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TMI Blog2016 (4) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... id order of the Industrial Court was not placed before the Recovery officer as is categorically recorded in the roznama. We therefore have no hesitation in rejecting this argument. Whether the sale of the mortgaged property was vitiated on the ground that the Recovery officer had not followed the mandatory provisions of rule 15(2) of Second Schedule to the Income Tax Act, 1961 which inter alia provides that when the sale is adjourned for a period of more than one month, then a fresh proclamation of sale is to be issued? - Held that:- The provisions of rules 60 and 61 are clear and unambiguous. In a nutshell, these rules provide that a defaulter is not allowed to challenge the sale of the immovable property sold in execution of a Recovery Certificate unless an application for setting aside the sale is preferred before the Recovery Officer and the amount sought to be recovered under the Recovery Certificate is deposited with the Recovery Officer. In the facts of the present case, as mentioned earlier, no such application was ever preferred by the Petitioners and no deposit has been made. The reason for the same is not far to see. It is because the Petitioners were aware that befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt) is wholly misplaced. The issue before the Supreme Court was whether the Tax Recovery officer could have confirmed the sale on a particular date when in fact the demand for tax for which the property was sold, had ceased to exist. It was in those facts that the observations of the Supreme Court have to be read and understood. In the facts of the present case, admittedly, the dues of the Respondent – Bank have not been satisfied. We therefore have no hesitation in rejecting this argument of the Petitioners. The Respondent – Bank, has on an earlier occasion, sought to settle the dues with the Petitioners without any success. Despite this, the Respondent – Bank once again gave an opportunity to the Petitioners to settle their dues by paying a sum of ₹ 3.03 crores by 20th September, 2005. Admittedly, no payment was made. In these facts, we cannot find any fault with the actions of the Recovery Officer or any of the authorities below in proceeding with the sale of the mortgage property to ensure recovery of the Respondent – Bank's dues. No violation by the Respondent – Bank of the RBI guidelines issued on 3rd September, 2005 mandating all Public Sector Banks to settle t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which we shall deal with later in this judgment. 2. The brief facts giving rise to the present controversy and which are not really in dispute are that Petitioner No.1 is a Private Limited Company incorporated under the Companies Act, 1956 and has availed of various credit facilities sanctioned by Respondent No.1 (Respondent Bank). Petitioner No.2 is a Director of Petitioner No.1. The credit facilities availed of by the Petitioners were inter alia secured by creation of an equitable mortgage of an immovable property bearing Plot No.125 situated at Government Industrial State, Kandivali West, Mumbai, admeasuring about 1,740 sq. mtrs. alongwith a two storied building and other structures, comprising of a built up area of about 18,327 sq.ft. (hereinafter referred to as the mortgaged property ). 3. It is not in dispute that the Petitioners committed defaults in repayment of the credit facilities availed by it. In view thereof, the Respondent Bank, in 1998 filed a suit in this Court against the Petitioners others inter alia for recovery of an amount of ₹ 4.14 crores together with interest. Thereafter, in 1999 this suit was transferred to DRT-II, Mumbai and renumbered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of IPCA Laboratories Ltd. (Respondent No.2 herein) was the highest at ₹ 3.21 crores. However, before this bid could be accepted by the Recovery Officer, he was informed of an order of interim injunction passed by the Industrial Court restraining the Bank from selling the mortgaged property. However, a copy of the order was not made available to the Recovery Officer. In view thereof, the Recovery Officer, in all fairness did not accept the bid on that date and deferred the same. Thereafter, the Respondent Bank approached the Industrial Court and the Industrial Court vide its order dated 16th August, 2005 vacated the injunction order and which was duly communicated by the Respondent Bank to the Recovery Officer. 7. The Recovery Officer thereafter on 22nd August, 2005 accepted the bid of Respondent No.2 ( viz. IPCA Laboratories Ltd.) and declared them as a successful purchaser and directed them to deposit the sale price within the given time schedule and fixed the matter for confirmation of sale on 26th September, 2005. It is not in dispute that Respondent No.2 (IPCA Laboratories Ltd.) deposited the sale price within the time schedule allowed by the Recovery Officer. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was filed beyond the time period prescribed, the Petitioners moved a Miscellaneous Application for condonation of delay which was initially rejected by the DRT on 19th December, 2005. Being aggrieved by this order, the Petitioners approached the DRAT and filed a Miscellaneous Application praying for interim reliefs. In this Miscellaneous Application, the DRAT, by its order dated 4th January, 2006 directed the Petitioners to deposit a sum of ₹ 3.05 Crores with the Respondent Bank on or before 9th January, 2006. Admittedly, this amount was not deposited with the Respondent Bank as directed by the DRAT. Therefore, after 9th January, 2006 there was no impediment in proceeding with the sale of the mortgaged property. In view thereof, the Recovery Officer vide his order dated 20th January, 2006 directed the Petitioners to handover possession of the mortgaged property to the auction purchaser viz. Respondent No.2 and also issued a sale certificate in their favour. Be that as it may, the appeal of the Petitioners was heard by the DRAT and by its order dated 11th January, 2008, the DRAT condoned the delay and directed the DRT to decide the Petitioners' appeal filed under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e RDDB Act. 12. Being aggrieved by this order of the DRT, the Petitioners approached the DRAT raising several contentions. One of the primary contentions raised was that the OTS sanctioned by the Respondent Bank was contrary to the RBI guidelines dated 3rd September, 2005. It was the contention of the Petitioners that the OTS sanctioned by the Respondent Bank on 16th September, 2005 giving them time to make payment of 3.03 crores by 20th September, 2005 was communicated to them only on 21st September, 2005. This made it impossible for the Petitioners to comply with the conditions of the OTS as the same was communicated to them after the date to make payment thereunder had already expired. To counter this argument the Respondent Bank contended that the OTS was approved by the Respondent Bank on 16th September, 2005 and the same was communicated to Petitioner No.2 on his mobile phone on the same day by their Deputy General Manager (Mr Bhaskar K. Mahajan). According to the Respondent Bank, Petitioner No.2 was also informed that as per OTS sanctioned, the Petitioners were required to pay an amount of ₹ 3.03 crores by 20th September, 2005. The reason for the delay in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Recovery Officer inter alia praying that the confirmation of sale be stayed / deferred at least for one month. There was no challenge laid to the sale of the mortgaged property. This application of Mrs Anjali Bhide was rejected by the Recovery Officer. Being aggrieved thereby, the Petitioners directly approached this Court in its writ jurisdiction. After this Writ Petition was heard for some time, the same was withdrawn with liberty to file an appeal under section 30 of the RDDB Act before the DRT. As per the said liberty, the Petitioners filed an appeal before the DRT and also made an application for condonation of delay. That application was initially rejected by the DRT on 19th December, 2005 but was allowed by the DRAT vide its order and judgment dated 11th January, 2008. It is pertinent to note that the DRAT by its interim order dated 4th January, 2006 had also passed a conditional order directing the Petitioners to deposit a sum of ₹ 3.05 crores. Therefore one more opportunity was afforded to the Petitioners to deposit the OTS amount. Admittedly, no deposit was made and no payment was tendered to the Respondent Bank. In any event, after the delay was condoned, the DRT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on the said date. Firstly, we find that no such argument was canvassed on behalf of the Petitioners either before the DRT or the DRAT in the appeals filed by the Petitioners under the provisions of the RDDB Act. This argument is being canvassed for the first time before us in the Writ Petition. On this ground alone we would be justified in rejecting this argument. However, since Petitioner No.2 argued in person, we have examined this issue from the record and we find that even otherwise this argument has no merit. The roznama of Recovery Proceedings No.348 of 2003 clearly establishes that on 27th June, 2005 (i.e. the date on which the bids were opened), a copy of the order of the Industrial Court was not made available to the Recovery Officer. It is in this light that the Recovery Officer recorded that there was no order before him restraining him from conducting the sale of the mortgaged property despite public notice being given in the newspapers. The Recovery Officer further recorded that taking into account the public interest and the fact that the bidders had deposited the earnest money deposit, he decided to open the bids of both immovable and movable properties. The bid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his reasons for such adjournment; Provided that, where the sale is made in, or within the precincts of, the office of the Tax Recovery Officer, no such adjournment shall be made without the leave of the Tax Recovery Officer; (2) Where a sale of immovable property is adjourned under sub-rule (1) for a longer period than one calendar month, a fresh proclamation of sale under this Schedule shall be made unless the defaulter consents to waive it. (3) Every sale shall be stopped if, before that lot is knocked down, the arrears and costs (including the costs of the sale) are tendered to the officer conducting the sale or proof is given to his satisfaction that the amount of such arrears and costs has been paid to the Tax Recovery Officer who ordered the sale. 20. As stipulated in the said rule, the Tax Recovery Officer may adjourn any sale to a specified day and hour and the Officer conducting such sale may, in his discretion adjourn the sale recording the reasons for the same. Sub-rule (2) of rule 15 provides that when the sale of immovable property is adjourned for a period longer than one month, a fresh proclamation of sale shall be made unless the defaulter consents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act, 1961 clearly stipulates that where an immovable property has been sold in execution of the certificate, the defaulter or any person whose interests are affected by the sale may, at any time within 30 days from the date of the sale, apply to the Recovery Officer to set aside the sale on his depositing the amount specified in the proclamation of sale with interest thereon as more particularly stipulated in the said rule as well as penalty equal to 5% of the purchase money which would be paid to the purchaser. Rule 60(2) stipulates that where a person has made an application under rule 61, he would not be allowed to prosecute his application under rule 60 unless he withdraws his application preferred under rule 61. 23. On similar lines, rule 61 reads as under:- 61. Application to set aside sale of immovable property on ground of non-service of notice or irregularity.- Where immovable property has been sold in execution of a certificate, such Income Tax Officer as may be authorised by the Chief Commissioner or Commissioner in this behalf, the defaulter, or any person whose interests are affected by the sale, may, at any time, within thirty days from the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osit has been made. The reason for the same is not far to see. It is because the Petitioners were aware that before their application to set aside the sale could be entertained by the Recovery Officer, they would be required to deposit the decretal amount. Since they had no intention to deposit the decretal amount, the Petitioners preferred not to challenge the sale of the mortgaged property but instead only made an application for deferment of the confirmation of sale. Having chosen this course of action all throughout, we cannot permit the Petitioners to place reliance on rule 15 and in an indirect fashion challenge the sale and give a complete go-by to the mandatory provisions of rules 60 and 61 of the Second Schedule to the Income Tax Act, 1961. If we were to accept the submissions of the Petitioners, it would effectively mean that the Petitioners are now allowed to challenge the sale of the mortgaged property without complying with the mandatory provisions of rules 60 and 61 and which sale was never challenged till the filing of this Writ Petition. In this view of the matter, we find absolutely no substance in this argument and the decisions of the Supreme Court relied upon by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready confirmed in favour of the auction purchaser (Respondent No.2). It is in this light that the authorities below have held that there was no question of deferring the confirmation of sale. Even otherwise rule 63 and which deals with confirmation of sale, clearly provides that where no application for setting aside the sale under rules 60, 61 and / or 62 is preferred, or where such an application is made and disallowed by the Recovery Officer, the Recovery Officer shall (if the full amount of the purchase money has been paid) make an order confirming the sale. It is not in dispute that no application for setting aside the sale was ever preferred by the Petitioners. In this view of the matter, no fault can be found in the actions of the Recovery officer in confirming the sale in favour of the auction purchaser. This is more so, in view of the fact that the application made for deferment of confirmation of sale was filed before the Recovery Officer after the sale had already been confirmed. We must also mention here that the OTS sanctioned by the Respondent Bank stipulated that the payment of ₹ 3.03 crores had to be made on or before 20th September, 2005. This amount admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time to make payment under the said OTS was clearly violative of Article 14 of the Constitution of India inasmuch as to several other parties, time to make payment under their respective OTS was ranging from two months to six months. In this view of the matter, the Petitioners submitted that the Respondent Bank be ordered and directed to accept the amount of ₹ 3.03 crores from the Petitioners towards the OTS. 29. To appreciate these arguments, it would be necessary to reiterate a few facts. It is not in dispute that this is not the first time that the Respondent Bank entered into a settlement with the Petitioners. As mentioned earlier, since the Petitioners defaulted in repaying the dues of the Respondent Bank, a suit came to be filed against the Petitioners in this Court in the year 1998 for recovery of ₹ 4.14 crores. Thereafter, the said suit was transferred in the year 1999 to the DRT and was numbered as Original Application No.2161 of 1999. Whilst this Original Application was pending, the Petitioners and the Respondent Bank arrived at a settlement. In view of this settlement, consent terms were filed by the parties in the pending Original Application o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that these findings of fact are perverse requiring interference in our writ jurisdiction. Even otherwise, we find from the record that even as late as on 4th January 2006, the DRAT, by an interim order had granted an opportunity to the Petitioners to deposit this amount of ₹ 3.05 crores. Admittedly, the same was not deposited. The totality of all these facts would clearly lead to an inference that the Petitioners never had any intention of honouring any settlement arrived at with the Respondent Bank and these arguments are being canvassed only to somehow thwart the sale of the mortgaged property which has become absolute and the possession of which has also been handed over to the auction purchaser as far back as in January, 2006. In these facts, we therefore do not find that there is any violation by the Respondent Bank of the RBI guidelines issued on 3rd September, 2005 mandating all Public Sector Banks to settle the dues of all NPAs below ₹ 10 crores by entering into a One Time Settlement Scheme. We do not read the RBI guidelines to mean that irrespective of the fact that the debtor has already defaulted in making payment of an earlier sanctioned OTS, would stil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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