Karnataka High Court
Tax Recovery Commissioner And Another vs K. Basavarajappa And Others on 13 February, 1992
Equivalent citations: [1992]197ITR398(KAR), [1992]197ITR398(KARN)
Author: Shivaraj Patil
Bench: Shivaraj V. Patil
JUDGMENT Shivaraj Patil, J.
1. The parties in these writ appeals will be referred to as they were referred to in Writ Petition No. 12082 of 1988, throughout this judgment.
2. Briefly stated, the facts leading to these writ appeals are the following :
Y. S. Devendra Murthy, brother of petitioner No. 2, was a defaulter under the Income-tax Act, 1961 (for short, "the Act"); recovery proceedings were initiated against him by issuing a notice under rule 2 of the Second Schedule to the Act (for short, "the Rules"); the said notice in ITCP-I was served on him on September 3, 1973; subsequently, attachment in ITCP-16 was made on February 11, 1988; proclamation of sale was issued in ITCP-13; thereafter, the property was brought to sale by respondent No. 2 and, in the auction held on March 14, 1988, respondent No. 3 was the successful bidder.
3. Petitioner No. 1 entered into an agreement with Y. S. Devendra Murthy, the defaulter, on November 20, 1982, to purchase the lands in respect of which notice under rule 2 had already been served on Y. S. Devendra Murthy on September 3, 1973, as stated above; petitioner No. 1 addressed a letter on April 12, 1988, to respondent No. 1 offering to deposit the entire tax arrears and sought for setting aside the sale under rule 60 on accepting the deposit; the said application was rejected by respondent No. 2 on April 20, 1988, stating that petitioner No. 1 was not a person whose interest was affected by the sale as he had absolutely no interest in the property by virtue of section 54 of the Transfer of Property Act; against the said order of rejection passed by respondent No. 2, the first petitioner alone filed an appeal before the first respondent and the first respondent, by his order dated June 13, 1988, dismissed the appeal, by confirming the order passed by the second respondent. There-after, petitioners Nos. 1 and 2 filed W. P. No. 12082 of 1988 challenging the order dated April 20, 1988, passed by respondent No. 2 and the order dated June 13, 1988, passed by respondent No. 1.
4. The petitioners contended that the first petitioner deposited the tax arrears, solatium, interest and expenses incurred by the authority; the second respondent, having accepted such deposit, directed the Income-tax Inspector to defer the confirmation of sale and as such respondent No. 2 ought to have allowed the application and set aside the sale. It was also contended that respondent No. 2 was not right in rejecting the application of petitioner No. 1 as directed by respondent No. 1, in that he failed to exercise the discretion vested in him by the statute.
5. Respondents Nos. 1 and 2 contended that, under rule 2, notice ITCP-I was served on Y. S. Devendra Murthy, the defaulter, on September 3, 1973; by virtue of rule 51, attachment proceedings, though subsequently made, relate back to September 3, 1973, the date on which notice was served under rule 2 on the defaulter; rule 16 prohibits private alienation or dealing with the property, after the service of notice under rule 2, by the defaulter or his representative in interest; the agreement of sale entered into on November 20, 1982, by petitioner No. 1 with Y. S. Devendra Murthy after service of notice under rule 2 was void and unenforceable in law; no right, title or interest in the property accrued to the first petitioner by virtue of the said agreement; the first petitioner was not a person whose interest was affected by the same as no interest accrued to him under the said agreement of sale by virtue of section 54 of the Transfer of Property Act; the application filed by him under rule 60 being one by a person whose interest was not affected by the sale was not at all maintainable. As such, it was rightly rejected by the respondent No. 2 and the appeal filed by the petitioner No. 1 was also rightly rejected by respondent No. 1 on the ground of maintainability as well as on merits.
6. The learned single judge held that, on a perusal of the records of the case, on appreciation of the facts and circumstances of the case and the order passed by the second respondent confirming the sale, the writ petition filed by the petitioners was maintainable. He also held that the second respondent, having accepted the deposit of the arrears of tax, was not right in rejecting the application made under rule 60 under the instructions received from the first respondent. In the view he took, the learned judge thought it unnecessary to deal with the other submissions made on behalf of the respondents. Hence, he allowed the writ petition, quashed the orders annexures-C and E to the writ petition and directed the second respondent to permit the second petitioner-power of attorney holder of the defaulter to make the deposit within four weeks and deal with the matter on its merits. Aggrieved by this order of the learned single judge dated December 14, 1990, respondents Nos. 1 and 2 have filed W. A. No. 293 of 1991 and respondent No. 3 has filed W. A. No. 721 of 1991.
7. Before us, Sri H. Raghavendra Rao and Sri K. R. Prasad, learned counsel for the respondents, urged that the orders, annexures-C and E, impugned in the writ petition, were just and valid; the notice ITCP-I under rule 2 had been served on the defaulter on September 3, 1973, and the attachment in ITCP-16 was made on February 11, 1988, which, by virtue of rule 51, related back to September 3, 1973. In view of rule 16, the defaulter was not competent to deal with the property after the attachment. Hence, the agreement of sale dated November 20, 1982, did not confer any right, title or interest over the property on petitioner No. 1 and the said agreement was null and void. The application filed by petitioner No. 1 under rule 60 was not maintainable, as he was not the person whose interest was affected by the sale. The appeal filed by petitioner No. 1 was not maintainable for the very same reason. Hence, the writ petition filed by the petitioners was itself not maintainable. Under the circumstances, the learned single judge ought to have dismissed the writ petition.
8. Sri K. S. Ramesh, learned counsel for the petitioners, submitted that the learned single judge has passed the order under appeal taking into consideration the fact of respondent No. 2 accepting the deposit of arrears of tax along with the application made under rule 60, deferring the confirmation of sale and rejecting the application as per the direction of respondent No. 1 without independently exercising the discretion vested in him by the statute. Hence, the order of the learned single judge is just and sustainable.
9. We have carefully considered the submissions made by learned counsel representing the parties. A notice under rule 2 was served on the defaulter on September 3, 1973, and the attachment, though made on February 11, 1988, by virtue of rule 51, related back to and took affect from September, 3, 1973, on which date the said notice was served upon the defaulter. Rule 16 states that where a notice has been served on a defaulter under rule 2, he or his representative-in-interest shall not be competent to mortgage, charge, lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer. It further states that, after an attachment has been made, the property attached or any interest therein and payment made to the defaulter contrary to such attachment shall be void as against all claims enforceable under the attachment. In view of the various dates given above as to the events that have taken place, it is clear that, as on November 20, 1982, the defaulter, Y. S. Devendra Murthy, was not competent to enter into an agreement of sale of the property belonging to him. Even otherwise a mere agreement of sale did not confer or create any right, title or interest in him over the immovable property. As a matter of fact, even the first petitioner had filed a suit for specific performance of the agreement. This being the position, the application filed by petitioner No. 1 under rule 60 was itself not maintainable as he was not a person whose interest was affected. Petitioner No. 1, by mere deposit of arrears of tax and other amounts required to be deposited under the said rule, and whose interest over the property was not affected could not maintain an application under the said rule.
10. It is only petitioner No. 1, who filed an appeal before respondent No. 1 against the order, annexure-C, dated April 20, 1988, passed by respondent No. 2 Petitioner No. 2, the brother and power of attorney holder of the defaulter, Y. S. Devendra Murthy, did not file any appeal. The first respondent held that as petitioner No. 1 was not an interested person for the purpose of rule 60, the appeal filed by him was not maintainable. The first respondent has dismissed the appeal even on merits as well. It is only thereafter the petitioners filed the writ petition questioning the correctness and validity of annexures-C and E to the writ petition. The learned single judge, as to the maintainability of the writ petition, has stated in paragraph 7 of the order that (at page 401) :
"Elaborate arguments were addressed by learned counsel for the successful bidder as to the maintainability of the writ petition. On a perusal of the records of the case and on appreciation of the facts and circumstances of the case and the order passed by the Tax Recovery Officer confirming the sale, I hold that the writ petition filed by the two petitioners is maintainable."
11. On a detailed examination of the facts and position of law stated above, we are unable to persuade ourselves to accept the view of the learned single judge in this regard. We have no hesitation to hold that the application filed by petitioner No. 1 under rule 60 was not property sold. For the same reason, he could not maintain the appeal before respondent No. 1. Petitioner No. 2 neither filed an application under rule 60 nor filed an appeal against the order, annexure-C, to the writ petition passed by the second respondent and as such could not maintain the writ petition. Thus, the writ petition filed by the petitioners was not maintainable. Consequently, orders annexures-C and E to the writ petition could not be quashed. We are inclined to agree with the observation could not be quashed. We are inclined to agree with the observation made by the learned single judge that respondent No. 1 committed an error in interfering with the discretionary power to be exercised by respondent No. 2 who was a statutory authority under the rules. In the view we have taken as to the maintainability of the writ petition itself, we think it unnecessary to probe into the matter any further.
12. In the light of the facts stated and discussion made, the writ appeals are entitled to succeed. Accordingly, these writ appeals are allowed, the order under appeals is set aside and the writ petition is dismissed. There shall be no order as to costs.