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P. Jyothimani, J.—The Revision in C.R.P. (PD) No. 936 of 2012 has been filed against the order of the Debts Recovery Appellate Tribunal
dated in R.A. No. 881 of 2010, by which the Appellate Tribunal while dismissing the Appeal filed against the order of the Debts Recovery
Tribunal-III, Chennai in O.A. No. 368 of 2007 as withdrawn, has granted liberty to the Petitioners to seek relief before the Recovery Officer with
respect to the proceedings under Second Schedule of the Income Tax Act, with a direction to the Recovery Officer to dispose of the same by
following the procedure and giving opportunity to the parties and the Revision in C.R.P. (PD) No. 937 of 2012 has been filed against the earlier
order of the Debts Recovery Appellate Tribunal dated 29.8.2011, wherein the Appellate Tribunal based on the representation of the learned
Counsel for the First Respondent/Bank that auction has been held and full consideration is yet to be paid by the auction purchasers, has directed
the Recovery Officer to confirm the sale, while restraining him from issuing the Sale Certificate. Let us get down to brass tacks. The Second
Respondent (M/s. P. Khaleelur Rahman & Co., Bangalore) is a partnership firm, which primitively had six partners. The Revision Petitioners 1 to 3
and the Third Respondent were four partners. One partner - P. Khaleelur Rahman passed away prior to the proceedings on 8.10.1994 itself and
Petitioners 4 to 9 and the Third Respondent are his legal representatives. One other partner of the firm C. Jameelur Rahman, who was the Fifth
Defendant before the Debts Recovery Tribunal in the Original Application, passed away pending the said proceedings and his legal representatives
are Petitioners 10 to 12.
1.1. Apropos of the availing of financial assistance by the Second Respondent/Partnership firm from the First Respondent/Bank, four immovable
properties were mortgaged in favour of the First Respondent/ Bank, namely:
(i) An extent of 33250 sq.ft. of land in T.S. No. 16, Pandit Jawaharlal Nehru Road, Vaniyambadi with a building constructed thereon in the name
of ""Wale Tannery"" situated in New Door No. 1507 - ''A'' Schedule Property - stated to belong to Late P. Khaleelur Rahman;
(ii) An extent of 0.86 Acres and 0.26 Acres of land in T.S. Nos. 16/4 & 16/3, Katchery Road, Vaniyambadi - ''B'' Schedule Property - stated to
belong to Late P. Khaleelur Rahman;
(iii) An extent of 0.36 Acres of land in R.S. No. 14, Katchery Road, Amburpet, Vaniyambadi - ''D'' Schedule Property - stated to belong to the
third respondent; and
(iv) An extent of 25870 sq.ft. of land in T.S. No. 21/2C, an extent of 331 sq.ft. in T.S. No. 24 and an extent of 4 sq.ft. in T.S. No. 23, in all
measuring 26205 sq.ft. in C.L. Hajee Abdul Subhan Street, Vaniyambadi with building thereon bearing Door No. 1507-A - ''C Schedule
Property -stated to belong to the Third Respondent and C. Jameelur Rahman, who was the Fifth Defendant in the Original Application.
1.2. It appears that in the year 1996, the First Respondent/Bank has filed a Suit in O.S. (SR) No. 6042 of 1996 before the Sub-Court,
Thirupathur for recovery of Rs. 2,76,00,824/- with future interest and for sale of the mortgaged properties and hypothecated movables. After the
Debts Recovery Tribunal came into existence, it appears that First Respondent/Bank has represented the papers before the Debts Recovery
Tribunal-I, Chennai and the same was numbered as O.A. No. 1001 of 1998.
1.3. The question of maintainability was raised by the Petitioners 1, 3 & Jameelur Rahman (5th Defendant in the Original Application) as a
preliminary issue. The Interlocutory Application came to be disposed of stating that the preliminary issue can be decided along with the Original
Application and that order came to be confirmed by the Debts Recovery Appellate Tribunal, Chennai and thereafter by this Court in C.R.P. (PD)
No. 733 of 2007 and ultimately, the SLP filed against the order in the Revision came to be dismissed by the Supreme Court.
1.4. It was thereafter the Original Application re-presented by the First Respondent/Bank came to be transferred to the Debts Recovery Tribunal-
III, Chennai and was re-numbered as O.A. No. 368 of 2007 and the Tribunal has passed a decree on 15.9.2009 for a sum of Rs. 2,67,43,091/-
with interest at 9% per annum from the date of the Original Application and also ordered for sale of mortgaged properties, namely Schedules ''A''
to ''D'' stated above, apart from the movables stated in Schedules ''E'' and ''F'' to the original Application.
1.5. It was against the decree passed by the Debts Recovery Tribunal dated 15.9.2009, an Appeal was filed in R.A. No. 88 of 2010 before the
Debts Recovery Appellate Tribunal, Chennai, which has allowed the Application filed by the Petitioners for waiver of pre-deposit.
1.6. While the Appeal was pending, the Recovery Officer issued a Recovery Certificate in DRC No. 159 of 2009 in O.A. No. 368 of 2007 for
recovery of Rs. 5,46,73,245.77 on 26.11.2009. Pursuant to that, the Recovery Officer, Debts Recovery Tribunal-III, Chennai has issued a public
notice for auction in R.P. No. 186 of 2009 in DRC No. 159 of 2009 for sale of four items of properties on 14.7.2011 in two lots - Lot-I
consisting of immovable properties mentioned in Schedules A, B & D, for which the upset price was fixed at Rs. 2,33,00,000/-, and Lot-II
consisting of immovable properties mentioned in Schedule ''C'', for which the upset price was fixed at Rs. 2,45,00,000/-. On 13.7.2011, there
was a direction issued by the Debts Recovery Appellate Tribunal to the Recovery Officer to proceed with the proposed auction, but not to
confirm such sale till 29.8.2011.
1.7. In the auction, Respondents 5 & 6 participated, who in fact have submitted a letter to the Recovery Officer dated stating that they are aware
of the pending case and specifically declaring that the auction is subject to the cases pending in the Competent Court. Respondents 5 & 6 were
declared as successful bidders in respect of Lot-I (Schedules - A, B & D) for Rs. 2,35,00,000/- and in respect of Lot-II (Schedule - C) for Rs.
2,85,50,000/-. It appears that Respondents 5 & 6, apart from making the initial deposit, have also deposited the balance sale consideration of Rs.
3,95,58,020/- on 29.7.2011.
1.8. However, on 29.8.2011, on the basis of a representation made by the learned Counsel for the First Respondent/Bank that full sale
consideration has not been paid by Respondents 5 & 6, the Debts Recovery Appellate Tribunal has directed the Appeal to be posted on
14.10.2011, while directing the Recovery Officer to confirm the sale but not to issue the Sale Certificate. The said order dated 29.8.2011 is the
subject matter of challenge in C.R.P. (PD) No. 937 of 2012.
1.9. Pursuant to the said order dated 29.8.2011, it appears that the Recovery Officer has confirmed the sale in respect of Lot-I relating to
Schedules A, B & D. However, the sale in respect of Lot-II relating to Schedule C was not confirmed owing to the reason that the Fourth
Respondent (R.R. Vasu @ Vijayashankar) claiming himself to be the purchaser from the original Partnership firm, namely the Second Respondent,
moved the Recovery Officer to set aside the sale. That Application filed by the Fourth Respondent came to be rejected, against which the Fourth
Respondent has moved the Debts Recovery Tribunal-III, Chennai and the Debts Recovery Tribunal-III, Chennai, by an order dated 18.8.2011,
has directed the Fourth Respondent to deposit the highest bid amount of Rs. 2,85,55,000/- and further sum of Rs. 8,44,770/- & Rs. 14,27,500/-
in respect of Lot-II (Schedule C).
1.10. Respondents 5 & 6, whose sale in respect of Lot-I (Schedules A, B & D) stood confirmed by the Recovery Officer, have filed an
impleading Petition in the Appeal filed by the Petitioners in R.A. No. 88 of 2010 before the Debts Recovery Appellate Tribunal.
1.11. Meanwhile, on 8.10.2011, the Petitioners have addressed to the First Respondent/Bank offering to pay an amount of Rs. 5.50 Crores, being
Rs. 19.50 Lakhs over and above the auction bid amount in respect of Lot-I and Lot-II, in order to save the properties. The First
Respondent/Bank has replied on 19.10.2011 stating that since the matter is pending before the Debts Recovery Appellate Tribunal, such request
cannot be entertained and also stated that, in fact, the sale proclamation made by the Recovery Officer was sent to the Petitioners also and it was
open to them to partake in the auction and, therefore, requested the Petitioners to approach the appropriate forum.
1.12. Based on the said letter, the Petitioners filed a memo before the Debts Recovery Appellate Tribunal, Chennai on stating that in respect of
Lot-I (Schedules A, B & D) even though Respondents 5 & 6 have deposited the payment, by dint of the order of the Debts Recovery Appellate
Tribunal dated 29.8.2011, wherein the Appellate Tribunal has directed the Recovery Officer to confirm the sale but not to issue sale certificate, the
sale is not completed. In respect of Lot-II (Schedule C) claimed to have been purchased by the Fourth Respondent from the Second
Respondent/Partnership firm, it was stated that such sale is not valid since the property belonged to the Third Respondent in his individual capacity
and even though the Fourth Respondent was directed to deposit the amount, as stated above, no such deposit was made and therefore, in respect
of both the lots, the sale has not been confirmed. It was further stated that the Petitioners are offering Rs. 5.50 Crores, namely Rs. 30 Lakhs over
and above the bid amount, and on such representation the First Respondent/Bank has directed the Petitioners to approach the appropriate forum
and, therefore, the Memo has been filed to put a quietus to the litigation and they prayed for dismissal of the Appeal as not pressed in the event of
redressal of their grievances. The relevant portion of the Memo is as follows:
(11) Hence this Memo for this Hon''ble Appellate Tribunal to consider and pass appropriate orders taking into consideration of giving a quietus to
the aforesaid Appeal on being withdrawn as ''Not Pressed'' in the event of the Appellants'' grievances are redressed as above.
1.13. Apart from filing such Memo, the learned Counsel for the Petitioners has specifically stated before the Debts Recovery Appellate Tribunal
that the Petitioners will settle the entire dues to the First Respondent/Bank and the Appeal may be dismissed as withdrawn, and sought permission
to move the Recovery Officer by filing proper Application. It was in those circumstances, the Debts Recovery Appellate Tribunal has passed the
impugned order on 21.12.2011, which is challenged in C.R.P. (PD) No. 936 of 2012, giving direction to the Recovery Officer to consider the
case of the Petitioners. The operative portion of the said order is as follows:
In view of the facts and circumstances of the case this RA is dismissed as withdrawn. The Appellants are at liberty to file the necessary
Applications for seeking reliefs before the Learned Recovery Officer with respect to the proceedings under II Schedule of the Income Tax Act and
equally they shall stand entitled for being properly heard by the said Authority. The Learned Recovery Officer shall upon filing of the said
Applications by the Appellants take them on file and dispose of the same in accordance with law after due notice to parties concerned. Needless
to say that the Appellants would also be entitled to move necessary Applications for seeking of interim reliefs before the Learned Recovery
Officer.
1.14. It is these two orders which are challenged by the Petitioners on the following grounds:
(i) that the Recovery Officer has no jurisdiction to decide about the receipt of the entire amount thereby closing the decree passed by the Debts
Recovery Tribunal;
(ii) that the memo filed by the Petitioners is pursuant to the letter of the First Respondent/Bank dated 19.10.2011 and even as per the said Memo
seeking permission to withdraw the Appeal, it was only subject to the redressal of the grievances of the Petitioners and such grievances cannot be
redressed by the Recovery Officer and therefore, even if the Counsel has made a representation seeking opportunity to enforce their rights before
the Recovery Officer, that cannot give jurisdiction to the Recovery Officer to decide about the decree passed by the Debts Recovery Tribunal;
(iii) that the payment or deposit stated to have been made by Respondents 5 & 6 in respect of Lot-I and the ownership claimed by 4th
Respondent in respect of Lot-II, are all unbeknownst to the Petitioners and the first Respondent is in cahoots with the said purchasers and that
cannot be put against the Petitioners and, hence, the impugned orders passed by the Debts Recovery Appellate Tribunal are on the misstatement
of facts and cannot be pressed into service against the Petitioners;
(iv) that Respondents 5 & 6 are not bona fide purchasers without notice of the proceedings and, therefore, they cannot claim to have any better
title; and
(v) that while the Memo consists of two portions, the Debts Recovery Appellate Tribunal has accepted only one portion of withdrawal of Appeal
and not decided about the other portion in respect of the offer made for payment of an amount Rs. 5.50 Crores and the Debts Recovery Appellate
Tribunal having known that the Recovery Officer has no jurisdiction to decide the same, ought to have decided by itself.
2.1. Mr. T.M. Hariharan, learned Counsel appearing for the Petitioners would vehemently contend that inasmuch as the Recovery Officer has no
jurisdiction to decide about the acceptance of the offer made by the Petitioners for the purpose of full settlement of the decree passed by the Debts
Recovery Tribunal, the orders of the Debts Recovery Appellate Tribunal are without jurisdiction, by relying upon the judgments in Meghmala and
Others Vs. G. Narasimha Reddy and Others, S.P. Chengalvaraya Naidu (dead) by L.Rs. Vs. Jagannath (dead) by L.Rs. and others, Muthavalli of
Sha Madhari Diwan Wakf S.J. Syed Zakrudeen and Another Vs. Syed Zindasha and Others, ; and Hasham Abbas Sayyad Vs. Usman Abbas
Sayyad and Others, .
2.2. By referring to Section 22 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and Rule 22 of the Debts Recovery
Appellate Tribunal (Procedure) Rules, 1994, he would contend that the said provisions confer power on the Debts Recovery Appellate Tribunal to
give appropriate direction. In this regard, he would rely upon the decision in Chinnamal and others Vs. P. Arumugham and another,
2.3. He has also referred to Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 which contemplates the
adherence to the procedure enshrined in the Second and Third Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate
Proceedings) Rules, 1962 with necessary modifications. In this regard, he would rely upon the decisions in J.N. Krishnan v. The Branch Manager,
Canara Bank and others, 2011 (4) CTC 698; and Philomina Jose Vs. Federal Bank Ltd. and Others, .
2.4. It is his further submission that even assuming that the CPC is not applicable to the proceedings before the Debts Recovery Appellate Tribunal
or Debts Recovery Tribunal, the well established principles of Transfer of Property Act, 1882 regarding mortgage, as stipulated u/s 60 of the
Transfer of Property Act, cannot be ignored.
3.1. Per contra, it is the submission of Mr. R. Thiagarajan, learned Counsel appearing for Respondents 5 & 6 and Mr. K.A. Ramakrishnan,
learned Counsel appearing for the 4th Respondent that the Debts Recovery Appellate Tribunal has acted only as per the memo filed by the
Petitioners. It is their submission that the Petitioners have not sought any opportunity to file a fresh case and there was no Application filed and it
was only a Memo for withdrawal, which was allowed by the Debts Recovery Appellate Tribunal.
3.2. The learned Counsel have also brought to the notice of this Court the fact that pursuant to the impugned order passed by the Debts Recovery
Appellate Tribunal, the Petitioners have already moved the Recovery Officer by filing Interlocutory Applications and while such Applications are
pending, the present Revisions have been filed and on that score these Revisions are liable to be dismissed.
3.3. The learned Counsel further submitted that as per the provisions of the Schedule to the Income Tax Act, 1961 and the Income Tax
(Certificate Proceedings) Rules, 1962, the Petitioners ought to have deposited the amount if they really intend to avoid the sale and inasmuch as
such deposit has not been made, the Petitioners are not acting bona fide. They would also rely upon the decision in Nazims Continental and Others
Vs. The Indian Overseas Bank and Others,
3.4. To substantiate the contention regarding the rights of the auction purchasers, they would rely upon the decision in Janatha Textiles and Others
Vs. Tax Recovery Officer and Another, .
3.5. According to them, the filing of the Revisions is playing fraud on the court and while the Petitioners have taken a specific stand before the
Debts Recovery Appellate Tribunal to withdraw the Appeal, they have chosen to challenge the order passed by the Appellate Tribunal dismissing
the Appeal as withdrawn.
3.6. They would also submit that redemption as claimed by the Petitioners u/s 60 of the Transfer of Property Act is possible only before the sale is
confirmed, by relying upon the decision in Mhadagonda Ramgonda Patil and Others Vs. Shripal Balwant Rainade and Others,
3.7. To substantiate their contention that co-mortgagee is liable to pay the entire amount due, he would rely upon the decision in Chhaganlal
Keshavlal Mehta Vs. Patel Narandas Haribhai,
We have heard the learned Counsel on both sides, referred to the orders passed by the Debts Recovery Appellate Tribunal which are
challenged in these Revisions and given our anxious thought to the issue involved in this case.
The decree passed by the Debts Recovery Tribunal in O.A. No. 368 of 2007 is not in question. It is on fact clear that at request of the
Petitioners, who have filed Memo before the Debts Recovery Appellate Tribunal, the Appellate Tribunal while permitting the Petitioners to
withdraw the Appeal has directed the Petitioners to approach the Recovery Officer for redressal of their grievances. It is also on record that
pursuant to such direction as sought by the Petitioners, they have in fact moved the Recovery Officer-III at Debts Recovery Tribunal-III, Chennai
by filing I.A. Nos. 594 & 595 of 2011 in D.R.C. No. 159 of 2009 in R.P. No. 186 of 2009 in O.A. No. 368 of 2007 seeking grant of certificate
to enable them to deposit the proposed mortgage amount of Rs. 5.50 Crores directly to the credit of D.R.C. No. 159 of 2009 in R.P. No. 186 of
2009 in O.A. No. 368 of 2007. The said Interlocutory Applications were filed in December, 2011 and the same are pending. The Petitioners
having filed Applications as per the impugned orders passed by the Debts Recovery Appellate Tribunal, have now challenged the impugned orders
by way of Revisions much after filing of the necessary Applications before the Recovery Officer. These Revisions have been filed in the end of
February, 2012.
As stated above, it is no doubt true that the Petitioners have filed a memo on 22.11.2011 the contents of which show that they are prepared to
offer Rs. 5.50 Crores in full settlement of the entire decree amount passed by the Debts Recovery Tribunal and subject to the said grievance they
wanted to withdraw the Appeal. It is not in dispute that the Petitioners have not deposited the said offered amount of Rs. 5.50 Crores. Even in the
Interlocutory Applications filed before the Recovery Officer pursuant to the impugned order of the Debts Recovery Appellate Tribunal, they have
only sought permission to pay the amount of Rs. 5.50 Crores and as on date such amount has not been deposited. On the other hand, the
purchasers, namely Respondents 5 & 6, who are no doubt aware of the pending litigation, have paid the entire amount of sale consideration, but
Sale Certificate was not issued because of the interim order passed by the Debts Recovery Appellate Tribunal.
On a reference to the order passed by the Debts Recovery Appellate Tribunal dated 21.12.2011 challenged in C.R.P. (PD) No. 936 of 2012,
it is clear that it is on the representation made by the learned Counsel appearing for the Petitioners seeking an opportunity to enforce the rights of
the Petitioners before the Recovery Officer, the Appellate Tribunal passed the order. Inasmuch as the order itself is very comprehensive and
permitted the Petitioners to withdraw the Appeal as dismissed with a direction as prayed for, it is relevant to extract the impugned order dated
21.12.2011, which is as follows:
Learned Counsel Shri C.P. Shivamohan appearing on behalf of the Appellants stated that the Appellants are ready and willing to settle the matter
with the Respondent Bank and that he has filed a memo enclosing a representation made by the Appellants to the Bank and added that the
Appellants will settle the entire dues of the Bank if an opportunity is given to them and that this Appeal is being withdrawn. Learned Counsel
prayed that the Appellants may be given an opportunity to enforce their rights before the Learned Recovery Officer through filing of proper
Applications as may be required and further prayed that the Learned Recovery Officer may be directed to dispose of the said Applications as
warranted under law.
Heard the Learned Counsel for the Appellants.
In view of the facts and circumstances of the case this RA is dismissed as withdrawn. The Appellants are at liberty to file the necessary
Applications for seeking reliefs before the Learned Recovery Officer with respect to the proceedings under II Schedule of the Income Tax Act and
equally they shall stand entitled for being properly heard by the said Authority. The Learned Recovery Officer shall upon filing of the said
Applications by the Appellants take them on file and dispose of the same in accordance with law after due notice to parties concerned. Needless
to say that the Appellants would also be entitled to move necessary Applications for seeking of interim reliefs before the Learned Recovery
Officer.
The Debts Recovery Appellate Tribunal has only directed the Petitioners to approach the Recovery Officer, pursuant to which, in fact, the
Petitioners have approached the Recovery Officer for redressal of their grievances and thereafter, it is not open, in our considered view, for the
Petitioners to turn around to say that the Recovery Officer has no jurisdiction. It is not as if against the order of the Recovery Officer there is no
relief available to the Petitioners.
Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, which is as follows:
Section 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.
Contemplates the applicability of the Income Tax (Certificate Proceedings) Rules, 1962 and the Second and Third Schedules to the Income Tax
Act, 1961, which relate to the sale of the properties. Rule 60 of the Rules in the Second Schedule to the Income Tax Act, 1961, which relates to
recovery, the procedure of which is directed to be applied as per Section 29 of the Recovery of Debts Due to Banks and Financial Institutions
Act, 1993 is as follows:
Application to set aside sale of immovable property on deposit.-
(1) Where immovable property has been sold in execution of a certificate, the defaulter, or any person whose interests are affected by the sale,
may, at any time within thirty days from the date of the sale, apply to the Tax Recovery Officer to set aside the sale, on his depositing:
(a) the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered, with interest thereon at the rate of
fifteen per cent per annum, calculated from the date of the proclamation of sale to the date when the deposit is made; and
(b) for payment to the purchaser, as penalty, a sum equal to five per cent of the purchase money, but not less than one rupee.
(2) Where a person makes an Application under Rule 61 for setting aside the sale of his immovable property, he shall not, unless he withdraws that
Application, be entitled to make or prosecute an Application under this Rule.
A reading of the said Rule makes it abundantly clear that any person who seeks to set aside the sale of immovable property, being a defaulter in
repayment, has to necessarily deposit the amount specified in the proclamation of sale and unless and until he deposits the said amount, there is no
possibility for the authority under the Act to decide the appeal. Therefore, the contention of the learned Counsel for the Petitioners that even
without deposit of the amount the Appellate Tribunal should have decided in their favour is totally fallacious.
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 and Others Vs. The Indian Overseas Bank and Others, (as His 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:
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).
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.
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:
u/s 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 u/s 30, but such Appeal could have been only before the DRT and not before the DRAT.
u/s 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:
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 u/s 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 u/s 30 of Act, 1993, against an order of recovery officer under Rules 60, 61 or 62, no pre-deposit amount required to be deposited.
In yet another decision in D. Duraisrinivasan v. The Registrar, Debts Recovery Appellate Tribunal and others, W.P. No. 5485 of 2009, dated
3.12.2009, S.J. Mukhopadhaya, J. (as His Lordship then was) has followed the earlier decision and held as follows:
There is no allegation made that the purchaser defaulted in making payment within time. It is also not in dispute that no person including the
petitioner filed any Application to set aside the sale under Rule 60 or Rule 61 of Schedule-II to the Income Tax Act. Therefore, waiting for the
prescribed period of 30 days, under Rule 62 of Schedule-II, as it was open for the Recovery Officer to confirm the sale under Rule 63 of
Schedule-II, the said Officer rightly confirmed the sale on 30.8.2007.
Inasmuch as the Petitioners have not availed the provisions of Rules 60 & 61 in the Second Schedule to the Income Tax Act, 1961, which
includes the mandatory provision of deposit of amount, we are of the considered view that de hors the Memo filed by the Petitioners, inasmuch as
the mandatory requirement of deposit has not been fulfilled and even as on date the amount has not been deposited by the Petitioners, they are not
entitled to claim any protection under any law. That was also the view expressed by the Supreme Court in Janatha Textiles and Others Vs. Tax
Recovery Officer and Another, wherein the Supreme Court has held as follows:
The Respondent-Department in the Counter-Affidavit stated that the Appellant-Firm had alternate efficacious remedy by way of filing a
Petition under Rules 60 & 61 of the Second Schedule to the 1961 Act. The Appellant ought to have availed of the statutory remedy for ventilating
its grievances instead of filing a Petition before the High Court.
The reliance placed by the learned Counsel for the Petitioners on various judgments, including Meghmala and Others Vs. G. Narasimha Reddy
and Others, , wherein it was held that no judgment of a Court or no order of a Minister can be allowed to stand if it has been obtained by fraud, in
the following words:
It is settled proposition of law that where an Applicant gets an order/office by making misrepresentation or playing fraud upon the Competent
Authority, such order cannot be sustained in the eye of the law. ''Fraud avoids all judicial acts, ecclesiastical or temporal.'' (Vide S.P.
Chengalvaraya Naidu (dead) by L.Rs. Vs. Jagannath (dead) by L.Rs. and others, In Lazarus Estates Ltd. v. Beasley, 1956 (1) QB 702, the Court
observed without equivocation that: ''No judgment of a Court, no order of a Minister, can be allowed to stand if it has been obtained by fraud.
Fraud unravels everything''.
In the absence of any allegation of fraud on the facts and circumstances of the present case, cannot be made applicable to the facts of the present
case by this Court.
The further reference to the judgment in Muthavalli of Sha Madhari Diwan Wakf S.J. Syed Zakrudeen and Another Vs. Syed Zindasha and
Others, , particularly with reference to paragraphs (12) & (13) relied upon by the learned Counsel for the Petitioners, which are as follows:
The reference was made only in respect of the amount of compensation. No reference has been made in regard to the right of persons to
whom it was payable or apportionment of compensation amongst the persons interested. The claim of the First Respondent has been noticed by
us. He has laid his claim on the title of the property. He has prayed for proper and effective implementation of the decree passed by a Civil Court.
He alleged mismanagement of the wakf property by the First Appellant.
A Reference Court is not a Court of original jurisdiction. It derives jurisdiction only in terms of the order of reference. The Act being a self-
contained code, the manner in which the reference is to be made and the statement required to be made by the Collector has been specified in
Section 19 of the Act. The list between the parties to the reference meaning thereby a person interested and the State is with regard to the quantum
of compensation. No other question can be raised therein. The Reference Court exercises a limited jurisdiction. It derives its jurisdiction from the
terms of reference.
Has also no relevance to the facts of the present case. That was a case where the Supreme Court has held that the Reference Court u/s 18 of the
Land Acquisition Act, 1894 derives jurisdiction only in terms of the order of reference.
The next judgment relied on by the learned Counsel for the Petitioners in Hasham Abbas Sayyad Vs. Usman Abbas Sayyad and Others, ,
relates to the jurisdictional error. It was held that the principles of estoppel, waiver and acquiescence or even res judicata, being procedural in
nature, would not confer jurisdiction on an authority which has no jurisdiction at all. On the facts of the present case, when it is admitted that the
procedure contemplated under the Income Tax (Certificate Proceedings) Rules, 1962, stated above, are applicable to the Recovery Officer as
well as the Tribunal and inasmuch as the Petitioners have already approached the Recovery Officer and the Debts Recovery Appellate Tribunal
itself has passed orders withdrawing the Appeal on the specific request made by way of a Memo by the Petitioners, we do not think that the said
judgment would give succour to the Petitioners.
The reliance placed on a Division Bench judgment in J.N. Krishnan v. The Branch Manager, Canara Bank and others, 2011 (4) CTC 698,
relates to a case of attachment stated to have been effected as per Rule 68-B of the Second Schedule to the Income Tax Act, 1961 on the face of
Section 25(a) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 which also confers power on the Recovery Officer to
attach and it was under such circumstances held that when the Act provides the power, there was no question of violation of the Rules. The
operative portion being as under:
The DRT does not contain any provision regarding limitation in the matter of sale of attached property. The provisions of Second and Third
Schedule to the Income Tax Act and the Income Tax Certificate Proceeding, 1963, were made applicable to the Recovery proceeding under DRT
Act only for the purpose of a fair and transparent procedure to be adopted by the Recovery Officer in the matter of Recovery of the Debts due to
banks and Financial Institutions. In case the Recovery Officer is give a free hand without any kind of established procedure governing the
Recovery proceedings, it would result in arbitrariness. It was only to regulate the proceedings the relevance Recovery Rules under the Income Tax
Act were made applicable to a Recovery proceeding under the Debts Recovery Tribunal Act. The various other provisions of the Income Tax Act
and the Recovery Rules cannot be imported to nullify the action taken by the Recovery Officer. Therefore, we are of the view that Rule 68-B
dealing with time limit for sale of immovable property after the expiry of three years from the end of the financial year in which the order giving rise
to a demand for recovery of which, the property has been attached by the Recovery Officer has no Application to an attachment made by the
Recovery Officer u/s 25 of the DRT Act. Accordingly, we reject the principal contention regarding the alleged violation of Rule 68-B.
We see no reason as to how the said judgment is applicable to the facts of the present case.
The further reliance placed by the learned Counsel for the Petitioners on the judgment of the Supreme Court in Chinnamal and others Vs. P.
Arumugham and another, , 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, 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.
In such view of the matter, we hold that the impugned orders are neither perverse nor without jurisdiction and we see no earthly reason to interfere
with the same. Accordingly, the Revisions are dismissed. However, it is always open to the Petitioners to workout their remedy after the Recovery
Officer passes orders. No costs. Consequently, M.P. Nos. 1 & 2 of 2012 in C.R.P. (PD) No. 936 of 2012 & M.P. No. 1 of 2012 in C.R.P.
(PD) No. 937 of 2012 are closed.