under Rule 171 of the Rules are found, the sub-registrar has no jurisdiction to refuse registration of a document; the document in the case at hand is the sale certificate.” The court directed the state government to issue a necessary circular in line with Rule 171 and the Supreme Court’s precedents.

The judgment further warned that any sub-registrar who unjustifiably delays registration would be subject to exemplary costs if such cases are brought before the court seeking a directive for registration.

Implications of the Judgment

This ruling is significant as it clarifies the limitations of the sub-registrar’s authority in refusing property document registration. It underscores that statutory dues like pending Income Tax cannot be used as a ground to deny registration if the property has been auctioned under the SARFAESI Act. This decision will ensure smoother transactions for properties sold under similar circumstances and reinforces the autonomy of the SARFAESI Act over other legal provisions regarding property encumbrances.

Conclusion

The Karnataka High Court’s decision to stay the appointment of the Ad-hoc Administrative Committee and reinstate the Equestrian Federation of India, coupled with this ruling on property registration despite pending Income Tax dues, highlights the judiciary’s role in upholding legal clarity and fairness in property transactions.

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