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M/s. Fashion Apparels, rep. by its Partner S. Balachander, Chennai & Others v/s Central Bank of India Mount Road Branch Chennai & Another

    Writ Petitions No.13107 to 13109 of 2009 and M.P.Nos.1, 1 & 1 of 2009 respectively in all the writ petitions

    Decided On, 30 September 2009

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE ELIPE DHARMA RAO & THE HONOURABLE MR. JUSTICE M. VENUGOPAL

    For the Petitioners: V.T. Gopalan, Senior Counsel for G. Desingu, Advocate. For the Respondents: R1, K. Rajasekaran, R2, R. Subramanian, Senior Counsel for Sunanda Suren, Advocate.



Judgment Text

(Prayer: All these Writ Petitions are filed under Article 226 of the Constitution of India, praying to issue a Writ of Certiorari to call for the records on the file of the Debts Recovery Appellate Tribunal, Chennai made in M.A.No.65 of 2007 and quash the order dated 5.3.2009, in confirming the order of the DRT-I, Chennai made in AOR SR-7/2006 in O.A.1/2006 in DRC.65/2004 in O.A.63/2003.)


Common order:


ELIPE DHARMA RAO, J.


The petitioner in the first writ petition above is a firm and the petitioners in the other two writ petitions are its partners, engaged in the business of exporting garments. The petitioners in the 2nd and 3rd writ petition above are husband and wife.


2. The petitioners availed packing credits and cash credit facilities aggregating a limit of Rs.60 lakhs on execution of necessary documents and on the security of immovable property by way of equitable mortgage and hypothecation of stocks. They have deposited the title deeds of the properties on 16.11.1998 and 10.12.1998 respectively with interest to create an equitable mortgage for the loan facility granted in favour of the firm. Subsequently, on their application, the first respondent Bank sanctioned packing credit facility and cash credit facility aggregating a sum of Rs.75 lakhs on execution of necessary documents on 24.4.1999. Subsequently, the first respondent Bank sanctioned placing credit facility and cash credit facility, aggregating a sum of Rs.72,50,000/= on execution of necessary instruments in favour of the Bank and on extension of equitable mortgage on 20.3.2000. Thereupon, the petitioners have failed to repay the loan amount. Therefore, the first respondent Bank filed O.A.No.63 of 2003 before the Debts Recovery Tribunal-II, Chennai for recovery of a sum of Rs.81,18,575/= with subsequent interest till date of payment with costs and draw the recovery certificate for the same. The said suit was decreed exparte on 31.12.2003, since in spite of notices, the petitioners did not appear before the Tribunal. The Tribunal issued the Recovery Certificate on 31.3.2004 and the properties were brought to sale by the Recovery Officer by public auction on 30.9.2004.


3. The petitioners filed M.A.Nos.55 and 56 of 2004 for setting aside the exparte order and for stay of recovery proceedings, but, as the conditional order imposed by the Debts Recovery Tribunal was not complied with by the petitioners, the said applications were dismissed. Subsequently, the petitioners represented to the first respondent Bank that B.Raja, their son, filed O.S.No.645 of 2005 before the XVI Assistant City Civil Court, Chennai and another son Arun Prasad filed O.S.No.19 of 2005 before the Principal District Judge, Chengalpattu for permanent injunction restraining the Bank to auction the suit property. In the said O.S.No.19 of 2005, while the petitioners are impleaded as defendants 1 and 2, the above said B.Raja was impleaded as third defendant and minor Aravind was impleaded as 4th defendant and the first respondent Bank was impleaded as 5th defendant. In O.S.No.645 of 2005, a conditional order was passed by the learned XVI Assistant City Civil Judge, Chennai, directing the plaintiff/petitioner therein (B.Raja) to pay a sum of Rs.5 lakhs to the Bank in a week's time and since the said conditional order was not complied with, the interim injunction granted earlier was not extended. In both the above said suits, the contention putforth on the part of sons of the petitioners is that the properties in question are ancestral properties and they want partition of the same.


4. Thereupon, the Recovery Officer brought the mortgage property for auction on 24.1.2006. The first petitioner Mr.Balachander filed C.R.P.No.144 of 2006 to set aside the auction sale proceedings in DRC.65 of 2004 in O.A.No.63 of 2003, including the Sale certificate dated 12.12.2005 and this Court, by the order dated 23.1.2006, has dismissed the said petition, on the ground that the auction sale notice was issued on 11.2.2005 and the petitioner, without questioning the same, has approached the High Court, after 11 months of the issuance of Sale certificate.


5. Then, on 24.1.2006, auction was conducted, wherein the second respondent was declared as the successful bidder for Rs.44,50,000/=. Immediately, the petitioners filed I.A.No.1 of 2006 before the Recovery Officer to set aside the sale and stay the confirmation of sale. But, the Recovery Officer, by the order dated 4.5.2006, dismissed the same and confirmed the sale on 9.5.2006 in favour of the auction purchaser and aggrieved by the order passed by the Recovery Officer, the petitioners preferred Appeal in AOR.SR.No.7/2006 before the Debts Recovery Tribunal-I, Chennai and on the same having also been dismissed by the order dated 27.11.2006, the petitioners have an preferred appeal before the Debt Recovery Appellate Tribunal, Chennai in M.A.No.65 of 2007 and the same having also met the fate of dismissal at the hands of the Appellate Tribunal, they have come forward to file these writ petitions individually on one and the same grounds. Therefore, all these writ petitions are taken up for common hearing and are being disposed of by this common order.


6. The learned senior counsel appearing for the petitioners would argue that the Recovery Officer issued the sale notice, fixing the sale on 24.1.2006 and prescribing number of conditions for taking part in the auction and though the fourth condition states that 'the successful bidder should pay 25% of the bid amount (less the EMD) immediately on the sale being knocked down in his favour and the balance money within 15 days', the purchaser had remitted the balance amount only on 24.2.2006, which he should have paid on or before 7.2.2006 and therefore, the Recovery Officer should not have confirmed the sale. The learned senior counsel, in support of his arguments that the sale being against the terms of conditions of sale is illegal, would rely on a judgment of the Honourable Apex Court in HIMADRI COKE AND PETRO LTD. vs. SONEKO DEVELOPERS (P) LTD. [(2005) 12 SCC 364]. In the said judgment, the offer of a third party to the entire auction was considered by the authorities over and above the highest bidder in the auction since he failed to deposit the balance sale consideration within the stipulated time. In those circumstances, the Honourable Apex Court has held that:


"We are of the view that the sale must be set aside and the property be sold after readvertisement. As far as the appellant is concerned it could not have been allowed to participate in the proceedings as it had not submitted an offer pursuant to the last advertisement. If any person?s offer other than the offers received in response to the advertisement has to be considered, then an opportunity must be granted to other offerers pursuant to a fresh advertisement. The appellant could not have been permitted to enter into the arena by making an offer which was not in response to the advertisement. The last date specified in the advertisement resulting in the sale to Respondent 1 has long since expired.


9. As far as Respondent 1 is concerned, we are of the view that it was bound by the terms and conditions of sale as was the authority concerned. It was not up to them to extend the dates for submission of the balance price when there was no clause in the terms and conditions of the sale allowing the authority to extend the time beyond the period specified in the advertisement for making the initial deposit or the balance price."


7. Relying on the above said judgment of the Honourable Apex Court, a further argument has been advanced on the part of the petitioners that though in the auction one Balu Reddy, Triplicane was declared as successful bidder, the sale certificate was issued in the name of his wife Mrs.B.Sathyavathi, the second respondent herein, and as per Rule 65 of the II Schedule to the Income-tax Act, the Recovery Officer should have issued sale certificate only in the name of the person who has taken part in the auction viz. Bali Reddy and since in the case on hand, the sale certificate has been issued in the name of the second respondent/a third party to the auction, the sale has to be held illegal.


8. On a perusal of the entire materials placed on record, we are able to see that on the date of auction, the second respondent by name Mrs.Sathyavathi, has addressed a letter titled 'Authorisation Letter' to the Recovery Officer, DRT-I, Chennai, authorising her husband to participate in the auction and do the formalities for the same on her behalf, as she was not able to come. Pursuant thereto, the auction proceedings were conducted wherein the name of Mr.P.Bali Reddy was mentioned at Serial No.B2. Though such an authorising letter was issued by the second respondent permitting her husband Bali Reddy to participate in the auction on her behalf, it seems, for the sake of convenience of calling the parties and verifying the other details, the authorities have noted down the name of Mr.P.Bali Reddy at Serial No.B2 wherefrom we are unable to find any illegality since, as has already been observed by us supra and as could be seen from page No.19 of the typed set filed by the petitioners themselves, which bears the seal of the Debt Recovery Tribunal, indicating that it is a part and parcel of the record, the second respondent has duly authorised her husband Mr.P.Bali Reddy to participate in the auction on her behalf and only for the sake of convenience, the name of Mr.P.Bali Reddy was mentioned at Serial No.B2. Therefore, the ratio laid down by the Honourable Apex Court in Himadri Coke case, to the effect that the offer made by the third party to the auction, subsequent to the auction in the absence of any rule permitting such action, will have no bearing to the case on hand.


9. Coming to the other aspect urged on the part of the petitioners that the balance of 75% of the sale price was not deposited by the auction purchaser within the time stipulated in the sale notice and therefore, the sale has to be held illegal, first of all it is to be mentioned that the petitioners did not file any application under Rule 61 of the second schedule to the Income-tax Act, 1961, challenging the sale conducted by the Recovery Officer on the ground of irregularity. For the sake of convenience, we extract hereunder Rule 61 of the second schedule to the Income-tax Act, 1961:


"61. Application to set aside sale of immovable property on ground of non-service of notice or irregularity ? Where immovable property has been sold in execution of a certificate, such Income Tax Officer as may be authorised by the Chief Commissioner or Commissioner in this behalf, 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 of the immovable property on the ground that notice was not served on the defaulter to pay the arrears as required by this Schedule or on the ground of a material irregularity in publishing or conducting the sale:


Provided that ?


(a) no sale shall be set aside on any such ground unless the Tax Recovery Officer is satisfied that the applicant has sustained substantial injury by reason of the non-service or irregularity; and


(b) an application made by a defaulter under this rule shall be disallowed unless the applicant deposits the amount recoverable from him in the execution of the certificate."


10. At this juncture, we feel it apt to quote Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, dealing with application of certain provisions of Income-tax Act and hence the same is extracted hereunder:


"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."


11. On a reading of this Section, it is clear that this Section authorises the Debt Recovery Officer to follow the Second and Third Schedules of the Income-tax Act, 'as far as possible' and apply with necessary modifications. Therefore, under this Section no obligation has been created on the Recovery Officer to scrupulously follow the Second and Third Schedules of the Income-tax Act and on the other hand, it has given a free-hand to the Recovery Officer to apply them, with necessary modifications. Therefore, it cannot be said that the Recovery Officer is bereft of any power to extend the time for payment of the sale amount or anything of that sort, since under Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, which has been enacted with an object of expeditious adjudication and recovery of debts due to banks and financial institutions, he is required to camouflage to the circumstances of the case and act judiciously, to achieve the objects of the Act.


12. At this juncture, the learned senior counsel appearing for the second respondent/subsequent purchaser would rely on a Division Bench judgment of the Andhra Pradesh High Court in P.MOHANREDDY AND OTHERS vs. DEBTS RECOVERY APPELLATE TRIBUNAL, MUMBAI AND OTHERS [AIR 2004 AP 94], wherein it has been held:


"Section 29 of the Act authorises the Debt Recovery Officer to follow the Second and Third Schedules to Income-tax Act, 1961 as far as possible with necessary modifications. The phrase "as far as possible" can be interpreted in various ways. Keeping in view the intent and object of the Act use of this phraseology "as far as possible" in S.29 does not impose an obligation on the Recovery Officer to meticulously follow the provisions of Second and Third Schedules. It provides liberty to Recovery Officer to follow said provisions with necessary modifications. The language employed is such that there is flexibility and not mandate to follow the rules as they are."


13. A contemporary Division Bench of this Court also in NAZIMS CONTINENTAL REP.BY ITS PARTNERS vs. THE INDIAN OVERSEAS BANK AND OTHERS [2009-3-L.W. 792], has held that:


"Rule 55 (Part-III) of 2nd Schedule relates to 'time of sale', however, u/s.27 of the Act, 1993, even after issuance of certificate of recovery of amount, the Presiding Officer is empowered to grant further time for payment of the amount; the recovery officer is also empowered to stay the proceeding until the expiry of the time so granted. Therefore, it is clear that Rule 55 of 2nd Schedule prescribing a 'time of sale' is not mandatory for recovery of debt under Act, 1993 and we hold accordingly."


14. For the above discussions, we do not find any illegality or irregularity in the action of the Recovery Officer in accepting the balance sale consideration from the second respondent over and beyond the time limit of 15 days prescribed in the sale notice, since he is fully authorised to act in the manner required under the facts and circumstances of the case, to achieve the objects of the Act.


15. The learned senior counsel for the petitioners would further submit that there was an objection for the sale by the sons of the petitioners on the ground that they are co-parceners since the property in question is ancestral and the Recovery Officer has not considered this objection before proceeding with the sale, which makes the sale illegal. In support of his contentions, the learned senior counsel for the petitioners relied on the following judgments:


1.DR.ANIL NANDKISHOR TIBREWALA AND ANOTHER vs. JAMMU AND KASHMIR BANK LTD. AND OTHERS [{2006} 133 Comp.Cas 645 (Bom)]


2.DEEPA UDHAYAKUMAR vs. STATE BANK OF HYDERABAD [2007 (3) CTC 344]


16. In the first judgment, a Division Bench of the Bombay High Court has held that 'the Tribunal to consider the objection that property mortgaged with Bank belongs to objector before proceeding further.'


17. In the second judgment cited above, when persons who were owners of property claimed that debtor had misused power of attorney executed by them and such act was beyond scope of power of attorney and Bank had fraudulently entered into compromise with some defendant and obtained decree and filed suit for declaring that compromise decree and Recovery Certificate as null and void, a Division Bench of this Court has held that 'Section 18 bars jurisdiction of any other Court or authority which would have otherwise had jurisdiction but for provisions of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and power to adjudicate upon liability is exclusively vested with DRT'.


18. In the cases on hand, the sons of the petitioners have filed two suits, one in O.S.No.645 of 2005 before the XVI Assistant City Civil Court, Chennai and the other in O.S.No.19 of 2005 before the Principal District Judge, Chengalpattu for partition and permanent injunction. But, surprisingly, even though the recovery proceedings have been initiated in the year 2003 itself in O.A.No.63 of 2003, the Recovery Officer has not been impleaded as a party to the above said suits. Further more, the conditional injunction order passed in O.S.No.645 of 2005 also was not complied with by one of the sons of the petitioners, resulting in refusal of extension of injunction order.


19. A bare perusal of the entire materials placed before us would show that the petitioners are initiating vexatious litigations, one after other, only to thwart the ongoing legal proceedings against them and it is in this process, the above said two suits have been filed by their sons at different places for different reliefs, but with similar averments, which shows the collusiveness among the parties to thwart the recovery proceedings initiated by the Bank.


20., Rule 60 of the Second Schedule to

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the Income-tax Act, reads as follows: "60. 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." 21. It is not the case of the petitioners that they have invoked the provision of this Rule, after complying with its mandate, so as to set aside the sale. In such circumstances, when the sale has been completed, by scrupulously following all the procedures contemplated under law, the auction purchaser becomes the absolute owner of the property. 22. The allegation of the petitioners that there was no notice regarding the sale also cannot be appreciated, in view of the fact that a publication has been effected in 'Daily Thanthi' newspaper, a copy of which has been filed in the typed set filed by the petitioners themselves, besides serving the sale notice by affixture by the first respondent Bank. For all the above reasons and discussions, we see no merit in these writ petitions and accordingly, all these writ petitions are dismissed. No costs. Consequently, connected Miscellaneous Petitions are also dismissed.
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