1. Heard Shri W.H. Khan, learned counsel for the petitioner
2. Petitioner before this Court is stated to have taken certain financial assistance from State Bank of India. Because of his having failed to return the financial assistance, the bank instituted Civil Suit no.61 of 1991 for realisation of a sum of nearly Rs.12.00 lacs.
3. The suit against the petitioner was decreed ex-parte on 27.5.1994. The petitioner made an application under Order 9, Rule 13 along with an application under Section 5 of the Limitation Act on 9.2.1996 for recall of the ex-parte decree.
4. In the meantime, Debit Recovery Tribunal was constituted under the Recovery of debt due to Bank, and other Financial Institutions Act, 1992 as a result whereof the suit proceedings along with the application for recall of the ex-parte decree stood transferred to the Debt Recovery Tribunal at Jabalpur and finally to Allahabad. The Debt Recovery Tribunal vide order dated 13.6.2002 rejected the application for recall of ex-parte decree.
5. Not being satisfied, the petitioner filed First Appeal No.R-187 of 2002 before the Debt Recovery Appellate Tribunal, Allahabad. The appeal was rejected vide order dated 3.11.2004. Not being satisfied, the petitioner filed writ petition no.50209 of 2004 wherein an interim order was granted on 29.11.2004 which provided that on deposit of 25% of the total amount due as on date with reference to the ex-parte judgment and decree along with interest within two months, the recovery proceedings against the petitioner shall remain stayed.
6. The records reflect that the petitioner failed to avail the benefits of the interim order so granted in his favour. The bank accordingly, proceeded for execution of the ex-parte judgment and decree.
7. The property of the petitioner had been attached under an order dated 22.4.2002. This property was put to auction and sale proclamation was issued on 27.5.2002. The petitioner objected to the fixation of the reserve price. It is his case that without considering the said objections of the petitioner, the property was sold on 28.4.2009 for a sum of Rs.9,55,000/-, after the reserve price was shown as Rs.9.00 lacs only.
8. The petitioner in order to challenge the auction proceedings made an application under Rule 61 of the Second Schedule of the Income Tax Act, 1961. Since the application was not being entertained because of the non-compliance of proviso (b) to Rule 61, the petitioner has come up before this Court by means of the present writ petition with the following prayer :-
'(i) issue a writ, order or direction in the nature of mandamus declaring proviso (b) to Rule 61 of the second schedule to Income Tax Act 1961 as ultra vires and commanding the respondents not to give effect to the said provision;
(ii) issue a writ, order or direction in the nature of certiorari quashing the impugned orders dated 29.05.2009 (Annexure-10) passed by respondent No. 1;
(iii) issue a writ, order or direction in the nature of mandamus commanding the for mandamus commanding the respondent no. 1 to entertain and decide the application/objection of the petitioners under Rule 61 of the second proviso to Income Tax Act 1961 on merits;
(iv) issue a writ, order or direction in the nature of certiorari quashing the auction sale dated 28.4.2009.'
9. So far as the first prayer made by the petitioner for the purpose of challenging the vires of proviso (b) to Rule 61 of the Second Schedule of the Income Tax Act, 1961 is concerned, counsel for the petitioner Shri W.H. Khan contended before us that the condition of deposit of the entire amount mentioned in the certificate as a condition precedent for entertaining the application, raising objection to the auction sale is arbitrary as it imposes harsh condition and makes the remedy illusory.
10. It is submitted that the condition provided for under proviso (b) to Rule 61 is hit by Article 14 of the Constitution of India, being oppressive in nature.
11. Counsel for the petitioner refers to the judgment of the Apex Court in the case of Mardia Chemicals Ltd. Etc. v. Union of India & Others reported in 2004(4) SCC 311 specifically paragraph 59 in support of the proposition that the proceedings under Rule 61 are in the nature of original proceedings and requirement of pre-deposit of the amount at the first instance of the proceedings to the extent mentioned in the recovery certificate cannot be sustained.
12. It is explained that such conditions for approaching the Adjudicating Authority at the first instance, would render the remedy illusory for the reasons which have been stated in paragraph 64 of the said judgment. He submits that same is the nature of proviso (b) to Rule 61.
13. Counsel for the respondent points out that the issue with regard to the validity of the condition imposed under Rule 61 proviso B had been the subject matter of consideration before the Madras High Court in the case of B. Sampath Kumar v. Recovery Officer, decided on 25.10.2007, reported in Madras Law Journal 2007 (6) page 1199. It is further explained to the Court that the recovery certificates with reference to which the property has been put to auctioned was preceded by adjudication by competent authority under the Debt Recovery Act followed by the decision on appeal provided before the Appellate Tribunal and in such a situation it cannot be said that recovery certificate which has been issued is the first stage of determination/quantification of the amount, which is said to be recovered. It is then stated that Rule 61 of the Income Tax Rule has stood the test of time for more than 55 years. There is hardly any reason for this Court to declare the rule as unreasonable, arbitrary and violative of Article 14 of the Constitution of India.
14. We have heard counsel for the parties and examined the records of the present writ petition.
15. At the very outset we may record that the Apex Court in the case of Mardia Chemicals (supra) has laid down that the conditions of pre-deposit while approaching the adjudicating authority at the first instance, not in appeal may be discriminatory if it imposes such conditions of deposit of 75% of the amount claimed. Inasmuch as such conditions are not alone onerous and oppressive they are also unreasonable and arbitrary.
16. But it has to be kept in mind that the Apex Court was examining the proceedings under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 wherein for setting aside the ex-parte recovery proceedings. It was held that the proceedings under Section 17 of the Securitization Act are in lieu of Civil Suit which remedy alternatively available but for the bar of section 34 of the Act which required deposit of 75% of the amount. It is in this context that the Supreme Court had gone on to hold that the condition imposed was oppressive and therefore, arbitrary and violative of Article 14 of the Constitution of India.
17. The facts in hand are clearly distinguishable as there had been adjudication of the quantum of the money which was due against the petitioner in the civil suit. Although under ex-parte decree and thereafter the petitioner had availed the two opportunities by making an application for setting aside the ex-parte decree, which was rejected by the Debt Recovery Tribunal. The appeal filed against the same was also rejected by the Appellate Tribunal. It is only thereafter that the recovery certificate has been issued which is sought to be recovered in the manner prescribed under Rule 61 of the Second Schedule to the Income Tax Act, 1961.
18. We therefore, have no hesitation to record that the proceedings under Rule 61 of the Income Tax Act, 1961 on a certificate issued under the Debt Recovery Tribunal Act cannot be said to be proceedings at the first instance and therefore, the judgment in the case of Mardia Chemicals (supra) is clearly distinguishable.
19. We may also record that the obligation for deposit of the entire amount as per the certificate under Rule 61 of the Income Tax Act has been provided for only to avoid frivolous and routine applications for interfering with the auction of the properties of a defaulter after adjudication by a competent Tribunal. The certificates are issued mostly in favour of public sector banks and financial institutions.
20. It is with a definite purpose that the Legislature has come out with the mode and manner of the recovery of the money in terms of the adjudication order of the competent court by resorting to the procedure under Rule 61 of the Income Tax Act, after the adjudication of the right takes place.
21. We, therefore, do not find any substance in the challenge to the vires of Proviso (b) to Rule 61. Prayer in that regard is refused.
22. So far as the other prayer made by the petitioner is concerned, we find that he has already filed a writ petition against the appellate order, wherein a conditioned interim order was granted in his favour, requiring him to deposit 25% of the amount. The petitioner has failed to avail the benefit of such interim order as a result whereof the judgment and decree had to be put to execution. The property of the petitioner
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after attachment has been sold. These proceedings are of consequently dependent upon the fate of the writ petition, which has been filed by the petitioner challenging the appellate order. 23. If the appellate order falls all sub-sequential auction, proceedings will also fall automatically, provide an amendment application is made in the pending writ petition. 24. We are, therefore, of the opinion that this Court may leave it open for the petitioner to make an amendment in his pending writ petition for challenging the auction proceedings, if he feels aggrieved there from. 25. It is clarified that we have not gone on the merits of challenge to the auction proceedings in any manner. 26. The deposited sum of Rs.20.00 lacs by the prospective buyer may be returned by the Registrar General of this Court by means of Crossed Cheque drawn in his name within a month. 27. The writ petition is dismissed. 28. Interim order, if any, stands discharged. Petition dismissed.