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TMI Blog1991 (4) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... king cancellation of the sale. A copy of the said application made on September 9, 1987 is produced as annexure 'C' to the writ petition. The Tax Recovery Officer, the first respondent, by his order dated September 17, 1987 (annexure-D), rejected the said application. Against the said order, the petitioners filed an appeal to the Tax Recovery Commissioner, respondent No. 2, under rule 86 of the Second Schedule. The second respondent, by his order dated February 15, 1988 (annexure-G), dismissed the appeal. Being aggrieved by these orders, the petitioners have challenged the same in these writ petitions. The contention of the petitioners is that both the Tax Recovery Officer and the Commissioner erred in dismissing the application on the ground that the petitioners are not "persons interested" to maintain an application under rule 61. Their argument is that, by virtue of the agreement of sale between them and the defaulter, they are to be treated as persons whose interests are affected and thus they have locus standi to file an application under rule 61 of the Act for setting aside the sale for the reasons stated in the application. They have challenged the orders made by the Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement holders, the petitioners, by virtue of the embargo placed on the defaulter under rule 16 to enter into any such agreement to alienate the property in any manner referred to therein. It was, therefore, argued that the petitioners were rightly considered as persons whose interests were not affected and that the application was rightly dismissed. Reliance was also placed on a similar expression used in rule 11. It was further submitted by learned counsel that the said expression must receive the same meaning both for the purpose of rule 11 and rules 60 and 61. Reliance was also placed on section 54 of the Transfer of Property Act in support of the proposition that the contract for the sale of immovable property does not, by itself, create any interest in or charge On such property and hence, the application by the agreement-holder was not maintainable. Learned counsel also relied upon the decision of the Supreme Court in Satyabrata Ghose v. Mugneeram Bangur and Co., AIR 1954 SC 44, in support of this proposition. Alternatively, it was contended by learned counsel that the sale, even if it is held a nullity, should not be set aside so as to affect the rights of the auction-purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61 which provides that any person whose interests are affected by the sale can maintain an application. According to the argument of learned counsel, persons interested includes any other person who has suffered substantial injury. Learned counsel also referred to the decision of the Supreme Court in CWT v. Arvind Narottam [1988] 173 ITR 479, and also the decision of the Gujarat High Court in M. H. Pandya v. TRO [1989] 178 ITR 538. It must be noted, at the outset, that the Rules in the Second Schedule to the Income-tax Act are framed more or less on the pattern of rules framed under Order 21, C. P. C. For a comparative study of the two rules, they have to be placed in juxtaposition. The relevant portion of rule 11 of the Income-tax Act, Schedule II, reads thus : "Rule 11 Order 21, rule 58 11. (1) Where any claim is Adjudication of claims to, or preferred to, or any objection is objections to attachment of, made to the attachment or sale of, property. - (1) Where any claim is any property in execution of a certificate preferred to, or any objection is on the ground that such property made to the attachment of, any is not liable to such attachment property attached in executi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m or possession, not on his own account objection ; or or as his own property, but on account of or in trust for some (c) continue the attachment person, or partly on his own account subject to any mortgage, charge or and partly on account of some other other interest in favour of any person, the Tax Recovery Officer person; or shall make an order releasing the property, wholly or to such extent as (d) pass such order as in he thinks fit, from attachment or the circumstances of the case it sale deems fit. (4) Where any claim or objection has been adjudicated upon under this rule, the order made thereon shall have the same force and be subject to the same conditions as to appeal or otherwise as if it were a decree. (5) Where a claim or an objection is preferred and the court under the proviso to sub-rule (1), refuses to entertain it, the party against whom such order is made may institute a suit to establish the right which he claims to the property in dispute ; but, subject to the result of such suit, if any, an order so refusing to entertain the claim or objection shall be conclusive. Rule 60 of the I. T. Rules Order 21, rule 89 60. (1) Where immovable property 89 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purchaser, or any other interests are affected by the sale, person entitled to share in a may, at any time within thirty days rateable distribution of assets, or from the date of the sale, apply to the whose interests are affected by the Tax Recovery Officer to set aside the sale, may apply to the court to set sale of the immovable property on aside the sale on the ground of a the ground that notice was not material irregularity or fraud in served on the defaulter to pay the publishing or conducting it. arrears as required by this Schedule (2) No sale shall be set aside or on the ground of a material on the ground of irregularity or irregularity in publishing or conducting fraud in publishing or conducting the sale : it unless, upon the facts proved, Provided that - the court is satisfied that the (a) no sale shall be set aside applicant has sustained substantial on any such ground unless the Tax injury by reason of such irregularity Recovery Officer is satisfied that the or fraud. applicant has sustained substantial (3) No application to set injury by reason of the non-service aside a sale under this rule shall or irregularity ; and be entertained upon any groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both rules 60 and 61, it is only the defaulter or any person whose interests are affected by the sale that can make an application to set aside the sale. Under rule 60 of the Second Schedule to the Income-tax Act, no application can be made unless the amount specified in the proclamation of sale is deposited along with solatium and interest. A person who makes an application under rule 60 is not permitted to challenge the sale on the ground of non-service of notice or irregularity under rule 61. Same is the position in the Civil Procedure Code (vide Order 21, rule 89(2) of the Civil Procedure Code). Therefore, both under rules 60 and 61, it is the same person, viz., the defaulter or any person whose interests are affected by the sale that can file an application to set aside the sale before confirmation, subject to conditions specified. But the choice is left to such person or persons either to have the sale set aside by depositing the entire amount or to challenge the sale on the ground of material irregularity in publishing or conducting the sale or for non-service of notice on the defaulter. Order 21, rule 89, provides the only means by which a judgment debtor can get rid of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be construed that an application under either of the rules, viz., rules 60 and 61, has to be made by the same person. In the present case, it is the three petitioners who entered into agreement to purchase the property who made the application under rule 61 before the Tax Recovery Officer. The Tax Recovery Officer, by his order dated September 17, 1987 (annexure-B), rejected the application on two grounds : (i) that there was no irregularity in the auction sale proceedings held on August 19,1987, and, (ii) that the petitioners have not sustained "substantial injury". The appeal filed by the petitioners before the Tax Recovery Commissioner under rule 86 was also dismissed, by his order dated February 15, 1988 (annexure-G). The Commissioner held that the petitioners had no locus standi to file the application under rule 61 on the ground that the agreement entered into by them with the defaulter was void by virtue of rule 16. It is this view taken by the Commissioner that is challenged in these writ petitions. It is vehemently argued by Sri Sarangan, learned counsel for the petitioners, that the petitioners have to be considered as persons whose interests are affected by the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt under ITCP-16 which was served on the defaulter. The further proceedings taken by the Department was to issue a proclamation of sale-ITCP-13-which were also served on the defaulter. It is only thereafter that the property of the defaulter was brought to sale and sold in public auction on August 19, 1987. The chronology of events shows that the petitioners who claimed interest in the property did not make any application under rule 60 to set aside the sale. The property was brought to sale to recover the income-tax arrears of Rs. 5,99,509 due from the defaulter. The defaulter having lost the opportunity to save the property apart from other technicalities, the petitioners, who are agreement-holders, chose a speculative remedy to get the sale set aside under rule 61. So far as the legal aspect, namely, whether the petitioners could be considered as persons whose interests are affected by the sale is concerned, rule 16 disentitles a person or persons like the petitioners from entering into an agreement with the defaulter for purchase of the property, on which a statutory charge is created, on the issue of a notice in Form No. ITCP-1 under rule 2. Rule 16 also prohibits the de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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