Madras High Court
M/S.G.V.Films Limited vs S.Priyadarshan on 19 August, 2008
Bench: M.Chockalingam, M.Venugopal
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 19-8-2008 CORAM THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM AND THE HONOURABLE MR.JUSTICE M.VENUGOPAL O.S.A.No.311 of 2005 and W.A.No.2239 of 2005 OSA 311/2005: M/s.G.V.Films Limited rep. By its Director p.Raghuraman No.4, Seshadri Road Alwarpet, Chennai 600 018. .. Appellant vs 1.S.Priyadarshan 2.Lissy Priyadarshan .. Respondents WA 2239/2005: G.V.Films Limited No.4, Seshadri Road Alwarpet, Chennai 600 018. .. Appellant vs The Tax Recovery Officer Media Range, Income Tax Department Room No.313, III Floor, New Block 121, Mahatma Gandhi Road Chennai 600 034. .. Respondent Original side appeal preferred under Clause 15 of the Letters Patent and Order 36 Rule 1 of O.S. Rules against the judgment and decree of the Court dated 5.12.2005 made in C.S.No.454 of 2005. Writ appeal preferred under Clause 15 of the Letters Patent against the order of the Court dated 5.12.2005 made in W.P.No.17576 of 2005. For Appellant : Mr.Ravi M/s.Rugan & Arya For Respondents : Mrs.Nalini Chidambaram Senior Counsel for Mr.S.Vasudevan for R2 Mrs.Pushya Sitaraman for Income Tax COMMON JUDGMENT
(Judgment of the Court was delivered by M.CHOCKALINGAM, J.) These appeals namely OSA No.311 of 2005 and WA 2239 of 2005, have arisen from the common judgment of the learned Single Judge of this Court made in C.S.No.454 of 2005 and W.P.No.17576 of 2005.
2.The case of the appellant is as follows:
(a) Since 1999, the appellant has been a lessee of the plaint scheduled mentioned premises which belonged to Sujatha Films Limited (SFL) and running two preview theatres. They have installed costly equipments in the premises for running the theatre. To recover the tax arrears from the said SFL, the Income Tax Department auctioned the schedule premises on 17.3.2005 pursuant to a proclamation of sale dated 7.2.2005. After the auction, the department attempted to transfer physical possession to the bidder even before the issuance of sale certificate. Immediately, the appellant filed a writ petition in WP 10094 of 2005, and an order was passed by this Court on 28.3.2005 restraining the department from interfering with the plaintiff's possession of the property for a minimum period of 30 days from the date of service of order dated 17.3.2005. The said order was subsequently modified on 8.4.2005 to the effect that the department should not interfere with the plaintiff's possession for a minimum period of 30 days from the confirmation of the sale. The confirmation of sale has been made by a certificate of sale dated 4.5.2005 issued by the department. While the matter stood thus, the defendants have made a hasty attempt to grab physical possession of the property. Under the circumstances, the appellant filed the above suit for a permanent injunction restraining the defendants from interfering with the plaintiff's possession and enjoyment of the property.
(b) The department has issued a letter dated 4.5.2005 demanding the appellant to vacate the subject premises by 3.6.2005 and has threatened to forcibly remove them from the property under Rule 39 of the Income Tax (Certificate of Proceedings) Rules, 1962. The department has no power to issue the same. The letter is vitiated by lack of jurisdiction. In the case of a property that is in the occupation of the tenant, once the certificate of sale is issued and Rule 40 is complied with as stated above, the obligation of the department has come to an end. Under such circumstances, the appellant has filed the above writ petition for a writ of certiorarified mandamus to quash the said letter.
3.The Income Tax Department filed a counter in the writ petition alleging that Rule 39 of the ITCP Rules applies to this case; that the alleged lease is void; that the appellant was given sufficient time as per the orders of this Court, but they have not availed the same; that the appellant is not a tenant, and hence the writ petition was to be dismissed.
4.The learned Single Judge on enquiry, dismissed the suit as not maintainable, and the writ petition was also dismissed. The aggrieved appellant has brought the original side appeal as well as the writ appeal before this Court.
5.Advancing arguments on behalf of the appellant, the learned Counsel Mr.Ravi would submit that the plaintiff/appellant has been a lessee of the premises described in the schedule to the plaint running two preview theatres; that the premises belonged to the company called Sujatha Films Limited (SFL); that in order to substantiate the lease of the premises, the plaintiff has entered into three lease deeds and has also paid the interest free advance deposit of Rs.75 lakhs; that the plaintiff has installed costly equipments in the said premises; that in order to recover the arrears of income tax due of the lessor Sujatha Films Limited, the Income Tax Department made proclamation of sale on 7.2.2005 which was issued by the Tax Recovery Officer (T.R.O.); that as per the proclamation, the sale was fixed to be held on 17.3.2005; that the sale proclamation would clearly indicate that the property to be sold was clearly mentioned; that it was also mentioned that the said theatre was under the occupation of the appellant as tenant; that even prior to the date of the proclamation of sale, the appellant had corresponded with the respondent department on the subject and the department has addressed a letter to the appellant on 4.1.2005; that the department made a publication without mentioning that the property was under the occupation of the appellant as tenant; that on 11.3.2005, the appellant objected to the proposed sale emphasising that their possession and right of occupancy through their letter and pointed out the defect in the proclamation and demanded rectification; that a reply was sent by the department on 14.3.2005 that the lease in favour of the appellant for 9 years from 1990 was after a TRO notice dated 31.1.1990, and therefore the lease was invalid; that the said notice was not mentioned in the proclamation of sale; that despite the objections raised by the appellant and even without rectifying the defects, auction was held on 17.3.2005; and that the defendants in the suit were declared as successful bidders.
6.Added further the learned Counsel that the first defendant was a Film Director and the second defendant is his wife being a former actress; that both were aware of the fact that the theatre was in possession of the appellant; that they themselves have witnessed the screening of the several films and have screened some of their films; that on 19.3.2005, the representatives of the defendants came to the premises with a letter issued on 17.3.2005 to the defendants by the department in which the respondent department had not only declared them to be the successful bidders, but also have stated that they might take necessary steps to safeguard the property; that when the defendants attempted to take possession of the theatre by force, it was successfully resisted by the appellant's staff; that the staff of the department came in the evening hours to the premises with two security persons and attempted to induct such security persons into the property; that they were also not permitted to do so; that on 21.3.2005, the appellant filed W.P.No.10094 of 2005 against the department for a writ of mandamus directing them to refrain from interfering with the possession of the said theatre in any manner except provided in Rule 40 of the Income Tax (Certificate of Proceedings) Rules, 1962, (ITCP); that pending the writ petition, an order was passed in WP 10094/2005 recording the statement of the Standing Counsel for the Income Tax Department that the writ petitioner had right of appeal and further directing that the respondent department should not interfere with the appellant's peaceful possession of the theatre except under Rule 40 for a minimum period of 30 days commencing from 17.3.2005; but, no appeal was provided against the auction sale, and thus, the statement made by the Standing Counsel was not correct; that when the error that crept in was brought to the notice of the Court, the said order was modified on 8.4.2005; that it was observed that the appellant had a right to file an application to set aside the sale which was also not correct; and that under the modified order, the respondent department was restrained from interfering with the appellant's possession for a minimum period of 30 days from the date of confirmation of the sale.
7.The learned Counsel would further add that the said auction sale was confirmed by the department in favour of the defendants by an order in Form No.18 on 4.5.2005; that the sale certificate has also been issued in favour of the defendants in Form No.20 of the ITCP Rules; that while issuing the confirmation order and the sale certificate, the respondent deliberately added a mention about a purported Recovery Certificate No.256/91-92 dated 31.1.1990 with a malafide view to fill up the lacuna in the proceedings of the department though such certificate was not mentioned in the proclamation of sale giving rise to a real apprehension that the said certificate was made up and produced with ulterior motive; that a copy of the sale certificate was affixed on the wall of the theatre premises by the staff of the Income Tax Department and by beat of "Tom Tom"; that they declared that the interest of the landlord defaulter was transferred to the purchaser as provided in Rule 40; that a letter was addressed by the advocates of the defendants to the respondent department seeking to set aside the auction sale and demanding the refund of the sale consideration and further referred to the department's order dated 29.4.2005 rejecting their request; that in the same letter, the defendants have also requested the department to obtain vacant possession from them under Rule 39; that pursuant to the same, the department wrote a letter to the appellant demanding that the appellant should vacate the theatre by 3.6.2005 and also quoted a provision providing for the imprisonment in the event of non-compliance; that while the matter stood thus, on 5.5.2005, the defendants accompanied by their henchmen once again made an attempt to forcible dispossess the appellant from the theatre; that the same was duly resisted; that immediately, the appellant filed C.S.No.454 of 2005 for a permanent injunction restraining the defendants from interfering with the possession except by due process of law; that the Income Tax Department and its Officers were not made parties therein since on 4.5.2005 they had already delivered symbolic possession under Rule 40 to the defendants and with that their concern in that matter was over; that the appellant filed O.A.No.543 of 2005 for injunction pendente lite; and that the Court granted interim injunction on 18.5.2005.
8.Added further the learned Counsel that the appellant filed W.P.No.17576 of 2005 for a certiorarified mandamus to quash the letter dated 4.5.2005 issued by the respondent department to the appellant by which the department had demanded vacant possession, and to restrain the department from interfering with the possession of the theatre; that the writ petition was also admitted and interim injunction was granted on 24.5.2005 in WPMP No.19093 of 2005; that the defendants filed a memo in O.A.No.543 of 2005 stating that they had already filed an appeal before the Commissioner, Income Tax Department, to set aside the auction sale and hence the application in the suit could be closed as infructuous; that recording the memo, the Court closed the O.A. 543 of 2005 and granted permission to the appellant to approach the Court for appropriate order in future if necessary; that the interim injunction originally granted in W.P.No.17576 of 2005 was extended by one week; that in view of the abstention of Advocates from Courts, the Counsel for the appellant was not able to get extension of the interim order; that taking advantage of the situation, the respondent department served a letter dated 13.7.2005 on the appellant at 10.50 a.m. and demanded that the appellant should vacate the premises within one hour; that the defendants with the connivance of the Income Tax Department forcibly took possession of the theatre with the police aid; and have caused considerable damage to the premises and also the installations; that the appellant filed Application Nos.2883 and 2884 of 2005 and O.A.No.692 of 2005 for restoration of the possession of the theatre; that an application was also filed in WPMP No.25189 of 2005 for restoration of possession; that on 22.8.2005 this Court passed a common order in both the applications in the suit and in the writ petition ordering restoration of possession to the appellant and reviving the interim injunction originally granted in O.A.No.543 of 2005 and WPMP No.19093 of 2005 until further orders; that it is pertinent to point out that the Court was convinced that the appellant was in possession of the property as a tenant of the lessor and hence their possession was to be protected; that though it was forcibly taken by the defendants with the aid of the Income Tax Department and police, the Court has passed an order for restoration of possession; and that pursuant to the order, the possession was delivered back to the appellant on 23.5.2005.
9.It is the further submission of the learned Counsel that after hearing the Counsel, the Court passed a common order in the above applications directing the respondent department to hear the appellant as well as the defendants on 22.9.2005 and pass orders as to the applicability of the Rule 39 to this case on or before 29.9.2005; that it was also made clear that the implementation of the said order shall await further orders to be passed in the suit and the writ petition; that at the time time of hearing before the respondent department, when the Counsel for the appellant argued that the defendants had purchased the theatre after reading the proclamation mentioning the appellant's tenancy, to counter that argument, the respondent himself produced an alleged English version of the proclamation; that it was a xerox copy of the form made from a text book and the same has been filled up in hand; that after hearing the submissions made by the Counsel for the appellant and defendants, the respondent department passed an order holding that Rule 39 was applicable to the present case; that while doing so, the respondent Officer had recorded a finding that the tenancy agreement claimed by the appellant was a collusive and sham arrangement, and the appellant had no tenancy rights, and the appellant was claiming title over the property, and the affixture of sale certificate, beating of tom tom and declaration made by the department on 4.5.2005 were not under Rule 40 and there was no symbolic delivery of possession thereby.
10.At this juncture, the learned Counsel took the Court to both the Tamil and English version of the proclamation and pointed out the discrepancy found therein. The learned Counsel would further submit that the English version of the proclamation was produced for the first time before the respondent department; that the appellant also filed detailed objections to the report of the respondent department; that the learned Single Judge has passed an order dismissing the WP and also the suit as not maintainable; that as far as the writ petition was concerned, the learned Single Judge has rested the entire order on the finding recorded by the TRO; that a perusal of that finding would clearly reveal that all were done by the Officer without jurisdiction; that the Officer was directed by the Court to find out the claim made by the appellant and also the nature of the possession; that he was never directed to find out the validity of the tenancy; that while doing so, the Officer has clothed himself with a jurisdiction which was not vested with him, and has recorded that the tenancy was void and invalid; that the materials including the proclamation, would clearly indicate that symbolic delivery was done following Rule 40 of ITCP Rules; that after doing so, the department cannot be allowed to say that for the instant case, Rule 40 is not applicable and Rule 39 alone has to be applied; that in order to suit the convenience of the department, the same was done after the auction purchasers came with a request to cancel the auction sale and also with a further request that the actual possession has got to be handed over by proceeding under Rule 39; and that all would go to show that the department had hand in glove with the auction purchaser.
11.Added further the learned Counsel that the appellant has sought for a permanent injunction to restrain the defendants auction purchasers from interfering with the possession except by due process of law; that the appellant has produced all the lease deeds which have come into existence even before the proceedings initiated by the department, and in such circumstances, the auction purchasers pursuant to the sale, would become the lessors and they must proceed against the appellant/tenant; that if they were to recover possession of the property, the department cannot act on their behalf after the auction sale was over; that the learned Single Judge has dismissed the suit as not maintainable; that once a suit was filed with specific averments, a necessity arose for framing necessary issues, giving the parties an opportunity to put forth their evidence both oral and documentary and recording its finding in favour of the plaintiff or otherwise, but even at the initial stage, the learned Single Judge has dismissed the suit as not maintainable; that more surprising was the appointment of an Advocate Commissioner to take possession of the property immediately on the very day and if necessary, with police protection and breaking open the locks; that even the request by the plaintiff that the execution of the judgment could be delayed by two days to enable the appellant to move the appellate forum was also rejected; that the learned Single Judge has held that the appellant could very well invoke the provisions of Sec.144 of C.P.C. if they succeed in the appeal; that it remains to be stated that it was a suit filed by the plaintiff/appellant seeking for a permanent injunction to restrain the defendants from interfering with the possession of the property; and that in such a suit, even though the Court disposed it of as one not maintainable, it could not act as an Executing Court by directing delivery of the possession the very day.
12.It is further contended by the learned Counsel that the Tax Recovery Officer of the Income Tax Department was directed only to find out whether Rule 39 of ITCP Rules was attracted to the present case; but, the TRO went beyond his authority and without trial and evidence held that the tenancy in favour of the appellant was invalid and void; that the said finding was vitiated since it was one without jurisdiction; that the learned Single Judge pending the writ petition, has specifically directed him to find out whether the said Rule was applicable to the present case or not; but, contrary to the direction and also the propositions of law, the TRO has declared the tenancy as void; that the trial Judge has confirmed the said finding of the Tax Recovery Officer without issues, evidence and trial and without giving opportunity to the appellant to let in evidence both oral and documentary to prove the contrary and thus, the order of the learned Single Judge in dismissing the writ petition was in violation of the principles of natural justice; and that the observations made by the learned Single Judge assailing the validity of the lease deeds were unsustainable on facts and have been made contrary to the available records.
13.The learned counsel appearing for the appellant, in support of his contentions, has relied on the following decisions:
a)AIR 1981 SC 981 (DEV RAJ DOGRA AND OTHERS VS. GYAN CHAND JAIN AND OTHERS)
b)1998 Indlaw MAD 570 (SANCHETI LEASING COMPANY LIMITED VS. INCOME TAX OFFICER AND ANOTHER)
c)(1998) 6 SCC 658 (TAX RECOVERY OFFICER II, SADAR, NAGPUR VS. GANGADHAR VISHWANATH RANADE)
d)(2003) 2 MLJ 220 (A.STEPHEN SAMUEL, PROPRIETOR, M/S.INDUSTRIAL SECURITY AGENCY, COIMBATORE VS. THE UNION OF INDIA REPRESENTED BY ITS SECRETARY TO MINISTRY OF FINANCE OF FINANCE DEPARTMENT OF ECONOMIC (BANKING DIVISION), NEW DELHI AND OTHERS)
e)AIR 1919 MAD 1186 (MANICKAM PILLAI VS. RATHNASAMY NADAR AND OTHERS)
f)(1980) 1 SCC 185 (BISWABANI PVT. LTD. VS. SANTOSH KUMAR DUTTA AND OTHERS).
g)AIR (39) 1952 SC 23 (RAMKUMAR DAS VS. JAGDISH CHANDRA DEO, DHABAL DEB AND ANOTHER) and
h)AIR 2001 DELHI 175 (M/S.PURAN CHAND AND CO. VS. M/S.GANESHI LAL TARA CHAND AND OTHERS).
Under the circumstances, the learned Counsel would submit that the judgment of the learned Single Judge has got to be set aside and the appeals be allowed.
14.In answer to the above, the learned Senior Counsel Mrs.Nalini Chidambaram appearing for the second respondent in the OSA, would submit that the defendants became the successful bidder; that adequate security personnel have been posted at the premises by the department to secure the property of the department; that under the circumstances, there is no question of interfering with the possession; that the interest of the auction purchasers requires to be secured; that the defendants are seeking possession by due process of law; that the learned Single Judge was perfectly correct in rejecting the request of the appellant, and hence that judgment has got to be sustained.
15.The Court heard the learned Counsel appearing for the Income Tax Department on the above contentions.
16.As seen above, the appellant as petitioner filed the writ petition seeking a writ of certiorarified mandamus to quash a letter No.Auction/2005-06 dated 4.5.2005 and to direct the respondent Tax Recovery Officer, Media Range, Income Tax Department, to refrain from disturbing or interfering with the appellant/petitioner's physical possession of the premises comprising land and building at Goodluck Theatre. The plaintiff/appellant also filed C.S.No.454 of 2005 seeking for a permanent injunction to restrain the defendants therein from interfering with the plaintiff's peaceful possession and enjoyment of the suit property. Both the reliefs sought for by the plaintiff/appellant rested on its bone contention that he was a lessee of the premises under Sujatha Films Limited.
17.All the deliberations though elaborate, concentrate mainly on two questions, firstly, whether the Tax Recovery Officer had jurisdiction to pass an order recording a finding that the alleged lease between the appellant and Sujatha Films Limited was invalid or void and secondly, whether the order of dismissal of the suit by the learned Single Judge as not maintainable without arriving at a conclusion on trial was correct.
18.Before adverting the attention to answer those questions, it would be more fit and proper to look into the factual events and circumstances under which such an order came to be passed by the Tax Recovery Officer of the respondent department.
19.The owner of the said property namely the Sujatha Films Limited who fell in income tax arrears to the tune of Rs.11.04 crores along with interest, was liable to pay Rs.19 crores. Pursuant to the certificate issued by the TRO on different dates, Rule 2 notice under Schedule II was issued on 27.2.1987, and the said property was attached on 30.9.1992. Following the same, the property was brought for auction sale by issuing a proclamation on 7.2.2005. The defendants in the suit who were the auction purchasers, when attempted to take possession, it was resisted by the appellant. The objections put forth by the defaulter were negatived and the property was actually auctioned on 7.3.2005. Following the said incident on 19.2.2005, the appellant filed W.P.No.10094 of 2005 on 21.3.2005 seeking for a writ of mandamus to restrain the respondent department from interfering with their possession of the property except as provided under Rule 40 of the Income Tax (Certificate of Proceedings) Rules, 1962. The said writ petition was disposed of by an order to the effect that the department should not interfere with the appellant's possession for a minimum period of 30 days commencing from 17.3.2005. A modification of the said order was sought for, and it was modified to the effect that the appellant's possession should not be interfered with for a minimum period of 30 days from the date of confirmation of the sale. On 4.5.2005, the sale was confirmed and sale certificate was issued to the defendants.
20.On receipt of a communication from the defendants, the department wrote a letter to the appellant to vacate the theatre on 3.6.2005 quoting a provision for providing imprisonment in the event of non-compliance. When an attempt was made to take possession of the property, the appellant who resisted the same, filed C.S.No.454 of 2005 for the aforesaid relief. Pending the writ petition and the suit, the plaintiff filed O.A.No.543 of 2005 seeking interim injunction pending the proceedings. When the said application came up for consideration, after perusal of the impugned notice dated 4.5.2005 challenged in the writ petition, and considering the contentions put forth by the plaintiff's side that it was a case where only symbolic delivery of possession could be made as contemplated under Rule 40, and the contrary contention put forth by the auction purchasers and the department stating that it was a fit case where the actual possession has got to be delivered as envisaged under Rule 39, the learned Single Judge has made the following order. Paragraphs 6 and 7 of the order read as follows:
"6.Having regard to the above stand of the respective parties, it was suggested whether the Court can direct the Tax Recovery Officer to hear the applicant as to his right to remain in possession and whether at all he could be proceeded against for eviction by invoking Rule 39 and the correctness of the said order can be examined by this Court in this Writ Petition as well as the respondents/defendants and also the learned Standing Counsel for the Income-Tax Department have no objection.
7.Therefore, I feel it appropriate to direct the Tax Recovery Officer-X, Media Range, to hear the applicant as well as the respondents/defendants on 22.9.2005 at 11.00 a.m. Before the Tax Recovery Officer neither of the party should seek for any adjournment on that day. The Tax Recovery Officer shall permit the respective counsel to represent the applicant as well as the respondents/defendants. They should present all their applications and documents before the Tax Recovery Officer without fail and proceed with and be ready with their submissions. After hearing the applicant as well as the respondents/defendants, the Tax Recovery Officer shall pass his orders as to the applicability of Rule 39 of the Income Tax (Certificate Proceedings) Rules, 1962 to the case of the applicant and such order shall be passed on or before 29.9.2005. Copy of the order may be furnished to the applicant as well as the respondents/defendants. The implementation of the said order shall await further order in these proceedings."
21.The very reading of the above part of the order would clearly indicate that the parties agreed that their respective contentions with regard to the possession and also the applicability of Rule 39 could be decided by the TRO, and the said order after it was made, could be subjected to test in the writ petition itself. It was also made clear that the implementation of the said order should await the further orders in the proceedings. Accordingly, pursuant to the order, both the parties appeared and placed their materials which were perused by the TRO which resulted in an order as follows:
"From the above, it is clear that
i)GVFL has been in possession of the property as an entity representing the defaulter as the lease arrangement is only a facade to transfer the perpetual enjoyment of the property, even while avoiding the due process of law.
ii)GVFL's claim to the property is based on a right, which has all the ingredients of title to the property created after attachment.
Hence, I hold that the provisions of Rule 39 of ITCP Rules, 1962 are squarely applicable to this case."
22.The said order of the TRO is vehemently assailed by the appellant's side stating that the TRO has no jurisdiction to declare the lease as invalid or void and since the appellant was a tenant under Sujatha Films Limited, Rule 39 of ITCP Rules is not applicable and only Rule 40 of ITCP Rules alone would apply; that the scope of tenancy could not be summarily determined by the TRO; that the legal validity of the tenancy could be gone into only by the civil Court; that the defendants were only auction purchasers who stepped into the shoes of the defaulter, and hence the appellant/plaintiff could be evicted only under due process of law by initiation of necessary proceedings by the auction purchaser; that the Income Tax Department and the auction purchasers have acted in collusion; that the outcome is the impugned order, and hence it cannot be implemented. It would be more apt and appropriate to reproduce Rules 39 and 40 of the ITCP Rules which read as follows:
"39.Delivery of immovable property in occupancy of defaulter:- (1) Where the immovable property sold is in the occupancy of the defaulter or of some person on his behalf or of some person claiming under a title created by the defaulter subsequently to the attachment of such property and a certificate in respect thereof has been granted under Rule 65 of the principal rules, the Tax Recovery Officer shall, on the application of the purchaser, order delivery to be made by putting such purchaser or any person whom the purchaser may appoint to receive delivery on his behalf in possession of the property, and if need be, by removing any person who refuses to vacate the same.
(2) For the purposes of sub-rule (1), if the person in possession does not afford free access, the Tax Recovery Officer may, after giving reasonable warning and facility to any woman not appearing in public according to the customs of the country to withdraw, remove or open any lock or bolt or break open any door or do any other act necessary for putting the purchaser, or any person whom the purchaser may appoint to receive delivery on his behalf, in possession."
40.Delivery of immovable property in occupancy of tenant:- Where the immovable property sold is in the occupancy of a tenant or other person entitled to occupy the same and a certificate in respect thereof has been granted under Rule 65 of the principal rules, the Tax Recovery Officer shall, on the application of the purchaser, order delivery to be made by affixing a copy of the certificate of sale in some conspicuous place on he property, and proclaiming to the occupant by beat of drum or other customary mode, at some convenient place, that the interest of the defaulter has been transferred to the purchaser."
23.From the very reading of the above Rules, it would be quite clear that the actual delivery of property sold in auction by removing the obstructor can be done under Rule 39 if the property is under the occupancy of the defaulter or of some person on his behalf or of some person claiming under a title created by the defaulter. When the immovable property is under the occupation of a tenant or other person entitled to occupy the same, then the delivery of property has got to be effected symbolically as per Rule 40. In the instant case, the plaintiff has not challenged the above order of the TRO in the writ petition. Pending the writ petition for the above relief to quash a letter of the department, by consent of both the parties, the matter was referred to the TRO for an enquiry as to the applicability of Rule 39. Even before the learned Single Judge, the auction purchasers and the department raised a contention that Rule 39 would apply to the present case, while it was contended by the plaintiff that symbolic delivery as contemplated under Rule 40 alone could be made. As per the directions of this Court, the TRO has conducted an enquiry and has placed the report. When a direction was issued by the Court to decide whether Rule 39 will be applicable to the present facts of the case, the TRO has to necessarily look into the factual position as evidenced by documents to decide whether the property was in possession of the defaulter or of some person on his behalf or of some person claiming under a title created by the defaulter. After scrutiny of the documentary evidence, the TRO has found that the plaintiff has been in possession of the property as an entity representing the defaulter as the lease arrangement was only a facade to transfer the perpetual enjoyment of the property even while avoiding the due process of law and the claim of the plaintiff to the property was based on a right which has all the ingredients of title to the property created after attachment. After the scrutiny of the available materials, the TRO has found that the plaintiff was actually in occupation on behalf of the defaulter and also claiming a title over the property in question. Having consented to such an order for referring the matter to the TRO and after producing all the documentary evidence in order to prove the alleged lease, the appellant cannot now be permitted to say that the TRO could not pass such an order. The learned Single Judge was thoroughly mindful of the situation, and hence it was also pointed out in the judgment that the order of the TRO could be tested by the Court in the proceedings, and also the implementation of the order would depend upon the result of the proceedings. In the instant case, the appellant cannot come forward with the plea to state that the TRO has neither power nor jurisdiction to go into the question as to the nature of possession of the appellant and give a report. If that contention was accepted, the very purpose for which the matter was referred to the TRO by consent of parties would be defeated. Hence the correctness of the order has got to be tested in the proceedings.
24.It is not in controversy that after the confirmation of the sale on 4.5.2005 and issuance of the sale certificate, the defendants made an attempt to take possession of the property. The plaintiff despite the auction sale in favour of the defendants and the confirmation of the sale, was resisting the delivery on the ground of tenancy. When such a resistance was made under the alleged tenancy, the TRO under Rule 43 has to find out whether such a claim was made in good faith. Rule 43 of the ITCP Rules reads as follows:
"43.Resistance or obstruction by bonafide claimant:- Where the Tax Recovery Officer is satisfied that the resistance or obstruction was occasioned by any person (other than the defaulter) claiming in good faith to be in possession of the property on his own account or on account of some person other than the defaulter, the Tax Recovery Officer shall make an order dismissing the application."
25.As rightly pointed out by the learned Counsel for the appellant and also as could be seen from the decisions of the Apex Court and other Courts relied on by them, the TRO had no jurisdiction to declare the validity of the lease deeds. But, in order to find out whether such a resistance made by the appellant/plaintiff, was done in good faith, he has to arrive at a satisfaction which could only be done by making the scrutiny of the materials placed before him, and only then, he could decide whether the case on hand would attract Rule 39 of the ITCP Rules. Under the stated circumstances, he cannot but make observations and comments on the documents including the lease deeds on which the appellant/plaintiff calling itself as a tenant rested its case. Without the scrutiny of those documents and without a finding whether the claim made by the plaintiff was in good faith, the question as to the applicability of Rule 39 of the ITCP Rules cannot be decided. That apart, it is not the case of the plaintiff either the admissible evidence was refused or inadmissible evidence was allowed to be let in and thus, it cannot be stated that the finding of the TRO suffered from fundamental flaws which would warrant an interference.
26.The following circumstances are noticed by the Court which would clearly adumbrate that the plaintiff was in possession of the property in question only on behalf of the defaulter.
(i)The plaintiff relied on three unregistered lease deeds dated 28.11.1989, 1.12.1990 and 20.8.1999 respectively. The first lease deed was for a period of 12 months, and the monthly rental was shown as Rs.5,000/-. The same was entered into between G.Venkateswaran and his wife, and both the lessor and lessee were shown to be in the same address. The document was witnesses by none. A deposit of Rs.15 lakhs was shown to have been paid. The second lease agreement was for a period of 9 years, and the monthly rental was written as Rs.5,000/-. A sum of Rs.75 lakhs was shown as the security deposit. The said amount of deposit would carry interest at 10% per annum. The said lease deed was also signed by the husband and wife as lessor and lessee respectively. While the matter stood thus, the third lease deed a perpetual one, was entered into by the wife of Venkateswaran as lessee and one of the directors of the GVFL which was to the effect of rental free. All these lease deeds on their face, would clearly indicate that they were prepared and kept ready for some ulterior purpose probably as put forth by the department to defraud the claim of the department.
(ii)Pursuant to the SFL's huge arrears of income tax from the year 1984-85, Rule 2 notices were issued for the first time on 27.2.1987. On service of Rule 2 notice, the defaulter became incompetent to deal with the property. It is quite clear under Rule 16 to Schedule II that after the service of Rule 2 notice if the defaulter has to deal with the property by way of mortgage, charge, lease or otherwise, he should get the prior permission of the TRO. Since the arrears were not paid, attachment was effected on the Goodluck Preview Theatre on 30.9.1992 itself. The said attachment though effected on 30.9.1992, would have the effect and reality back to the date of the service of the notice on 27.2.1987 as per the relevant rule of ITCP Rules. By a letter dated 22.3.1990, the defaulter has specifically stated that by paying Rs.3,50,033/- on 21.3.1990, the arrears for the assessment year 1984-85 was cleared.
(iii)The Chairman of SFL on 20.3.1990 gave an undertaking that he would not encumber the assets. As rightly pointed out by the learned Counsel for the appellant, the property in question was under the clutches of attachment from the date of notice, and hence the lease agreement and also the subsequent renewals were all violative of the undertaking and in breach of the order of attachment.
27.All the above would clearly adumbrate that the lease deeds were created to serve an ulterior purpose. On perusal of the same it could be noticed that they were created in violation of the undertaking and also of the attachment order. In such circumstances, it could be well stated that the resistance made by the plaintiff calling itself as a tenant in respect of the property thoroughly lacked bonafide and definitely not made in good faith.
28.The TRO as directed by this Court in order to find out whether Rule 39 is applicable to the present facts of the case in respect of the delivery of possession, has scrutinized the documents placed before him and recorded a finding that the property was in occupation of the plaintiff only on behalf of the defaulter, and hence the contentions that the TRO has decided the matter summarily or he cannot go into the question of the alleged lease cannot be countenanced. In order to find out the applicability of Rule 39 and whether there was any resistance by a bonafide claimant on the available materials, after scrutiny of the available materials, the TRO has found that the lease deeds relied on by the plaintiff, were only created, and since the plaintiff was in occupation only on behalf of the defaulter, Rule 39 of the ITCP Rules has got to be applied in the present facts of the case.
29.It is true that ordinarily the validity of the lease agreement has got to be determined only in Civil Court and the TRO is not competent to adjudicate upon this issue. But, in the instant case, a necessity arose to refer the matter to TRO pending the proceedings before this Court, to find out whether delivery of possession was to be effected under Rule 39 of ITCP Rules, and thus, he was called upon to exercise his jurisdiction as envisaged in the Rules to find out whether any resistance was made by the plaintiff in good faith. On such exercise, he has found that the resistance was not bonafide since the lease deeds relied on by the plaintiff to call itself as a lessee were against the order of attachment and made in violation of the undertaking and hence of no consequence. In such circumstances, at no stretch of imagination, it can be stated that the TRO has acted without jurisdiction or exceeded jurisdiction.
30.The learned Counsel for the appellant took the Court to the proclamation of sale made by the department dated 7.2.2005, for the sale of the property and pointed out the schedule of property in the said proclamation was shown under the occupation of the appellant as tenant, and there were letter correspondences between the appellant and the respondent department even prior to the same. A perusal of the said proclamation would indicate that the appellant was shown as tenant in the property. The said proclamation was not done after looking into or being satisfied as to the tenancy, but could have been only in view of the alleged correspondence that preceded the proclamation. When a publication was made by the respondent department on 27.2.2005, the property was not shown in the occupation of the appellant as tenant. When the appellant raised objection to the proposed sale emphasizing the lease and also about the publication made, the respondent department sent a reply on 14.3.2005 that the lease was invalid. It could be seen that the appellant desired to take advantage of the proclamation and the affixture of the sale certificate to contend that the appellant/plaintiff was a lessee, and hence the symbolic delivery as provided under Rule 40 alone could be given. It is true that the department originally had the view that the appellant was a lessee under the defaulter; but, after the resistance was made, the department clearly understood that there was no lease deed in the eye of law, and the resistance was untenable. In the considered opinion of the Court, all these contentions regarding the proclamation and the affixture of sale certificate would not hold water at this stage.
31.After raising the resistance if aggrieved, the plaintiff should have exhausted the remedy available before the department. Instead, the appellant has filed the writ petition and also the suit. Pending the proceedings, both the parties put forth their rival contentions as to the applicability of Rule 30 and by consent the matter was referred to Tax Recovery Officer to decide as to the applicability. Both the parties were also directed to place their evidence. The parties who obtained such an order by consent, have placed the documentary evidence. The plaintiff had rested its case on the three lease deeds in order to contend that it was a lessee under the defaulter. As per the directions of the Court and in exercise of the jurisdiction, vested under the Rules, the TRO was to go into the question as to the applicability of Rule 39 and in order to find out the same, the TRO has to decide the question whether the resistance made by the appellant was bonafide. In order to resolve the question, a duty was cast upon the TRO to look into the documents and take a decision and place before the Court which he has accordingly done. The learned Single Judge while issuing direction to the TRO to find out the applicability of Rule 39, has also further pointed out that the order so made by the TRO was to be tested by this Court and also the implementation of the said order should await the further orders in the proceedings. Accordingly, the learned Single Judge has elaborately discussed in the judgment both factual and legal positions in the writ petition and has found that there was no ground to set aside the order of the TRO recording a finding that Rule 39 of the ITCP Rules would be applicable to the present facts of the case.
32.At this juncture, it is pertinent to point out that in the writ petition filed seeking the relief of certiorarified mandamus as mentioned above, the auction purchasers were not made as parties. As far as the suit for permanent injunction was concerned, the Income Tax Department was not made as a party. But, in both the proceedings, the appellant rested its case only on lease. In order to get the relief under the writ petition, the appellant should prove that it was a lessee and in the absence of the same, the appellant was not entitled for the relief.
33.As far as the contention put forth by the appellant that without deciding the question of tenancy by giving an opportunity to adduce evidence both oral and documentary, the learned Single Judge should not have dismissed the suit on maintainability is concerned, this Court is of the considered opinion that such a contention cannot be countenanced. If the delivery of possession in respect of the property in question has got to be done, following the procedures in Rule 39, no necessity arose to be further proceeded in the suit to decide the question whether there was a valid lease as put forth by the appellant. As found in the interim order in the writ petition, the order of the TRO has stood the test. When the Court has taken a view that the delivery of possession to the auction purchasers has got to be done as contemplated under Rule 39 of the ITCP Rules, nothing survives in the suit to be further decided.
34.Insofar as the contention put forth by the respondent department that in view of the specific bar under Sec.293 of the Income Tax Act, the civil Court has no jurisdiction to entertain the suit, the learned Single Judge has accepted this contention. But, this Court is of the view that this contention of the respondent department has got to be rejected for the simple reason that it was not a suit filed by the plaintiff against the department but against the auction purchasers, and hence the bar under Sec.293 of the Income Tax Act cannot be applied to the present facts of the case.
35.The last contention put forth by the learned Counsel for the appellant before the Court is that the learned Single Judge has appointed an Advocate Commissioner in order to effect the immediate delivery of possession on 6.12.2005 at 3.00 P.M. despite the request of the appellant to challenge the judgment. It is pertinent to point out that the appellant has given an undertaking before the Court that if the Court held that Rule 39 of the ITCP Rules is found applicable, then they would surrender possession forthwith. When the Court came to the conclusion that Rule 39 of the ITCP Rules alone would apply, as per the undertaking, the appellant/plaintiff should come forward to hand over possession. But, they sought for time to prefer an appeal which, in the opinion of the learned Single Judge, should not be allowed. It is pertinent to point out that the learned Single Judge while ordering immediate delivery of possession, has also pointed out that if the plaintiff came out successful in the appeal, the plaintiff can very well invoke Sec.144 of C.P.C. for restoration of possession. Under the stated circumstances, this Court is unable to see any merit in the contention put forth by the appellant's side.
36.It could be seen from the ITCP Rules that after an order was passed by the TRO that there was bonafide resistance or obstruction when delivery was sought for, the course open to the party aggrieved is to file a suit. But, in the case on hand, the suit was filed even before the orders were passed. The writ petition was also filed not challenging the order of the TRO, but only a letter issued by the department for handing over possession of the property invoking Rule 39. Pending the writ petition, the Court directed, on consent of the parties, the TRO to go into the question whether Rule 39 is applicable and in order to find out the same, the parties are also directed to cooperate by filing the documents available in their hands. Accordingly, the appellant/plaintiff filed the three lease deeds referred to above. Needless to say, they should have been filed for the purpose of scrutiny and consideration by the TRO and to take a decision whether Rule 39 would be applicable or not on the evidence and materials available including the three lease deeds. On scrutiny of those three lease deeds, the TRO has made an observation that the lease deeds would clearly indicate that they were created with an intention to evade the revenue. The appellant was actually a person in possession on behalf of the defaulter. Thus all would indicate that the resistance made in the case on hand was not by a bonafide claimant.
37.At this juncture, it is pertinent to point out that even in the order made in the writ petition, it was clearly stated that the said order could be tested by the Court. After the order was passed, the learned Single Judge was perfectly correct in applying the mind, made a test and found that the claim made by the appellant was not bonafide, and it was intended to evade tax, and the said transfer under those lease deeds were also against the order of attachment and also the undertaking given by the defaulter. It is true that the TRO had no jurisdiction to decide the validity of the tenancy, but had jurisdiction to go into those lease deeds and find whether they were genuine documents or created with some purpose to evade tax and also to go into whether the possession of the appellant on the strength of those documents could be considered as that of a tenant or they were in possession on behalf of the defaulter. Thus the TRO has acted as per the directions of the Court and on evaluation of the available materials, found that the appellant was in possession on behalf of the defaulter. Under the circumstances, the learned Single Judge was perfectly correct in sustaining the order.
38.It remains to be stated that the appellant has filed the suit only for permanent injunction to restrain the auction purchasers from interfering with the possession on the strength of the alleged lease. Even after the same was denied both by the department and by the auction purchasers, the appellant has not filed a suit for declaration that it was a tenant or made an attempt to amend the plaint for such a declaration since the appellant was conscious of the fact that if such a declaration of lessee was sought for on the strength of those lease deeds, he could not make out a case to obtain the relief. Once the appellant was unable to make out a case in the writ petition where they challenged the delivery of possession under Rule 39, the delivery of possession under Rule 39 has to necessarily follow. The relief what is sought for in the suit namely permanent injunction against the auction purchasers not to interfere with the possession, has got to be denied as not maintainable. There was no need that arose to undergo an ordeal of trial by framing issues and allowing the parties to let in their evidence and to take a decision thereon. It was a fit case where the suit was to be termed as not maintainable in order to avoid avoidable exercise of an ordeal of trial, and hence the learned Single Judge was perfectly correct in dismissing the suit as not maintainable and also the writ petition as devoid of merits. There judgment of the learned Single Judge has got to be sustained.
39.In the result, both the original side appeal and the writ appeal are dismissed confirming the judgment of the learned Single Judge and leaving the parties to bear their costs.
(M.C.,J.) (M.V.,J.) 19-8-2008 Index: yes Internet: yes nsv/ M.CHOCKALINGAM, J.
AND M.VENUGOPAL, J.
nsv/ OSA No.311 of 2005 and WA No.2239 of 2005 Dt: 19-8-2008