Debt Recovery Appellate Tribunal - Madras
Shakura Prime Tanning Co. And Anr. vs Central Bank Of India And Anr. on 27 April, 2006
Equivalent citations: III(2007)BC7
JUDGMENT
K. Gnanaprakasam, J. (Chairperson)
1. This miscellaneous appeal is directed against the order dated 30th November, 2005 in appeal No. 5 of 2005 in LA. No. 27/2005 in D.R.C. 18/2003 in T.A. 342/2001, passed by the D.R.T. 2 at Chennai.
2. The appellants are the defendant Nos. 1 and 2 in the Original Application and the said Original Application was decreed on 10th April, 2002. Pursuant to the decree, their properties were brought to sale on 8th September, 2004, and was sold and the sale was also confirmed in favour of the auction purchaser on 2th November, 2004, The appellants have filed an application in the month of November, 2004 challenging the sale and it was dismissed by the Recovery Officer and the sale was confirmed and the same was affirmed by the learned Presiding Officer by his order dated 30th November, 2005. Hence this appeal.
Heard the learned Advocate for the appellants and the respondents also perused the appeal papers.
3. The appellants challenged the sale held on 8th September, 2004, mainly on the following two grounds:
(1) The properties were not sold for proper price, and (2) The auction purchaser did not pay the balance of the sale consideration within 15 days from the date of auction and time was extended by the Recovery Officer and, therefore, the confirmation of the sale in favour of the auction purchaser is null and void and the same is liable to be set aside.
4. From the records it could be seen that after wide publication of the sale in newspapers dated 7th August, 2004, the properties were brought on sale on 8th September, 2004. The upset price fixed for the property was Rs. 4 lakh based on the valuation report of the approved valuer of the respondent Bank. On the date of the auction there was only one bidder namely, P. Jai Shankar, who bid for Rs. 4,10,000/- and as there was no other bidder much less higher bidder, the bid made by Jai Shankar was accepted and he was declared as the purchaser of the property and he had also deposited 25% of the amount of the purchase money as required under Rule 57 of the Second Schedule to the Income Tax Act, 1961. He had also deposited the balance of 75% of this amount in two instalments on 6th October, 2004, and the sale was confirmed on 2nd November, 2004. Till such time, no one much less the appellants, have filed any application to set aside the sale as required under Rules 60 to 62 of the Second Schedule to the Income Tax Act, 1961. But, the appellants herein have filed an application to set aside the sale only on 8th November, 2004, alleging that the property was not sold for proper price and that the property was worth more than Rs. 50 lakh. The other contention that was raised by the appellants was that, the auction purchaser did not pay the entire balance of the sale consideration within 15 days from the date of auction as required under Rule 57 of the Second Schedule to the Income Tax Act and the Recovery Officer has no authority to extend the time for payment of the balance of the sale consideration.
5. The respondent-Bank opposed the said petition on the ground that the Recovery Officer has followed the rules and regulations as provided under the Second Schedule to the Income Tax Act as far as possible and he has not committed any illegal Act. Section 29 of RDDBFI Act, 1993, sates that, "The provisions of the Second and Third Schedules to the Income Tax Act, 1961 (43 of 1961) and the Income Tax (Certificate Proceedings) Rules, 1962 as in force from time-to-time shall, as far as possible (emphasis supplied) apply with necessary modifications as if the said provisions and the rules referred to the amount of debt due under this Act instead of to the Income Tax Act." The Recovery Officer has followed the rules of Income Tax Act, as far as possible and he has not violated any of the Rules and, therefore, the sale and the confirmation of sale in favour of the auction purchaser is valid under law. The petition was also not filed within 30 days from the date of sale and hence the petition is liable to be dismissed on this ground also.
6. The Recovery Officer accepted the case of the respondent and dismissed the petition.
7. The appellants referred an appeal before the D.R.T.-II at Chennai, and reiterated the very same submissions and the D.R.T. also did not accept the case of the appellants and dismissed the appeal and hence the present appeal.
8. The learned Advocate for the appellants before this Tribunal also canvassed the very same grounds that (1) the property was not sold for proper price, and (2) the procedure adopted by the Recovery Officer in extending the lime for the payment of balance of the sale consideration of 75% beyond 15 days, is against law.
9. As far as the first contention of the appellants is concerned, it is on record that the properties were widely published in Tamil newspapers about the sale to be held on 8th September, 2004 and the upset price was fixed as Rs. 4 lakh, which was based upon the valuation report of the approved valuer. It appears that the auction notice was also printed and widely circulated by the respondent Bank in the area where the property is situated. The appellants have not chosen to challenge the upset price fixed. On the date of the sale i.e. on 8th September, 2004; there was only one bidder and he had offered Rs. 4,10,000/- and as there was no other bidder, the Recovery Officer was constrained to declare him as the highest bidder. Though the appellants state that the property would fetch more amount than for which it was sold, no materials have been placed to substantiate their submission. In fact, at the time when such an argument was advanced before the learned Presiding Officer, he had put a question to the appellants to produce any prospective purchaser to purchase the property for Rs. 50 lakh as stated by the appellants and they were not able to do so. As such, the contention of the appellants that the property would fetch more price than for which, it was sold, has no basis and it is nothing but a gainsaying to protect the proceedings. If the statement of the appellants is true and acceptable, even after the sale, the appellants could have brought a prospective purchaser offering the said amount of Rs. 50 lakh and could have taken steps to set aside the sale, but has not done so. That in the absence of the same, the argument advanced on behalf of the appellants that the property was not sold for a proper price, cannot at all be accepted and hence the same is rejected.
10. The second contention of the appellants that the auction purchaser was allowed to pay the balance of the sale consideration beyond 15 days and the same is against Rule 57 of the Income Tax Act, and the same is not proper and, therefore, the confirmation of sale is not proper. The support his submission, the appellants relied upon the case of Manilal Mohanlal Shah v. Sardar Saved Ahmed Sayed Mohamad . The case arose under the provisions of CPC wherein an application taken out to set aside the sale on the ground that the balance of the money was not paid within 15 days as required under Rules 84 and 85 of Order 21 of the CPC. It was held, "Provisions of Rules 84 and 85 of Order 21 of the CPC requiring the deposit of 25 per cent of the purchase money immediately on the person being declared as a purchaser and the payment of the balance within 15 days of the sale are mandatory and if these provisions are not complied with there is no sale at all.
Non-payment of the price on the part of the defaulting purchaser renders the sale proceedings as a complete nullity.
The inherent powers of the Court cannot be allowed to circumvent the mandatory provisions of the Code and relieve the purchasers of their obligation to make the deposit.
11. The case of Mahmood Ahmed Khan v. Ranbir Singh , was also relied upon by the appellants and the said case arose under the U.P. Zamidari Abolition and Land Reforms Rules, 1952, where under Rule 285D, it is mandatory to deposit the sale amount by cash and not by cheque and, therefore, the sale was set aside. The facts in that case are totally different from the facts of our case on hand and, therefore, it is not applicable. Appellants also relied upon the case of Balram, son of Bhasa Ram v. Ilam Singh IV ; and the case of Usmansab Hatelsahab v. R.L. Meharwade . Both these cases arose under Order 21 Rules 85 and 90. In those cases, the purchaser of the property did not pay the balance of the sale consideration within 15 days from the date of sale under Order 21 Rules 84 and 85, and in the said circumstances it was held that the sale has become a nullity.
12. Per contra, the learned Advocate for the respondent No. 1-Bank has argued that the provisions of the Second and Third Schedules to the Income Tax Act, 1961, and the Income Tax Rules, 1962, are governed and controlled by Section 29 of the RDDBFI Act, which states, "The provisions of the Second and Third Schedules to the Income Tax Act, 1961 (43 of 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 this Act instead of to the Income Tax Act" thereby meaning that those provisions could be made applicable as far as possible and the Recovery Officer has got every power to permit the auction purchaser to pay the balance of the said consideration beyond 15 days as prescribed under Rule 57, and the same is not illegal. To strengthen their contention, they relied upon the case of Dove Investments Pvt. Ltd. v. Gujarat Industrial Inv. Corporation II , wherein it was held, "Whether a statute would be directory or mandatory will depend upon the scheme thereof. Ordinarily a procedural provision would not be mandatory even if the word 'shall' employed therein unless a prejudice is caused". The Hon'ble Supreme Court relied upon the case of P. T. Ratan v. T.P.M. Sahir , and also the case of Chandrakant Uttam Chodankar v. Dayanand Rayu Madrakar , wherein the Supreme Court had observed, "In this case it is not necessary for us to go into the question as to whether Section 83 is imperative in character or not inasmuch it is settled law that even where the expression "shall" is used, the same may not be held to be mandatory. Even a mandatory provision having regard to the text and context of the statute may not call for strict construction."
The case of Mohan Singh v. International Airport Authority of India , was also followed by the Supreme Court in Dove Investments Pvt. Ltd. (supra), wherein it was held, "The distinction of mandatory compliance or directory effect of the language depends upon the language couched in the statute under consideration and its object, purpose and effect. The distinction reflected in the use of the word "shall" or "may" depend on conferment of power.... The scope and language of the statute and consideration of policy at times may, however, create exception showing that the Legislature did not intend a remedy (generality) to the exclusive. Words are the skin of the language. The language is the medium of expressing the intention and the object that particular provision or the Act seeks to achieve. Therefore, it is necessary to ascertain the intention. The word "shall" is not always decisive. Regard must be held to the context, subject-matter and object of the statutory provision in question in determining whether the same is mandatory or directory. No universal principle of law could be laid in that behalf as to whether a particular provision or enactment shall be considered mandatory or directory. It is the duty of the Court to try to get at the real intention of the Legislature by carefully analysing the whole scope of the statute or section or a phrase under consideration, thereby emphasising that the extension of time granted by the Recovery Officer to deposit the balance of the sale consideration beyond 15 days as prescribed under Rule 57 is not at all an illegal act.
13. The learned Advocate for the respondent No. 2 auction purchaser has submitted that the Recovery Officer is empowered to grant extension of time for the payment of the balance of the sale consideration notwithstanding the fact that 15 days time is prescribed under Rule 57 of the Income Tax Rules. The Second and Third Schedules to the Income Tax Act, 1961 and the Income Tax Rules, 1962, are subject to Section 29 of the RDDBFI Act, 1993, which section says that those sections and rules could be followed as far as possible and the relaxation of condition prescribed under Rule 57 is not at all an illegal act and the same is permissible. In support of his submission, he relied upon the case of P. Mohanreddy v. D.R.A.T., Kapadwanji Kadi, Mumbai II (2004) BC 76 : 2004(2) D.R.T. 82 (AP), wherein the Division Bench of the Andhra Pradesh High Court had dealt with Section 29 of the Act and also the Rule 61 of the Schedule II to the Income Tax Act, 1961 at length. The A.P. High Court took note of the decision rendered by the Supreme Court in the case of Manilal Mohanlal Shah v. Sardar Sayed Ahmed Sayed Mohamad (supra), and after making a thorough analysis of the decision rendered by the Supreme Court in the above case and considering the powers conferred under Section 29 of the Act has opined, Section 29 of the Act thus authorises the Debts Recovery Officer to follow the Second and Third Schedules to Income Tax Act, 1961 as far as possible with necessary modifications. The Phrase "as far as possible" can be interpreted in various ways. Keeping in view the intent and object of the Act, in our view, use of this phraseology "as far as possible" in Section 21 does not impose an obligation on the Recover Officer to meticulously follow the provisions of Second and Third Schedules. Section 29 does provide liberty to the Recovery Officer to follow the provisions of Second and Third Schedules with necessary modifications. It gives him enough description that he has to follow the provisions of Second and Third Schedules as far as possible and may make necessary modifications. The language employed is such that there is flexibility and not mandate to follow the rules as they are. The rules no doubt have to be followed but as far as possible with necessary modifications. Section 20 clarifies that the said rules may be followed with necessary modifications and wherever it refers to recovery of tax, the same be read as amount of debt due. Therefore, the amount of debt due under the Act has to be recovered by the Recovery Officer by sale of the property for which he would follow the provisions of Second and Third Schedules to the Income Tax Act, 1961 "as far as possible". In fact, in the said case, in the auction notice itself, it was stated that the successful bidder has to deposit 25% of the bid amount within seven days and the balance before 16th January, 1999. Accordingly, amount was paid within seven days from the date of the sale and the balance of sale consideration was deposited within the date fixed in the auction notice. By taking note of this act done by the Recovery Officer, the Andhra Pradesh High Court had ruled, in the instant case, the Debts Recovery Officer having regard to the discretion conferred on him by Section 29 of the Act, instead of providing that 25% of the amount will be deposited immediately on declaration of the successful bidder as is provided in Rule 57(1), fixed a period of seven days from the date of auction to deposit 25% of the bid amount. In view of the phraseology employed in Section 29 of the Act the discretion exercised by the Debts Recovery Officer, while following the Rule 57, would not vitiate the auction proceedings. This modification thus cannot make the sale as illegal and without authority of law." It was further held, that. "The interpretation that could be given to the rules that Section 29 of the Act makes Rule 57 as directory only and not mandatory." It was further observed, "Since the Legislature has made it explicitly clear in Section 29 that the rules regarding recovery of tax would be applicable as far as possible with necessary modifications and discretion vests in the Recovery Officer the fact that 25% of the bid amount was not paid by the auction purchaser immediately but was paid subsequently as per the auction notice, will not affect the legality and validity of the sale and acceptance of the amount thereafter also would not vitiate the auction proceedings.... It is not open for the petitioner to challenge in the proceedings on the ground of there being irregularity in conduct of sale." Ultimately, it was held that the non-payment of 25% of the bid amount on the same date and the payment of the balance of sale consideration not within 15 days from the date of sale, were not irregular and it would not vitiate the auction sale and the Recovery Officer has discretion to grant such time, and held the sale is valid.
It is also further held that the only right available to the aggrieved party is to invoke the provisions of Rule 61 to have the sale set aside on the ground of material irregularity and such right also could be invoked within 30 days from the date of the sale. As these things were not done, the sale in favour of the auction purchaser was confirmed. In our case also, the appellants have not chosen to file the application as required under Rules 60 and 61. The respondent No. 2 also relied upon the case of Kamal Kishore Gupta v. State Bank of India II (2006) BC 177 : 2005(2) D.R.T.C. 445 (D.R.A.T. All.), wherein also a similar question arose for consideration of the D.R.A.T., Allahabad, and the D.R.A.T. had followed the decision rendered by the Division Bench of the Andhra Pradesh High Court in P. Mohanreddy 's case and had observed that the Recovery Officer has got discretion, which could be exercised in the manner set out in Section 29 of the Act. D.R.A.T. also has said that the decision of the Supreme Court in , has been rightly differentiated by the A.P. High Court and ultimately held that the rules to Second and Third Schedules of the Income Tax Act can be followed as far as possible and granted of time for the payment of the balance of the sale consideration beyond 15 days as prescribed under Rule 57 is neither irregular nor illegal.
Bombay High Court in the case of Keshrimal Jivji Shah v. Bank of Maharashtra IV (2004) BC 6 : (Vol. 273) 2005 I.T.R. 451, has an occasion to consider Section 29 of the RDDBFI Act and also the Second and Third Schedules to the Income Tax Act, 1961. In fact, a specific question was framed by the Court, "Whether and to what extent the procedure under Rule 11 of the Second Schedule to the Income Tax Act, 1961 is applicable in execution of a recovery certificate issued under Section 19(7) of the RDDBFI Act, 1993" and after having discussed the matter at length and breadth had opined. "Considering the importance of the matter and as the issue frequently crops up for importance of the matter and as the issue frequently crops up for consideration we proceed to answer the question No. 2 as well. In our view, we cannot ignore the plain words of the status. Section 29 in clearest terms states that the provisions of the Second and Third Schedules to the Income Tax Act and the 1962 Rules, as in force from time-to-time, shall 'as far as possible', apply with necessary modifications as if the said provisions and rules refer to the amount of debt due under this Act instead of the Income Tax Act. Whenever the Legislature uses words such as 'as far as possible', 'as far as practicable', etc. the intent is not to apply the provisions in their entirety. Whenever, the Legislature uses words as far as practicable, as far as possible, it conveys one and the same meaning. The purpose of the RDDBFI Act is to expediently recover public monies in a summary manner, then an interpretation which would be advanced for this purpose should be placed on Section 29 of the RDDBFI Act. If it is so interpreted, it will not be possible to read the provisions of the Second Schedule and more particularly Rule 11 in its entirety in Section 29. They will have to be read as far as possible and with the modification and the facts and circumstances of the case and the nature of the investigation required." Ultimately ruled, "Parliament does not make it mandatory or compulsory for the Recovery Officer to apply the Second and Third Schedules to the Income Tax Act and 1962 Rules, advisedly because the Legislature has taken safeguards after investigation of claims and objections by the Recovery Officer, they have also relied upon, assented and followed the conclusions reached by the Division Bench of the Andhra Pradesh High Court in P. Mohanreddy v. D.R.A.T. case (supra). It is, therefore, made out that the acceptance of the balance of the sale consideration from the auction purchaser beyond 15 days by the Recovery Officer would not amount to any irregularity or illegality. In fact, the appellants have not made out any case of prejudice or loss caused to him. In the absence of any prejudice, loss of irreparable injury, the case of the appellants that the Recovery Officer had accepted the amount beyond the prescribed period, cannot at all be countenanced."
14. The learned Advocate for the auction purchaser has also advanced an argument that the appellants have not chosen to file the application to set aside the sale as required under Rule 61 of the Second Schedule to the Income Tax Act, which says that, "Such an application should be filed within thirty days from the date of the sale and that application should be filed only on the ground of material irregularity in publishing or in the conduct of the sale." Sub-clause (b) of Rule 61 prescribes 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". The appellants in our case also have not deposited the amount, which is recoverable from him and on that count also, they are not entitled to set aside the sale. As such, the appellants have incurred the disqualification under Rule 61 that the application was not filed within 30 days and they have also not deposited the amount as required under Clause (b) of Rule 61. In support of this submission, the decision rendered by the D.R.A.T., Allahabad, in Kamal Kishore Gupta v. State Bank of India (supra), and the case of Bhangoo & Company v. Mittal & Garg Enterprises I (2006) BC 112 (D.R.A.T./D.R.T.) are relied upon.
15. The fact that the appellants have not preferred their application within 30 days from the date of the sale and that they have also not deposited the amount recoverable from them in the execution of the certificate, are not in dispute. As such, the application filed by the appellants to set aside the sale has no legs to stand. That apart, the attack made by the appellants, with regard to the extension of time granted by the Recovery Officer for payment of balance of sale consideration is also rejected. I with all respect rely upon the case of A.P. High Court in P. Mohanreddy 's case wherein the matter was discussed threadbare and the confusions reached were based on sound principles, to arrive at such a conclusion. Section 29 of the Act, enables or empowers the Recovery Officer to follow the Rules of Income Tax Act only to the extent as far as possible. That apart, the appellants have not made out any case of prejudice or irreparable injury, which would weigh to some extent to consider the application of the appellants. I am, therefore, of the firm view that the application filed by the appellants suffers from all these infirmities and as a matter of fact, when the D.R.T. put a question to the appellants to produce a prospective purchaser to purchase the property for Rs. 50 lakh as contended by the appellants, they were not able to produce any prospective purchaser and, as such, the contention of the appellants that the property would be worth more than Rs. 50 lakh, cannot also be accepted. Taking all these facts into consideration, I come to the conclusion that the D.R.T. has not committed any error in dismissing the application filed by the appellants as it does not suffer from any infirmity, which required interference.
16. In the result, the appeal is dismissed and the order of the learned Presiding Officer of D.R.T.-II, Chennai, dated 30th November, 2005, and the order of the Recovery Officer dated 22th June, 2005, are confirmed.