Madras High Court
B. Sampath Kumar vs The Recovery Officer on 25 October, 2007
Author: V. Dhanapalan
Bench: V. Dhanapalan
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 25.10.2007 Coram: The Honourable Mr. Justice V. DHANAPALAN W.P. Nos.20484 and 20485 of 2005 AND W.P.M.P. No.22393 of 2005 B. Sampath Kumar ..Petitioner in both the WPs. Vs. 1 The Recovery Officer Office of the Recovery Officer Debts Recovery Tribunal No.1670 Trichy Road Ramanathapuram Coimbatore 641 601. 2 Indian Overseas Bank represented by its Manager No.115 Kumaran Road Tirupur. 3 Navinkumar Agarwal ..Respondents in WP.20484/2005 1 The Union of India represented by its Secretary to Govt. Ministry of Finance New Delhi. 2 The Recovery Officer Office of the Recovery Officer Debts Recovery Tribunal No.1670 Trichy Road Ramanathapuram Coimbatore 641 045. 3 Indian Overseas Bank represented by its Manager No.115 Kumaran Road Tirupur ..Respondents in WP.20485/2005 Prayer in W.P. No.20484 of 2005 Writ Petition filed under Article 226 of the Constitution of India praying for issuance of a writ of certiorarified mandamus as stated therein. Prayer in W.P. No.20485 of 2005 Writ Petition filed under Article 226 of the Constitution of India praying for issuance of writ of declaration as stated therein. For petitioner in both the W.Ps. : Mr. N. Anand Venkatesh For RR 2 & 3 in W.P. Nos. : Mr. R. Thyagarajan, Sr. Counsel WP.20484 & 20485 of 2005 respectively : for Mr. F.B. Benjamin George For R3 in W.P. No.20484/2005 : Mr. A. Thiyagarajan For R1 in WP No.20485/2005 : Mr. V.T. Gopalan, Addl. Solicitor General for Mr S.Udayakumar COMMON ORDER
While W.P. No.20484 of 2005 has been filed to quash the proclamation of sale drawn by the first respondent herein dated 21.04.2005 after calling for the records and pursuing the same and direct the first respondent herein to draw a fresh proclamation of sale strictly in accordance with Rule 52 and 53 of the Second Schedule to the Income Tax Act, 1961 before bringing the property situated at Old Door No.15, First Street, Royapuram Extension, Tirupur Taluk for resale, W.P. No.20485 of 2005 has been filed for issuance of a writ of declaration to declare sub-rule (b) of Rule 61 of the Second Schedule to the Income Tax Act, 1961 (43/61) as unconstitutional, arbitrary and violative of Article 14 of the Constitution of India.
2. Since the petitioner has filed both the writ petitions aggrieved by the order dated 21.04.2005 passed by the Recovery Officer, Debts Recovery Tribunal, Ramanathapuram, Coimbatore and since both the writ petitions are inter-related, they are decided by this common order.
3. The common facts, as culled out from the affidavits and which give rise to both the writ petitions are as under:
The petitioner and his brothers who are partners in Gold Mines Knitting and Weaving Mills approached the Tirupur Branch of Indian Overseas Bank, the second respondent in W.P. No.20484 of 2005 (in short "the bank") seeking credit facilities to run their firm and they were granted cash credit facility and packing credit facility for which they mortgaged their personal property by way of deposit of title deeds. Due to sudden fall in business, the firm incurred loss and was in fact closed and consequently, the loan facilities availed from the bank became due. To recover its outstanding of Rs.38,01,247/- along with interest @ 19.38% per annum, the bank filed an Original Application before the Debts Recovery Tribunal, Chennai (now transferred to Coimbatore) against the firm and its partners and in default of the payment, for bringing the properties mortgaged to the bank for sale. The Debts Recovery Tribunal, Coimbatore, (in short "the DRT") by its judgment and decree dated 19.09.2003, directed the firm and its partners to pay Rs.95,41,544/- towards Principal and Interest and Rs.91,059/- towards cost to the bank and in default of such payment, the same was made recoverable by sale of properties mortgaged to the bank. The partners had negotiated with the bank for making one-time settlement but in vain. Pursuant to its order dated 19.09.2003, the DRT passed an order dated 24.09.2004 in and by which the partners' personal property which was mortgaged with the bank was attached. Accordingly, the Revenue Officer of the DRT (in short "the Revenue Officer) came out with a publication of proclamation of sale without causing the proclamation of the intended sale to be made in the language of the district and without publishing therein the various contents such as revenue assessed upon the property, nature and value of the property required to be published as mandated under Rules 52(2) and 53 of the Second Schedule to the Income Tax Act, 1961 (in short "the Second Schedule") and merely fixing the upset price as Rs.40 lakhs. The said residential bungalow of the firm's partners was auctioned for a meagre sum of Rs.46.20 lakhs in favour the third respondent in W.P. No.20484 of 2005, the auction purchaser. Though Rule 61 of the Second Schedule provides for filing an application to set aside the sale of an immovable property in the event of material irregularity before the Recovery Officer, Rule 61(b) imposes a condition that such an application would be entertained only if the applicant deposits the entire amount recoverable from him.
4. Thus, challenging the proclamation of sale dated 21.04.2005 drawn by the Recovery Officer and calling in question the legality of Rule 61(b) of the Second Schedule, the present writ petitions.
5. The bank has filed a common counter mainly contending that:
a. the sale notices were published in two leading newspapers one in Tamil and other in English in addition to making wide publicity by issuing pamphlets;
b. since the petitioner has not challenged the final order dated 19.09.2003 in T.A. No.783 of 2002, it remains unchallenged and has become final;
c. Rule 53 of the Second Schedule does not stipulate the requirement to publish the revenue assessed on the property or estimated value of the property and it merely stipulates publishing of reserve price and d. the attempt of the petitioner is only aimed at delaying the confirmation of sale and thus force the auction purchaser to withdraw his bid so that he could continue in possession of the property without paying the dues to the bank.
6. For his part, the auction-purchaser also has filed counter denying the various claims made by the petitioner.
7. Mr. Anand Venkatesh, learned counsel for the petitioner has contended that the impugned proclamation of sale is in violation of Rule 52(2) and 53 of the Second Schedule inasmuch as it was not made in the language of the District, viz., Tamil and does not contain various particulars such as the nature of the property to be sold, the amount for the recovery of which the sale is ordered and also the nature and value of the property. In this connection, he has argued that since the nature and value of the property did not form part of the proclamation of sale in the auction held on 31.05.2005, the highest bid for the property was quoted at Rs.46.20 lakhs as against the value of more than one crore of rupees which the property could easily fetch and consequently, in order to recover the balance amounts, two other properties which have also been mortgaged may be brought to sale leading to irreparable loss to the petitioner. On the aspect of fixation of reserve price, he has contended that the Recovery Officer has neither taken any attempt, much less sincere attempt, to estimate the value of the property by calling for valuations from the bank and also the borrowers nor has, on the basis of material facts, independently attempted to value the property and this failure on the part of the Recovery Officer has resulted in gross under-valuation of the property prejudicing the right and interest of the petitioner.
8. With regard to the validity of Rule 61(b) of the Second Schedule which is the point for consideration in W.P. No.20485 of 2005, the learned counsel for the petitioner has contended that it has to be declared unconstitutional, arbitrary and violative of Article 14 of the Constitution of India inasmuch as it requires pre-deposit of amount due from the borrower at the initial proceeding itself of challenging the sale, particularly when the borrower is not in a position to raise the amount due.
9. In support of his contention that the onerous condition imposed under Rule 61(b) of the Second Schedule is unreasonable, the learned counsel for the petitioner has relied on a judgment of the Supreme Court reported in 2004 (2) CTC 759 in the case of Mardia Chemicals Ltd., etc., etc. vs. Union of India and others, etc. etc. (para 60) "The requirement of pre-deposit of any document at the first instance of proceedings is not to be found in any of the decisions cited on behalf of the respondents. All these cases relate to appeals. The amount of deposit of 75% of the demand, at the initial proceeding itself sounds unreasonable and oppressive more particularly when the secured assets/the management thereof along with the right to transfer such interest has been taken over by secured creditor or in some cases property is also sold. Requirement of deposit of such a heavy amount on basis of one sided claim alone, cannot be said to be a reasonable condition at the first instance itself before start of adjudication of the dispute. Merely giving power to the Tribunal to waive or reduce the amount, does not cure the inherent infirmity leaning to one-sidedly in favour of the party, who, so far has alone been the party to decide the amount and the fact of default and classifying the dues as NPAs without participation/association of the borrower in the process. Such an onerous and oppressive condition should not be left operative in expectation of reasonable exercise of discretion by the concerned authority. Placed in a situation as indicated above, where it may not be possible for the borrower to raise any amount to make the deposit, his secured assets having already been taken possession of or sold, such a rider to approach the Tribunal at the first instance of proceedings, captioned as appeal, renders the remedy illusory and nugatory."
10. In support of his contentions, the learned counsel for the petitioners has placed reliance on:
i. a judgment of the Supreme Court reported in (1994) 1 SCC 131 in the case of Desh Bandhu Gupta vs. N.L. Anand & Rajinder Singh (para 9) "However, there is considerable force in the contention of the appellant that the procedure prescribed under Order 21 Rule 66 was flagrantly violated by the Executing Court. We have already noted the order of the court to conduct the sale. For judging its legality and validity, it would be desirable to have a bird's eye view of the procedure for sale of immovable property in execution. On an application for execution filed under Order 21 Rule 5 the court shall ascertain the compliance of the prerequisites contemplated under Rule 17 and on finding the application in order, it should be admitted and so to make an order, thereon to issue notice under Rule 22, subject to the conditions specified therein. If a notice was served on the judgment-debtor as enjoined under Order 5 bud he did not appear or had not shown cause to the satisfaction of the court, under Rule 23 the court "shall order the decree to be executed". If an objection is raised to the execution of the decree, by operation of sub-rule(2) thereof, "the court shall consider such objections and make such order as it thinks fit". Thereafter in the case of a decree for execution against immovable property an attachment under Rule 54 should be made by an order prohibiting the judgment-debtor from transferring or creating encumbrances on the property. Under Rule 64 the court may order sale of the said property. Under Rule 66(2) proclamation of sale by public auction shall be drawn up in the language of the court and it should be done after notice to the decree-holder and the judgment-debtor and should state "the time and Place of sale" and "specify as fairly and accurately as possible" the details specified in clauses (a) to (d) of sub-rule (2) thereof. The Civil Rules of Practice in Part L in the Chapter 12 framed by the High Court of Delhi 'Sale of Property and Delivery to the Purchaser" Rule 2 provides that whenever a court makes an order for the sale of any attached property under Order 21, Rule 64, it shall fix a convenient date not being distant more than 15 days, for ascertaining the particulars specified in Order 21 Rule 66(2) and settling the proclamation of sale. Notice of the date so fixed shall be given to the parties or their pleaders. In Rule 4 captioned 'Settlement of Proclamation of Sale, Estimate of Value' it is stated that on the day so fixed, the court shall after perusing the documents, if any, and the report referred to in the preceding paragraph, after examining the decree-holder and judgment-debtor, if present, and after making such further enquiry as it may consider necessary, settle the proclamation of sale specifying as clearly and accurately as possible the matters required by Order 21 Rule 66(2) of the Code. The specifications have been enumerated in the rule itself. The proclamation for sale is an important part of the proceedings and the details should be ascertained and noted with care. This will remove the basis for many a belated objections to the sale at a later date. It is not necessary to give at proclamation of sale the estimate of the value of the property. The proclamation when settled shall be signed by the Judge and got published in the manner prescribed by Rule 67. The court should authorise its officers to conduct the sale. Under Rule 68, the sale should be conducted at "the place and time" specified or the time may be modified with the consent in writing of the judgment-debtor. The proclamation should include the estimate, if any, given by either judgment-debtor or decree-holder or both the parties. Service of notice on judgment-debtor under Order 21 Rule 66(2), unless waived by appearance or remained ex parte, is a fundamental step in the procedure of the court in execution. Judgment-debtor should have an opportunity to give his estimate of the property. The estimate of the value of the property is a material fact to enable the purchaser to know its value. It must be verified as accurately and fairly as possible so that the intending bidders are not misled or to prevent them from offering inadequate price. In Gajadhar Prasad v. Babu Bhakta Ratan this Court, after noticing the conflict of judicial opinion among the High Courts, held that a review of the authorities as well as the amendments to Rule 66(2)(e) make it abundantly clear that the court, when stating the estimated value of the property to be sold, must not accept merely the ipse dixit of one side. It is certainly not necessary for it to state its own estimate. If this was required, it may, to be fair, necessitate insertion of something like a summary of a judicially considered order, giving its grounds, in the sale proclamation, which may confuse bidders. It may also be quite misleading if the court's estimate is erroneous. Moreover, Rule 66(2)(e) requires the court to state only nature of the property so that the purchaser should be left to judge the value for himself. But, the essential facts which have a bearing on the very material question of value of the property and which could assist the purchaser in forming his own opinion must be stated, i.e. the value of the property, that is, after all, the whole object of Order 21, Rule 66(2)(e), CPC. The court has only to decide what are all these material particulars in each case. We think that this is an obligation imposed by Rule 66(2)(e). In discharging it, the court should normally state the valuation given by both the decree-holder as well as the judgment-debtor where they both have valued the property, and it does not appear fantastic. It may usefully state other material facts, such as the area of land, nature of rights in it, municipal assessment, actual rents realised, which could reasonably and usefully be stated succinctly in a sale proclamation has to be determined on the facts of each particular case. Inflexible rules are not desirable on such a question. It could also be angulated from another perspective. Sub-rule (1) of Rule 66 enjoins the court that the details enumerated in sub-rule (2) shall be specified as fairly and accurately as possible. The duty to comply with it arises only after service of the notice on the judgment-debtor unless he voluntarily appears and is given opportunity in the settlement of the value of the property. The absence of notice causes irremedial injury to the judgment-debtor. Equally publication of the proclamation of sale under Rule 67 and specifying the date and place of sale of the property under Rule 66(2) are intended that the prospective bidders would know the value so as to make up their mind to offer the price and to attend at sale of the property and to secure competitive bidders and fair price to the property sold. Absence of notice to the judgment- debtor disables him to offer his estimate of the value who better knows tis value and to publicise on his part, canvassing and bringing the intending bidders at the time of sale. Absence of notice prevents him to do the above and also disables him to know fraud committed in the publication and conduct of sale or other material irregularities in the conduct of sale. It would be broached from yet another angle. The compulsory sale of immovable property under Order 21 divests right, title and interest of the judgment-debtor and confers those rights, in favour of the purchaser. It thereby deals with the rights and disabilities either of the judgment-debtor or the decree-holder. A sale made, therefore, without notice to the judgment-debtor is a nullity since it divests the judgment-debtor of his right, title and interest in his property without an opportunity. The jurisdiction to sell the property would arise in a court only where the owner is given notice of the execution for attachment and sale of his property. It is very salutory that a person's property cannot be sold without his being told that it is being so sold and given an opportunity to offer his estimate as he is the person who intimately knew the value of his property and prevailing in the locality, exaggeration may at time be possible. In Rajagopala Ayyar v. Ramachandra Ayyar the Full Bench held that a sale without notice under Order 21 Rule 22 is a nullity and is void and that it has not got to be set aside. If an application to set aside such a void sale is made it would fall under Section 47."
ii yet another judgment of the Supreme Court reported in (1973) 2 SCC 629 in the case of Gajadhar Prasad and others v. Babu Bhakta Ratan and Others: (paras 12, 15 & 16) "12. The whole of Rule 66 reads as follows:
(1) Where any property is ordered to be sold by public auction in execution of a decree, the court shall cause a proclamation of the intended sale to be made in the language of such court.
(2) Such proclamation shall be drawn up after notice to the decree-holder and the judgment-debtor and shall state the time and place of sale, and specify as fairly and accurately as possible
(a) the property to be sold
(b) the revenue assessed upon the estate or part of the estate where the property to be sold is an interest in an estate or in part of an estate paying revenue to the Government;
(c) any encumbrance to which the property is liable;
(d) the amount for the recovery of which the sale is ordered;and
(e) every other thing which the court considers material for a purchaser to know in order to judge of the nature and value of the property.
. . .
15. A review of the authorities as well as the amendments to Rule 66(2)(e) make it abundantly clear that the court, when stating the estimated value of the property to be sold, must not accept merely the ipse dixit of one side. . . It may also be quite misleading if the court's estimate is erroneous. . . . Hence, the purchaser should be left to judge the value for himself. But, essential facts which have a bearing on the very material question of value of the property and which would assist the purchaser in forming his own opinion must be stated. We think that this is an obligation imposed by Rule 6(2)(e). . . It may usefully state other material facts such as the area of land, nature of rights in it, municipal assessment, actual rents realised which could reasonably be expected to effect valuation.
16. In the case before us, the execution Court had practically accepted as its own valuation, without indicating reasonable grounds for this preference, whatever the decree-holders had asserted about the value of the property. It did not bother to seriously even consider the objections of the judgment-debtors. We think that the duty to consider what particulars should be inserted in the sale proclamation and how the sale ought to be conducted should be performed judicially and reasonably. If the execution Court does not, as it did not in the case before us, apply its mind or give any consideration whatsoever to the objections of the judgment-debtor, we think a material irregularity would be committed by the execution court. . . . The order should show that it considered the objections, if any, of the decree-holders or the judgment-debtors, as the case may be. It should not merely accept unhesitatingly the ipse dixit of one side. . . ."
11. The learned Additional Solicitor General of India, appearing for the Union of India in W.P. No.20485 of 2005, in support of his contention that the Recovery Officer and the Tribunal have got exclusive jurisdiction to adjudicate the liability and to recover the amount due from the borrower, has relied on a judgment of the Supreme Court reported in AIR 2000 SC 1535 in the matter of Allahabad Bank v. Canara Bank and another - in short "Allahabad Bank case" (para 25) "Thus, the adjudication of liability and the recovery of the amount by execution of the certificate are respectively within the exclusive jurisdiction of the Tribunal and the Recovery Officer and no other Court or authority much less the Civil Court or the Company Court can go into the said questions relating to the liability and the recovery except as provided in the Act. Point is decided accordingly."
12. Contending that imposition of a condition obliging the defaulter to pay the arrears as per the tax recovery certificate is meant to avoid frivolous and routine applications being mechanically filed for setting aside a sale, reliance has been placed by the learned Additional Solicitor General on a judgment of this Court reported in 218 ITR 518 in the case of Devaki Ammal (decd.) and others vs. Tax Recovery Officer and Others:
"The writ petitioner also filed W.P. No.7089 of 1985 for a writ of declaration declaring that the proviso to rule 61 of the Second Schedule to the Act which imposed a condition of pre-deposit of the arrears as a condition precedent for entertaining an application for setting aside the sale as unconstitutional.
. . .At the time of hearing of the writ petitions, learned counsel for the petitioner has to fairly concede that he cannot substantiate the challenge with reference to the provisos to rule 61. A cursory perusal of provisos (a) and (b) to rule 61 of the Second Schedule to the Act would go to show that they are almost akin to similar provisions contained in rules 89 and 90 of Order XXI of the Civil Procedure Code, 1908. That apart, imposing a condition of the nature obliging the defaulter to pay the arrears as per the tax recovery certificate is meant to avoid frivolous and routine applications being mechanically filed for setting aside a sale and such stipulations cannot be considered to be either arbitrary or unreasonable. For all the reasons stated, I do not see any merit in W.P. No.7089 of 1985 and the same shall stand dismissed."
13. In support of his contentions, the learned Additional Solicitor General has placed further reliance on the following judgments:
i. (2007) 2 SCC 230 in the matter of Raghunath Rai Bareja and another vs. Punjab National Bank and others (Paras 57 and 58) "The literal rule of interpretation really means that there should be no interpretation. In other words, we should read the statute as it is, without distorting or twisting its language.
We may mention here that the literal rule of interpretation is only followed by judges and lawyers, but it is also followed by the layman in his ordinary life. To give an illustration, if a person says "this is a pencil", then he means that it is a pencil; and it is not that when he says that the object is a pencil, he means that it is a horse, donkey or an elephant. In other words, the literal rule of interpretation simply means that we mean what we say and we say what we mean. If we do not follow the literal rule of interpretation, social life will become impossible, and we will not understand each other. If we say that a certain object is a book, then we mean it is a book. If we say it is a book, but we mean it is a horse, table or an elephant, then we will not be able to communicate with each other. Life will become impossible. Hence, the meaning of the literal rule of interpretation is simply that we mean what we say and we say what we mean."
ii (2006) 4 SCC 278 in the case of Standard Chartered Bank and others vs. Directorate of Enforcement and Others (para 25) "The prayer for the issue of a writ of prohibition restraining the authorities under the Act from proceeding with the adjudication and the prosecution is essentially based on the constitutional challenge to the relevant provisions of the Act on the ground that they violate Articles 14 and 21 of the Constitution. Once we have held, as the High Court did, that the provisions are constitutional, the basis on which the writ of prohibition is sought for by the appellants disappears. It is settled by the decisions of this Court that a writ of prohibition will issue to prevent a tribunal or authority from proceeding further when the authority proceeds to act without or in excess of jurisdiction; proceeds to act in violation of the rules of natural justice; or proceeds to act under a law which is itself ultra vires or unconstitutional. Since the basis of the claim for the relief is found not to exist, the High Court rightly refused the prayer for the issue of a writ of prohibition restraining the authorities from continuing the proceedings pursuant to the notices issued. As indicated by this Court in State of U.P. v. Brahm Datt Sharma when a show cause notice is issued under statutory provision calling upon the person concerned to show cause, ordinarily that person must place his case before the authority concerned by showing cause and the courts should be reluctant to interfere with the notice at that stage unless the notice is shown to have been issued palpably without any authority of law. On the facts of this case, it cannot be said that these notices are palpably without authority of law. In that situation, the appellants cannot successfully challenge the refusal by the High Court of the writ of prohibition prayed for by them."
iii (1998) 9 SCC 191 in the case of State of Maharashtra and others vs. Nazmunnisa and Others: (para 2) "The appeal is taken up for final hearing. The respondents were issued notices in the special leave petition with a clear indication therein that the matter will be finally disposed of at the notice stage itself. Notices issued to them by order of 11.07.1995 have still not been received back. Neither AD cards nor unserved envelopes have come back. Years have passed thereafter. Therefore, a clear presumption arises that they must be deemed to have been served. It is obvious that the respondents have nothing to say in connection with the final disposal of these proceedings. Hence, it is not necessary to issue fresh notices to them. We therefore, proceed to dispose of this appeal on merits."
14. Mr. R. Thyagarajan, learned Senior Counsel appearing for the respondent bank has contended that the Recovery Officer appointed under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (in short 'the RDB Act") is empowered to recover the money determined by the Debts Recovery Tribunal by following any of the modes prescribed under Section 25 of the RDB Act and that as per Section 29 of the RDB Act, the provisions of the second and third schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules 1962 as in force from time to time shall, as far as possible, apply with necessary modifications as if the said provisions and the Rules referred to the amount of debt due under the RDB Act instead of to the Income Tax Act. He has further contended that as per Rule 3 of the Debts Recovery Tribunal (Procedure) Rules, 1993, proceedings of the Tribunal shall be conducted either in English or Hindi and no other language is contemplated therein and as such, there is no infirmity in the proclamation drawn by the Recovery Officer in English.
15. The learned Senior Counsel appearing for the respondent Bank, to strengthen his arguments, has placed strong reliance on the following judgments:
i. a judgment of the Supreme Court reported in AIR 2002 SC 1479 in the matter of Union of India and another vs. Delhi High Court Bar Association and others:
"29. The Guwahati High Court had held that Sections 25 and 28 are arbitrary and unreasonable, being without any guidelines prior to the amendment of Sections 25 and 28. After amendment the said provisions read as under:
25. Modes of recovery of debts-
The Recovery Officer shall, on receipt of the copy of the certificate under sub-section (22) of Section 19, proceed to recover the amount of debt specified in the certificate by one or more of the following modes, namely:
a. attachment and sale of the movable or immovable property of the defendant;
b. arrest of the defendant and his detention in prison c. appointing a Receiver for the management of the movable or immovable properties of the defendant.
28 Other modes of recovery-
1. Where a certificate has been issued to the Recovery Officer under sub-section (7) of Section 19, the Recovery Officer may, without prejudice to the modes of recovery specified in Section 25, recover the amount of debt by any one or more of the modes provided under this section.
2. If any amount is due from any person to the defendant, the Recovery Officer may require such person to deduct from the said amount, the amount of debt due from the defendant under this Act and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Recovery Officer:
Provided that nothing in this sub-section shall apply to any part of the amount exempt from attachment in execution of a decree of a Civil Court under Section 60 of the Code of Civil Procedure, 1908 (5 of 1908).
(3) i The Recovery Officer may at any time or from time to time, by notice ini writing, require any person from whom money is due or may become due to the defendant or to any person who holds or may subsequently hold money for or on account of the defendant, to pay to the Recovery Officer either forthwith upon the money becoming due or being held or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount of debt due from the defendant or the whole of the money when it is equal to or less than that amount.
ii A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or an account of the defendant jointly with any other person and for the purposes of this sub-section, the shares of the joint holders in such amount shall be presumed, until the contrary is proved, to be equal.
iii A copy of the notice shall be forwarded to the defendant at his last address known to the Recovery Officer and in the case of a joint account to all the joint holders at their last addresses known to the Recovery Officer.
iv. Save as otherwise provided in this sub-section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office,bank, financial institution, or an insurer, it shall be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like to be made before the payment is made notwithstanding any rule, practice or requirement to the contrary.
v. Any claim respecting any property in relation to which a notice under the sub-section has been issued arising after the date of the notice shall be void as against any demand contained in the notice.
vi. Where a person to whom a notice under this sub-section is sent objects to it by a statement on oath that the sub demanded or the part thereof is not due to the defendant or that he does not hold any money for or that he does not hold any money for or on account of the defendant, then, nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the Recovery Officer to the extent of his own liability to the defendant on the date of the notice, or to the extent of the defendant's liability for any sum due under this Act, whichever is less.
vii The Recovery Officer may, at any time or from time to time, amend or revoke any notice under this sub-section or extend the time for making any payment in pursuance of such notice.
viii The Recovery Officer shall grant a receipt for any amount paid in compliance with a notice issued under this sub-section and the person so paying shall be fully discharged from his liability to the defendant to the extent of the amount so paid.
ix Any person discharging any liability to the defendant after the receipt of a notice under this sub-section shall be personally liable to the Recovery Officer to the extent of his own liability to the defendant so discharged or to the extent of the defendant's liability for any debt due under this Act, whichever is less.
x If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Recovery Officer, he shall be deemed to be a defendant in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realisation of the amount as if it were a debt due from him, in the manner provided in Sections 25, 26 and 27 and the notice shall have the same effect as an attachment of a debt by a Recovery Officer in exercise of his powers under Section 25.
4. The Recovery Officer may apply to the Court to whose custody there is money belonging to the defendant for payment to him of the entire amount of such money, or if it is more than the amount of debt due, an amount sufficient to discharge the amount of debt so due.
4A The Recovery Officer may, by order, at any stage of the execution fo the certificate of recovery, require any person, and in case of a company, any of its officers against whom or which the certificate of recovery is issued, to declare on affidavit the particulars of his case or its assets.
5 The Recovery Officer may recover any amount of debt due from the defendant by distraint and sale of his movable property in the manner laid down in the Third Schedule to the Income Tax Act, 1961 (43 of 1961)"
While Section 25 provides for modes of recovery of debts either by attachment and sale or arrest or appointment of a Receiver, Section 28 provides for modes of recovery in addition to the ones specified in Section 25. a perusal of the aforesaid provisions cannot lead one to the conclusion that the same are arbitrary, unreasonable or without any guidelines. It is quite clear that in order to recover the debts, the Recovery Officer has to attach and sell the immovable property and that for protection and preservation of the same, he has the power to appoint a Receiver for the management thereof.
30 By virtue of Section 29 of the Act, the provisions of the Second and Third Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules 1962, has become applicable for the realisation of the dues by the Recovery Officer. Detailed procedure for recovery is contained in these schedules to the Income Tax Act, including provisions relating to arrest and detention of the defaulter. It cannot, therefore, be said that the Recovery Officer would act in an arbitrary manner. Furthermore, Section 30, after amendment by the Amendment Act, 2000, gives a right to any person aggrieved by an order of the Recovery Officer, to prefer an appeal to the Tribunal. Thus now an appellate forum has been provided against any orders of the Recovery Officer which may not be in accordance with law. There is therefore, sufficient safeguard which has been provided in the event of the Recovery Officer acting in an arbitrary or an unreasonable manner. The provisions of Sections 25 and 28 are, therefore, not bad in law."
ii. a judgment of the Madhya Pradesh High Court reported in 1983 Tax LR 201 in the case of Anshiram vs. The Tax Recovery Commissioner (Income Tax), Madhya Pradesh II, Bhopal and others (para 6) "As regards the second contention, a perusal of R.61 which we have earlier quoted goes to show that this provision is much wider than R.90 of O.21. Even a ground which makes the sale wholly invalid has to be raised for avoiding the sale by making any application under R.61. The rule specifically says that if the defaulter wants to challenge the sale on the ground that the notice was not served on him to pay the arrears, that ground has also to be taken in the application to be made under R.61. Under the scheme of O.21, the ground that no notice was given under R.22 or R.66 not being merely material irregularity in publishing or conducting the sale will not fall under R.90. Having regard to the wider scope of R.61 of Sch. II, we are of opinion that even a ground that no notice was issued to the defaulter before drawing up the proclamation of sale under R.53 ought to be taken only by an application under R.61 and that such an objection cannot be otherwise taken.. . ."
16. Before proceeding further, it would be relevant to refer to the following:
Rule 61 of the Second Schedule:
Application to set aside sale of immovable property on ground of non-service of notice of irregularity:
Where immovable property has been sold in execution of a certificate, such income tax officer as may be authorised by the Chief Commissioner or Commissioner in this behalf, the defaulter or any person whose interests are affected by the sale, may, at any time, within thirty days from the date of the sale, apply to the Tax Recovery Officer, to set aside the sale of the immovable property on the ground that notice was not served on the defaulter to pay the arrears as required by this Schedule or on the ground of a material irregularity in publishing or conducting the sale:
provided that
(a) no sale shall be set aside on any such ground unless the Tax Recovery Officer is satisfied that the applicant has sustained substantial injury by reason of the non-service or irregularity; and
(b) an application made by a defaulter under this rule shall be disallowed unless the applicant deposits the amount recoverable from him in the execution of the certificate.
Section 90 of Civil Procedure Code Application to set aside sale on ground of irregularity or fraud:
1 Where any immovable property has been sold in execution of a decree, the decree-holder or the purchaser or any other person entitled to share in a rateable distribution of assets or whose interests are affected by the sale, may apply to the Court to set aside the sale on the ground of a material irregularity or fraud in publishing or conducting it.
2 No sale shall be set aside on the ground of irregularity or fraud in publishing or conducting it unless, upon the facts proved, the Court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud.
3 No application to set aside a sale under this rule shall be entertained upon any ground which the applicant could have taken on or before the date on which the proclamation of sale was drawn up.
Explanation: The mere absence of, or defect in, attachment of the property sold shall not, by itself, be a ground for setting aside a sale under this rule.
17. I have heedfully considered the submissions made by the learned counsel for the parties and also the judgments relied on by them and I have also perused the material documents placed before this Court.
18. There are two writ petitions, i.e. W.P. No.20484 of 2005, to quash the proceedings of the first respondent, viz., the Recovery Officer of the Debts Recovery Tribunal, Coimbatore and W.P. No.20485 of 2005 seeking to declare sub-rule (b) of the Second Schedule as unconstitutional, arbitrary and violative of Article 14 of the Constitution of India.
19. While dealing with the writ petition challenging the proceedings of the Recovery Officer of the DRT, it is seen that the petitioner and his brothers who are partners in Gold Mines Knitting and Weaving Mills transacted with the second respondent bank and they were granted cash credit and packing credit facilities for which they mortgaged their personal property by way of deposit of title deeds; due to certain unforeseen circumstances, they incurred loss and there was a liability towards the second respondent bank; in order to recover the outstanding amount along with Interest, the second respondent bank filed an Original Application before the DRT against the firm and its partners and in default of payment, for bringing the properties mortgaged to the bank for sale. It is also seen that the DRT, in its judgment and decree dated 19.09.2003, directed the petitioner to pay Rs.95,41,544/- towards Principal and Interest and Rs.91,059/- towards the cost of the bank and in default of such payment, the same was made recoverable by the sale of properties and pursuant to the judgment and decree, the DRT has passed an order on 24.09.2004 for attachment of the properties of the petitioner; accordingly, the first respondent has come out with a publication of proclamation of sale and the same is challenged in this writ petition.
20. The authority competent to proceed with the recovery of debts under the Act, i.e. the first respondent, is empowered to recover the money determined by the DRT as per the judgment and decree dated 19.09.2003. As per Section 29 of the RDB Act, the provisions of the second and third schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules 1962 as in force from time to time shall, as far as possible, apply with necessary modifications and as per the provisions and rules referred, the amount of debt due is under the RDB Act instead of to the Income Tax Act. Also, as per Rule 3 of the Debts Recovery Tribunal (Procedure) Rules, 1993, proceedings of the Tribunal shall be conducted either in English or Hindi and no other language is contemplated therein. Therefore, the order impugned in this writ petition is in conformity with the provisions of the RDB Act and the rules and the proclamation also has been drawn in English. It is also seen that by virtue of Section 29 of the RDB Act, the provisions of the Second and Third Schedules to the Income Tax Act,1961 has become applicable for the realisation of the dues by the Recovery Officer. Detailed procedure for recovery is contained in these schedules to the Income Tax Act, including provisions relating to arrest and detention of the defaulter. In the absence of any arbitrariness on the part of the first respondent, the action contemplated and the proceedings initiated against the petitioner do appear to be in accordance with the procedure prescribed. Also, Section 25 of the RDB Act provides for modes of recovery of debts either by attachment and sale. A perusal of the above said provision makes it clear that the first respondent is competent to proceed and accordingly, he has proceeded as per the procedure prescribed and therefore, the proceedings are not vitiated by any infirmity. It is also made clear that Section 30 of the RDB Act, after amendment by the Amendment Act, 2000 gives a right to any person aggrieved by an order of the Recovery Officer to prefer an appeal to the Tribunal. As an appellate forum has been provided against the orders of the Recovery Officer,the petitioner, instead of preferring an appeal, has hastened to approach this Court challenging the proceedings under Article 226 of the Constitution of India. It is very clear that the only remedy open to the petitioner is to go before the appellate forum. As per Rule 61 of the Second Schedule,the remedy available to the petitioner is to go before the Recovery Officer and instead of doing so, in order to escape from the liability under Rule 61(b) of the Second Schedule to pay the deposit and contest the matter, the petitioner has chosen to come before this Court without exhausting the remedy available to him. Therefore, there is no locus standi for the petitioner to come before this Court and challenge the impugned sale proceedings of the first respondent. In that view of the matter, there is no other option but to hold that W.P. No.20484 of 2005 does not merit any consideration.
21. Coming to W.P. No.20485 of 2005, the challenge is to Rule 61(b) of the Second Schedule which provides that an application made by a defaulter under this rule shall be disallowed unless the applicant deposits the amount recoverable from him in the execution of the certificate. Under Rule 61 of the Second Schedule, it is provided that where immovable property has been sold in execution of a certificate, such income tax officer as may be authorised by the Chief Commissioner or Commissioner in this behalf, the defaulter or any person whose interests are affected by the sale, may, at any time, within thirty days from the date of the sale, apply to the Tax Recovery Officer, to set aside the sale of the immovable property on the ground that notice was not served on the defaulter to pay the arrears as required by this Schedule or on the ground of a material irregularity in publishing or conducting the sale. Therefore, in order to comply with the above provision, the requirement under Rule 61(b) of the Second Schedule, the petitioner has to deposit the amount recoverable from him in execution of the certificate. This has been challenged in this writ petition to declare it as unconstitutional, arbitrary and violative of Article 14 of the Constitution of India.
22. An attack has been made that this provision is ultra vires the constitutional rights as it is burdensome, onerous and oppressive and it may give undue hardship to the petitioner which goes against the various settled principles. The learned Additional Solicitor General of India, to defend that the provisions of the Act are in no way violative of Article 14 of the Constitution of India, has contended that the Recovery Officer and the Tribunal have got exclusive jurisdiction to adjudicate the liability and to recover the amount due from the borrower and in this regard, he has placed reliance on a decision of the Supreme Court reported in Allahabad Bank case reported in AIR 2000 SC 1535 wherein a proposition has been laid down to the effect that the adjudication of liability and the recovery of the amount by execution of the certificate are respectively within the exclusive jurisdiction of the Tribunal and the Recovery Officer and no other Court or authority much less the Civil Court or the Company Court can go into the said questions relating to the liability and the recovery except as provided in the Act.
23. Further, the learned Additional Solicitor General has strenuously contended that imposition of a condition obliging the defaulter to pay the arrears as per the tax recovery certificate is meant to avoid frivolous and routine applications being mechanically filed for setting aside a sale and in support of this contention of his, he has relied on a decision of this Court reported in 218 ITR 518 in the case of Devaki Ammal (dead) and others vs. Tax Recovery Officer and Others where a similar challenge was made in respect of Rule 61(b) and in the said decision, it has been held that a cursory perusal of provisos (a) and (b) to Rule 61 of the Second Schedule would go to show that they are almost akin to similar provisions contained in rules 89 and 90 of Order XXI of the Civil Procedure Code, 1908 and that apart, imposing a condition of the nature obliging the defaulter to pay the arrears as per the tax recovery certificate is meant to avoid frivolous and routine applications being mechanically filed for setting aside a sale and such stipulations cannot be considered to be either arbitrary or unreasonable. Therefore, a reading of the provisions and object and nexus sought to be achieved is interpreting the real meaning of the word which is provided under Rule 61(b) of the Second Schedule which is with the avowed object to achieve what would be the statutory provision which is sought to be achieved. As such, the petitioner has not made out any case to grant the prayer for issuance of a writ of declaration declaring sub-rule (b) of the Second Schedule to the Income Tax Act as unconstitutional and arbitrary on the ground that it violates Article 14 of the Constitution of India especially when there is no vires or unconstitutionality in the said sub-rule. In the absence of any material to show that this provision infringes the fundamental rights of the person aggrieved and the petitioner having failed to establish that there is arbitrariness, unreasonableness and it is in violation of Article 14 of the Constitution of India and it is only with an intention to file an application in a routine manner which cannot be a ground to declare Rule 61(b) of the Second Schedule as unconstitutional. The requirement of deposit of amount is a condition precedent to fulfill to contest the sale proceedings by a defaulter which an authority is competent to proceed to secure its liability and for which the conditions imposed to pay the deposit cannot be said to be onerous, oppressive and burdensome. In that view of the matter, looked at from any angle, as the petitioner has not made out any case for declaring Rule 61(b) of Second Schedule to the Income Tax Act is violative of Article 14 of the Constitution of India, I find no reason to declare it as unconstitutional, arbitrary and violative of Article 14 of the Constitution of India, particularly in view of the fact that the provision has been stipulated with the avowed object sought to be achieved and the Act is made for a specific purpose.
In the result, both the writ petitions which deserve no consideration, are dismissed without any order as to costs with liberty to the petitioner to exhaust the alternative remedy by approaching the appropriate forum and it is made clear that the time taken by the petitioner in approaching this Court need not be taken into account for the purpose of limitation. Consequently, connected W.P.M.P. is closed.
cad To 1 The Recovery Officer Office of the Recovery Officer Debts Recovery Tribunal 1670 Trichy Road Ramanathapuram Coimbatore 641 601 2 The Manager Indian Overseas Bank No.115, Kumaran Road Tirupur 3 The Union of India represented by its Secretary to Government Ministry of Finance New Delhi