2020 (1) TMI 731 - HC - Indian Laws

Procedure for recovery of tax - contention urged by the petitioner is that as per the provisions contained in the Second Schedule to the Income Tax Act as made out in the procedure for recovery of tax, (the Rules applicable for recovery under the SARFAESI Act), the 1st respondent cannot conduct a resale without repaying the amount remitted by the petitioner etc - HELD THAT - A mere glance of the provisions contained in Rule 58 of the Rules in terms of the Second Schedule to the Income Tax Act, which deals with the procedure for recovery of tax (which has been made available for recovery under SARFAESI Act) as well as Rule 9(5) of the Security Interest (Enforcement) Rules, 2002 framed under the enabling provisions contained in SARFAESI Act would clearly mandate that in default of payment by the purchaser within the period mentioned in the Rule, the deposit may, if the Tax Recovery Officer thinks fit, after defraying the expenses of the sale, be forfeited to the Government and the property shall be resold and the defaulting purchaser shall forfeit all claims to the property or to any part of the sum for which it may subsequently be sold. Similar provisions are also made out in Rule 9(6) of the Security Interest (Enforcement)Rules, 2002. In the light of the above said provisions contained in the above said Rules, it is only to be held that the above said contentions of the petitioner that he is legally entitled to get refund of the deposit made by him etc., is absolutely bereft of any merit and lacks any substance. Accordingly, it is only to be held that the above said prayers made by the petitioner in the above said Writ Petition are not tenable or sustainable. In that view of the matter, it is ordered that the above said Writ Petition (Civil) will stand dismissed.

Summary

Issues:
1. Petitioner's request for extension of time to remit balance amount in an e-auction.
2. Rejection of petitioner's demand for return of 25% bid amount.
3. Legality of respondent's notice for a fresh auction.
4. Interpretation of provisions in the Second Schedule to the Income Tax Act and SARFAESI Act.
5. Petitioner's prayers for writ of Certiorari, mandamus, and refund of deposited amount.

Analysis:

Issue 1:
The petitioner, highest bidder in an e-auction, sought an extension to remit the balance amount due to illness. Respondent denied the extension request and rejected the demand for return of the 25% bid amount. The petitioner argued that the respondent's notice for a fresh auction was illegal and arbitrary. The petitioner filed a Writ Petition seeking relief.

Issue 2:
The main contention was the applicability of Rules 57 and 58 of the Second Schedule to the Income Tax Act and Rule 9(5) of the Security Interest (Enforcement) Rules, 2002 under the SARFAESI Act. These rules dictate the consequences of default in payment by the purchaser in an auction. The rules provide for forfeiture of deposit and resale of the property in case of default, with the defaulting purchaser losing all claims to the property or any part of the sum.

Issue 3:
The judgment highlighted that the petitioner's argument for a refund of the deposit lacked merit based on the provisions of the aforementioned rules. It was concluded that the petitioner was not legally entitled to a refund of the deposit. Consequently, the prayers made by the petitioner in the Writ Petition were deemed untenable and unsustainable, leading to the dismissal of the Writ Petition.

In conclusion, the court dismissed the Writ Petition, emphasizing the legal provisions governing auction defaults and the lack of merit in the petitioner's claims for a refund. The judgment underscored the forfeiture of the deposit and resale of the property in case of default by the purchaser, as stipulated in the relevant rules.