Anand Datwani vs IDBI And Ors.

Ranjit Singh, J

Here is a case where the appellant was arrested pursuant to the orders passed by the Recovery Officer (R.O.) and was released on an undertaking given by him that he will deposit a sum of Rs. 10 lacs within 15 days. The appellant is the son of the borrower who defaulted in making payment of dues of certain Banks. The appellant, therefore, has suffered the consequence of default committed by his father in discharging the liability of the Bank. The appellant was pleaded as one of the L.Rs. of his father in an Original Application filed by the Bank/FIs for the recovery of the amount which was obtained by his father.

The question in the present appeal primarily is not that of the recovery, but is against the action leading to the arrest of the appellant and his release upon his having undertaken to deposit a sum of Rs. 10 lac.

The Counsel for the appellant would plead numerous grounds to find fault with this action taken by the R.O., which, as per the Counsel, was in gross violation of the statutory provisions. The Counsel appearing for the Bank/FIs, on the other hand, would make an attempt to brand the appellant as rather a bad person who has resorted to the theft of plant and machinery, besides making allegation of selling the same and thus siphoning off the amount which the Bank could have recovered to satisfy its dues. May be that the Counsel appearing for the Bank/FIs would lose sight of the fact that even a bad person has to be dealt with in accordance with the procedure established by law. The R.O. may have been well within his jurisdiction to determine the liability, if any, falling on the appellant being LR of his late father, who was borrower/defaulter, and then proceed to recover the same in accordance with law and if for the said purpose there was need to take the appellant in custody, he could even do so. What is expected from the R.O. or for that matter any authority exercising powers to follow law and to act strictly in accordance with the provisions of law. The documents on record and the submissions advanced on the basis of these documents would show that R.O. apparently did violate certain provisions and in the bargain deprived the appellant of his liberty which is most cherished right and therefore is having a Constitution protection. In an era governed by liberty-oriented Constitution, those who are called upon to deprive the citizens of their personal liberty in the discharge of what they conceive to be their duty are expected to strictly and scrupulously observe the norms and rule of law.

In the background, as noticed above let us now proceed to see if the R.O. had acted in accordance with the provisions of law while issuing direction to arrest the appellant and if further action of obtaining undertaking from the appellant for his release can be held justified or not.

The appellant has approached this Tribunal against the order passed by the Presiding Officer upholding the validity of the order passed by the R.O. the whole issue has arisen from the decision passed by the Tribunal in O.A. No. 330/2000. This O.A. was filed against M/s. Meltex Ceramics Ltd. for recovery of various amounts by different Banks. The father of the appellant was impleaded as defendant No. 2. On the death of defendant No. 2, the appellant was impleaded as defendant 2(d) in the O.A., being one of his LRs. This O.A. was allowed holding IDBI, IFCI and ICICI entitled for recovery of Rs. 1,48,85,775/-, Rs. 77,53,881/- and Rs. 90,83,632/- respectively. All these Bank/financial institutions were also held entitled to the interest @ 10% p.a. simple from 15.6.2000. The liability of the L.Rs. of defendant No. 2 was limited to the extent of the property inherited by them from defendant No. 2. Thus, the appellant was responsible for the recovery of the amount to the extent of the property he inherited from his father. All the defendants were directed to appear before the R.O. on 26.7.2012.

The trouble started for the appellant once he did not appear before the R.O. who initiated the process to summon the appellant in order to effect the recovery. At the outset, the Counsel for the appellant has made reference to the observation recorded in the order vide which the O.A. was decided where notice is taken of an affidavit filed by the appellant stating that he had not inherited any movable or immovable property from his father (defendant No. 2). This is so found recorded in para 6 of the order.

To challenge the legality of the order of arrest and undertaking to deposit Rs. 10 lac, the Counsel for the appellant would submit that this order came to be passed without effecting any service on the appellant. To plead that appellant was not served before his arrest warrant came to be executed and that this would be in violation of the power and jurisdiction of the R.O., the Counsel for the appellant would first refer to those documents on record which shows that the notice had not been served on him.

The Counsel would first refer to the demand notice which was issued in the name of the appellant and the other L.Rs. where it is recorded that sum of Rs. 90,80,632/- is due from the CDs including the appellant. In this demand notice, the R.O., has directed the appellant and others to pay the sum within 15 days from the receipt of the notice, failing which the recovery was to be made in accordance with the RDDBFI Act and Rules. The appellant along with others were directed to appear before R.O. at 11 a.m. on 3.10.2010.

The Bank had filed an affidavit of service to show if the service of demand notice had been effected on the appellant or not. In this affidavit, it is stated that the address of CD No. 2(d) (appellant) was not traceable and as such demand notice could not be served dasti. The Counsel for the appellant would then point out that no service had thus been effected on the appellant either of the demand notice or otherwise, but the R.O. did not take any notice of this fact and issued directions for all the CDs including the appellant to file the details of the assets inherited by them, movable or immovable, from CD-2 on or before next date of hearing. Thus, it is seen that without effecting service of demand notice on the appellant, the direction were issued for disclosing assets. The case rather was adjourned to 5.11.2012 with the directions to the CDs (which will include appellant as well) to file their details of assets.

On 5.11.2012, the Counsel for the Bank stated before the R.O. that no one was appearing on behalf of the appellant and CD-2(a) and (d) and hence prayed for issuing default notice against them. Neither the Counsel for the Bank took care to point out nor the R.O. took notice of the same that the demand notice had not been served on the appellant. The Counsel for the appellant would be justified in his submission that the default notice could be issued in case appellant had not appeared despite service.

On the next date, the Counsel appearing for the Bank stated before the R.O. that default notice had been served upon the appellant and CD-2(a) and stated that service report would be filed within one week. After issuing some direction to the other CDs the case was adjourned to be listed on 6.12.2012.

On this date, the Counsel for the Bank stated before the R.O. that he had filed service report in respect of appellant [CD-2(d)] and CD-2(a) in the Registry. It is this report that the Counsel would highlight to show that the Bank had given the address of three different lawyers where the default notice had allegedly been served. The Counsel would further point out that the Bank was fully aware of the residential address of the appellant which is mentioned in this service report to be E-478, Greater Kailash, Part II, New Delhi. The Counsel for the appellant would highlight that even the e-mail address and mobile number of the appellant are correctly mentioned in this document. As per the Counsel, no notice was ever sent or served on the appellant at his residential address, i.e., E-478, Greater Kailash, Part-II, New Delhi which continues to be the address of the appellant till date. The Counsel even would point out that no document can be shown to establish that Bank had ever made any effort to serve the appellant at his residential address, i.e., E-478, Greater Kailash, Part-II, New Delhi which is even the address given by the appellant in the present appeal. The Counsel thus apparently is justified in submitting that the action which the Bank took to serve the default notice was at the addresses of his Counsel who even was not the Counsel in the case before 'R.O.' or Tribunal and might have appeared at same stage in different proceedings for the appellant. In any case, the Counsel would urge that default notice could not have been served on the Counsel for the appellant. The appellant therefore, would plead that without service of a demand notice and without otherwise ensuring service on the appellant, the R.O. not only proceeded with the recovery proceedings but ultimately issued order for his arrest.

Reference is made to the arrest memo to highlight that though the liability of the appellant was limited only to what he had inherited from his father, but still in this warrant of arrest recovery due for the appellant is reflected as over Rs. 90 lacs and it therefore carried a condition for its non execution if the entire liability which is to the tune of Rs. 90 lacs was discharged. Plea is that the recovery of entire liability could not have been pressed against the appellant. The appellant therefore was confined in Tihar Jail as he was not in position to discharge this liability. It is only after the arrest of the appellant that his Counsel appeared before the R.O. on making a special mention which was taken up on 6.5.2013 that his release could be secured by under taking to pay Rs. 10 lacs.

Reference is made to the affidavit filed by the appellant that he had not inherited any property from his father and undertaking was submitted by one Mr. Chander S. Batra that the appellant shall appear on each and every date and had further given an undertaking that he will deposit a sum of Rs. 10 lac before the R.O. within 15 days from his release from judicial custody. The R.O., thereafter, issued the following directions:-

"Direction--

The Superintendent of the Tihar Jail No. 4 is directed to release CD#2(d) i.e. Sh. Anand Datwani, from the judicial custody and the warrant issued on 16.4.2013 stands cancelled.

CD#2(d) is directed to deposit Rs. 10 lacs within 15 days from today otherwise, the arrest warrant will be issued without further notice.

CD#2 (d) is further directed to deposit the copy of the passport with the CH Bank and further directed whenever, he intend to pay any visit to the abroad before leaving, he will inform about his visit to this Forum.

Copy of this order be given dasti to all the concerned parties and also to Mr. Jamil Ahmed, Head Constable, Delhi Police, posted at 3rd Batalian, Vikas Puri, Delhi, for compliance.

Let this matter be listed on 17.5.2013 the date which is already fixed."

The appellant then came to challenge the order of his arrest and undertaking obtained from him to deposit Rs. 10 lac. The warrant of arrest of the appellant was issued on 16.4.2013 and vide order dated 6.5.2013 the warrant issued was cancelled with the direction to the appellant to deposit a sum of Rs. 10 lac with in 15 days. Thus, the appellant has challenged these orders passed by the R.O. on 16.4.2013 and 6.5.2013.

Tribunal below has noticed the fact in detail and has considered the power of the R.O. to issue arrest warrant. The Tribunal has noticed that appellant was aware about the date on which the case was coming up for hearing and thereafter repeated steps were taken to summon him but he was evading service. The summons were sent to correct address by post which was taken as deemed service. The Tribunal below has noticed that the R.O. has not recorded in so many words that the he was satisfied that defaulter is not appearing in obedience to the notice. The Tribunal below thereafter has viewed that there were sufficient reasons to indicate that the conduct of the defaulter was such that he had shown disobedience in appearing before the R.O. it is noticed that if the appellant had not inherited anything from his father, he could have appeared before the R.O. to state so. The Tribunal in this background found, that the arrest warrant to put the appellant in civil prison was not because of his default in-making the payment. The Tribunal has even gone on to notice that the R.O. could not have done so as the appellant could not have personally been proceeded as his liability was restricted to the extent of property inherited. Thereafter, the Tribunal has observed that the Bank was entitled to investigate and find out whether under colour of corporate identity the appellant has usurped the borrower company property. The tribunal has then held that the cooperation of the appellant was required to lift the corporate veil, which is legally permissible and instead of co-operating with the R.O., the appellant was evading the proceeding which compelled the R.O. to issue arrest warrant. The Tribunal thus has held that the arrest warrant was issued in accordance with Rule 73(3) of the Schedule II to the Income Tax Act Rules (hereinafter referred as 'Rules') and there was no illegality or irregularity in the action of the R.O. in issuing such arrest warrant. The Tribunal thus declined to interfere in the orders dated 16.4.2013 and 6.5.2013. Aggrieved against the same, the present appeal is filed.

The first issue, therefore, that would require determination is if the R.O. was justified in issuing arrest warrant of the appellant and whether legally the appellant could be held bound by the undertaking that he gave for depositing of Rs. 10 lac or not. The Counsel for the appellant has made reference to various provisions of the rules to urge that the action taken by the R.O. was in violation of the law and the provisions contained in the Rules. As per the Counsel, Rule 2 of the said Rules provides for issue of notice and reads as under:

"2. Issue of notice--When a certificate has been drawn up by the Tax Recovery Officer for the recovery of the arrears under this Schedule, the Tax Recovery Officer shall cause to be served upon the defaulter a notice requiring the defaulter to pay the amount specified in the certificate within fifteen days from the date of service of the notice and intimating that in default steps would be taken to realise the amount under this Schedule."

It is thus clear that once the recovery certificate is drawn, then the R.O. would be required to serve notice on the defaulter requiring him to pay the specified amount within 15 days, besides intimating that in default steps would be taken to realize this amount under the schedule. Important thing to notice is that the R.O. is required to serve this notice on defaulter and cannot remain content by issuing such notice (emphasis added by me).

Reference is then made to Rule 3 of the Rules which provides as to when the certificate may be executed. As per Rule 3, no step in execution of certificate shall be taken until the period of 15 days has elapsed since the date of the service of the notice required by the preceding rule, i.e. Rule 2 of the Rules. The Counsel for the appellant would highlight these provisions that this notice is required to be served on a defaulter and the liability of the appellant in this case may not has been as a defaulter, but as LR of the defaulter and as such his liability was limited to the property inherited by him.

In this regard only, reference is made to Rule 85 of the Rules to urge that fee of death of a defaulter, the proceedings against the legal representative of a defaulter may be continued, but these have to be with exception of arrest and detention. Rule 85 is as under:

"85. Procedure on death of defaulter---If any time after the certificate is drawn up by the Tax Recovery Officer the defaulter dies, the proceedings under this Schedule (except arrest and detention) may be continued against the legal representative of the defaulter, and the provisions of this Schedule shall apply as if the legal representative were the defaulter."

The plea accordingly is that the proceeding for arrest and detention could only be continued against the defaulter, but where he dies then the proceeding under the Second Schedule may be continued against the L.Rs. of the defaulter but these can be other than the arrest and detention. The Counsel, therefore, would find fault with the action of the R.O. in issuing warrant of arrest for recovery of about Rs. 90 lac for which the appellant was in no way responsible. His liability being limited and otherwise also he was not amenable to the provisions causing his arrest or detention while proceedings for recovery were being held in terms of the Second Schedule to the Income Tax Act.

Since the Tribunal below has held the action of 'R.O.' justified in issuing arrest warrant for not obeying the notice issued to the appellant, the provisions of Rule 73 of the Rules may call for examination. Part V of the Rules containing Rules 73 to 81 relates to arrest and detention of defaulters. Rule 73 provides for notice to show cause when any order of arrest or detention in civil prison is required to be made. This rule is as under:

"73. Notice to show cause--(1) No order for the arrest and detention in civil prison of a defaulter shall be made unless the Tax Recovery Officer has issued and served a notice upon the defaulter calling upon him to appear before him on the date specified in the notice and to show cause why he should not be committed to the civil prison, and unless the Tax Recovery Officer, for reasons recorded in writing, is satisfied--

(a) that the defaulter, with the object or effect of obstructing the execution of the certificate, has, after the drawing up of the certificate by the Tax Recovery Officer, dishonestly transferred, concealed, or removed any part of his property, or

(b) that the defaulter has, or has had since the drawing up of the certificate by the Tax Recovery Officer the means to pay the arrears or some substantial part thereof and refuses or neglects or has refused or neglected to pay the same.

(2) Notwithstanding anything contained in Sub-rule (1), a warrant for the arrest of the defaulter may be issued by the Tax Recovery Officer if the Tax Recovery Officer is satisfied, by affidavit or otherwise, that with the object or effect of delaying the execution of the certificate, the defaulter is likely to abscond or leave the local limits of the jurisdiction of the Tax Recovery Officer.

(3) Where appearance is not made in obedience to a notice issued and served under Sub-rule (1), the Tax Recovery Officer may issue a warrant for the arrest of the defaulter.

(3A) A warrant of arrest issued by a Tax Recovery Officer under Sub-rule (2) of Sub-rule (3) may also be executed by any other Tax Recovery Officer within whose jurisdiction the defaulter may for the time being be found.

(4) Every person arrested in pursuance of a warrant of arrest under this rule shall be brought before the Tax Recovery Officer issuing the warrant as soon as practicable and in any event within twenty-four hours of his arrest (exclusive of the time required for the journey):

Provided that, if the defaulter pays the amount entered in the warrant of arrest as due and the costs of the arrest to the officer arresting him, such officer shall at once release him."

Thus, there are two conditions which may have to be satisfied if arrest and detention in civil prison is to be ordered. From the wording of Rule 73(1) of the Rules, it is clear no order of arrest or detention in civil prison of the defaulter can be made unless the R.O. has issued and served a notice upon the defaulter calling upon him to appear before him on the date specified in the notice. Only if this notice had been issued and served that the 'R.O.' then can call upon to show-cause why he should not be committed to civil prison. This requirement of show-cause may be dispensed with if the R.O. is satisfied for reasons to be recorded in writing that the defaulter with the object of effect of obstructing the execution of the certificate has dishonestly transferred, concealed, or removed any part of the property, etc. This requirement may further be dispensed with where the defaulter has means to pay the arrears or some substantial part thereof and refuses or neglects to pay, etc.

As per Rule 73(3) of the Rules, R.O. may issue arrest warrant if appearance is not made in obedience to notice, but he can do so if requirement of notice has been complied with and show-cause notice is also issued. The show-cause notice can be dispensed with by recording reasons to the effect as contained in 73(1)(a) and (b) of the Rules.

Since the Tribunal has justified the action of the 'R.O.' by making reference to Rule 73(3), it may call for enquiry if the appellant had not appeared despite Notice. If noticed had not been served on the appellant then there may not be any justification to issue arrest warrant under 73(3) of the rules. It may have also to be seen if this warrant was for disobedience of appearance or for payment of dues. The Rules 74 to 81 would regulate the procedure once the defaulter appears before the R.O. in obedience to a notice, which may not be relevant in the present context.

As per the Counsel for the appellant, the R.O. could not have issued an arrest warrant unless he had issued and served a notice as required under Rule 73 of the Rules. Apparently, serving a notice in recovery proceedings is one thing whereas service of a notice as required under Section 73 may be different from the notice in the recovery proceedings, as now the R.O., in such an event would be taking action to deprive the defaulter of his personal liberty.

Even if the submissions made by the Counsel for the Bank is accepted that the service of a notice in the recovery proceedings had been effected on the appellant, could he be taken in custody without notice in terms of Rule 73 of the Rules?

The notice which was issued to the appellant obviously was under Rule 2 of the Rules which required him to pay the amount within 15 days. Even notice dated 31.8.2012 is very clear that it was a demand notice. Record would show that 'R.O.' had issued demand notice on 26.7.2012. It is in continuation if this demand notice that affidavit of service was filed by the Bank on 3.10.2012 mentioning that CD-2(d) (the appellant) was not traceable. Instead of ensuring service on untraceable appellant the Bank pleaded for default notice and the 'R.O.' issued default notice against the appellant. It is then noticed by the 'R.O.' in its order dated 23.11.2012 that default notice is served upon the appellant. Service report is showing service at the address of Counsel. In short, this was a demand notice under Rule 2 of the Rules. It is a different issue that there is even a serious doubt about this notice having been properly served on the appellant or not.

Next question to be considered is if this notice could be taken as a notice for appearance under Rule 73(1) of the Rules?

Reference has been made above to the order passed in the recovery proceedings for effecting service on the appellant. As can be seen from the order dated 13.2.2013 that the Counsel for the Bank had pointed out that the show-cause notice for arrest against the appellant and CD-2(a) had been filed in the Registry. This notice apparently was served at No. 32, Western Greens, Raugpuri, Shivaji Park, New Delhi. The Counsel appearing for the recipient of the notice had appeared before the R.O. to submit that the appellant was not residing there and that she would file his known, address and would provide copy thereof to the Counsel for the Bank. Still, the Tribunal did not take any action to serve notice on the appellant. Can this notice be taken as notice under Rule 73(3) of the Rules is not free from doubt. On 21.3.2013, which was the next date of hearing, it is recorded that the Counsel for the occupier of the property No. 32, Western Greens, Raugpuri, Shivaji Park, New Delhi submitted that he was going to file an affidavit of the last known permanent address of the appellant. The case was accordingly adjourned to 16.4.2013. On this date, the Counsel for the occupant of property No. 32, Western Greens, Raugpuri, Shivaji Park, New Delhi stated before the Tribunal that he was representing the wife of the appellant and proceeding under the Domestic Violence Act was pending in various Courts and accordingly she stated that she had nothing to submit more than what was submitted in the affidavit. The Counsel for the Bank thereafter pleaded before the R.O. that the arrest warrant for the appellant may be issued at the addresses one of which was E-478, 2nd floor, Greater Kailash, Part II, New Delhi.

From the facts as noticed, it can safely be inferred that the R.O. failed to strictly follow the mandate of Rule 73 of the Rules. The Rule 73 of the rules starts with words 'No' by providing that, "No order of arrest and detention in civil prison of a defaulter shall be made...." The word used 'shall' and the word 'No' in this rule would undoubtedly show that the requirement under this rule is mandatory in nature and would not call for any exception except in those events which are given in the proviso to the rule. Another important aspect which would emerge from this rule is that it talks of 'issuance' and 'service' of notice. Firstly there is doubt if notice calling upon appellant to appear was issued or served. Even if one was to consider that the notice had been issued to the defaulter calling upon him to appear before the R.O. on the date specified in the notice and to show cause as to why he should not be committed to the civil prison, but certainly the notice had not been served on the appellant. The question of assuming service of this notice on the appellant would also not arise because the facts which revealed before the R.O. were that the appellant was not residing at his given address, i.e. 32, Western Greens, Raugpuri, Shivaji Park, New Delhi and ultimately his wife who claims to have strained relation with the appellant disclosed his address. Instead of taking notice to him on that address as to why he should not be taken in custody and detained in civil prison, as is the purview of Rule 73 of the Rules, the R.O., in my view, has apparently acted in haste in issuing arrest warrant of the appellant instead of properly applying himself to the requirement of law as is laid down in Rule 73 of the Rules. A little attention on his part would have made him wise to issue a show-cause notice to the appellant once his address had been disclosed, asking him to show cause as to why he should not be committed to civil prison. If he had not appeared before the R.O., pursuant to such notice, then alone it could have been assumed that the notice under Rule 73 of the Rules had been served upon him and thereafter he still had not put in appearance before the R.O. to explain the cause as to why he should not be committed to civil prison. As is noted above, the earlier notices were demand notices under Rule 2 of the Rules and may not satisfy the requirement of notice under Rule 73(1) when aim is to take the defaulter in custody. Here the defaulter is required to be issued notice to show cause as to why he should not be committed to civil prison. Exception is neither pleaded nor are any reason recorded in any order in this regard.

Though not so pleaded before me, but if such a notice had been served upon the appellant he could have well appeared and pleaded before the R.O. that he be not taken in custody as his liability is limited and not Rs. 90 lacs and that he being only LR of the defendant, may not be termed as defaulter for the amount as claimed against him. In my view, the R.O. has acted in haste in issuing arrant of arrest which led to the arrest of the appellant and subsequent release after furnishing an under-taking to deposit a sum of Rs. 10 lac within 15 days of his release.

The finding of the Tribunal below would also show that the R.O. could not have put the appellant in prison because of default in making the payment. Was it really so or this has been so held by the Tribunal below without properly appreciating the documents and the warrant of arrest?

The perusal of the warrant of arrest issued by the R.O. would show that reference is made to the recovery certificate issued by the Presiding Officer specifying the amount of Rs. 90,80,632/- along with pendente lite and future interest @ 10% p.a. from 15.6.2000 onwards until realization with cost of Rs. 1.50 lac. It is then recorded that the said sum along with interest and cost has not been paid in satisfaction of the certificate. Thereafter, the R.O. has commanded the SHO to arrest the appellant to bring him before the R.O. and in any event within 24 of his arrest unless he paid the said amount of Rs. 90,80,632/- along with interest and cost. This command in the warrant of arrest is recorded as under:

"These are to command you to arrest the said defendant and bring him before the undersigned as soon as practicable and in any event within 24 hours of his arrest (exclusive of the time required for the journey) unless the defendant pays to you the said amount of Rs. 90,80,632.00 (Rupees ninety lacs eighty thousand six hundred thirty-two only) along with pendente lite and future interest @ 10% p.a. from 15.06.2000 onwards until realization with cost of Rs. 1,50,000/- (Rs. one lac fifty thousand only)."

How in this background one could say that direction by the R.O. to put the appellant in civil prison was not because of his default in making the payment? If this arrest was only to ensure the presence of the appellant before the Tribunal, then his release could not have been made subject to payment of a sum of Rs. 90 lac (approx.) which was the amount required to be recovered. This is also indicative of the fact that the R.O. ordered the release of the appellant only when he gave an undertaking to deposit a sum of Rs. 10 lac within 15 days and then made it as part of his direction requiring the appellant to deposit this amount. If the subsequent action had not been stayed firstly by the Tribunal below or later by this Tribunal, then obviously the appellant by now might have again been cooling his heels in Tihar Jail.

To contest the observation of the Tribunal below that the provisions of rule contained in the Rules are applicable to the proceedings under the RDDBFI Act as far as possible and these would apply with necessary modification to justify the action of the R.O., reference is made to the recent decision of the Hon'ble Supreme Court in the case of C.N. Paramsivam & Anr. v. Sunrise Plaza Tr. Partner & Ors., IV (2010) BC 165 : AIR 2013 SC 2941. The submission made before the Hon'ble Supreme Court was that words used in Section 29 of the RDDBFI Act, reading "as far as possible" and "with necessary modifications" give sufficient power to the R.O. to apply the said rule in appropriate cases having regard to the facts and circumstances of a given case. The Hon'ble Supreme Court in this regard has held as under:

"21. Applying the above principles to the case at hand Section 29 of the RDDBFI Act incorporates the provisions of the Rules found in the Second Schedule to the Income Tax Act for purposes of realisation of the dues by the Recovery Officer under the RDDBFI Act. The expression "as far as possible" and "with necessary modifications" appearing in Section 29 have been used to take car of situations where certain provisions under the Income Tax Rules may have no application on account of the scheme under the RDDBFI Act being different from that of the Income Tax Act or the Rules framed thereunder. The provisions of the Rules, it is manifest, from a careful reading of Section 29 are attracted only insofar 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 RDDBFI Act. That 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 RDDBFI Act, which confusion could arise from a literal application of the Rules to recoveries under the said Act. Proviso to Section 29 further makes it clear that any reference "to the Assessee" under the provisions of the Income Tax Act and the Rules shall be construed as a reference to the defendant under the RDDBFI Act. It is noteworthy that the Income Tax Rules make provisions that do not strictly deal with recovery of debts under the Act. Such of the rules cannot possibly apply to recovery of debts under the RDDBFI Act. For instance Rules 86 and 87 under the Income Tax Act do not have any application to the provisions of the RDDBFI Act, while Rules 57 and 58 of the said Rules in the Second Schedule deal with the process of recovery of the amount due and present no difficulty in enforcing them for recoveries under the RDDBFI Act. Suffice it to say that the use of the words "as far as possible" in Section 29 of the RDDBFI 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 RDDBFI Act. The argument that the use of the words "as far as possible" in Section 29 is meant to give discretion to the Recovery Officer to apply the said Rules or not to apply the same in specific fact situations has not impressed us and is accordingly rejected."

Hon'ble Supreme Court, therefore, has clearly held that the words "as far as possible" in Section 29 of the RDDBFI 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 RDDBFI Act. The argument that the use of these words were meant to give discretion to the R.O. to apply the said rule was rejected as this submission did not impress the Hon'ble Supreme Court, Thus, the R.O. cannot take shelter behind the wordings of Section 29 to apply the provisions contained in Second Schedule to the Income Tax Act as he would think appropriate.

The Counsel appearing for the Banks made desperate attempt to paint the appellant as a bad person. It is pointed out that appellant had stolen the plant and machinery of the factory for which an FIR had been filed against, for which he is facing trial in a Court at Gurgaon. In this regard only, the matter is pending before the Company Judge of the Delhi High Court to say that the appellant is the one who has not approached the Tribunal with clean hands and he does not deserve any sympathy or consideration. A loud attempt is made to urge that the service had been effected on the appellant and he cannot rely upon the service to find fault with his arrest. It is also pointed out that the appellant cannot escape the liability of paying Rs. 10 lac after having given an undertaking in this regard.

The Counsel for respondent No. 2 even has contested the aspect of Court fee which the appellant has filed on this appeal. Though this part of the plea by the respondent was accepted and the appellant was made to pay the deficit Court fee, but the Counsel for respondent No. 2 still would insist that the Court fee now paid is on a sum of Rs. 10 lac which would still be deficient. I do not find any substance in the plea raised by the Counsel for respondent No. 2. Firstly, the liability of the appellant is limited only to the extent of the property he has inherited from his late father. His liability is yet to be determined and he, therefore, cannot be called upon to deposit a Court fee on the sum which is determined in the O.A. Even otherwise, the challenge in the present proceedings is in regard to the payment of Rs. 10 lac which the appellant undertook to deposit and if any Court fee is payable, it fairly would be on this amount and the same amount would also be relevant for deciding the prayer for waiver of requirement of pre-deposit made by the appellant.

Having considered the submissions made before me and once a prima facie view has been formed that the undertaking obtained from the appellant was compulsive in nature, I am of the view that the appellant cannot be bound down to make any pre-deposit in this case, I would therefore allow the request of the appellant made in the application for waiver, holding that the appellant need not make any pre-deposit.

The stand of the respondent No. 2 otherwise in the reply is on the basis of some observations recorded in the Company Petition where the appellant has been said to be the brain behind whole illegal act. An FIR has been registered on the basis of direction issued by the Company Court. This issue, in my view, is not relevant for considering the challenge made in the present appeal. By means of this order, the appellant is not seeking his discharge from the liability if he otherwise is under any obligation to pay. The R.O. has first to determine his liability and then only to proceed against him to recover the same. In the present appeal, the appellant is seeking no relief either against the FIR in which he is being prosecuted or against the direction of the Company Judge to the effect that he is the one who has sold the plant and machinery. If the appellant had done so, his liability in that regard had to be determined first, may be on the basis of finding recorded by the Company Judge, and then the recovery of such amount that he has illegally obtained are required to be assessed against him. Till date the liability of the appellant has not been definite and determined and he is liable only to the extent what he has inherited from his late father. The R.O. or any other competent authority has to determine whether some liability can be fastened on to the appellant if he had committed any theft in the factory and had realised some amount from the illegal sale of such plant and machinery.

In any event, the appellant has come to challenge the order whereby he was taken in custody and his release which was ordered after obtaining an undertaking to deposit a sum of Rs. 10 lac. I have already held in the foregoing part of the judgment that the action of the R.O. in issuing the arrest warrant was not strictly in accordance with the provisions of the Act and, therefore, the said order cannot be sustained. Since the appellant has already been released from the custody after giving an undertaking, no further action therefore is called for in this regard. However, I am not been able to find anything amiss on the part of the R.O. in exercise of his judicial power or that he had in any manner exceeded his jurisdiction. R.O. seems to have acted within his jurisdiction as per his understanding.

The next question to consider is if the direction of the R.O. in requiring the appellant to make a payment of Rs. 10 lacs as per the undertaking can legally be sustained or not. The Counsel for the appellant in this regard has relied upon a decision in the case of Pradip Kumar Basu v. Regional Provident Fund Commissioner & Anr., (2002) II LLJ 512 (Cal.). The Court in this case was dealing with a situation where warrant of arrest was issued in a recovery proceedings under Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The petitioner before the Court had appeared in the proceedings and gave an undertaking to pay the amount in instalments. Pursuant to this undertaking some instalments were paid. Thereafter, he filed a writ petition pleading that he was a Manager of the Partnership Firm against which the liability is being sought to be enforced and that the said Partnership firm has since been dissolved.

In this context, the question which arose before the Court was as to when undertaking binds a person. The Court has noticed that unless in law liability can be fixed on the petitioner, no amount of admission can make him liable particularly when such admission is made under threat of arrest in default of payment. The Court has therefore held that such an undertaking given under constraint does not bind a person unless he is legally liable for it. Relying upon this proposition of law, the Counsel for the petitioner would contend that the undertaking which the appellant was forced to make while he was in custody and such an undertaking was given to seek his release from the said custody cannot be held binding.

The circumstances under which this undertaking was given by the appellant obviously would appear to be a compulsive undertaking and not given out of his free will. This undertaking was given by the appellant while being under the constraint of his arrest and cannot therefore be termed as voluntary one. This undertaking apparently was coercive if not from an individual but from the circumstances in which the appellant was placed. Coerced by these circumstances, the appellant virtually had no option but to give this undertaking. In my view, the appellant can be bound by this undertaking and admission in case he is legally liable for this amount. The legal liability of the appellant is yet to be ascertained. In view of this, that part of the direction issued by the R.O. requiring the appellant to make a deposit of Rs. 10 lac cannot be legally sustained.

Any observation made above cannot be taken to mean that the appellant is not liable for the recovery in this case. The R.O. would be well within his jurisdiction to determine the liability of the appellant on the basis of the appellant having inherited the property from his late father and also on any other count like illegal sale of plant and machinery over which the respondent Bank had a valid charge. This order will not have any effect on the proceeding which are in progress against the appellant for committing theft of the property and also for his responsibility of having sold the hypothecated plant and machinery of the respondent company. If the R.O. finds that the appellant had sold the plant and machinery or any other property which was under the charge of the Bank/financial institutions, the appellant can be made liable and held responsible for the recovery of the same by the R.O. even if no such recovery had been determined in the order passed in the O.A.

Mr. Janak Datwani, one of the brothers of the appellant has filed an application for being impleaded as respondent in this appeal. He is one of the L.Rs. of Jamnadas Datwani (defendant No. 2). The said applicant wants to be impleaded as party as he intends to assist the Tribunal in realizing the illegal siphoning of valuable hypothecated plant and machinery. Merely on this count this applicant cannot claim to be impleaded as party in the appeal as he in any event cannot be termed as a proper or necessary party for deciding the lis raised in this appeal. Accordingly this application is dismissed. The present appeal is accordingly disposed of in the above terms.