2020 (1) TMI 197 - HC - Indian Laws

Interpretation of statute - Section 60(1)(ccc) of the Code of Civil Procedure, 1908 - Attachment and sale of the property - HELD THAT - he expression judgment debtor used in Clause (ccc) of proviso to Section 60(1) of the Code has to be read and understood in the context of the meaning ascribed to the expression debtor in the parent Act, i.e. the PRI Act as amended, and the expression judgment debtor cannot be understood to mean any judgment debtor , as generally understood - Thus, clause (iv) was read and understood in the context of Section 205 of the Companies Act, 1956. Similarly, the expression judgment debtor used in Clause (ccc) of proviso to Section 60(1) of the Code has to be read and understood in the context of the expression debtor used in the PRI Act, lest it leads to wholly unintended benefits being showered upon debtors for whose benefit the said clause was not introduced, and causes injustice to creditors against whom it was never intended to be used as a shield. The intention of the Legislature could never have been to provide protection against attachment and sale in execution of a decree, of the residential property owned by a judgment debtor - irrespective of the nature and extent of the residential property that the judgment debtor may own, and irrespective of the standing/ avocation/ background of the debtor, or the creditor. The interpretation of Clause (ccc) of proviso to Section 60(1) of the Code in a plain and grammatical way, de hors the context in which the said Clause came to be introduced by the extension of the PRI Act as amended to Delhi, in the Code as applicable to Delhi, would continue to throw up completely absurd results, where debtors occupying extremely large and valuable properties the value whereof far exceeds the debt owed to the decree holder/ certificate holder, would get away without discharging their adjudicated liability. Such an interpretation would strike at the very foundation of the Rule of Law - The interpretation sought to be canvassed by the petitioner in respect of Clause (ccc) of proviso to Section 60(1) of the Code would encourage fraudulent contrive by debtors to evade their liability which, certainly, would not be conducive to the preservation of the Rule of Law. The Legislature, in its wisdom, sought to carve out exceptions to Section 60(1) only in exceptional cases of agriculturists, labourers and domestic servants (under Clause (c) of proviso to Section 60(1) of the Code). Other Clauses contained in the Proviso, similarly, provide protection against attachment and sale in execution of a decree. Clause (ccc) has also to be viewed in the light of the other Clauses contained in the Proviso to Section 60(1). If the submission of the petitioner premised on the basic needs of a man for shelter were to be accepted, there would be no justification to allow the attachment and sale in execution of a decree of any residential property, of any person whatsoever. However, that is not the intendment of the law. The submission of learned counsel for the petitioner that the said property is exempted from attachment and sale in execution of a decree of a Civil Court under the Code, is rejected - Reliance placed by the petitioner on Rule 10 of the Rules is, therefore, of no avail and the same is rejected. Petition dismissed.

Issues Involved:
1. Validity of the attachment and sale of the property under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
2. Interpretation of Section 60(1)(ccc) of the Code of Civil Procedure, 1908, as applicable to Delhi.
3. Legitimacy of the sale of the property to the petitioner.
4. Application of Rule 10 of the Second Schedule to the Income Tax Act, 1961.
5. The effect of the Punjab Relief of Indebtedness Act, 1934, as extended to Delhi.

Detailed Analysis:

1. Validity of the Attachment and Sale of the Property:
The petitioner challenged the attachment and sale of the property under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The property in question was attached by the Recovery Officer under Rule 48 of the Second Schedule to the Income Tax Act, 1961, which relates back to the date of service of the demand notice in March 2002. The petitioner argued that the sale of the property in her favor in 2006 was legitimate and not fraudulent. However, the court found that the property was already under attachment since 2002, and the sale in 2006 was in violation of Rule 16 of the Second Schedule to the Income Tax Act, 1961, which prohibits the transfer of attached properties.

2. Interpretation of Section 60(1)(ccc) of the Code of Civil Procedure, 1908:
The petitioner argued that the property was exempt from attachment and sale under Section 60(1)(ccc) of the Code of Civil Procedure, 1908, as applicable to Delhi, which exempts one main residential house from attachment. However, the court interpreted that the exemption under Section 60(1)(ccc) applies specifically to debtors as defined under the Punjab Relief of Indebtedness Act, 1934, and not to all judgment debtors. The court emphasized that the exemption is intended to protect small agriculturists and not to provide a blanket exemption for all residential properties.

3. Legitimacy of the Sale of the Property to the Petitioner:
The petitioner claimed to be a bona fide purchaser without notice of the attachment. However, the court noted that the property was already under attachment when the sale occurred in 2006. The sale was executed by BRD (CD-3) after the property was attached and in violation of the specific restraint order dated 24.08.2004. The court held that the sale was null and void under Rule 16 of the Second Schedule to the Income Tax Act, 1961, and the petitioner could not claim a better title than BRD (CD-3).

4. Application of Rule 10 of the Second Schedule to the Income Tax Act, 1961:
The petitioner relied on Rule 10, which exempts properties from attachment and sale if they are exempt under the Code of Civil Procedure, 1908. The court rejected this argument, stating that the exemption under Section 60(1)(ccc) of the Code of Civil Procedure, 1908, does not apply to the petitioner as she does not fall within the definition of a "debtor" under the Punjab Relief of Indebtedness Act, 1934.

5. Effect of the Punjab Relief of Indebtedness Act, 1934, as Extended to Delhi:
The court examined the amendments to the Code of Civil Procedure, 1908, introduced by the Punjab Relief of Indebtedness Act, 1934, and its applicability to Delhi. The court concluded that the expression "judgment debtor" in Section 60(1)(ccc) of the Code of Civil Procedure, 1908, must be understood in the context of the Punjab Relief of Indebtedness Act, 1934. The exemption is intended for small agriculturists and not for all judgment debtors. The court emphasized that the legislative intent was to protect small debtors and not to provide a broad exemption that could be exploited by others.

Conclusion:
The court dismissed the petition, holding that the property was validly attached and the sale to the petitioner was null and void. The exemption under Section 60(1)(ccc) of the Code of Civil Procedure, 1908, as applicable to Delhi, did not apply to the petitioner. The court's interpretation of the exemption was in line with the legislative intent to provide relief to small agriculturists and not to all judgment debtors. The petitioner's reliance on Rule 10 of the Second Schedule to the Income Tax Act, 1961, was also rejected.

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