Madras High Court
Machine Tools And Accessories P. Ltd. vs Recovery Officer Drt-I And Ors. on 20 December, 2006
Author: S. Rajeswaran
Bench: S. Rajeswaran
JUDGMENT S. Rajeswaran, J.
1. By consent of learned Counsel appearing for all the parties the main writ petition itself is taken up for final hearing.
2. The brief facts as culled out from the affidavit are as follows:
The petitioner is a small scale industry which closed down its business in the year 2001. The second respondent-bank issued a notice on February 25, 2003, demanding a sum of Rs. 1,23,04,186.58 from the petitioner. On May 10, 2005, the petitioner was surprised to find an attachment order issued through the first respondent on behalf of the second respondent pasted on the factory door. Thereafter, on verification they came to know that all the notices were sent by DRT-II, Chennai, to the company address and paper publication was effected and an ex parte order was passed against them on June 15, 2004.
3. The first respondent issued auction notice and brought the property to sale by way of public auction held on March 23, 2006. The petitioner's managing director was also personally present on the day of auction. On July 26, 2006, the petitioner received an order dated July 18, 2006, informing that the third respondent was the successful bidder and the sale certificate was issued to them on June 30, 2006. By the very same order dated July 18, 2006, the petitioner was asked to vacate the property within 7 days and by letter dated July 26, 2006, the petitioner sent a letter to the first respondent/Recovery Officer requesting time to locate a place and to relocate the machinery. By letter dated August 28, 2006, the petitioner requested the first respondent to disclose the bid amount as the petitioner was entitled to the balance payment. On August 31, 2006, the first respondent sent a communication asking the petitioner to vacate, but no reply was given to the letter dated August 28, 2006. According to the petitioner, the disputed amount is Rs. 1,23,04,186.58 and the auction took place for a sum of Rs. 4.11 crores and therefore they are entitled to the balance sum, but the same has been retained by the first respondent. Now the petitioner apprehends that the property itself has been sold by the first respondent without following the rules and procedures. Therefore the petitioner has filed the above writ petition to quash the order dated August 31, 2006, issued by the first respondent to deliver vacant possession and to direct the first respondent to consider and reply the letter dated August 28, 2006.
4. This Court while admitting the writ petition on October 19, 2006, granted an order of interim injunction in M. P. No. 1 of 2006 on the same day restraining the respondents from enforcing the order dated August 31, 2006, issued by the first respondent.
5. After service of notice, the third respondent filed M. P. No. 2 of 2006, to vacate the interim injunction granted on October 19, 2006. In their counter affidavit filed in support of the vacate stay petition, the third respondent submitted that they offered a price of about Rs. 4.10 crores and the first respondent was pleased to issue a receipt on June 23, 2006, and thereafter the sale certificate was issued on June 30, 2006. After paying the entire sale consideration they (third respondent) requested the first respondent to deliver vacant possession as the property was under the occupation of the writ petitioner. Pursuant to the request made by them, the first respondent passed an order dated July 18, 2006, directing the petitioner to hand over vacant possession. The petitioner by letter dated July 26, 2006, sought for 60 days time and the same was granted by the first respondent by order dated August 1, 2006, to enable the writ petitioner to remove the machinery. But the writ petitioner sent another letter to the first respondent dated August 28, 2006, seeking details about the payments made by the bidder. Thus the petitioner is only dragging the proceedings and they are not willing to vacate the premises even though 60 days time sought for by them were granted by the first respondent. Hence, the third respondent has filed the above M. P. No. 2 of 2006 to vacate the order of injunction granted on October 19, 2006.
6. Heard learned Counsel for the petitioner, learned senior counsel for the third respondent (vacate stay petitioner) and learned Counsel for the second respondent-bank. I have also gone through the documents and the judgments filed and referred to by them in support of their submissions.
7. Learned Counsel for the petitioner submitted that even though a request was made to the first respondent by letter dated August 28, 2006, requesting him to furnish the details about the confirmation of sale in favour of the third respondent, no reply has been sent by the first respondent furnishing the details asked for. Without divulging the details, the first respondent has passed the order impugned directing the petitioner to deliver vacant possession. Therefore, learned Counsel for the petitioner submitted that they have legitimate apprehension that the sale itself was made by the first respondent in favour of the third respondent without following the rules and procedures. Learned Counsel further contended that until the entire details are furnished by the first respondent, the petitioner should not be asked to vacate the property.
8. Per contra, learned senior counsel for the third respondent has submitted that the writ petition itself is not maintainable as the writ petitioner can very well approach the DRT-II, Chennai to redress all their grievances. Learned senior counsel for the third respondent further submitted that the third respondent having paid a huge sum of Rs. 4.11 crores should be permitted to take possession of the property. Learned senior counsel further submitted that having granted 60 days time as granted by the first respondent, it is not for the writ petitioner to misuse the time granted and to file the above writ petition.
9. In support of his submission, learned senior counsel for the third respondent relied on a decision of this Court reported in Times Guarantee Ltd. v. Branch Manager, Industrial Development Bank of India [2006] 134 Comp Cas 237 (Mad) : [2006] 4 MLJ 33, and the decision of the hon'ble Supreme Court in C. Rajagopal v. R. Shankar Rao Jadhav [2006] 9 SCC 253.
10. Learned Counsel for the second respondent-bank while adopting the arguments of learned senior counsel for the third respondent has submitted that the sale has been made in favour of the third respondent in accordance with the rules and the writ petition is not maintainable when there is an effective and alternative remedy before the DRT-II, Chennai available.
11. I have carefully considered the rival submissions with regard to the facts and citations.
12. The order impugned in the above writ petition is an order of the Recovery Officer dated August 31, 2006. In that order it was stated that 60 days time was granted to the writ petitioner for arranging finance to relocate the machinery, but no steps were taken to vacate the land and building. Therefore the first respondent granted a further period of 30 days time to deliver vacant possession, failing which the possession of the property would be placed in the hands of the auction purchasers at the risk and cost of the writ petitioner.
13. It is not in dispute that a Debt Recovery Certificate No. 175 of 2004, dated December 15, 2004, was issued by the DRT in O. A. No. 152 of 2003, as the writ petitioner failed to pay a sum of Rs. 1,47,85,100.14 to the second respondent-bank. Therefore an order of attachment was passed by the first respondent on May 10, 2005, informing that the properties would be sold by public auction.
14. It is also admitted position that the property was sold in public auction on March 23, 2006, to the third respondent and the managing director of the writ petitioner was also personally present on the date of auction. The sale was confirmed and the sale certificate was also issued to the third respondent on June 30, 2006.
15. Pursuant to the confirmation of sale the first respondent by order dated July 18, 2006, directed the writ petitioner under Rule 39 of the Income-tax (Certificate Proceedings) Rules, 1962 read with Section 29 of the DRT Act to hand over vacant possession of the property within 7 days. The writ petitioner by letter dated July 26, 2006, requested the first respondent to grant 60 to 65 days time to locate a place and to re-locate the machinery. By order dated August 1, 2006, the first respondent granted time for 60 days from the date of issue of sale certificate, i.e., up to August 31, 2006, to relocate the machinery and to hand over vacant possession of the property.
16. Thereafter by letter dated August 28, 2006, the writ petitioner requested the first respondent under the Right to Information Act to provide them the details of payments made by the bidder and sought for further period of one month from the date of receipt of the amount due to them in one lot by way of demand draft in their favour. This was followed by another letter dated August 29, 2006, requesting the first respondent to grant them time till October 31, 2006, for arranging temporary finance facility of a few crOres and other requirements explained in detail in their earlier letters.
17. Thereafter the impugned order has been passed by the first respondent granting 30 days time from August 31, 2006, to deliver vacant possession of the properties. From the above facts it is very clear neither the decree passed by the DRT in O. A. No. 152 of 2003 nor the order of attachment passed by the first respondent dated May 10, 2005, nor the auction sale held on March 23, 2006, nor the sale certificate issued on June 30, 2006, nor the order dated July 18, 2006, issued by the first respondent under Rule 39 of the Income-tax Rules was challenged by the writ petitioner in a manner known to law. The writ petitioner's only grievance is that no proper reply was sent by the first respondent to their letter dated August 28, 2006, requesting the first respondent to provide the details of payments made by the bidder under the Right to Information Act and until such time they should not be asked to vacate the property.
18. The first respondent passed an order under Rule 39 of the Income-tax (Certificate Proceedings) Rules, 1962, read with Section 29 of the DRT Act directing the writ petitioner to hand over vacant possession of the property within 7 days. But this order was not at all challenged by the writ petitioner. What was challenged before this Court is the subsequent order dated August 31, 2006, granting further period of 30 days time to vacate the property. Therefore, when the order dated July 18, 2006, is not challenged in the manner known to law, it is not for the writ petitioner to challenge the subsequent order dated August 31, 2006, that too before this court, which is only a consequential order sent in reply to the request seeking for explanation of time.
19. Learned Counsel for the writ petitioner in the course of his arguments made an attempt to attack the sale certificate issued by the first respondent in favour of the third respondent by referring to the various procedures mentioned in the Schedule II of the Income-tax Act, 1961, for recovery of tax. Learned Counsel for the petitioner pointed out that Rules 2, 11, 52, 53, 56, 57, 58 and 59 were not complied with by the first respondent before selling the property in favour of the third respondent. He has also contended that the sale has been made in violation of the Rules 18 and 19 of Schedule I to the Indian Stamp Act, 1899. He further submitted that Sections 31 and 32 of the Stamp Act are not also followed before selling the property to the third respondent.
20. Learned senior counsel for the third respondent replied that it is not for the writ petitioner to agitate all these issues before this Court under Article 226 of the Constitution of India and the writ petition itself is not maintainable.
21. I find merits and force in the submissions of the learned senior counsel for the third respondent.
22. First of all, the sale effected in favour of the third respondent is not at all challenged before this court. Even otherwise if aggrieved by the order of the Recovery Officer, the remedy available to the writ petitioner is to file an appeal to the DRT II.
23. I have already held that without challenging the order dated July 18, 2006, issued under Rule 39 of the Income-tax Rules read with Section 29 of the DRT Act, a consequential order dated August 31, 2006, which is impugned in the writ petition cannot be challenged in this court.
23. Even for challenging the order dated July 18, 2006, an appeal remedy is provided under the DRT Act. In such circumstances, the writ petitioner cannot challenge the confirmation of sale before this Court that too for the first time under Article 226 of the Constitution of India.
24. In C. Rajagopal v. R. Shankar Rao Jadhav [2006] 9 SCC 253, the hon'ble Supreme Court held that they failed to understand how the High Court could have exercised its jurisdiction under Articles 226 and 227 of the Constitution of India to set aside the final orders passed by the DRT and further held that the order passed by the High Court in exercise of writ jurisdiction is wholly unjustified.
25. In Times Guarantee Ltd. v. Branch Manager, Industrial Development Bank of India [2006] 134 Comp Cas 237 (Mad) : [2006] 4 MLJ 33, this Court held as under (page 247):
18. I am afraid whether a writ petition can be maintained by the petitioner with these factual averments to stall the auction conducted by the Recovery Officer, who is exercising his exclusive jurisdiction as decided by the Supreme Court. If any encroachment or misclaim is made by the auction purchaser, the remedy of the petitioner is elsewhere and not by way of writ petition.
19. It was argued by counsel for the debtor-company that the auction purchaser has withdrawn most part of the amount deposited by him leaving a small fraction so as to keep the litigation alive. Per contra, it is submitted by the auction purchaser that the Industrial Development Bank of India has not shown any interest to get the stay order vacated. The petitioner got impleaded himself as a party in W. P. No. 25635 of 2004 on September 29, 2004, and filed applications to vacate the interim orders granted in W. P. Nos. 25635 and 27208 of 2004, and the vacate stay petition was not listed on October 6, 2004. As the matter has not been taken up for final orders, the auction purchaser has withdrawn portion of the amount by giving an unconditional undertaking to deposit the entire amount within seven days of the disposal of the writ petitions in his favour.
26. In Punjab National Bank v. O. C. Krishnan , the hon'ble Supreme Court held that the DRT Act has been enacted with a view to provide special procedures for recovery of debts due to banks and financial institutions and there is a hierarchy of appeal provided in the Act. This fast-track procedure contemplated under the DRT Act cannot be allowed to be derailed by taking recourse to proceedings under Articles 226 and 227 of the Constitution of India.
27. I have also held in M. P. Nos. 2, 3 and 4 of 2006, in W. P. No. 40073 of 2006 dated December 19, 2006, that the writ petition challenging the order of the DRT Act is not maintainable under Article 226 of the Constitution of India and the writ petitioner has got an effective alternative remedy under the DRT Act itself.
28. In the light of the above discussions and the judgments, it is not for the writ petitioner to challenge the confirmation of sale made by the first respondent in favour of the third respondent.
29. Learned Counsel for the petitioner finally submitted that even according to the first respondent as per order of attachment dated May 10, 2005, the writ petitioner failed to pay only a sum of Rs. 1,47,85,100.14 and the auction sale fetched a sale confirmation of Rs. 4.11 crores. In such circumstances the excess money belonging to the writ petitioner is illegally detained by the first respondent and there was no reply by the first respondent to their letter dated August 28, 2006, asking for details of the payment made by the bidder and the balance repayable to them. Till such details are furnished by the first respondent, the writ petitioner should be permitted to be in possession of the property.
30. I am not able to accept these submissions of learned Counsel for the writ petitioner. Non-furnishing of the details by the first respondent has nothing to do with the third respondent taking possession of the property pursuant to an auction purchase that too after investing a huge sum of money. The writ petitioner cannot deny possession to the second respondent on this score.
31. The writ petitioner has made out a case for getting information from the first respondent with regard to the entire details in connection with the sale made by the first respondent in favour of the third respondent. Therefore, I direct the first respondent to issue a proper reply to the letter of the petitioner dated August 28, 2006, in so far as seeking particulars of the details of payment made by the bidder and the balance repayable to them. Hence, the first respondent is directed to give these particulars to the writ petitioner by following the relevant rules and also in accordance with the law within 4 weeks from the date of receipt of this order. To that extent this writ petition is allowed and the writ petition fails in so far as the other prayer is concerned namely, to quash the order of the first respondent dated August 31, 2006. No costs. M. P. Nos. 1 and 2 of 2006, are closed.