Delhi High Court
Bhasin Tobaccos Ltd. & Ors. vs Gambro Nexim (India) Medical Ltd. & Ors. on 21 January, 2019
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 21st January, 2019.
+ CS(COMM) 962/2016, CCP No.128/2013, IA No.20451/2013 (u/O
XXXIX R-1&2 CPC), IA No.2160/2014 (u/O XXXIX R-1&2
CPC), IA No.13912/2018 (u/O VII R-11 CPC) & IA
No.13913/2018 (u/S 151 CPC)
BHASIN TOBACCOS LTD. & ORS. ..... Plaintiffs
Through: Mr. B.B. Gupta, Sr. Adv. with Mr.
S.K. Gandhi, Ms. Manjula Gandhi,
Mr. Aditya Kapoor, Mr. Nawit Suri,
Ms. Soumya Sarin & Mr. Himanshu
Dubey, Advs.
Versus
GAMBRO NEXIM (INDIA) MEDICAL
LTD. & ORS. ....Defendants
Through: Mr. Chetan Sharma, Sr. Adv. with
Ms. Ananya Bhattacharya, Adv. for
D-1 to 3.
Mr. Sunil Magon, Adv. for D-4&5.
Mr. Ayush Chaudhary, Adv. for Mr.
Gautam Awasthi, Adv. for D-
6/Indian Bank.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. IA No.13912/2018 of the defendants no.1 to 3 under Order VII Rule
11 of the CPC read with Sections 18 and 34 of the Recovery of Debts Due
to Banks & Financial Institutions Act, 1993 (DRT Act) is for consideration.
CS(COMM) No.962/2016 Page 1 of 25
2. The counsel for the plaintiffs was heard at length on the said
application on 5th December, 2018 when, after recording the submissions
made and the queries of the Court, further opportunity was given to the
plaintiffs to make submissions. The senior counsel for the plaintiffs
appearing today, the senior counsel for the defendants no.1 to 3 and the
counsel for the defendant no.6 Indian Bank have been heard. The counsel
for the defendants no.4 and 5 has made only one submission, that it is the
choice of the plaintiffs, whether to proceed before the Debt Recovery
Tribunal (DRT) / its Recovery Officer or before this Court.
3. The plaintiffs instituted this suit, initially for the reliefs of, (i)
declaration that the plaintiffs are the owners of property no.47, Ring Road,
Lajpat Nagar-III, New Delhi-110 024 and that the defendants no.1 to 3 have
no right, title and interest in the said property; (ii) mandatory injunction
directing the defendant no.5 to refund the amount of Rs.5,20,000/- entrusted
by the plaintiffs to the defendant no.5 for conversion of leasehold rights in
the land underneath the said property into freehold; (iii) mandatory
injunction directing the defendant no.5 to get the property converted from
leasehold to freehold and execute the sale deed of the property in favour of
the plaintiffs; and, (iv) permanent injunction restraining the defendants no.1
to 3 from representing themselves to be the owners of the property.
4. In the suit as initially filed, the defendant no.6 Indian Bank was not a
party.
5. The suit, in which issues had already been framed, was listed before
the undersigned on 7th December, 2016 when on being informed that the
lease of the land underneath the property and the property is in the name of
CS(COMM) No.962/2016 Page 2 of 25
the defendant no.1, of which defendants no.2 and 3 are the Directors and
that the plaintiffs were only claiming an Agreement to Sell by the
defendants no.4 and 5 coupled with registered General Power of Attorney
with respect to the property in their favour, it was enquired as to how the
plaintiffs, without having any title to the property could seek a declaration
of being the owners of the property. The said question arose in the light of
the dicta of the Supreme Court in Suraj Lamp & Industries Pvt. Ltd. Vs.
State of Haryana (2009) 7 SCC 363 and (2012) 1 SCC 656.
6. Thereafter the application of the defendants no.1 to 3 under Order
VII Rule 11 of the CPC for rejection of the plaint in the suit as originally
filed came up for consideration before the undersigned on 1 st March, 2017
when again after recording detailed submissions and drawing attention of
the counsel for the plaintiffs to the dicta of the Courts holding that
Agreement to Sell merely creates a right to seek specific performance and
does not vest any right, title or interest in the property subject matter
thereof, on the request of the counsel for the plaintiffs, the hearing was
adjourned.
7. Thereafter the plaintiffs sought amendment of the plaint to seek the
relief of specific performance of the Agreements to Sell in their favour and
for seeking other reliefs including of impleadment of defendant no.6 Indian
Bank and the plaint as it stands today is for the reliefs of (a) declaration that
the plaintiffs are the sole, absolute and exclusive owners of the property and
the defendants no.1 to 3 and 6 have no right, title and interest of any nature
whatsoever in the property; (b) specific performance directing the
defendants no.4 and 5 to cooperate with the plaintiffs in getting the
CS(COMM) No.962/2016 Page 3 of 25
leasehold rights in the land underneath the property converted to freehold
on the basis of General Power of Attorney dated 27th March, 1997 executed
by the defendant no.1 in favour of defendant no.5 and to thereafter execute
the sale deed of the property in favour of the plaintiffs; (c) permanent
injunction restraining the defendants from interfering in any manner
whatsoever in the right, title and interest of the plaintiffs in the property; (d)
declaration restraining the defendants no.1 to 3 and 6 from giving effect to
the orders dated 23rd November, 2012, 20th December, 2012, 27th
November, 2013 in proceedings bearing No.61/2012 titled Indian Bank Vs.
Rexima Exports Pvt. Ltd. pending before the Recovery Officer, DRT and
from giving effect to the order dated 8th November, 2013 of the Debt
Recovery Appellate Tribunal in appeal No.411/2013 titled Rexima Exports
& Ors. Vs. Indian Bank; (e) declaration of the aforesaid orders as non est,
null and void and having been obtained by playing fraud; (f) mandatory
injunction directing the defendants no.1 to 3 and 6 to hand over physical
possession of the property to the plaintiffs; and, (g) permanent injunction
restraining the defendants no.1 to 3 and 6 from proceeding against the
property before the Recovery Officer / Debt Recovery Tribunal.
8. Rejection of the plaint is sought on the ground of the jurisdiction of
this Court being barred by the DRT Act.
9. It is deemed appropriate to set down the relevant facts in chronology:
(i) The DRT, vide order dated 5th December, 1996 in OA
No.871/1996 titled Indian Bank Vs. Gambro Nexin (I) Medical Ltd.
i.e. defendant no.1 herein, restrained the defendant no.1 from
CS(COMM) No.962/2016 Page 4 of 25
alienating, encumbering or parting with possession of property
aforesaid.
(ii) It is not in dispute that as on that date, the defendant no.1 was
the owner of the property and lessee of the land underneath the
property and in possession thereof.
(iii) The defendant no.1, on 27th March, 1997 entered into an
Agreement to Sell the property to the defendant no.4 Motor &
General Finance Ltd. and executed and registered a General Power of
Attorney with respect to the property in favour of defendant no.5 Mr.
Rajeev Gupta, Executive Director of Motor & General Finance Ltd.
(iv) The property, at the time of Agreement to Sell was mortgaged
with Punjab & Sind Bank and it was inter alia a term of the
Agreement to Sell that the defendant no.4 will deposit the amount
mentioned in the Agreement to Sell with the Punjab & Sind Bank, in
full and final settlement of all the dues of the said Bank and take
custody of the title deeds of the property deposited by way of
equitable mortgage with the Punjab & Sind Bank.
(v) It is not in dispute that the defendant no.4 paid the dues of
Punjab & Sind Bank and took custody of the title deeds of the
property.
(vi) On 29th April, 2000, the defendant no.4 entered into ten
Agreements to Sell with each of the plaintiffs and also executed a
registered General Power of Attorney in favour of each of the ten
plaintiffs.
CS(COMM) No.962/2016 Page 5 of 25
(vii) At the time of Agreement to Sell in favour of the defendant
no.4 as well as the Agreements to Sell in favour of the plaintiffs,
Chapter XXC of the Income Tax Act, 1961 was in vogue. The same
prohibited transfer of property in excess of the specified value
without obtaining the prior permission of the Authority constituted
under the Income Tax Act and which Authority was empowered to
pre-emptively acquire the property. Permission was obtained for
transfer to defendant no.4. However, no permission was obtained for
transfer to the ten plaintiffs, because the value of each of the
Agreements to Sell was below the specified limits.
(viii) OA No.871/1996 supra instituted by the defendant no.6 Indian
Bank and in which vide order dated 5th December, 1996 aforesaid
there was an injunction restraining the defendant no.1 from dealing
with the property, was decided on 28th March, 2012 and a Recovery
Certificate ordered to be issued in favour of the defendant no.6
Indian bank and against the defendants no.1 to 3.
(ix) The Recovery Officer of the DRT, in pursuance to the
Recovery Certificate aforesaid, issued notice and which notice was
also affixed on the suit property. It was then that the plaintiffs,
though the present suit was already pending, filed objections before
the Recovery Officer of the DRT.
(x) The Recovery Officer of the DRT on 6th December, 2013 took
physical possession of the property and according to the plaintiffs
from the plaintiffs.
CS(COMM) No.962/2016 Page 6 of 25
(xi) Vide interim order dated 16th December, 2013 in this suit, the
Receiver, who on behalf of the Recovery Officer of the DRT had
taken possession, was directed to maintain status quo both as regards
title and possession of the property. Owing to the said order being in
force for the last over five years, no proceedings before the Recovery
Officer qua the said property have taken place.
10. The question for adjudication before this Court is, whether the suit
for the reliefs aforesaid claimed in the amended plaint lies before this Court
and / or whether the jurisdiction of this Court is barred by the DRT Act.
11. The senior counsel for the plaintiffs has drawn attention to Sections
17 and 18 of the DRT Act and which are as under:
"17. Jurisdiction, powers and authority of Tribunals.--(1) A Tribunal shall
exercise, on and from the appointed day, the jurisdiction, powers and authority to
entertain and decide applications from the banks and financial institutions for
recovery of debts due to such banks and financial institutions.
[(1A) Without prejudice to sub-section (1), --
(a) the Tribunal shall exercise, on and from the date to be appointed by the
Central Government, the jurisdiction, powers and authority to entertain and
decide applications under Part III of Insolvency and Bankruptcy Code,
2016.
(b) the Tribunal shall have circuit sittings in all district headquarters.]
(2) An Appellate Tribunal shall exercise, on and from the appointed day, the
jurisdiction, powers and authority to entertain appeals against any order made, or
deemed to have been made, by a Tribunal under this Act.
[(2A) Without prejudice to sub-section (2), the Appellate Tribunal shall exercise,
on and from the date to be appointed by the Central Government, the jurisdiction,
powers and authority to entertain appeals against the order made by the
Adjudicating Authority under Part III of the Insolvency and Bankruptcy Code,
2016.]
CS(COMM) No.962/2016 Page 7 of 25
18. Bar of Jurisdiction.--On and from the appointed day, no court or other
authority shall have, or be entitled to exercise, any jurisdiction, powers or authority
(except the Supreme Court, and a High Court exercising jurisdiction under articles
226 and 227 of the Constitution) in relation to the matters specified in section 17:
[Provided that any proceedings in relation to the recovery of debts due to
any multi-state co-operative bank pending before the date of commencement of the
Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act,
2012 under the Multi-State Co-operative Societies Act, 2002 shall be continued and
nothing contained in this section shall, after such commencement, apply to such
proceedings."
12. Attention has next been invited to Section 29 under Chapter-V titled
"Recovery of Debt Determined by Tribunal" of the DRT Act and which is
as under:
"29. Application of certain provisions of Income-tax 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
this Act instead of to the Income-tax:
Provided that any reference under the said provisions and the rules to
the "assessee" shall be construed as a reference to the defendant under this
Act."
13. Attention is next invited to Schedule II of the Income Tax Act and
Rule 11 whereof is as under:
"Investigation by Tax Recovery Officer.
11. (1) Where any claim is preferred to, or any objection is made to the
attachment or sale of, any property in execution of a certificate, on the
ground that such property is not liable to such attachment or sale, the Tax
Recovery Officer shall proceed to investigate the claim or objection:
CS(COMM) No.962/2016 Page 8 of 25
Provided that no such investigation shall be made where the Tax
Recovery Officer considers that the claim or objection was designedly or
unnecessarily delayed.
(2) Where the property to which the claim or objection applies has been
advertised for sale, the Tax Recovery Officer ordering the sale may
postpone it pending the investigation of the claim or objection, upon such
terms as to security or otherwise as the Tax Recovery Officer shall deem
fit.
(3) The claimant or objector must adduce evidence to show that--
(a ) (in the case of immovable property) at the date of the service of
the notice issued under this Schedule to pay the arrears, or
(b ) (in the case of movable property) at the date of the attachment,
he had some interest in, or was possessed of, the property in
question.
(4) Where, upon the said investigation, the Tax Recovery Officer is
satisfied that, for the reason stated in the claim or objection, such property
was not, at the said date, in the possession of the defaulter or of some
person in trust for him or in the occupancy of a tenant or other person
paying rent to him, or that, being in the possession of the defaulter at the
said date, it was so in his possession, not on his own account or as his
own property, but on account of or in trust for some other person, or
partly on his own account and partly on account of some other person, the
Tax Recovery Officer shall make an order releasing the property, wholly
or to such extent as he thinks fit, from attachment or sale.
(5) Where the Tax Recovery Officer is satisfied that the property was, at
the said date, in the possession of the defaulter as his own property and
not on account of any other person, or was in the possession of some
other person in trust for him, or in the occupancy of a tenant or other
person paying rent to him, the Tax Recovery Officer shall disallow the
claim.
CS(COMM) No.962/2016 Page 9 of 25
(6) Where a claim or an objection is preferred, the party against whom an
order is made may institute a suit in a civil court to establish the right
which he claims to the property in dispute; but, subject to the result of
such suit (if any), the order of the Tax Recovery Officer shall be
conclusive."
14. The senior counsel for the plaintiffs has next drawn attention to Tax
Recovery Officer II, Sadar, Nagpur Vs. Gangadhar Vishwanath Ranade
1998 (6) SCC 658 laying down that, (i) under Rule 11(1) supra of the
Second Schedule to the Income Tax, where any claim is preferred to or any
objection is made to the attachment or sale of any property in execution of a
certificate on the ground that such property is not liable to such attachment
or sale, the Tax Recovery Officer shall proceed to investigate the claim or
objection; (ii) under Rules 11(4) to 11(6), the Tax Recovery Officer has to
examine who is in possession of the property and in what capacity; he can
only attach property in possession of the assessee in his own right and / or
in possession of somebody for the benefit of or on behalf of the assessee;
(iii) the Tax Recovery Officer cannot declare any transfer made by the
assessee in favour of a third party as void; if the department finds that a
property of the assessee is transferred by him to a third party with the
intention to defraud the Revenue, it will have to file a suit under Rule 11(6)
to have the transfer declared void under Section 281; (iv) if the judgment-
debtor was in possession, he may have been in possession as agent or
trustee for another and this has to be enquired into; to that extent title may
be a part of the inquiry; similarly, if the property attached is claimed by a
third party who adduces evidence to show that he was possessed of the
property under some kind of a title, the property will have to be released
CS(COMM) No.962/2016 Page 10 of 25
from attachment; the procedure is not meant to decide intricate questions of
law as to title to the property; (v) therefore, where a claim is made to the
property attached by someone claiming to be a transferee from the
judgment-debtor and the claim is disallowed, the claimant can institute a
suit under Order XXI Rule 63 to establish his title to the property and in
such a suit it would be open to the attaching creditor to plead in defence
that the transfer was in fraud of the general body of creditors and was void
under Section 53 of the Transfer of Property Act, 1882; and, (vi) similarly,
if the claim of the transferee is allowed, the attaching creditor may sue on
behalf of himself and all other creditors under Section 53 of the Act for a
declaration that the transfer was void.
15. The senior counsel for the plaintiffs on the basis of aforesaid has
contended that Section 29 of the DRT Act having applied the Second
Schedule to the Income Tax Act in the matter of enforcement of the
Recovery Certificate, the dicta aforesaid in Gangadhar Vishwanath
Ranade supra would squarely apply and since intricate questions of law are
involved, this suit is maintainable.
16. Section 29 of the DRT Act however, while making the provisions of
Second Schedule to the Income Tax Act applicable, does so "as far as
possible" and "with necessary modifications". I have thus enquired from
the senior counsel, whether not the DRT Act provides for appeals against
all orders of the Recovery Officer to the DRT and if so, why should the
remedy of the plaintiffs in pursuance to a decision of the Recovery Officer
(as the Recovery Officer is stated to have already taken), be not before the
DRT.
CS(COMM) No.962/2016 Page 11 of 25
17. Section 30 of the DRT Act as under:
"30. Appeal against the order of Recovery Officer.--(1)
Notwithstanding anything contained in section 29, any person aggrieved
by an order of the Recovery Officer made under this Act may, within
thirty days from the date on which a copy of the order is issued to him,
prefer an appeal to the Tribunal.
(2) On receipt of an appeal under sub-section (1), the Tribunal may, after
giving an opportunity to the appellant to be heard, and after making such
inquiry as it deems fit, confirm, modify or set aside the order made by the
Recovery Officer in exercise of his powers under sections 25 to 28 (both
inclusive)."
provides for appeals to the DRT against an order of the Recovery
Officer. Not only so, Section 30 is notwithstanding anything contained in
Section 29. The same reaffirms that notwithstanding the applicability of the
provisions of the Second Schedule of the Income Tax Act to Recovery
Certificates under the DRT Act, the option as available under Rule 11(6), of
filing a civil suit, is not available with respect to proceedings under the
DRT Act and the remedy against the order of the Recovery Officer on the
objections preferred by the plaintiffs is before the DRT.
18. The senior counsel for the plaintiffs in this context has also drawn
attention to the dicta of the Division Bench of the Bombay High Court in
Hill Properties Ltd. Vs. Union Bank of India 2009 SCC OnLine Bom
1669, the question no.1 framed wherein as under:
"1. Whether in view of the provisions of Section 29 of the Recovery
of Debts Due to Banks and Financial Institutions Act, 1993 read with
Rule 11(1) and 11(6) of the, Second Schedule of the Income Tax Act,
1961 a person against whom an order is passed is entitled to institute a
CS(COMM) No.962/2016 Page 12 of 25
suit in a civil Court, or whether the said order can only be challenged by
way of an Appeal under Section 30 of the Act?"
was answered as under:
"(i). Question No.1 would have to be answered in the affirmative. The
remedy of an Appeal provided under Section 30 would not oust the
jurisdiction of the Civil Court in entertaining a Civil Suit as provided
under Rule 11(6) of the Second Schedule to the I.T. Act."
19. With due respect, I am unable to accept that a person who has
preferred objections to an attachment of immovable property affected by
the Recovery Officer and whose objections have been dismissed by the
Recovery Officer has a choice, whether to appeal under Section 30 of the
DRT or to file a civil suit, as is contended by the senior counsel for the
plaintiffs.
20. I say so not only because of the words "as far as possible" and "with
necessary modifications" in Section 29 and the words "Notwithstanding
anything contained in Section 29" in Section 30, but also because in my
view, the DRT Act and the Rules thereunder are a complete Code and if it
is held that person claiming right to the property attached by the Recovery
Officer has a right to invoke the jurisdiction of the Civil Court, the same
would stall indefinitely the recovery proceedings and inspite of Certificates
of Recovery being issued, the same will remain unexecuted indefinitely.
21. In Punjab National Bank Vs. O.C. Krishnan (2001) 6 SCC 569 it
was held (i) that the DRT Act has been enacted with a view to provide a
special procedure for recovery of debts due to the banks and the financial
institutions; (ii) there is hierarchy of appeal provided in the Act and the fast
CS(COMM) No.962/2016 Page 13 of 25
track procedure under the said Act cannot be allowed to be derailed either
by taking recourse to proceedings under Articles 226 and 227 of the
Constitution or by filing a civil suit, which is expressly barred; and, (iii)
even though a provision under an Act cannot expressly oust the jurisdiction
of the Court under Articles 226 and 227 of the Constitution, nevertheless
when there is an alternative remedy available, judicial prudence demands
that the Court refrains from exercising its jurisdiction under the said
constitutional provisions. Again, in Central Bank of India Vs. State of
Kerala (2009) 4 SCC 94, on an analysis of the provisions of the said Act, it
was held (i) that the primary object of the DRT Act was to facilitate
creation of special machinery for speedy recovery of the dues of banks and
financial institutions; (ii) that this is the reason why the DRT Act not only
provides for establishment of the Tribunals and Appellate Tribunals with
the jurisdiction, powers and authority to make summary adjudication of
applications made by banks or financial institutions and specifies the modes
of recovery of the amount determined by the Tribunal or Appellate Tribunal
but also bars the jurisdiction of all Courts except the Supreme Court and
High Courts in relation to the matters specified in Section 17; (iii) that the
Tribunals and Appellate Tribunals have also been freed from the shackles
of procedure contained in the CPC; (iv) that DRT Act has not only brought
into existence special procedural mechanism for speedy recovery of the
dues of banks and financial institutions, but also made provision for
ensuring that defaulting borrowers are not able to invoke the jurisdiction of
Civil Courts for frustrating the proceedings initiated by the banks and
financial institutions; (v) that DRT Act was enacted by the Parliament in the
backdrop of recommendations made by the Expert Committees appointed
CS(COMM) No.962/2016 Page 14 of 25
by the Central Government for examining the causes for enormous delay in
the recovery of dues of banks and financial institutions which were
adversely affecting fiscal reforms; and, (vi) that the non obstante clause
contained in Section 34(1) of the DRT Act gives overriding effect to the
provisions of this Act only if there is anything inconsistent contained in any
other law or instrument having effect by virtue of any other law. Similarly,
in Standard Chartered Bank Vs. Dharminder Bhohi (2013) 15 SCC 341 it
was held that the intendment of DRT Act is for speedy recovery of dues of
the bank and in this backdrop, the Tribunals are expected to act in quite
promptitude, regard being to the nature of the lis and see to it that an
ingenious litigant does not take recourse to dilatory tactics.
22. The senior counsel for defendants No.1 to 3 in this context has also
drawn attention to my judgment in Radnik Exports Vs. Standard
Chartered Bank 2014 SCC OnLine Del 3404 where, on an analysis of the
provisions of the DRT Act it was held that if suits under Section 34 of the
Specific Relief Act, 1963 for declaration with respect to title to the property
were held to be maintainable, the same would set at naught the very reason
for the enactment of the DRT Act and establishment of the DRT and would
lead to a waste of effort on the part of DRT in adjudication, if the same
were not binding. It was observed that the hard reality of life that every
person against whom the bank or financial institution has a claim would be
interested in stalling the same and with the said intent approach the Civil
Court, cannot be overlooked.
23. The matter is also found to be no longer res integra. In C.N.
Paramasivam Vs. Sunrise Plaza (2013) 9 SCC 460, the words "as far as
CS(COMM) No.962/2016 Page 15 of 25
possible" and "with necessary modifications" in Section 29 were for
interpretation, though in the context of Rules 57 & 58 of Second Schedule
to the Income Tax Act. It was held (i) that the said words have been used to
take care of situations where certain provisions under the Income Tax Rules
may have no application on account of the scheme under the DRT Act
being different from that of the Income Tax Act or the Rules framed
thereunder; (ii) that the Rules in Schedule II to the Income Tax Act are
attracted only in so far as the same deal with recovery of debts under the
Act with the modification that the „amount of debt‟ referred to in the Rules
is deemed to be one under the DRT Act; (iii) that this modification was
intended to make the position explicit and to avoid any confusion in the
application of the Income Tax Rules to the recovery of debts under the
DRT Act, which confusion could arise from a literal application of the
Rules to recoveries under the DRT Act; (iv) that the Income Tax Rules
make provisions that do not strictly deal with recovery of debts under the
DRT Act; (v) that such of the Rules cannot possibly apply to recovery of
debts under the DRT Act; and, (vi) that suffice it is to state that the use of
the words "as far as possible" in Section 29 of the DRT Act simply indicate
that the provisions of the Income Tax Rules are applicable except such of
them as do not have any role to play in the matter of recovery of debts
recoverable under the DRT Act. The argument, that the use of the words
"as far as possible" in Section 29 are meant to give discretion to the
Recovery Officer to apply the said Rules or not to apply the same in
specific fact situations, did not find favour and was rejected.
24. Division Benches of the High Court of Madras also in J.N. Krishnan
Vs. The Branch Manager, Canara Bank, Aravenu Branch, Kothagiri
CS(COMM) No.962/2016 Page 16 of 25
2011 SCC OnLine Mad 828 and in S. Reshma Vs. Debt Recovery Tribunal
MANU/TN/0862/2017 are found to have held that the use of the words "as
far as possible" in Section 29 means that entire provisions of Second and
Third Schedule to the Income Tax Act in relation to proceedings under the
DRT Act were to be applied "suitably and not absolutely".
25. Supreme Court, dealing with the challenge to the vires of the DRT
Act, in Union of India Vs. Delhi High Court Bar Association (2002) 4
SCC 275 held, (i) that by virtue of Section 29 of the DRT Act, the
provisions of the Second and Third Schedules to the Income Tax Act have
become applicable for the realisation of the dues by the Recovery Officer;
(ii) that detailed procedure for recovery is contained in the Schedules to the
Income Tax Act; (iii) that it cannot, therefore, be said that the Recovery
Officer would act in an arbitrary manner; (iv) furthermore, Section 30 of
the DRT Act, after the amendment thereto of the year 2000, gives a right to
any person aggrieved by an order of the Recovery Officer, to prefer an
appeal to the Tribunal; (v) that thus now an appellate forum has been
provided against any orders of the Recovery Officer which may not be in
accordance with law; (vi) that there is sufficient safeguard which has been
provided in the event of the Recovery Officer acting in an arbitrary or an
unreasonable manner; and, (vii) that the provisions of Sections 25 and 28
could not therefore be held to be bad in law.
26. It would thus be seen that while upholding the vires of the provisions
of the DRT Act and commenting particularly on Section 29 thereof, notice
was taken of the remedy of appeal to the DRT against the order of the
Recovery Officer and which remedy does not exist in the Second and Third
CS(COMM) No.962/2016 Page 17 of 25
Schedules to the Income Tax Act. Once in the scheme of the DRT Act,
there is a remedy of appeal against the order of the DRT, the question of the
objector before the DRT having a choice, whether to prefer an appeal to the
DRT or to institute a suit under Rule 11(6) of the Second Schedule to the
Income Tax Act, as held by the Division in my humble opinion, would not
arise.
27. Mention may be made of the judgment of a Co-ordinate Bench of
this Court in Triveni Gupta Vs. Bijender Singh 2014 SCC OnLine Del
2537. The Court therein was concerned with a challenge under Article 227
of the Constitution of India to the order of the Sub-ordinate Court of
dismissal of an application for interim relief in a suit filed by the plaintiff
for stay of sale of the immoveable property ordered by the Recovery
Officer of the DRT, after the dismissal of the objections preferred by the
plaintiff before the DRT. The petition was dismissed reasoning that since
efficacious statutory remedy of appeal before the DRT was available to the
plaintiff, the plaintiff could not petition the Civil Court seeking alternate
remedy. Section 41(h) of the Specific Relief Act was invoked.
28. Mention may lastly be made of Sadashiv Prasad Singh Vs.
Harendar Singh (2015) 5 SCC 574 where the Supreme Court noticed that a
remedy of appeal against the order of the Recovery Officer under Section
30 of the DRT Act is available to the objector and set aside the judgment of
the High Court in exercise of writ jurisdiction interfering with the order of
the Recovery Officer.
CS(COMM) No.962/2016 Page 18 of 25
29. The emphasis of the senior counsel for the plaintiffs has been that
Section 18 of the DRT Act bars jurisdiction of the civil court only in respect
of matters specified in Section 17.
30. I am unable to agree. Section 17 encompasses within itself
applications for recovery of debts and if it were to be held that the
expression „recovery of debts‟ includes within itself only the issuance of
Recovery Certificate, the Recovery Officers of the DRT would become
redundant and the Recovery Certificates will have to be brought to the civil
courts for execution, delaying what has been sought to be expedited by
enacting the DRT Act.
31. There is also difference in the version of the senior counsel for the
plaintiffs and the senior counsel for the defendants no.1 to 3 as to the status
of the objections preferred by the plaintiffs before the Recovery Officer.
While the senior counsel for the plaintiffs states that the said objections
have been decided inasmuch as possession could not have been taken
without deciding the objections, the senior counsel for the defendants no.1
to 3 states that the objections are still pending consideration and in fact it is
the plaintiffs who have been taking adjournments before the Recovery
Officer on the plea of pendency of the present suit. The senior counsel for
the plaintiffs also has not drawn attention to any specific order of the
Recovery Officer by which the objections may have been disposed of as
claimed.
32. It is also the contention of the senior counsel for the plaintiffs that the
order dated 5th December, 1996 of the DRT was not extended beyond that
date. Reliance is placed on Ashok Kumar Vs. State of Haryana AIR 2007
CS(COMM) No.962/2016 Page 19 of 25
SC 1411. However, in my view the question whether the DRT extended
the order of stay granted on 5th December, 1996 or not again cannot be
decided by this Court and has to be necessarily decided by the DRT only.
One Court cannot decide whether any interim order passed in a proceeding
on the board of another Court or Tribunal was extended or not.
33. The senior counsel for the plaintiffs, in the context of Suraj Lamp &
Industries Pvt. Ltd. supra has also referred to Hardip Kaur Vs. Kailash 193
(2012) DLT 168 (SLP preferred whereagainst is stated to have been
dismissed in limine) but again once I have concluded that it is for the
Recovery Officer of the DRT to decide whether the plaintiffs have some
interest in the property or not, it is not for this Court which has not found
itself to be seized of the jurisdiction, to comment thereon.
34. Yet another argument of the senior counsel for the plaintiffs has been
that the Recovery Officer of the DRT cannot adjudicate intricate issues of
title to immovable property.
35. Attention of the senior counsel for the plaintiffs is drawn to the dicta
of the Constitution Bench in Ashoka Marketing Ltd. Vs. Punjab National
Bank (1990) 4 SCC 406 meeting the said plea in the context of the Estate
Officer under the Public Premises (Eviction of Unauthorized Occupants)
Act, 1971 (PP Act) and rejecting the said contention. Once the DRT Act is
found to have modified the provisions of Schedule II of the Income Tax Act
in their application to the DRT Act by providing for appeal against the
order of the Recovery officer on objections, it cannot be forgotten that just
like PP Act provides for appeal against the orders of the Estate officer to the
District Judge, similarly, the eligibility condition for appointment as a
CS(COMM) No.962/2016 Page 20 of 25
Presiding Officer of the DRT is equivalent to a District Judge / Additional
District Judge and the dicta aforesaid would squarely apply.
36. It is also the contention of the senior counsel for the plaintiffs that the
relief of specific performance claimed by the plaintiffs in the present suit
cannot be granted by the Recovery Officer and / or by the DRT.
37. However, the entitlement of the plaintiffs to the relief of specific
performance would depend on whether the interim injunction order dated
5th December, 1996 was continued or not inasmuch as if it was continued, a
question would arise whether an Agreement to Sell and delivery of
possession in violation of the order of the DRT would create any rights
whatsoever in favour of the defendant no.4 even if claiming specific
performance in whose favour they were created. It has been held in Surjit
Singh Vs. Harbans Singh (1995) 6 SCC 50 and Vidur Impex and Traders
Private Limited Vs. Tosh Apartments Private Limited (2012) 8 SCC 384
that an Agreement to Sell in violation of the order of the Court is null and
void and of no avail. It was held that if alienation/assignment made in
defiance of an injunction order is permitted, it would defeat the ends of
justice and the prevalent public policy. It was further held that when the
Courts intend a particular state of affairs to exist while in seisin of a lis that
state of affairs is not only required to be maintained but also presumed to
exist till the Court orders otherwise and the Court in these circumstances
has duty as also the right to treat the alienation/assignment as having not
taken place at all. If that be so, then the very basis of the claim for specific
performance would not stand. I have however in Om Prakash Vs. Santosh
CS(COMM) No.962/2016 Page 21 of 25
Chaddha 2013 SCC OnLine Del 4383 noticed the dichotomy of views on
the said proposition.
38. It is the contention of the senior counsel for the defendants no.1 to 3
in this context that the Agreement to Sell and Power of Attorney executed
by the defendants no.4 and 5 (who are supporting the plaintiffs) in favour of
the plaintiffs have been executed not for and on behalf of defendant no.1
and / or as attorney of defendant no.1 but on the premise of the defendants
no.4 and 5 being the absolute owners of the property. It is argued that the
plaintiffs have not claimed for specific performance against the defendant
no.1 in whom title to the property vests.
39. Needless to state all the aforesaid questions also would be in the
domain of the objections before the Recovery Officer and / or appeal
against the order on the objections before the DRT.
40. In this context, the argument of the senior counsel for the plaintiffs,
of fraud and with respect to Rule 9 of the Second Schedule of the Income
Tax Act may also be noted. The said Rule 9 of the Second Schedule of the
Income Tax Act is as under:
"General bar to jurisdiction of civil courts, save where fraud alleged.
9. Except as otherwise expressly provided in this Act, every question
arising between the [Tax Recovery] Officer and the defaulter or their
representatives, relating to the execution, discharge or satisfaction of a
certificate, or relating to the confirmation or setting aside by an order
under this Act of a sale held in execution of such certificate, shall be
determined, not by suit, but by order of the Tax Recovery Officer before
whom such question arises:
CS(COMM) No.962/2016 Page 22 of 25
Provided that a suit may be brought in a civil court in respect of any such
question upon the ground of fraud."
41. The question with which Rule 9 of the Second Schedule of the
Income Tax Act is dealing is a question between the Recovery Officer and
the defaulter or his representative. The plaintiffs do not claim themselves
to be the representatives of the defaulter i.e. defendants no.1 to 3. Thus the
question of applicability of proviso to Rule 9 and the action in the Civil
Court being maintainable does not arise.
42. Attention of the senior counsel for the plaintiffs has also been drawn
to Section 17 of the Contract Act, 1872 defining fraud in relation to a
contract as under:-
"17. Fraud Defined.--„Fraud‟ means and includes any of the
following acts committed by a party to a contract, or with his
connivance, or by his agent, with intent to deceive another party
thereto or his agent, or to induce him to enter into the
contract:--
(1) the suggestion, as a fact, of that which is not true,
by one who does not believe it to be true;
(2) the active concealment of a fact by one having
knowledge or belief of the fact;
(3) a promise made without any intention of
performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially
declares to be fraudulent."
43. Since the relationship of the parties in the present case is nothing but
contractual, the said definition would apply. Admittedly, there was no
CS(COMM) No.962/2016 Page 23 of 25
privity of contract between the plaintiffs and the defendants no.1 to 3. The
Agreements / Power of Attorney executed by the defendants no.4 and 5 in
favour of the plaintiffs were also not as Power of Attorney or on behalf of
defendants no.1 to 3 but in their own rights and on the basis of their own
title when there was no title. The plaintiffs dealt with the defendants no.4
and 5 in the matter of purchase of immovable property without satisfying
themselves of the title to the defendants no.4 and 5 and cannot now be
permitted to raise such pleas of fraud.
44. The senior counsel for the plaintiffs also relies on Bhaurao Dagdu
Paralkar Vs. State of Maharashtra (2005) 7 SCC 605 but which deals with
fraud in the context of public law and would have no application in view of
Section 17 of the Contract Act.
45. Reliance is also placed by senior counsel for plaintiffs on Ashok
Kumar Raizada Vs. The Bank of Rajasthan ILR (2014) I Del 356 but
which only is on arguable case of fraud and relegating the parties to leading
evidence and would not qualify as a precedent. It is not disclosed as to what
happened finally in the suit i.e. whether the ground of fraud succeeded or
not.
46. The senior counsel for the plaintiffs has lastly contended that the
defendants did not raise any such objection as is now being raised and
defendants no.1 to 3 have filed this application for rejection taking cue from
orders of this Court.
47. Even if that be so, the issue is legal and this Court cannot be a silent
spectator of its process being abused.
CS(COMM) No.962/2016 Page 24 of 25
48. I am therefore of the view that the present suit, insofar as for specific
performance, is premature and resultantly the plaint is rejected.
CCP No.128/2013
49. The counsel for the plaintiffs states that this arises from the action of
the defendants no.1 to 3 before the Recovery Officer of not disclosing the
interim order in the present suit.
50. Since this suit has been held to be premature, the CCP is also
disposed of.
RAJIV SAHAI ENDLAW, J.
JANUARY 21, 2019 „gsr/bs‟ (corrected & released 9th February, 2019) CS(COMM) No.962/2016 Page 25 of 25