2016 (12) TMI 1814 - HC - Income Tax

Recovery proceedings - Notices of Motion - communication received by the Income Tax Recovery Officer from the original petitioner (Stock Exchange) - Stock Exchange to prohibitory and attachment orders issued by the Revenue in regard to membership card licensed to Mr. Bharat S. Khona and Mr. Akhil Dalal - Auction proceeds of their membership rights and the Stock Exchange is in the process of releasing these surplus amounts to the two defaulting members - HELD THAT - This Court followed the decision of the Apex Court in Bombay Stock Exchange vs. V.S.Kandalgaonkar Ors. 2014 (10) TMI 368 - SUPREME COURT wherein it is held that the member has no right to Stock Exchange membership card as it is only a personal privilege. Consequent to the disposal of the petitions by this Court it is a settled position in law that this Court becomes Functus Officio. Therefore an application relating the disposed of petition cannot be entertained. In any case, the cause of action of the Revenue, if any, in respect of the communication dated 4th May, 2016 arises post disposal of the Writ Petitions by Order dated 15th October, 2015. Consequently the cause of action on the basis of which this application is filed is a separate and distinct cause of action. Therefore the Revenue is free to adopt such proceedings as they deem fit in respect of letter dated 4th May, 2016. However, the present applications seeking to modify the order dated 15th October, 2015 by taking out this Notice of Motion cannot be entertained by us in a disposed of petition. Moreover it appears the communication dated 4th May, 2016 is separate cause of action and the present application filed by the Revenue is inappropriate. Learned Counsel appearing for the original Petitioner Stock Exchange on instruction states that for a period of eight weeks from today, the original petitioner Stock Exchange will not part with the surplus amount of ₹ 1,57,06,642.26 and ₹ 11,09,849.93 or any part thereof received on sale of the membership card to the defaulting members Mr. Bharat Khona and Mr. Akhil K. Dalal. This should give more than sufficient time to the Revenue to consider its position in law and take appropriate proceedings, in law if so advised. Both the Notices of Motion are dismissed.

Summary

Issues:
1. Modification of final order dated 15th October, 2015 in disposed of writ petitions.
2. Surplus amount in the accounts of defaulters post disposal of writ petitions.
3. Challenge to prohibitory and attachment orders issued by Revenue in relation to membership card.
4. Entertaining application post disposal of writ petitions.
5. Cause of action for Revenue post disposal of writ petitions.
6. Dismissal of Notices of Motion.

Analysis:
1. The Revenue filed Notices of Motion seeking to modify the final order dated 15th October, 2015, which disposed of Writ Petition Nos. 215 of 2003 and 217 of 2003. The trigger for these motions was a communication from the Income Tax Recovery Officer regarding surplus amounts in the accounts of defaulters Mr. Bharat Khona and Mr. Akhil K. Dalal, arising from the auction proceeds of their membership rights.

2. The disposed writ petitions challenged prohibitory and attachment orders issued by the Revenue in relation to membership cards held by the defaulters. The Court upheld the challenge, citing a precedent where it was established that a membership card is a personal privilege and not a right. Following the disposal of the petitions, the Court became Functus Officio, meaning it could not entertain further applications related to the disposed petitions.

3. The cause of action for the Revenue, based on the communication received post disposal of the writ petitions, was deemed a separate and distinct cause of action. The Court held that the Revenue was free to pursue appropriate proceedings regarding the surplus amounts mentioned in the communication but could not modify the order dated 15th October, 2015, through the present Notices of Motion.

4. The Court emphasized that the communication dated 4th May, 2016, which prompted the Revenue's application, constituted a separate cause of action. The application seeking modification of the previous order could not be entertained in a disposed of petition. The Court also noted that the Revenue was at liberty to take suitable legal actions concerning the surplus amounts.

5. The original petitioner, Stock Exchange, agreed not to release the surplus amounts to the defaulting members for a period of eight weeks, allowing the Revenue time to assess its legal position and take necessary steps. Consequently, both Notices of Motion were dismissed, with no order as to costs.

In conclusion, the judgment clarified the limitations on modifying final orders in disposed writ petitions, emphasized the separation of causes of action, and highlighted the importance of adhering to legal procedures post disposal of petitions.