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TMI Blog2015 (9) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... are for the first time in February or March, 2012. They never raised objections either to fixation of the reserved prices or public notices / proclamations for sale. Scheme of Second Schedule as modified by the DRT Act reveal legislative intent to give the defaulter as much latitude as possible till end. He can, under Rule 60, without assigning any cause but after depositing the sum as mentioned therein within the stipulated time, avoid auction & protect his property. Process becomes difficult & he is asked to meet the ingredients of Rule 61 only thereafter. Thus after stage of Rule 60 is over, right of petitioners/borrowers get diluted & primacy is given to the creditor Bank & interest of the auction purchaser like respondent no. 3 herein. Hence, while approaching this Court directly under Art. 226 of the Constitution of India, it is axiomatic that the petitioners will have to make out an exceptional case. They will have to plead & prove their diligence & also steps taken to warn the bidders of their grievances or of status of subject property. They must see that irregularity, if any, is cured at the earliest & can not indulge in fence-sitting or wait till the proceedings are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above mentioned Second Schedule and to direct the Recovery Officer to accept the said application for setting aside of sale dated 28.03.2012 and to set it aside. The petitioners also seek a direction to allow it to deposit the amount in terms of said provision within a period of 30 days of issuance of appropriate writ, order or direction by this Court. Respondent No. 3 before this Court claims to be the auction purchaser and is placed in possession by Respondent Nos. 1 2. 3. Petitioner No. 2 borrowed sum of ₹ 15 lakh from Respondent No. 1 and mortgaged the property as described in para 2 of writ petition i.e. Survey No. 7/4 located at Mouza - Kastakhed, Tahsil - Balapur, District - Akola, which holds a Hotel building of Hotel Paras Garden, in favour of Respondent No. 1 - Bank. Said property is mentioned as subject property hereafter. Petitioner No. 2 claims that he met with an accident and became paralysed, therefore, he was required to close down the establishment and shifted to his native place i.e. District - Jalgaon. He had notified this change in address to Respondent No. 1 - Bank. He never received notice of Recovery proceedings or any other notice at his Jalg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, sale cannot take place. For said purpose, he places reliance on the judgment of in the case of Tikaram Sons (P.) Ltd. v. CIT [1983] 142 ITR 319 (All). The terms and conditions of sale were also changed by Central Bank of India and its Recovery Officer from time to time. It has not been conducted in fair and transparent manner. Reserved price was also altered on several occasions and despite specific challenge, Respondent Nos. 1 2 have not produced any documents to show how it was arrived it. He points out from records, the determination of reserved price varying from ₹ 11,77,500/- to ₹ 25 lakh. He points out that as per Government valuer, valuation of land was ₹ 37,41,900/- and valuation of Hotel building was ₹ 18,23,700/-. As per ready reckoner in the office of Sub- Registrar, valuation was not less than ₹ 44,95,500/-. Hence, sale in favour of Respondent No. 3 for ₹ 18,42,500/- is far too low consideration. 6. The petitioner obtained loan in 2002 and at that time Government valuer had arrived at said figure of ₹ 16,75,000/-. Thereafter land was converted for Non-agricultural purposes and then a building came to be constructed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. Cavalet India Ltd. [2005] 4 SCC 456; Pravin Gada v. Central Bank of India [2012] 10 SCC 271; Pravin Gada (supra); Mahesh Chandra v. Regional Manager, U.P. Financial Corpn. AIR 1993 SC 935; Jammigumpula Sivaiah v. A.P. State Financial Corpn. [2004] 13 SCC 653; Laxmi Devi v. Mukand Kanwar AIR 1965 SC 834; Satyanarain Bajoria v. Ramnarain Tibrewal AIR 1994 SC 1583; Desh Bandhu Gupta v. N.L. Anand Rajinder Singh [1994] 1 SCC 131. Ram Kishun v. State of U.P. AIR 2012 SC 2288; T.P. Vishnu Kumar v. Canara Bank [2013] 199 SCL 208. He contends that the market value of the property is now in excess of Rs. One crore and Respondent No. 1 is attempting to recover balance amount from Petitioner No. 2. If this sale at ridiculously low price is not set aside, the petitioner and his family members would be thrown on street. 10. Shri Almelkar, learned counsel appearing on behalf of the Central Bank of India submits that Section 30(1) of Debts Recovery Tribunal Act gives remedy of appeal to the petitioners and petitioners, therefore, must first avail that statutory remedy. Respondent No. 1 - Bank got decree ex-parte on 06.01.2006 and with great difficulty could sale property in 2012. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different modes of recovery and Section 30 gave petitioner remedy of filing an appeal against the order dated 20.06.2012 passed by the Recovery Officer. The petitioner has misled this Court by making a statement in paragraph 13 of writ petition that he has no alternate remedy. He states that as the petitioner has misled this Court and has also not pointed out any valid reason for not availing such remedy, writ petition is liable to be dismissed. 13. The application for setting aside sale was filed by the petitioners on 22.05.2012 and in prayer clause of said application, they sought time to complete payment as required by law. That prayer is repeated even in present writ petition. He invites attention to the provisions of Rule 16 of Schedule II of Income Tax Act to point out two conditions which the petitioner ought to have fulfilled. He contends that lacunae in said application are attempted to be filled in by moving this writ petition. The application moved by the petitioner does not satisfy ingredients either of Rule 60 or Rule 61 of Second Schedule. The petitioner's application itself, therefore, was not maintainable and its rejection as such by Respondent No. 2 - Recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60 is not available in present matter. He points out that though Respondent Nos. 1 2 have alleged service of notice upon the petitioner, they have not produced any acknowledgement of such service either before Respondent No. 2 or before this Court. He submits that Respondent No. 2 - Recovery Officer is not competent to look into application of the petitioner for setting aside sale after 30 days as he has no power to condone delay. As such, there is no question of preferring any appeal under Rule 60 in this matter. 17. Shri Almelkar, learned counsel submits that he has personally verified files and seen acknowledgements of three notices served upon the petitioner at Jalgaon, which are available on record. He relies upon the affidavit sworn by Shri Harish Nilkanthrao Bante, on 02.04.2013 filed here for this purpose. 18. The provisions relating to recovery are contained in Chapter-V of DRT Act ie1993 Act. It is titled as Recovery of Debt Determined by Tribunal . Section 25 therein is about modes of recovery of debts. As per the said provision, Recovery Officer appointed by the Central Government under Section 7(1) for each Tribunal has to commence recovery proceedings afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te is for recovery of ₹ 17,61,291/-. 19. It is therefore, apparent that the provisions of second schedule of the Income Tax Act, 1961 need to be referred to. Second schedule provides for recovery of tax- here recovery of debt. The Tax Recovery Officer has to serve upon the defaulter notice requiring said defaulter to pay amounts specified in a certificate for recovery. Here the Debt Recovery Officer therefore has to serve such notice upon the debtor, after he receives the recovery certificate under Section 19(22) of the 1993 Act. Said notice has to give defaulter time of 15 days from its receipt and the recovery officer has to intimate that otherwise steps to realize the amount would be taken in second schedule, as per Rule 3. No steps in execution of certificate can be taken until period of 15 days has elapsed. Rule 4 provides for mode of recovery and if the amount is not paid within a period of 15 days, the recovery officer can proceed to realize the amount by one or more of the modes prescribed therein. First one is by attachment and sale of debtors movable property. Second is, by attachment and sale of his immovable property. Third one is by arrest of debtor and his de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ublic auction to the highest bidder and subject to confirmation by the recovery officer. Rule 57 after such sale, requires the purchaser who has been declared as purchaser to deposit 25% of the amount of his purchase money immediately and in default of such deposit, property must be resold. Part amount of purchase money shall be paid by the purchaser on or before 15th day from the date of sale of property. In case of default by the purchaser, the recovery officer after defraying the expenses of sale, forfeit the remaining amount to Government and property must be resold. Rule 59 permits the Authority which has to recover money to participate in the auction in certain contingencies. Said Rule is not relevant in this matter. 22. Rule 60 of the Second Schedule is about application to set aside the sale of immovable property on deposit. The debtor has been given option to apply to the recovery officer to set aside the sale within 30 days from the date of sale, on his depositing the amounts specified in the proclamation of sale and for payment to purchaser as penalty, a sum equal to 5% of the purchase money. Rule 61 enables the debtor to file an application to set aside the sale on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n has been raised by the petitioner, no serious arguments on it have been advanced by any of the parties. Powers under Section 29 of DRT Act, show that the provision of Second Schedule as in force from time to time apply with necessary modifications, as far as possible. These words as far as possible and with necessary modifications , have been interpreted by the Division Bench of Madras High Court in a ruling J.N. Krishnan v. Canara Bank 2011 (4) CTC 698. The Hon'ble Madras High Court has held that this time limit and therefore Rule 68B in Second Schedule is not attracted to recoveries under 1993 Act, as the 1993 Act itself does not recognize any such limitation. In this situation, as no arguments have been advanced on this aspect, we find no hesitation in adopting the view of Hon'ble Madras High Court. The objection raised by the petitioner about expiry of period of limitation is, therefore, rejected. 24. The Division Bench of this Court has in Keshrimal Jivji Shah v. Bank of Maharashtra [2004] 3 Mh. L.J. 893 observed :- '31. Considering the importance of the matter and as the issue frequently crops up for consideration we proceed to answer question No.2 as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be defeated. If Banks and financial institutions are made to face another round of litigation in the form of civil suit- after consideration of the claim to attachment and sale then it will become impossible for them to recover and realise their dues. Even otherwise, in the case of Gopalpur Tea Co. Vs. Corporation of Calcutta reported in A.I.R. 1966 Calcutta 51, it has been held that non following of procedure of seizure strictly in accordance with the provisions made in that behalf, would not vitiate the seizure itself once the Legislature does not make it obligatory and mandatory to follow the same. Similar analogy can be applied here. The Parliament does not make it mandatory nor compulsory for the recovery officer to apply the second and third Schedule of I.T. Act and 1962 Rules, advisedly because the Legislature has provided safeguards after investigation of claims and objections by recovery officer. This investigation can be challenged in Appeal under section 30 of the Act which has been substituted with effect from 17th January, 2000. Even proceedings in such appeal are not final because section 20 of R.D.B. Act provides for a further appeal by person aggrieved against an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is a legal valid order of attachment, in this case. It is obvious that the Bank has to prove the attachment it has not produced any such order or even pointed out its date. Public notice of sale or its proclamation does not constitute attachment of the subject property as required in the scheme of Second Schedule. 27. On the basis of recovery certificate dated 01.02.2006, Recovery Proceedings No.9/2006,, were initiated before the respondent no.2 Recovery Officer by certificate holder - respondent no.1 against the certificate debtor i.e. present petitioner. Notice dated 20.09.2006, issued by the respondent no.2 shows that it is addressed to M/s. Hotel Paras Garden through its proprietor i.e. petitioner no.1 at its address at Balapur, Akola. It is also addressed to petitioner no.2 personally at his address at Jalgaon. Names of two guarantors resident of Balapur are also shown there at Sr. Nos.3 and 4. After describing the property put to sale, the Recovery Officer has stated that he has ordered for sale of property mortgaged/attached, on as is, where is basis. There is no dispute between the parties about identity of the property. Later public notice dated 28.02.2007 show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition has been amended later, these portions have been retained as it is. They have stated that they have continued in possession and enjoyment of that property. Petitioner had sought loan on 01.01.2002 and availed it. Before that he gave an affidavit, which is also dated 01.01.2002. Petitioner no.1 in that affidavit has described subject property, his ownership and possession over it. He has also asserted that it is unencumbered. He has declared that if bank sanctions him loan, he would mortgage it with the Bank. Bank has produced before this Court a document by which title documents of subject property were deposited with it. This document is on stamp paper of ₹ 5000/- purchased in the name of petitioner no.2 - Prabhakar. It is signed by Senior Manager of respondent no.1 Bank on 19.03.2002. After giving description of the property, it observes that Prabhakar having been called upon on that date, deposited with the Bank original title deed of his agricultural land, with search report in relation to that property from Advocate H.N. Mohta of Shegaon. Stamp paper of ₹ 5000/- purchased by him and sanction letter of Balapur Branch have been accepted. It is also stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted. Here, as we have already noted above, the field is occupied by the provisions of 1993 Act and Second Schedule II of the Income Tax Act, as such there is no scope for considering the guidelines laid down by the Hon'ble Apex Court unless and until some lacunae or vacuum is pointed out in existing procedure. Karnataka State Industrial Investment and Development Corpn. Ltd. (supra) is the other judgment of Hon'ble Apex Court which considers same law. Jammigumpula Sivaiah (supra) is again on the same enactment. 31. Satyanarain Bajoria (supra) relied upon by the petitioners considers the provision of Order 21 Rule 19 and 22 of Code of Civil Procedure. The Hon'ble Apex Court has held that service of notice of execution application as per Rule 22 on judgment debtor must be equally proved and mention thereof in order sheet is not sufficient. Desh Bandhu Gupta (supra), considers the provision of Order 21 Rule 66[2] and 54[1-A] of Civil Procedure Code. It is held that service of notice on judgment debtor is mandatory and sale without service is nullity. The Hon'ble Apex Court has held that the judgment debtor must have an opportunity to give his estimate of property, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct deals with the application to set aside sale of immovable property on deposit. It reads :- 60. Application to set aside sale of immovable property on deposit .- (1) Where immovable property has been sold in execution of a certificate, the defaulter, or any person whose interests are affected by the sale, may, at any time within thirty days from the date of the sale, apply to the Tax Recovery Officer to set aside the sale, on his depositing- (a) the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered with interest thereon at the rate of 1 (one and one-fourth per cent for every month or part of a month], calculated from the date of the proclamation of sale to the date when the deposit is made; and (b) for payment to the purchaser as penalty, a sum equal to five per cent of the purchase-money, but not less than one rupee. (2) Where a person makes an application under Rule 61 for setting aside the sale of his immovable property, he shall not, unless he withdraws that application, be entitled to make or prosecute an application under this rule. Thus this provision nowhere expects the debtor to show any injury gives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners before us. In addition to showing compliance with the above three, petitioners must also deposit the amount for recovery of which the entire exercise was undertaken by the respondent no. 2 recovery officer. Language employed in second proviso use of word disallowed assumes significance. An application which otherwise could have been allowed because the three ingredients noted supra are satisfied, stands rejected i.e. disallowed if the deposit as stipulated in proviso (b) is not made. 33. Latest judgment of Hon'ble Apex Court Vasu P. Shetty (supra) also considers its little earlier judgment in Mathew Varghese (supra). In Vasu P. Shetty (supra) the Hon'ble Apex Court has observed :- 18. It can, thus, be seen that there is no conflict between the two sets of judgments, namely, Mathew Varghese case followed in J. Rajiv Subramaniyan case on the one hand and Ikbal case on the other hand. In the first set of cases the interpretation given to Rules 8 and 9 of the Rules hold that these Rules are mandatory. It is so held even in Ikbal case. However, Ikbal case proceeds further to lay down the principle that since these provisions are for the benefit of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs have not placed before this Court any offer even exceeding the price quoted by Respondent no. 3, though they got period of about three years. In affidavit dated 02/05/2013, petitioners state that they never mortgaged the subject property with the respondent no. 1 Bank said property is already attached 7 to 8 years back by Shri Mahavir Urban Cooperative Society Ltd., Jalgaon for recovery of ₹ 15,28,614/-. They also submit that said mortgage was in force when property was sold by the Respondent no. 1 Bank to Respondent no. 3. They also plead that said sale is not known to Mahavir Bank. This state of affairs itself shows that deposit of title deeds with Respondent 1 was not pointed out to the Mahavir Bank by the petitioners. The petitioners enjoyed loan from both the Banks kept them in dark about it. In affidavit dated 22/05/2012 filed before the recovery officer for setting aside the sale dated 28/03/2012 as confirmed on 30/04/2012, valuation of subject property at ₹ 1 Crore ill health or being bed-ridden are the only grounds canvassed by the Petitioners. In impugned order dated 20/06/2012, the recovery officer has rejected the contentions of petitioners about no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime, avoid auction protect his property. Process becomes difficult he is asked to meet the ingredients of Rule 61 only thereafter. Thus after stage of Rule 60 is over, right of petitioners/borrowers get diluted primacy is given to the creditor Bank interest of the auction purchaser like respondent no. 3 herein. Legislature has till Rule 60 shown some inclination to lean in favour of the borrower who wants to save his property or business. But then it has envisaged an equilibrium defaulting borrower can not thereafter lightly unsettle the auction. It is apparent that after this stage also if any favour is shown to the borrower, the creditors like respondent no. 1 Bank may not get the bidders persons desirous of participating in auction process will be discouraged. Lending Institutes may stop releasing the loan without rigorous securities sureties. This may affect other genuine innocent borrowers. Any intervention by this Court not fore-seen in the scheme of DRT Act Second Schedule may create difficulties in future advances recoveries. Hence, while approaching this Court directly under Art. 226 of the Constitution of India, it is axiomatic that the petitioners will ..... X X X X Extracts X X X X X X X X Extracts X X X X
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