Dr. Mathew Antony vs Oriental Bank Of Commerce on 22 October, 2024

[Cites 24, Cited by 0]

Kerala High Court

Dr. Mathew Antony vs Oriental Bank Of Commerce on 22 October, 2024

[OP (DRT) Nos.88/2017, 64/2018] Heard Mr Dinesh R Shenoy, learned Counsel for the petitioner and Mr V V Sidharthan, learned Senior Advocate; Mr Saji P Joseph and Mr Vipin D G learned Counsel for the respondents.

2. These two OP (DRTs) have been filed by one Dr Mathew Antony arising out of the proceedings under the provisions of the SARFAESI Act and the Rules made thereunder and the Orders passed by the Debts Recovery Tribunal and the Debts Recovery Appellate Tribunal.

2.1 In OP(DRT) No.64/2018, the challenge is to Ext.P8 order dated 15.12.2017, whereby the Debts Recovery Appellate Tribunal dismissed the appeal on the ground of non-compliance with the directions dated 15.11.2017 for making a pre-deposit of Rs.50 lakhs in two instalments. The Tribunal dismissed the appeal as the petitioner herein and appellant before the Tribunal did not comply with the order of pre-deposit. OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 6 2024:KER:78480 2.2 In OP (DRT) No.88/2017, the challenge is to the order dated 12.07.2017 passed by the Debts Recovery Tribunal-2, Ernakulam, and the order dated 12.04.2016 passed by the Recovery Officer in I.A. No.700/2010 in DRC No.1503/OBC/EKM in O.A. No.71/2002. The challenge also concerns the order/certificate issued by the Recovery Officer after the sale of the secured asset was completed.

2.3 The facts are common in both the O.P.(DRT), except for some minor differences.

O.P. (DRT) No.64/2018

3. According to the petitioner, he is a Doctor by profession and served abroad in Libya from 1996 to 2004. In 2005 he moved to Saudi Arabia. M/s Amrok Shipping Private Limited had applied for a business loan from the respondent Bank and offered the properties of Mr George Antony, Mr Alex Antony, Mr Jacob Antony and the petitioner. These four persons are brothers. On 09.10.1997, Mr Alex Antony and the petitioner deposited their title deeds to create an equitable mortgage in favour of OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 7 2024:KER:78480 the Bank and they also executed a memorandum of deposit of the title deed and vide letter dated 07.05.1997 they executed a letter confirming deposit of title deeds. The properties mortgaged to the Bank by Mr Alex Antony, and the petitioner comprised 2.448 hectares (2.70 hectares as per Encumbrance Certificate and Valuation Report) in Resurvey No.325/5, Block No.14 (Old Sy. No.1/1A) and 2.62 hectares in Resurvey No.325/4, Block No.14 (Old Sy. No.1/1A) of Kanjirappilly Village and sub- district in Kottayam District. These properties had come to the share of Mr Alex Antony and the petitioner as per Partition Deed No.1869/1988 of the SRO Kanjirappally. The said partition deed was executed between the legal heirs of the late Antony, the father of the petitioner and other brothers.

3.1 According to the petitioner, when the petitioner was abroad the property documents were taken from the petitioner's wife, who had a restricted Power of Attorney for the creation of a mortgage over the petitioner's properties without his knowledge and consent. A power of OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 8 2024:KER:78480 attorney in favour of his wife did not contain any power to mortgage the properties, and no concurrence was taken from the petitioner either before or after the alleged creation of the mortgage.

4. The Bank filed O.A. No.71/2002 before the Debts Recovery Tribunal Ernakulam under Section 19(1) of the Recovery of Debts Due to Banks and Financial Institutions Act 1993 for recovery of a sum of Rs.1,31,47,825.53 with interest at the rate of 17% per annum from the defendants in the Original Petition including the M/s Amrok Shipping Private Limited and the petitioner who was arrayed as the 5th defendant in the Original Petition.

4.1 The defendants entered appearance on 03.05.2002 and sought adjournment from time to time to file a written statement. But a written statement was never filed even after a lapse of more than 22 months. The said O.A. was decreed on 19.03.2004 for Rs.1,19,22,838.53 with interest thereon at the rate of 13% per annum from 22.01.2002 to the date 19.03.2004 and after the decree at the rate of 12% per annum till OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 9 2024:KER:78480 realisation with appropriate costs from the defendants jointly and severally and by sale of the scheduled properties.

5. A Review Application came to be filed as R.A. No.3/2012 in O.A. No.71/2002 seeking review of the final order dated 19.03.2004 passed in O.A. No.71/2002 under Section 22 of the Recovery of Debts Due to Banks and Financial Institutions Act 1993 read with Rule 5A of the Debts Recovery Tribunal (Procedure) Rules 1993. It was stated on behalf of the petitioner that at the time of availing of the loan by M/s Amrok Shipping Private Limited from the Bank, the petitioner's wife was caused to affix her signature on some blank printed forms and a few blank papers at the instigation of Mr George Antony, the brother of the petitioner, stating that she would be only a witness. The wife of the petitioner had never intended to and was not authorised to mortgage the property to the Bank at all. The petitioner was not aware of the aforesaid loan or mortgaging his properties. It was also stated that at the time of taking the loan, the brothers had taken away some papers OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 10 2024:KER:78480 belonging to the petitioner, including the title deeds of the properties and handed them over to the Bank.

5.1 It was further stated that at the time of filing the Original Application, the Company had already been wound up as per the winding up order dated 07.03.2001 in Company Petition No.27/1999 and Company Petition No.42/2000 of the Kerala High Court. The Tribunal, however, dismissed the said Review Application vide order dated 16.08.2012 noting that there was nothing on record to show that the Order passed in O.A. No.71/2002 was vitiated by any fraud. The Tribunal also did not find any mistake or error apparent on the face of the order. The Tribunal noted that the counsel engaged by the petitioner in the Original Application was participating all along in the O.A. proceedings. Therefore, the Review Application was held to be not maintainable in law or facts. Hence, the Review Application came to be dismissed.

6. The petitioner filed an appeal, AIR No.861/2012 before the Debts Recovery Appellate Tribunal at Chennai. The Appellate Tribunal OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 11 2024:KER:78480 had directed the petitioner vide order dated 15.11.2017 to make a pre- deposit of Rs.50 lakhs in two instalments. The petitioner did not comply with the said pre-deposit. Therefore, the appeal stood dismissed on 15.12.2017, which is the order impugned in O.P.(DRT) No.64/2018.

7. The petitioner filed I.A. No.700/2010 in DRC 1503/OBC/EKM praying to declare the sale deed dated 24.09.2009 and all other proceedings in DRC No.1503/OBC/EKM before the Recovery Officer as illegal, invalid, null and void ab initio. Therefore, the auction sale should not be confirmed. The ground taken by the petitioner was that he was not served with any of the notices in O.A. and the mandatory notices required under Rule 2 and Rule 53 of the Second Schedule to the Income Tax Act 1961 were not served on him. The Recovery Officer dismissed the said I.A. vide order dated 18.03.2010 on the ground that the petitioner did not comply with the provisions of Rule 61 of the Second Schedule to the Income Tax Act 1961 as the petitioner did not deposit the amount recoverable from him in the execution of the certificate instead he has OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 12 2024:KER:78480 filed a petition under Section 22(1) of the Recovery of Debts Due to Banks and Financial Institutions Act 1993 read with Section 47 of CPC. In the absence of the requisite compliance of Rule 61, the Recovery Officer held that the petition filed by the petitioner was not maintainable.

7.1 Rule 61(b) of the Second Schedule to the Income Tax Act prescribes the procedure for hearing the application made by a defaulter. The application is not maintainable unless the applicant deposits the amount recoverable as given in the execution of the certificate. In the absence of such mandatory compliance, the application was found to be not maintainable.

7.2 The petitioner did not stop there. He filed I.A. No.2591/2010 in DRC 1503 in O.A.71/2002, praying to review or recall the order dated 18.03.2010 passed by the Recovery Officer. The said Review Application was dismissed vide order dated 11.10.2010 holding that the order dated 18.03.2010 passed by the Recovery Officer did not suffer from any mistake apparent on the face of the record.

OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 13 2024:KER:78480

8. Challenging the order dated 11.10.2010 passed in I.A. No.2591/1010 in DRC 1503 in O.A. No.71/2002, the petitioner had filed Appeal No.27/2011 before the Debts Recovery Tribunal, Ernakulam. The said Appeal was allowed by order dated 25.10.2013 by the Debts Recovery Tribunal Ernakulam and remitted the matter back to the Recovery Officer for fresh disposal in accordance with the law after affording an opportunity of hearing to both parties. The Recovery Officer was directed not to confirm the auction sale already held till a fresh order is passed on remand.

9. The petitioner thereafter approached this Court by filing OP (DRT) No.9/2015 (O). This Court, vide judgment dated 08.07.2015, disposed of the said OP (DRT), observing that the Recovery Officer should decide the maintainability of the application at the initial stage of the proceedings inasmuch as the question of maintainability should be decided on a question of law. If the maintainability was to be adverted to with reference to any evidence, the said issue should be decided along OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 14 2024:KER:78480 with other issues during the final hearing. The parties were directed to appear before the Recovery Officer on 02.08.2015.

9.1 On remand, the Recovery Officer again dismissed I.A. No.700/2010 in DRC No.1503 in O.A. No.71/2002 vide Order dated 12.04.2016 as not maintainable. Thereafter, on 22.04.2016, the certificate of sale of immovable properties was issued, and the sale was executed in favour of the auction purchaser, Mr P J Chacko. The possession of the properties was handed over. Against the order passed by the Recovery Officer, the petitioner has filed OP(DRT) No.88/2017 (the connected case).

10. The respondents have contended that the petitioner had no right or interest in the matter. Neither the petitioner nor any of the other defendants challenged the final order passed in the Original Application. It is also pointed out that the petitioner had assigned the mortgaged properties in favour of a third person, and without disclosing these facts, he approached this Court. The petitioner is prosecuting OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 15 2024:KER:78480 these Original Petitions on behalf of the person in whose favour he had assigned the mortgaged property during the pendency of the proceedings.

11. Learned Counsel for the petitioner submits that the impugned order in O.P.(DRT) No.64/2018 suffers from illegality inasmuch as per the unamended Section 21 of the Recovery of Debts and Bankruptcy Act 1993 there was absolute discretion with the Tribunal to waive off the entire statutory pre-deposit and the Tribunal had proceeded on the basis of the amended Act, which does not apply in the instant case.

11.1 What has to be considered is the Debts Recovery Appellate Tribunal (Procedure) Rules 1994. Rule 9 of the Debts Recovery Appellate Tribunal (Procedure) Rules 1994 was amended with effect from 04.11.2016. However, under the unamended Rule, there was no discretion vested in the Appellate Tribunal to reduce the amount of pre- deposit from 50% to 25%. By way of substitution, Rule 9 now empowers the Appellate Tribunal for reasons to be recorded in writing to reduce OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 16 2024:KER:78480 the amount to be deposited up to 25%.

12. Even if the contention of the petitioner is accepted that the unamended Section 21 of the Recovery of Debts and Bankruptcy Act 1993 provided discretion to the Appellate Tribunal to waive off the amount of pre-deposit of 50% for reasons to be recorded, the impugned order would suggest that the Tribunal had not exercised the said discretion on the facts of the case. Therefore, the Tribunal directed the petitioner to deposit Rs.50 lakhs instead of 50% of the amount, as provided under unamended Section 21 of the Recovery of Debts and Bankruptcy Act 1993.

13. In view of the aforesaid facts, I do not find that the Tribunal had committed any error of law or jurisdiction in dismissing the appeal filed by the petitioner. The petitioner never challenged the order dated 15.11.2017, whereby the petitioner was directed to deposit Rs.50 lakhs in two instalments but has come before this Court against the final order whereby the appeal has been dismissed for non-compliance with the OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 17 2024:KER:78480 order dated 15.11.2017.

13.1 Even otherwise, on facts, it can be seen that the petitioner has assigned the property in favour of the third person and the petitioner is indulging in protracted litigation to espouse the cause of the third person in whose favour he has assigned the rights. The sale has already been confirmed, the certificate has already been issued, the property has been registered in the name of the auction purchaser, and the possession has been delivered. Therefore, I do not find that this petition has any merit even otherwise. This Court is exercising its revisional jurisdiction under Article 227 of the Constitution of India; the Court has to see whether there is any error apparent on the face of the record, of facts or law, or is there any jurisdictional error. From the perusal of the order passed by the Tribunal, this Court does not find that there is any error apparent on the face of the record, either in fact or law or of jurisdiction, which requires interference by this Court.

Therefore, the O.P.(DRT) No.64/2018 is hereby dismissed. OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 18 2024:KER:78480 O.P.(DRT) No.88/2017

14. This O.P.(DRT) has been filed challenging the order dated 12.07.2017 passed by the Debts Recovery Tribunal-2, Ernakulam, and the order dated 12.04.2016 passed by the Recovery Officer in I.A. No.700/2010 in DRC No.1503/OBC/EKM in O.A. No.71/2002. The challenge also concerns the orders/certificates issued by the Recovery Officer after the sale of the secured asset was complete.

15. From a catena of decisions of the different jurisdictional High Courts, including the Supreme Court, it is well settled that an application to set aside the sale of an immovable asset is not maintainable unless the defaulter makes a pre-deposit as mandated under Rule 61(b) of the Second Schedule of the Income Tax Act 1961.

16. I am not interested to verbose this judgment by citing all the decisions on the issue, except a few decisions mentioned hereunder:

OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 19 2024:KER:78480 Nazims Continental v. The Indian Overseas Bank1 16.1 The Division Bench of the Madras High Court has held that the application to set aside the sale is not maintainable unless the defaulter under unamended Rule 61 of the Second Schedule of the Income Tax Act until the condition prescribed under sub-rule (b) of Rule 61 is complied with.

16.2 Paragraphs 12, 13, 14, 19 and 23 of the said judgment are extracted hereunder:

12. From Rule 60, it will be evident that application to set aside sale of immovable property on any ground can be made by the defaulter or any person, whose interests are affected by the sale, within 30 days from the date of sale. In such case, the amount specified in the proclamation of sale with interest thereon @ 15% p.a., from the date of proclamation of sale to be deposited apart from payment of penalty @ 5%.

Per contra, under Rule 61, any person, whose interests are affected, may, apply within 30 days to set aside the sale of immovable property only on the ground of 'non-service of notice' or 'irregularity' and has to show that notice was not served on the defaulter to pay the arrears as required 1 2009 (3) LW792; MANU/TN/1130/2009 OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 20 2024:KER:78480 by the schedule or on the ground of a material irregularity in publishing or conducting the sale. However, no sale can be set aside on any of such ground unless the recovery officer is satisfied that the applicant has sustained "substantial injury" by reasons of non-service or irregularity. Such application made by defaulter under Rule 61 is to be disallowed unless the DEFAULTER deposits the amount recoverable from him in the execution of the certificate. (Emphasis added).

13. Therefore, 'in the case of a defaulter', for filing a petition under Rule 61 to set aside the sale of immovable property, the defaulter is required to deposit the 'amount recoverable from him in the execution of the certificate', as distinguished from the 'amount specified in the proclamation of sale' as stipulated under Rule 60. Under Rule 61, only if a person, whose interests is affected by sale, but is not a defaulter, is not liable to make any pre-deposit to set aside the sale of immovable property.

14. Similar matter fell for consideration before a Division Bench of this Court in Sakura Prime Tanning Co. v. Central Bank of India and Ors. in W.P. No. 14581/06, disposed of on 28th Sept., 2007, wherein the Court held as follows:

3. The provisions of the Second Schedule to Income Tax Act, 1961 is applicable in this case in view of Section 29 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993. Rule 60 to the Second Schedule of Income Tax Act, 1961, while postulates time OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 21 2024:KER:78480 limit to file application to set aside the sale, under Clause (b) of Proviso to Rule 61 to the Second Schedule of the Income Tax Act, 1961, an application made by the defaulter under the rule cannot be allowed unless the defaulter deposits the amount recoverable from them in the execution of the certificate.

In another case of Indian Bank v. Stanfrose Agvet Farms W.P. No. 19833/07 and analogous cases, a Division Bench, by its unreported judgment dated 10th March, 2008, held as follows:

13. Under Section 30 of the RDB Act, 1993, appeal can be preferred against the order of the Recovery Officer within 30 days' from the date on which copy of such order is issued. As the borrowers intended to challenge the auction-sale pursuant to the order passed by the Recovery Officer, it was open for them to prefer such appeal under Section 30, but such appeal could have been only before the DRT and not before the DRAT.

14. Under Section 29 of the RDB Act, 1993, the provisions of Second and Third Schedule to the Income Tax Act, 1961 are applicable, as far as possible. Under Rule 60 of the Second Schedule to the Income Tax Act, 1961, it is mandatory to deposit the amount specified in the proclamation of sale as that for the recovery of which sale was ordered with interest thereon, at the rate prescribed under the said Rules for setting aside the sale of immovable property.

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 OP (DRT) NO. 88 OF 2017 and
OP (DRT) NO. 64 OF 2018




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19. In the case of Union of India v. Delhi High Court Bar Association MANU/SC/0194/2002: [2002]2SCR450, the Supreme Court noticed Section 29 anc Section 30 substituted vide Amendment Act 2000 and held as follows:

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, have 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.

20. In view of the provisions of law and finding of the Court and discussions made above, we hold that the recovery officer has also jurisdiction to entertain an application under Rules 60, 61 and 62 of Part-

III of 2nd Schedule to the Income Tax Act and in case any person is OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 23 2024:KER:78480 aggrieved against such order, may prefer appeal under Section 30 of the Act, 1993. As the defaulter or any person whose interests are affected by sale is supposed to pay the pre-deposit amount under Rule 60 and a defaulter required to pay pre-deposit amount under Rule 61 except the person whose interests are affected due to non-service of notice on defaulter to pay the arrears or material irregularity in publishing or conducting the sale should apply under Rule 61 or the purchaser, who may file application under Rule 62, who are not liable to pre- deposit any amount, in such case, for preferring an appeal under Section 30 of Act, 1993, against an order of recovery officer under Rules 60, 61 or 62, no pre- deposit amount required to be deposited.

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23. So far as W.P. No. 13210/08 is concerned, the borrower is the petitioner. He raised the question of upset price of valuation of property and jurisdiction of the recovery officer under Rules 60 and 61 of Part-III of II Schedule to Income Tax Act. They preferred application under Rule 61 of Part-III of II Schedule to Income Tax before the recovery officer to set aside the sale without compliance of pre-deposit amount. For the said reason, amount having not deposited as per Rule 61, the application to set aside was dismissed against which they preferred appeal before the Debts Recovery Appellate Tribunal, which has also been dismissed by the Appellate Tribunal vide impugned order dated 6th May, 2008. First of all, it is the appellant, who preferred appeal under Rule 61 and, therefore, they cannot say the recovery officer has no jurisdiction to pass OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 24 2024:KER:78480 order under Rule 61 and the appeal to set aside the sale is only maintainable under Section 30 of the Act, 1993. We have already held that an application to set aside sale is also maintainable under Rule 61, but we have also held that a defaulter, such as borrower, is required to pre- deposit the amount in view of proviso to Rule 61. The petitioners being the defendant-borrowers, as they failed to comply by pre-depositing the amount, we hold that the recovery officer rightly rejected the application under Rule 61 preferred by borrowers and the Appellate Tribunal rightly affirmed the same." P Shuyjaath Raheed v. State Bank of India2

17. The same view has been reiterated by the Division Bench of the Madras High Court in paragraphs 10 and 17 of the judgment, which reads thus:

"10. The applicability of the provisions of Second Schedule to the Income Tax Act, 1961 in accordance with Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, particularly with reference to Rules 60 & 61 came up for consideration before a Division Bench of this Court in Nazims Continental & others v. The Indian Overseas Bank, Triplicane Branch and others, MANU/TN/1130/2009: 2009 (3) LW 792. S.J. Mukhopadhaya, J. (as His 2 2012 (3) CTC 724; MANU/TN/1516/2012 OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 25 2024:KER:78480 Lordship then was) while narrating the relevant provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the Income Tax Act and the Income Tax (Certificate Proceedings) Rules, 1962 in the context of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, has held as follows:

12. From Rule 60, it will be evident that Application to set aside sale of immovable property on any ground can be made by the defaulter or any person, whose interests are affected by the sale, within 30 days from the date of sale. In such case, the amount specified in the proclamation of sale with interest thereon @ 15% p.a., from the date of proclamation of sale to be deposited apart from payment of penalty @ 5%.

Per contra, under Rule 61, any person, whose interests are affected, may, apply within 30 days to set aside the sale of immovable property only on the ground of 'non-service of notice' or 'irregularity' and has to show that notice was not served on the defaulter to pay the arrears as required by the Schedule or on the ground of a material irregularity in publishing or conducting the sale. However, no sale can be set aside on any of such ground unless the Recovery Officer is satisfied that the Applicant has sustained "substantial injury" by reasons of non-service or irregularity. Such Application made by defaulter under Rule 61 is to be disallowed unless the DEFAULTER deposits the amount recoverable from him in the execution of the certificate.

(Emphasis added).

OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 26 2024:KER:78480

13. Therefore, 'in the case of a defaulter', for filing a Petition under Rule 61 to set aside the sale of immovable property, the defaulter is required to deposit the 'amount recoverable from him in the execution of the certificate', as distinguished from the 'amount specified in the proclamation of sale' as stipulated under Rule 60. Under Rule 61, only if a person, whose interests is affected by sale, but is not a defaulter, is not liable to make any pre-deposit to set aside the sale of immovable property.

14. Similar matter fell for consideration before a Division Bench of this Court in Sakura Prime Tanning Company v. Central Bank of India & Ors. in W.P. No. 14581/06, disposed of on 28th Sept., 2007, wherein the Court held as follows:

(3) The provisions of the Second Schedule to Income Tax Act, 1961 is applicable in this case in view of Section 29 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993. Rule 60 to the Second Schedule of Income Tax Act, 1961, while postulates time limit to file Application to set aside the sale, under Clause (b) of Proviso to Rule 61 to the Second Schedule of the Income Tax Act, 1961, an Application made by the defaulter under the rule cannot be allowed unless the defaulter deposits the amount recoverable from them in the execution of the certificate.

In another case of Indian Bank v. Stanfrose Agvet Farms, W.P. No. 19833/07 and analogous cases, a Division Bench, by its unreported judgment dated 10th March, 2008, held as follows:

OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 27 2024:KER:78480

13. Under Section 30 of the RDB Act, 1993, appeal can be preferred against the order of the Recovery Officer within 30 days' from the date on which copy of such order is issued. As the borrowers intended to challenge the auction-sale pursuant to the order passed by the Recovery Officer, it was open for them to prefer such Appeal under Section 30, but such Appeal could have been only before the DRT and not before the DRAT.

14. Under Section 29 of the RDB Act, 1993, the provisions of Second and Third Schedule to the Income Tax Act, 1961 are applicable, as far as possible. Under Rule 60 of the Second Schedule to the Income Tax Act, 1961, it is mandatory to deposit the amount specified in the proclamation of sale as that for the recovery of which sale was ordered with interest thereon, at the rate prescribed under the said Rules for setting aside the sale of immovable property.

The Division Bench has also relied upon a plethora of decisions and has ultimately held that the deposit of amount is a mandatory requirement in the following words:

20. In view of the provisions of law and finding of the Court and discussions made above, we hold that the recovery officer has also jurisdiction to entertain an Application under Rules 60, 61 & 62 of Part-III of 2nd Schedule to the Income Tax Act and in case any person is aggrieved against such order, may prefer Appeal under Section 30 of the Act, 1993. As the defaulter or any person whose interests are affected by sale is supposed to pay the pre-deposit OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 28 2024:KER:78480 amount under Rule 60, and a defaulter required to pay pre-deposit amount under Rule 61, except the person whose interests are affected due to non-service of notice on defaulter to pay the arrears or material irregularity in publishing or conducting the sale should apply under Rule 61 or the purchaser, who may file Application under Rule 62, who are not liable to pre-deposit any amount, in such case, for preferring an Appeal under Section 30 of Act, 1993, against an order of recovery officer under Rules 60, 61 or 62, no pre-deposit amount required to be deposited.

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17. The further reliance placed by the learned Counsel for the Petitioners on the judgment of the Supreme Court in Chinnammal v. P. Arumugham, MANU/SC/0321/1990: 1990 (1) SCC 513, is again of no help to the case of the Petitioners. That was a case where the Supreme Court has distinguished between the decree-holder, who is himself an auction purchaser, and the third party auction purchaser and in those circumstances, the Supreme Court has held that the third party auction purchaser is unaffected and he does not lose the property by subsequent reversal or modification of the decree. It is true that in this case Respondents 5 & 6 are third parties and the records show that they are purchasers having known about the litigation. But their rights cannot be said to be affected, especially when the confirmation of the sale itself is yet to be made and Petitioners have not acted as per the Rule, as elicited above, especially the Rules in the Second Schedule to the Income Tax Act, OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 29 2024:KER:78480 1961, particularly Rule 60, which contemplates the mandatory requirement of deposit. Therefore, the third party purchasers' right in the present case will be affected only in cases where the defaulter performs his conduct in accordance with law. There is absolutely nothing to presume the abuse as repeatedly contended by the learned Counsel for the Petitioners by relying upon Section 22 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, inasmuch as in the public auction Respondents 5 & 6 having been the highest bidders have not only paid the initial payment, but also the subsequently paid the balance amount in full. Unless and until it is shown with concrete evidence that the First Respondent/Bank is in cahoots with Respondents 5 & 6 or in any event the property has been sold below the upset price, one cannot come to a conclusion that there is a mala fide intention. Therefore, the judgments which are relied upon by the learned Counsel for the Petitioners cannot be pressed into service on the facts and circumstances of the present case. At the risk of repetition it has to be reiterated that what the learned Counsel for the Petitioners sought before the Debts Recovery Appellate Tribunal has been granted and in accordance with that the proceedings before the Recovery Officer is pending and it is always open to the Petitioners to challenge the order to be passed by the Recovery Officer, if so advised."

OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 30 2024:KER:78480 State Bank of India v. Janardhanan3

18. This Court has also taken a similar view in its judgment in paragraph 20, which is extracted hereunder:

"20. Accordingly, since it is evident from the records that the first respondent herein carried grounds which ought to have been urged under R.61 of the Second Schedule to the Act of 1961 and since the invocation of such Rule would have required the first respondent to make the pre- deposit, it was not open to the first respondent to bypass such provision and choose the appellate route to urge the same grounds. However, the situation would have been different if grounds other than those available in R.60 and R.61 were urged by a similarly placed person by way of an appeal."

Janatha Textiles v. Tax Recovery Officer4

19. The Supreme Court, in its judgment, has held that the rights of the auction purchaser in the property are to be protected, and if there is an uncertainty of confirmation of the sale in favour of the auction purchaser, the sale of the property would not fetch market value or fair 3 2021 KHC 5222 4 2008 (12) SCC 582; MANU/SC/2670/2008 OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 31 2024:KER:78480 price of the property. Paragraph 26 of the judgment reads thus:

"26. Law makes a clear distinction between a stranger who is a bona fide purchaser of the property at an auction sale and a decree-holder purchaser at a court auction. The strangers to the decree are afforded protection by the court because they are not connected with the decree. Unless the protection is extended to them the court sales would not fetch market value or fair price of the property."

20. On confirmation of the sale, it becomes absolute, and the judgment debtor would not have any right and title over the property. Considering the long-drawn litigation and the facts of the case, I am of the view that O.P.(DRT) No.88/2017 also does not have any merit, which is hereby dismissed.

Result:

In view of the above discussions both O.P.(DRTs) stand dismissed.

All Interlocutory Applications regarding interim matters stand closed.

Sd/-

D. K. SINGH JUDGE jjj OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 32 2024:KER:78480 APPENDIX OF OP (DRT) 64/2018 PETITIONER EXHIBITS Exhibit P7(a) TRUE PHOTOCOPY OF I.A.NO.975/2013 IN APPEAL NO.861/2012, DEBT RECOVERY APPELLATE TRIBUNAL, CHENNAI.

Exhibit P7(b) TRUE PHOTOCOPY OF ORDER DATED 17/11/2017 IN A.R.NO.861/2012, DEBT RECOVERY APPELLATE TRIBUNAL, CHENNAI.

EXT.P3: COPY OF THE SUMMONS FROM SAID TO HAVE BEEN ISSUED TO THE PETITIOENR/REVIEW APPLICANT (FROM THE DRT, ERNAKULAM IN OA NO 71/2002 EXT.P4: COPY OF ACKNOWLEDGMENT CARD SAID TO BEFOR THE NOTICE ISSUED TO THE PETITIONER/REVIEW APPLICANT IN DRC 1503/OBC.

EXT.P5: COPY OF ACKNOWLEDGMENT CARD SAID TO BEFOR THE NOTICE ISSUED TO THE PETITIONER/REVIEW APPLICANT INDRC 1503/OBC.

EXT.P1: COPY OF PROCEEDINGS SHEET OF DRT, ERNAKULAM IN OA NO.

71/2002 FROM 3/5/2002 TO 5/3/2004.

EXT.P7: COPY OF THE APPEAL MEMORANDUM 861/2013, DEBT RECOVERY APPELLATE TRIBUNAL, CHENNAI EXT.P8: COPY OF THE ORDER DATED 15/12/2017 DISMISSING THE APPEAL NO.

861/2012 BY THE DEBT RECOVERY APPELLATE TRIBUNAL, CHENNAI EXT.P6: COPY OF FINAL ORDER DATED 19/3/2004 IN OA NO. 71/2002, DEBT RECOVERY TRIBUNAL, ERNAKULAM EXT.P2: COPY OF THE MEMORANDUM OF REVIEW PETITION IN RA NO. 3/2012 IN OA NO. 71/2002, DEBT RECOVERY TRIBUNAL, ERNAKULAM R1A TRUE COPY OF THE FINAL ORDER IN OA NO.71/2002 DATED 19.03.2004 R1B TRUE COPY OF THE ORDER IN RA NO.3/2012 IN OA NO.71/2012 DATED 16.08.2012 R1C TRUE COPY OF THE ORDER IN I.A. NO.700/2010 IN DRC NO.1503 IN OA NO.71/2012 DATED 18.03.2010 R1D TRUE COPY OF THE ORDER IN IA NO.2591/2010 IN DRC NO.1503 IN OA OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 33 2024:KER:78480 NO.71/2012 DATED 11.10.2010 R1E TRUE COPY OF THE ORDER IN APPEAL NO.27/2011 DATED 25.10.2013 R1F TRUE COPY OF THE JUDGMENT IN OP (DRT) NO.9/2015 DATED 08.07.2015 R1G TRUE COPY OF THE RECOVERY CERTIFICATE DATED 22.04.2016 ISSUED IN FAVOUR OF THE AUCTION PURCHASER.

OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 34 2024:KER:78480 APPENDIX OF OP (DRT) 88/2017 PETITIONER EXHIBITS Exhibit P23 TRUE PHOTOCOPY OF REPORT OF VALUATION OF THE IMMOVABLE PROPERTY OF JOSEPH K ANTONY BY K.A.THOMAS, CHARTERED ENGINEER.

EXHIBIT P2 TRUE PHOTOCOPY OF APPEAL NO. 3/2016, DEBT RECOVERY TRIBUNAL-1, ERNAKULAM.

EXHIBIT P3 TRUE PHOTOCOPY OF ACKNOWLEDGMENT CARD DATED 4/8/2014 EXHIBIT P4 TRUE PHOTOCOPY OF ACKNOWLEDGMENT CARD DATED30/3/2005 EXHIBIT P5 TRUE PHOTOCOPY OF SUMMONS DATED 10/10/2002 IN OS NO.

71/2002, DEBT RECOVERY TRIBUNAL, ERNAKULAM. EXHIBIT P1 TRUE PHOTOCOPY OF ORDER DATED 12/7/2017 IN TR.APPEAL NO.

40/2016 (FOREMERLY APPEAL NO.3/2016), DRT-11, KERALA AT ERNAKULAM.

EXHIBIT P7 TRUE PHOTOCOPY OF ORDER DATED 24/9/2009 IN WPC 26799/2009, HIGH COURT OF KERALA.

EXHIBIT P8 TRUE PHOTOCOPY OF VALUATION REPORT DATED 13/1/1997 ISSUED BY FEBI CONSULTANTS, KALOOR.

EXHIBIT P9 TRUE PHOTOCOPY OF JUDGMENT DATED 13/9/2010 IN WPC NO.

30611/2010, HIGH COURT OF KERALA EXHIBIT P10 TRUE PHOTOCOPY OF CERTIFICATE DATED 9/12/2014 ISSUED BY BRANCH MANAGER, ORIENTAL BANK OF COMMERCE.

EXHIBIT P6 TRUE PHOTOCOPY OF ORDER DATED 24/9/2009 IN DRC NO. 1503 IN OA NO. 71/2002, RECOVERY OFFICER, DEBT RECOVERY TRIBUNAL, ERNAKULAM.

P11 TRUE COPY OF ORDER DATED 18.04.2016 SAID TO HAVE BEEN PASSED BY THE 3RD RESPONDENT IN IA NO.1154/2016 IN DRC NO.1503, DRT-I, ERNAKULAM P12 TRUE PHOTOCOPY OF SALE CERTIFICATE DATED 22.04.2016 IN DRC OP (DRT) NO. 88 OF 2017 and OP (DRT) NO. 64 OF 2018 35 2024:KER:78480 1503 IN O.A. 71/2002, DEBT RECOVERY TRIBUNAL, ERNAKULAM P13 TRUE PHOTOCOPY OF PROCEEDINGS BEFORE THE RECOVERY OFFICER DATED 18.04.2016 AND 19.07.2017 PASSED BY THE 3RD RESPONDENT IN DRC 1503, DRT-1, ERNAKULAM P14 TRUE PHOTOCOPY OF THE ORDER OF DELIVERY OF IMMOVABLE PROPERTY TO CERTIFIED PURCHASER DATED 19.07.2017 R2 H TRUE COPY OF ORDER OF CONFIRMATION OF SALE PASSED BY THE RECOVERY OFFICER ON 18.04.2016 P2I TRUE COPY OF THE CAVEAT OP NO.231/2016 FILED BEFORE THE DEBT RECOVERY TRIBUNAL, ERNAKULAM

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