9911796707
TMI Blog2010 (3) TMI 1237X X X X Extracts X X X X X X X X Extracts X X X X ..... re-numbered as O.A. No. 1098 of 2001. 3. Respondents 1 to 3 were set exparte on 25.2.1999 and exparte Decree also came to be passed on 20.9.1999. The respondents 1 to 3 filed Application in I.A. No. 2240 of 1999 for setting aside the exparte order and Application in I.A. No. 2606 of 1999 for setting aside the exparte Decree. The Applications were dismissed for default on 20.11.2001. The respondents 1 to 3 herein filed I.A. Nos. 897 and 898 of 2001 to restore the Interlocutory Applications in I.A. Nos. 2240 and 2606 of 1999 and they were dismissed on 1.5.2002. 4. In the meanwhile, in execution of the Recovery Certificate, the immovable property was brought to sale by public auction held on 7.3.2003 and the petitioners herein took part in the auction and purchased the property. The respondents 1 to 3 filed I.A. No. 146 of 2003 for setting aside the auction held on 7.3.2003 and I.A. No. 150 of 2003 seeking for not to confirm the sale. The Debts Recovery Tribunal passed a conditional order, dated 10.4.2003 in I.A. No. 150 of 2003 to defer the confirmation of sale on condition the respondents 1 to 3 paying a sum of ₹ 10 lakhs to the Bank or to the Recovery Officer on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90 of 2006 before the Debts Recovery Appellate Tribunal, Chennai and the Appellate Tribunal by order, dated 13.7.2006, allowed the appeal and set aside the order and directed the Debts Recovery Tribunal to take up the Interlocutory Application in I.A. No. 20 of 2005 along with O.A. No. 1098 of 2001 and dispose of them in accordance with law. Challenging the said order, the petitioners herein preferred writ petition in W.P. No. 29356 of 2006 and a Division Bench of this Court, by Order dated 29.11.2006, set aside the order of the Appellate Tribunal and remitted the case to Debts Recovery Appellate Tribunal to decide the issue whether the rights of the bonafide purchasers stand curtailed or not even after the exparte Decree is set aside. On remand, the Debts Recovery Appellate Tribunal held that the petitioners herein are not bonafide purchasers of the property and set aside the sale and directed the respondents 1 to 3 to deposit the entire amount claimed in Original Application. The said impugned order is challenged in the present writ petition. 8. Mr. R. Murari, learned Counsel for the petitioners, submitted that the petitioners were not made parties to any Application filed by res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is more than ₹ 8 Crores and the petitioners were well aware of the Applications filed by the respondents 1 to 3 herein for setting aside the exparte Decree and to stay the sale and with the knowledge of pending litigation, the purchase has been made and such purchase is not legally protected and in any event the Application seeking possession has been filed beyond the statutory period of limitation viz. one year, as prescribed under Article 134 of the Limitation Act and it is hit by limitation and hence it is not maintainable. The learned Senior Counsel further contended that the auction sale proceedings became void due to operation of Rule 57 Second Schedule to Income Tax Act, 1961, when the Auction Purchasers failed to deposit 25% of the auction amount on the date of auction after declaration as successful bidders and even after default of such deposit, the property was not re-sold and further the Auction purchasers had failed to deposit the balance of purchase money within a period of fifteen days as mandated in Rule 57 as well as in the Terms and Conditions of sale and the Sale had become null and void and the Sale proceedings are completely wiped out as if they do not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the amount of debt due. 12. Section 29 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 makes the Second and Third Schedules to the Income Tax Act , 1961 applicable for recovery of debt due under the Act. Rules 57 and 58 of Second Schedule to the Income Tax Act, 1961 are relied upon to have the auction sale set aside for breach of the said Rules. The said Rules read as under. 57. Deposit by purchaser and resale in default: (1) On every sale of immovable property, the person declared to be the purchaser shall pay, immediately after such declaration, a deposit of twenty five per cent on the amount of his purchase money, to the Officer conducting the sale; and, in default of such deposit, the property shall forthwith be resold. (2) The full amount of purchase money payable shall be paid by the purchaser to the Tax Recovery Officer on or before the fifteenth day from the date of sale of the property. 58. Procedure in default of payment: In default of payment within the period mentioned in the preceding rule, the deposit may, if the Tax Recovery Officer thinks fit, after defraying the expenses of the sale, be forfeited to the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rules requiring the deposit of 25 per cent of the purchase money immediately on the person being declared as a purchaser and the payment of the balance within 15 days of the sale are mandatory and upon non-compliance with these provisions there is no sale at all. The rules do not contemplate that there can be any sale in favour of a purchaser without depositing 25 per cent of the purchase money in the first instance and the balance within 15 days. When there is no-sale within the contemplation of these rules, there can be no question of material irregularity in the conduct of the sale. Non-payment of the price on the part of the defaulting purchaser renders the sale proceedings as a complete nullity. The very fact that the court is bound to re-sell the property in the event of a default shows that the previous proceedings for sale are completely wiped out as if they do not exist in the eye of law. We hold, therefore, that in the circumstances of the present case there was no sale and the purchasers acquired no rights at all. The above decision has been followed by the Supreme Court in the subsequent decision in Balram Son Of Bhasa Ram's Case: AIR 1996 Supreme Court 2781 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties auctioned on 7-3-2003 in the above DRC proceedings and the balance bid amount and 1% poundage payable by the bidders within 15 days is ₹ 87,78,000/-. From the above, it is seen that the petitioners have paid a sum of ₹ 17,37,500/- (Rupees seventeen lakhs thirty seven thousand five hundred only) by two cheques while making the deposit of 25% of the amount of the purchase money. 16. The Supreme Court, in the decision in Rao Mahmood Ahmed Khan's Case: AIR 1995 Supreme Court 2195, while interpreting Rule 285D of the U.P. Zamindari Abolition and Land Reforms Rules, which is regarded as pari materia to Rule 84 of Order XXI of CPC held that the deposit of 25 per cent of bid amount by cheque will not be a valid tender within the meaning of the Rule and the Rule does not contemplate any payment by cheque but a cash deposit of 25 per cent of the bid amount and there was non-compliance of the rule. For better appreciation, the relevant observation made by Their Lordships in the said decision are as follows: 11. Thus, it is settled law that the provisions of Order 21, Rule 84, 85 and 86 of the Code of Civil Procedure are mandatory and the provisions of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Rule and there was no compliance of Rule 57(1) as well as the Conditions of auction sale. 18. The second limb of the contention of the learned Senior Counsel appearing for the respondents 1 to 3 pertaining to non-compliance of provision of Rule 57(2) is that the Auction purchasers viz. the petitioners had failed to deposit the balance purchase money within a period of fifteen days from the date of sale and hence there was no sale at all. 19. The payment of balance of purchase money within fifteen days from the date of sale is mandatory as per Rule 57 and it is also mandatory condition stipulated in the Auction Sale Notice. Moreover, the Recovery Officer in his order dated 7.3.2003, referred above, has also reiterated that the balance of bid amount and one per cent poundage fee payable by the petitioners within 15 days is ₹ 87,78,000/- (Rupees eighty seven lakhs and seventy eight thousand only). The period of fifteen days from the date of sale lapsed on 22.3.2003. Admittedly, the auction purchasers/petitioners did not pay the balance of purchase money till 22.3.2003. They did not also file any petition seeking for extension of time. 20. The petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Auction purchasers/petitioners did not pay the balance of purchase money within fifteen days of sale viz. 22.3.2003 and no payment was made during that period and they have paid the full amount of purchase money only in the month of May, 2003. There was clear non-compliance of Rule 57 and also the Conditions of sale. 21. A Division Bench of the Bombay High Court in the decision in Narayan Karwa's Case : [2008] 296 ITR 545 considered Rule 57 of Second Schedule of Income Tax Act, 1961 and held that failure to deposit the entire purchase money on or before the fifteenth day from the date of sale not only renders the sale invalid but also renders the 25 per cent purchase price deposited on the date of auction liable to be forfeited. For better appreciation, the relevant portion of the above decision is extracted below. However, in the present case, it is an admitted fact that respondent No. 4 has failed to deposit the entire purchase price within the time stipulated under the Act. According to the petitioners, failure to deposit the entire purchase price within the stipulated time, not only renders the sale invalid but also renders the 25 per cent deposit made on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act instead of to the Income Tax. 23. A Division Bench of the Andhra Pradesh High Court in the decision in P. Mohanreddy and Other's Case : AIR 2004 AP 94 held that Section 29 of the Act does not enjoin upon the Recovery Officer to follow the provisions of Recovery of Tax Rules provided in Second Schedule to Income Tax Act in letter and spirit but gives him discretion to follow the same as far as possible and Section 29 of the Act makes Rule 57 as directory only and the belated payment of purchase money will not affect the legality and validity of the sale. 24. With respect, we are not in agreement with the view taken by the Division Bench of Andhra Pradesh High Court in the above decision. 25. Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 makes the Second Schedule to the Income Tax Act applicable for recovery of the debt due and the Recovery Officer is bound to follow the said rule. In the absence of any rule under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 modifying the Second Schedule to Income Tax Act, 1961, it is not open to the Recovery Officer to deviate from the said rules an ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
