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Judgment
K.K. Sasidharan, J.—These civil revision petitions are directed against the order dated 81.12.2W5 in M.A. No. 124 of 2095, whereby the
Debts Recover? Appellate Tribunal modified the order dated 28.07.2095 in Appeal No. 2/2005 on the file of the Debts Recovery Tribunal-I,
Chennai, with respect to the property in item No. 1 in the auction notice held on 18.11.2004 (C.R.P. No. 1842 of 2005) and the order dated
20.02.2006 in I.N.No.315/2005and I.A.No.91/2006, whereby the Debts Recovery Appellate Tribunal directed to take steps to auction the
property in item No. 3 of the auction notice (C.R.P. No. 518 of 2006).
W.P. No. 536 of 2006 has been filed by the defaulter for issue of a Writ of Certiorari calling for the orders dated 28.07.2005 in Appeal No.
2/2005 as well as the order dated 01.12.2005 in M.A. No. 124 of 2005 which is the subject matter of C.R.P. No. 1842 of 2005 and to quash
the same.
For the purpose of appreciating the facts in all the three matters, the factual details as found in C.R.P. No. 518 of 2006 is referred to here
under:
The third respondent in C.R.P. No. 518 of 2006, namely M/s. Global Trust Bank, Chennai filed O.A. No. 1481 of 1998 before the Debts
Recovery Tribunal-I, Chennai against the respondents 1 and 2 (hereinafter referred to as defaulters) for recovery of a sum of Rs. 13,17,43,656.58
with future interest at the rate of 24% per annum and the said original application was allowed as per order dated 27.12.2062 and a recovery
certificate for the said sum was issued by the Tribunal. In pursuance of the recovery certificate No. 35/2003 issued by the Tribunal, three items of
property were brought to sale and for better appreciation, the details of property offered for sale are scheduled here under:
Item No. 1: Survey Nos. 43/1,43/1A,43/1B Maduravoyal Village of an extent of 1.33 acres of the land and building situated at 307, Door No.
165, Poonamallee High road, Aarthi Nagar, Maduravoyal, Chennai-102. (Known as Aarthi Towers)
Upset Prick: Rs. 6,00,00,000/- (Rupees six crores only)
Item No. 2: All that piece and parcel of land measuring 2568 sq.ft. built up area including common wall marked as Plot No. 9, at premises No.
3.9, Door No. 36, (Block No. 1), Vuppatur Avenue Off, Flower road, Old No. 11, Kilpauk, Chennai.
Upset Price: Rs. 49,00,008/- (Rupees forty nine lakhs only)
Item No. 3: Agricultural land admeasuring 21.09 acres or thereabouts in Chingleput Registrations District and Walajabad Sub Registration District
in No. 149, Pappanguli Village in S. Nos. 1, 1 (P), 2/1, 2/2A, 3/2A1, 3/2A2, 3/28 (Part), 3/2B, 3/2C1, 3/2B(P), 3/3A, 11/2, 11/3, 12/1b1, 21,
22/2, 24/6b, 241, 256/5A, 256/5B & 256/6.
Upset Price: Rs. 67,00,000/- (Rupees sixty seven lakhs only).
The recovery certificate issued by the Debts Recovery Tribunal bearing No. 35/2903 and the consequential order of attachment and proposed
sale of property as published in ''Daily Thanthi'' dated 16.19.2004, fixing the auction on 18.11.2004 were challenged by the defaulter before the
Debts Recovery Tribunal-I, Chennai in Appeal No. 2 of 2005.
The Recovery Officer proposed to sell all the three items of property on 18.11.2004. However, item No. 2 in the auction notice alone was sold
on 18.11.2004. As there were no bidders in respect of item Nos. 1 and 3, the sale was postponed to a subsequent date. However, no specific
date was mentioned in the said proceeding. Subsequently, as per proceedings dated 01.12.2004, item Nos. 1 and 3 were brought to sale on
15.12.2004 and on the said date, item No. 1 in the auction notice measuring an extent of 1.33 acres situated at Maduravoyal Village in Chennai
was sold. However, item No. 3 was not sold on the said date and as per the proceedings of the Recovery Officer, in order to enable the petitioner
to inspect the property and to verify the documents, the sale was postponed to 17.12.2604 at 04.30 p.m. The sale proceeding was taken upon on
17.12.2934 and the sale of item No. 3 was made in favour of the petitioner for a sum of Rs. 67,10,000/- and the purchaser has deposited 25% of
the bid amount by way of demand draft. However, the balance was not paid on account of stay granted by this Court against confirmation of sale.
So far as C.R.P. No. 1842 of 2005 is concerned, the same relates to item No. 1 of the property and the upset price was fixed at Rs. 6 crores
and the auction, which was originally scheduled on 18.11.2004, was adjourned, without specifying any date and time and subsequently on
15.12.2P84 the sale was made in favour of the petitioner for a sum of Rs. 6,00,19,000/-.
The appeal preferred by the defaulter before the Debts Recovery Tribunal at Chennai was disposed of as per order dated 28.07.2005,
whereby the appeal was partly allowed. As per the said order, the Debts Recovery Tribunal made certain changes in the sale proceedings in
respect of item No. 1, but permitted the Recovery Officer to issue the sale certificates in respect of other properties as per rules.
The order dated 28.07.2095 in Appeal No. 2 of 2905 was challenged by the defaulter before the Debts Recovery Appellate Tribunal, Chennai
in M.A. No. 124 of 2005 and the petitioners in the civil revision petitions filed Application to implead as party and they were also heard in the
matter.
The Debts Recovery Appellate Tribunal, as per order dated 01.12.2895, directed to bring the item No. 1 of the property for sale fixing the
upset price at Rs. 6,00,10,000/- after giving due publication and the petitioner was also permitted to take part in the auction. The petitioner was
also permitted to withdraw the amount deposited by him earlier with accrued interest, if any, and accordingly modified the order dated 28.07.2905
on the file of the Debts Recovery Tribunal-I, Chennai. The said order is challenged in C.R.P. No. 1842 of 2005 by the auction purchaser, who
was impleaded as a party before the Debts Recovery Appellate Tribunal. Similarly, the Debts Recovery Appellate Tribunal, as per order dated
20.02.2006, directed to bring item No. 3 of the property for sale fixing the Upset price at Rs. 67,10,000/- and the petitioner was also permitted to
take part in the auction. The said order is challenged in C.R.P. No. 518 of 2006. The appellant in Appeal No. 2 of 2005 on the file of the Debts
Recovery Tribunal-I, Chennai has preferred the writ petition in W.P. No. 536 of 2006 challenging the order dated 28.07.2005 in Appeal No. 2 of
2005 on the file of the Debts Recovery Tribunal-I, Chennai as well as the order dated 01.12.2005 in M.A. No. 124 of 2005 on the file of the
Debts Recovery Appellate Tribunal, Chennai. The order of the Debts Recovery Appellate Tribunal dated 01.12.2005 is challenged on the ground
that the sale in respect of item Nos. 2 and 3 were not set aside in the said proceeding, while setting aside the sale in respect of it No. 1 of the
property. The petitioner in the Civil Revision Petition is referred to hereinafter as the petitioner and the petitioner in the writ petition is referred to as
the defaulter.
We have heard Thiru. T.R. Rajagopalan, learned Senior Counsel appearing for the petitioners in C.R.P. Nos. 1842/2005 and 518/2006 and
Thiru. Sathish Farasaran, learned Counsel appearing for the first respondent in C.R.P. No. 1842 of 2005 and respondent Nos. 1 and 2 in C.R.P.
No. 518 of 2006 as well as the petitioner in W.P. No. 536 of 2006 and Thiru. K.V. Babu, learned Counsel appearing for the bank.
The learned Senior Counsel appearing for the petitioner in both the civil revision petitions contended that the order of the Debts Recovery
Appellate Tribunal is perse erroneous and is liable to be set aside for more than one reason. According to the learned Senior Counsel, once a sale
by way of auction is made by the Recovery Officer, the same could be set aside only by resorting to the proceedings as contemplated under Rules
60 and 61 of the Income Tax Recovery Rules in II Schedule by filing an application to set aside the sale within 30 days after fulfilling the pre-
conditions stipulated therein. It is his contention that the Tribunal has gone beyond the pleadings and prayer made by the defaulter and interfered
with the auction sale conducted by the Recovery Officer and according to him, the very application before the Debts Recovery Appellate Tribunal
is not maintainable and the defaulter has got other remedies available as per law and as such, prayed for setting aside the order of the Appellate
Tribunal.
Thiru. Sathish Parasaran, learned Counsel appearing for the defaulter vehemently contended that the whole procedure adopted by the
Recovery Officer is wrong and in fact fraud has been committed by the Recovery Officer in confirming the auction in favour of the petitioner, he
being an international real estate broker and to facilitate the confirmation of sale in favour of the petitioner, the sale was adjourned to a subsequent
date without fixing a definite date and at the instance of the petitioner, the auction was adjourned by two days again and without giving any
publicity, the property was sold in favour of the petitioner. As such, according to the counsel, the Appellate Tribunal is justified in interfering with
the fraudulent sale and as such, prayed for rejecting the revisions.
We have gone through the order of the Debts Recovery Appellate Tribunal as well as the documents filed on either side to substantiate their
contentions in the respective civil revision petitions and in the writ petition.
The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is a self-contained Code enacted for the purpose of establishment
of Tribunals for expeditious adjudication. Section 19 of the Act permits application to be made by the Banks and Financial Institutions to recover
any debt from any person and the order passed by the Pebts Recovery Tribunal is made appealable before the Appellate Tribunal u/s 20 of the
Act. Chapter V of the Act deals with mode of recovery of debt on receipt of a recovery certificate by the Recovery officer from the Tribunal. As
per Section 29 of the Act, the provisions of the second and third schedule to the Income Tax Act, 1961 and the Income Tax (Certificate
Proceedings) Rules, 1962, as in force from time to time with the necessary modifications, if any, is made applicable to a proceeding under Act 51
of 1993.
The present controversy relates to the manner of conduct of auction and the procedure adopted by the defaulter to set aside the sale effected
by the Recovery Officer.
Admittedly, the auction was scheduled to be held on 18.11.2004 in respect of the three items of property shown in the auction notice. Since
there were bidders only for item No. 2, the said property was sold for a sum of Rs. 62 lakhs and in the auction proceedings recorded by the
Recovery Officer, it is stated that there are no bidders and hence, the same is postponed to a subsequent date. However, the Recovery Officer has
not fixed any specific date or time to conduct the auction, which is a mandatory requirement under Rule 15(1) of the II Schedule to the Income
Tax Act, 1961. The Recovery officer has power to postpone or adjourn the sale. But while doing so, duty is cast on him to adjourn the sale to a
specified date and time and to give wide publicity so as to enable the prospective purchasers to take part in the auction on the adjourned date.
Though there is no entry on 18.11.2004 in the proceeding with regard to the adjourned date of auction, surprisingly the Recovery Officer has
recorded a proceeding on 01.12.2004 stating that the properties will be sold in public auction at 04.30 p.m. on 15.12.2004. The Appellate
Tribunal, after going through the records of the auction proceedings, found that there is another proceeding on the very same date containing the
very same wordings and in the said proceeding, it is ordered that the proceedings whereby the auction is adjourned to 15.12.2004 shall be put up
in the notice board of the Tribunal and the bank was directed to paste a copy of the notice on the premises of the property. However, in the other
proceedings dated 01.12.2004, there is no such endorsement about the requirement of publication of the notice either in the notice board or in the
subject matter of the sale. Naturally, the Tribunal observed that it is not clear as to what warranted the Recovery Officer to make two proceedings
on the very same date with respect to the very same matter. On 15.12.2004 item No. 1 was sold in favour of the petitioner for a euro of Rs.
6,00,10,000/- which was just Rs. 18,000/- over and above the upset price fixed for the sale of the said item.
The auction with respect to itera No. 1 was made on 15.12.2004 and the auction with respect to item Wo.3 was postponed by two days so
as to enable the petitioner to verify the documents. Subsequently on 17.12.2O04 the auction was confirmed in the name of the petitioner for a
COTS of Rs. 67,10,000/- which was also just Rs. 10,080/- over and above the upset price.
It is the contention of the learned Counsel for the defaulter that the whole auction was a drama stage managed by the Recovery Officer to
favour the petitioner which is substantiated by the fact that by adjourning the auction sale on 18.11.2004, there was no proceeding recorded by the
Recovery Officer fixing the sale to a specified date and time. According to the learned Counsel, the factum of recording suo motu proceeding twice
on 01.12.2004 shows that the Recovery Officer was creating documents to appear as if the auction was adjourned to a specific date to be taken
up on 15.12.2004 at 04.30 p.m. and due publicity was given so as to enable the prospective purchasers to take part in the auction. It is also on
record that the petitioner has paid only 25% of the bid amount in respect of item No. 3 and the remaining amount was kept with them, as
according to the petitioner, the confirmation of sale was stayed by this Court.
There is no material available on record to show that the sale was adjourned on 18.11.2004 to a specific date. The Recovery Officer is dealing
with the property of defaulters and guarantors and merely because the property to be auctioned belongs to the defaulter did not cloth with any right
on the Recovery Officer to sell the property in the manner suitable to him and when there is a prescribed procedure which mandates that the
auction sale has to be conducted in a particular manner, the Recovery Officer is bound to conduct the same in accordance with the said procedure,
failing which the whole proceedings are liable to be set aside. The observation of the Tribunal with regard to the defect in the procedure adopted
by the Recovery Officer cannot be termed to be a perverse finding without any material. The Appellate Tribunal found that the petitioners alone
participated in the auction on 15.12.2004 which also made the Tribunal to doubt the manner in which the auction was conducted by the Recovery
Officer. Therefore, we are in agreement with the conclusion arrived at by the Appellate Tribunal that the sale made on 15.12.2004 and
17.12.2004 in respect of item Nos. 1 and 3 respectively are vitiated and are liable to be set aside.
The other contention of the learned Senior Counsel appearing for the petitioner pertains to the maintainability of the application before the
Debts Recovery Appellate Tribunal to set aside the auction sale. According to the learned Senior Counsel, the procedure prescribe under the
Income Tax Rules with respect to sale has to be followed said the remedy of the aggrieved party is not to file an appeal before the Debts Recovery
Appellate Tribunal.
The Schedule-II to the Income Tax Act which is made applicable to a proceeding under Act 51 of 1993 contains provisions to file application
to set aside the sale of immovable property. Section 60(1) permits an application to be made to set aside the sale of immovable property on
deposit of the amount specified in the confirmation of sale along with a sum equivalent to 5% of purchase money payable to the auction purchaser.
Section 61 enables an application to be filed to set aside the sale of immovable property on ground of non-service of notice or irregularity and a
person aggrieved by the sale in execution of a certificate may apply to the Tax Recovery Officer to set aside the sale on the ground that notice was
not served on the defaulter to pay the arrears as required or on the ground of material irregularity in publishing and conducting the sale. There is no
condition for pre-deposit for making an application u/s 61 unlike an application u/s 60 which requires payment of the amount shown in the
proclamation of sale along with 5% of the purchase money payable to the auction purchaser.
The learned Counsel for the defaulter contended that there is a difference in the procedure of auction as contemplated by the Income Tax Act
1961. Sale of property which is the subject matter of the proceedings of the Debts Recovery Tribunal is made by the Tribunal itself through the
Recovery Officer who is an officer appointed by the Central Government for each Tribunal u/s 7(1). The Recovery Officer is a functionary under
the Debts Recovery Tribunal and he shall function as per the direction of the Presiding Officer of the Tribunal. On the other hand, the Recovery
Officer under the Income Tax Act is not functioning under the Income Tax Officer, who makes the assessment and as such, the learned Counsel
contended that it is not possible to file an application before the Recovery Officer inasmuch as the very sale is deemed to be made by the Tribunal
itself acting through its officer functioning as Recovery Officer.
The Apex Court in S.N. Jadi A Brothers v. Subhashchandra reported in 1997 (9) Scale 202 observed that the procedural law is always sub-
serving to the akin of justice and held thus:
All the rules of procedure are the handmaid of justice. The language employed by the draftsman of processual law may be liberal or stringent,
but the fact remains that the object of prescribing procedure is to advance the cause of justice. In an adversarial system, no party should ordinarily
be denied the opportunity of participating in the process of justice dispensation. Unless compelled by express and specific language of the Statute,
the provisions of the CPC or any other procedural enactment ought not to be construed in a manner which would leave the Court helpless to meet
extraordinary situations in the ends of justice.
The mortality of justice at the hands of law troubles a Judge''s conscience and points an angry interrogation at the law reformer.
The processual law so dominates in certain systems as to overpower substantive rights and substantial justice. The humanist rule that procedure
should be the handmaid, not the mistress, of legal justice compels consideration of vesting a residuary power in judges to act ex debito justiciae
where the tragic sequel otherwise would be wholly inequitable - justice is the goal of jurisprudence-processual, as much as substantive. See Sushil
Kumar Sen Vs. State of Bihar, .
No person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner for the tine being by or
for the Court in which the case is pending, and if, by an Act of parliament the mode of procedure is altered, he has no other right than proceed
according to the altered mode. See Blyth v. Blyth 1966 (1) A.E.R. 524 (HL) . A procedural law should not ordinarily be construed as mandatory,
the procedural law is always subservient to and is in aid to justice. Any interpretation which eludes or frustrates the recipient of justice is not to be
followed. See Shreenath and Another Vs. Rajesh and Others, .
Processual law is not to be a tyrant but a servant, not an obstruction but an aid to justice. Procedural prescriptions are the handmaid and not
the mistress, a lubricant, not a resistant in the administration of justice.
The provision regarding setting aside the sale as provided under the Debts Recovery Tribunal Act is akin to that of a proceeding under Order
21 Rule 89 of the Code of Civil Procedure.
In Raju Vs. State of Karnataka, , the Apex Court held thus:
Execution is the enforcement by the process of the court of its orders and decrees. This is in furtherance of the inherent power of the Court to
carry out its orders or decrees. Order 21 CPC deals with the elaborate procedure pertaining to the execution of orders and decrees. Sals is one of
the methods employed for execution. Rule 89 of Order 21 is the only means by which a Judgment debtor can escape from a sale that has been
validly carried out. The object of the rule is to provide a last opportunity to put an end to the dispute at the instance of the judgement-debtor
before the sale is confirmed by the court and also to save his property from dispossession. Rule 89 postulates two conditions: they are depositing:
(1) of sum equal to five percent of the purchase money to be paid to the purchaser, (2) of the amount specified in the proclamation of sale less any
amount received by the decree-holder since the date of such proclamation, in the court. If these two conditions are satisfied the court shall make an
order for setting aside the sale under Rule 92(2) of Order 21 CPC on an application made to it. In other words, then there will be compliance with
the court''s order Or decree that is sought to be executed. Because the purpose of Rule 21 is to ensure the carrying out of the orders and decrees
of the court, once the judgment-debtor carries out the order or decree of the court, the execution proceedings will correspondingly come to an
end. It is to be noted that the Rule does not provide that the application in a particular form shall be filed to set aside the sale. Even a memo with
prayer for setting aside sale is sufficient compliance with the said Rule. Therefore, upon the satisfaction of the compliance with conditions as
provided under Rule 89, it is mandatory upon the court to set aside the sale under Rule 92. And the court shall set aside the sale after giving notice
under Rule 92(2) to all affected persons.
The impugned order of the Debts Recovery Appellate Tribunal has been passed in an appeal preferred against the order dated 28.07.2095 in
Appeal Ho.2 of 2005 on the file of the Debts Recovery Tribunal-I, Chennai. The order impugned fn Appeal No. 2 of 2005 is nothing but the
auction scheduled to be conducted by the Recovery Officer pursuant to the recovery certificate issued by the Debts Recovery Tribunal as well as
the order dated 27.12.2002 in O.A. No. 1481 of 1998. It is the contention of the learned Senior Counsel appearing for the petitioner that the
irregularity of the sale was not an issue in Appeal No. 2 of 2005 and as such, the Debts Recovery Appellate Tribunal erred in setting aside the
auction sale on the ground of material irregularity, while exercising appellate jurisdiction against the order of Debts Recovery Tribunal in an appeal
challenging the final order in the original application and consequent recovery proceedings on a totally different ground.
It is true that the appeal No. 2 of 2005 pertains to the order passed by the Debts Recovery Tribunal regarding the issue of debt recovery
certificate No. 35/2983 and consequential order of attachment and the auction notification published in ''Daily Thanthi'' dated 16.18.2004 whereby
auction was scheduled to be conducted on 18.11.2004. While deciding the appeal, the Debts Recovery Tribunal found that the dues to the bank is
to the tune of Rs. 13 crores and as such indicated that in case opportunity is given to procure maximum price for the property from the prospective
purchasers, then such an alternative has to be resorted to and ultimately the Tribunal directed the defaulter and Mr. Dhanaval, who offered Rs.
6.26 crores for the property in item No. 1, to deposit the said sum and also passed certain equitable orders in the interest of both the parties. The
Debts Recovery Tribunal also permitted the Recovery Officer to issue sale certificate in respect of other properties as per rules. It is the said order
which was challenged before the Debts Recovery Appellate Tribunal and when the order permitting the Recovery Officer to issue sale certificate
was challenged in appeal, it cannot be said that the defaulter is not entitled to bring the material irregularity in conducting the auction sale before the
appellate authority. In the present case, there is a glaring irregularity in the conduct of sale. The observation made by the Tribunal in its order in
Appeal No. 2 of 2005 to ascertain the feasibility of getting more amount for the property has not been taken note of by the Recovery Officer.
There is nothing on record to show that the auction which was postponed on 18.11.2004 was made known to the general public so as to get
better offers from the intending purchasers. The suo motu proceedings recorded by the Recovery Officer on 01.12.2004 stating that the sale will
be held at 04.30 p.m. on 15.12.2004 appears to be a make belief affair. There is also nothing on record to show that the proceeding dated
01.12.2004 has been duly published. For reasons best known to the Recovery Officer, the sale was adjourned on 18.11.2004 without specifying
any date. The fact that there was yet another proceeding on 01.12.2004 directing the bank to paste a copy of the notice on the premises of the
property as well as in the notice board of the Debts Recovery Tribunal shows that the Recovery Officer has been trying to make the records clean
so as to appear as if wide publicity was given to the sale scheduled to be held on 15.12.2004. When the sale was not adjourned to a specified
date on 18.11.2004 and when the proceedings dated 01.12.2004 was not published in newspapers or in any other mode, it is really surprising to
note as to how the petitioner came to know of the scheduled auction on 15.12.2004. When there was no other bidder other than the petitioner on
15.12.2004 for item No. 3 instead of obliging the petitioner to adjourn the matter by two days and fixing the auction on 17.12.2084, the Recovery
Officer should have again given wide publicity so as to enable other prospective purchasers also to take part in the auction or in case the Recovery
Officer feels that no public notice could be given within two days, he should have adjourned the sale by a reasonable time so as to enable him to
publish the sale notice to get batter offers and for attracting more purchasers. The Recovery Officer is expected to sell the property for the
maximum price and in case there is any balance money, the same has to be returned to the defaulter. Such being the case, the Recovery Officer
should have taken all the possible efforts to get maximum price for the property and he should not have attempted to sell the property somehow
and to conclude the proceedings at the earliest. Therefore, the findings of the Debts Recovery Appellate Tribunal to the effect that the whole
proceeding appears to be a make belief affair cannot be said to be an erroneous finding or perverse so as to interfere in a proceeding under Article
227 of the Constitution of India.
The Apex Court considered the need for maximum public participation in the process of sale in the case of Chairman and Managing Director,
SIPCOT, and Madras and others Vs. Contromix Pvt. Ltd. by its Director (Finance) Seetharaman, Madras and another, and held thus:
In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold. This can be achieved
only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer. Public auction after
adequate publicity ensures participation of every person who is interested in purchasing the property and generally secures the best price. But
many times it may not be possible to secure the best price by public auction when the bidders join together so as to depress the bid or the nature
of the property to be sold is such that suitable bid may not be received at public auction. In that event, the other suitable mode for selling of
property can be by inviting tenders. In order to ensure that such sale by calling tenders does not escape attention of an intending participant, it is
essential that every endeavour should be made to give wide publicity so as to get the maximum price.
In Gajraj Jain Vs. State of Bihar and Others, , the Apex Court in the context of Section 29(1) of the State Financial Corporations Act, 1951
observed that the words ""realisation of the property pledged, mortgaged, hypothecated"" presuppose realisation of sale proceeds and
application/appropriation thereof to liquidate the dues of the paramount charge-holder and from the surplus payment to persons entitled thereto
and it is for this reason that the best possible price has got to be tried for u/s 29 off the Act and held thus:
Under Section 29(1) of the 1951 Act, where any industrial concern under a liability to the financial corporation makes any default in repayment of
loan, the corporation is empowered to take over possession of the industrial concern and realise the property pledged, mortgaged, hypothecated
or assigned to the corporation. u/s 29(4), all costs, charges and expenses incurred by the corporation as incidental to such realisation of the
property pledged, hypothecated or mortgaged shall be recovered firstly from the industrial concern and the balance shall be paid to the person
entitled thereto. As stated above, a charge consists in the right of a creditor to receive the payment out of the proceeds of the realisation of
property or fund charged with the debt. A bare reading of Sub-sections (1) and (4) of Section 29 shows that it is similar to Section 69 of the TP
Act under which it is stipulated that a mortgagee exercising the power of sale is a trustee of the surplus sale proceeds and after satisfying his own
charge he holds the surplus for the subsequent encumbrancers and ultimately for the mortgagor. See Rajah Kishendatt Ram v. Rajah Mumtaz Ali
Khan. Section 29(1) contemplates therefore, a sale for distribution of sale proceeds and not a sale for distribution of property charged with the
debt. It also implies that the first charge'' holder must act in a manner which protects not only its own interest but also the interest of the subsequent
charge-holder and the mortgagor. This in turn implies that the first charge-bolder is bound to obtain the best possible price for the mortgaged
assets and the best possible price must, in the context, mean the fair market value.
In Gajraj Jain case cited supra, the Apex Court found that there was collusion between the Bihar State Industrial Credit and Investment
Corporation Limited and the respondent No. 4, the purchaser of the property. The Apex Court held in the said judgment that in the absence of
proper mechanism, the auction sale becomes only a pretence. Ultimately, the Apex Court found that the Corporation has misused its authority and
power in breach of law by taking into account extraneous matters and by ignoring the relevant matters which has rendered all its actions ultra vires
and set aside the sale with a direction to restore possession of the assets to the defaulter. The facts in the present case also shows that the
Recovery Officer has not taken any effort to get the maximum price and in such circumstances, the observation of the Debts Recovery Appellate
Tribunal with regard to the illegality conducted by the Recovery Officer cannot be said to be a finding not supported by any material.
During the course of bearing, the learned Counsel for the defaulter submitted that the property in item No. 1 was sold during the pendency of
the present proceeding for a substantial amount much mere than the offer given by the petitioner and the entire amount of Rs.765.85 lakhs was
paid to the bank and the bank has also issued no dues certificate and returned the title deeds to the defaulter. According to the learned counsel, the
defaulter was able to clear the entire arrears with the sale consideration received by way of sale of item No. 1 alone. We do not propose to
consider the subsequent sale made by the defaulter pending disposal of the proceedings except to take note of the fact that the property involved in
this matter was sold for a huge sum than the amount offered by the petitioner. This also shows the worth of the property and it is also a justification
for setting aside the sale made by the Recovery Officer on the ground that due publicity was not given to attract better offers and while adjourning
the sale, it was not postponed to a specified date.
A perusal of the order impugned in the revision petition shows that the Debts Recovery Appellate Tribunal has considered the issue on the
basis of relevant materials and as such, the said decision cannot be said to be unreasonable. While exercising the power of judicial review, this
Court cannot act like an appellate authority. There is also material available with the Detts Recovery Appellate Tribunal for its various conclusions
and those conclusions cannot be said to be perverse, or irrational, warranting interference by this Court by way of judicial review.
The Recovery Officer being a creature of the statute is obliged to act fairly and in a reasonable manner, while dealing with the property of the
defaulters. As per the provisions of Act 51 of 1993, wide powers are given to the Recovery Officer including power of distraint and sale of
property and when there are enormous powers conferred on an authority, the law expects much more responsibility from such authorities. The
function of the Recovery Officer is not to sell the property for a paltry sum, but he should see that the property is sold for its maximum value which
would otherwise be termed as market price and if there is any balance after discharging the dues to the bank or financial institutions, it should go to
the defaulter. Merely because the defaulter is in arrears to the bank or financial institutions, it cannot be said that his property has to be sold
irrespective of its worth, and he should not have the benefit of the balance sale consideration after meeting the liabilities. Therefore, utmost care has
to be taken by the Recovery Officer in the matter of sale of the property of the defaulters and due publicity should be given for such sale as
otherwise the property will be snatched away by the real estate agents by forming cartel, and there will be still balance to be paid to the bank and
the defaulter will continue to be debtor through out his life. On the other hand, if an attempt is made by the Recovery Officer to get the maximum
price for the property, it will be is the interest of both the bank as well as the defaulter. As noted earlier, the Recovery Officer is empowered to
effect recovery by various modes as made mentioned u/s 25 of the Act and the said power coupled with the relevant provisions of the Income Tax
Act, 1961 made applicable to recovery proceeding under Debts Recovery Tribunal Act, the Recovery Officer enjoins wide powers in the matter
of sale of property. As per Section 63(1) of II Schedule to the Income Tax Act which is made applicable to the recovery proceedings under the
Debts Recovery Tribunal. Act, the confirmation of sale is also to be made by the Tax Recovery Officer.
In Navalkha and Sons Vs. Ramanuja Das and Others, , the Apex Court considered the importance of confirmation in the matter of sale of
property and observed thus:
The principles which should govern confirmation of sales are well established. Where the acceptance of the offer by the Commissioners is
subject to confirmation of the Court the offer or does not by mere acceptance get any vested right in the property so that he may demand
automatic confirmation of his offer. The condition of confirmation by the Court operates as a safeguard against the property being sold at
inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the Court to
satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the Court is satisfied about the adequacy
of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion. In Gordon Das Chuni Lal Dakuwala Vs. T.
Sriman Kanthimathinatha Pillai and Another, , it was observed that where the property is authorised to be sold by private contract or otherwise it is
the duty of the Court to satisfy itself that the price fixed is the best that could be expected to be offered. That is because the Court is the custodian
of the interests of the Company and its creditors and the sanction of the Court required under the Companies Act has to be exercised with judicial
discretion regard being had to the interests of the Company and its creditors as well. This principle was followed in Ratnasami Pillai Vs. Sabapathy
Pillai and Others, and S. Soundararajan and Others Vs. Khaka Mahomed Ismail Saheb of Messrs. Roshan and Co., . In A. Subbaraya Mudaliar
Vs. K. Sundararajan, (Joint Receiver) and Others, , it was pointed out that the condition of confirmation by the Court being a safeguard against the
property being sold at an inadequate price, it will be not only proper bat necessary that the Court in exercising the discretion which it undoubtedly
has of accepting or refusing the highest bid at the auction held in pursuance of its orders, should see that the price fetched at the auction is an
adequate price even though there is no suggestion of irregularity or fraud. It is well to bear in mind the other principle which is equally well settled
namely that once the court comes to the conclusion that the price offered is adequate, no subsequent higher offer can constitute a valid ground for
refusing confirmation of the sale or offer already received. See the decision of the Madras High Court in Roshan and Co.''s case AIR 1949 Mad
42.
The power to confirm the sale giver to the Recovery Officer as per Section 63{1) of the Income Tax Act, 1961 enjoins upon the recovery
officer to see that the property is sold for the market price in a free auction made with wide publicity.
The provision relating to recovery proceeding is akin to that of a proceeding u/s 29 of the State Financial Corporations Act, 1951 which
authorises the financial corporation to take possession of the assets of the defaulting company or business concern. The concept of best possible
price is considered to be the dominant consideration for the sale u/s 29 of the State Financial Corporations Act, 1951, and as held by the
Suprmeme Court in Gajraj Jain cited supra, if publicity and maximum participation is to be attained, then the bidders should know the details of the
assets and in the absence of the proper mechanism, the auction sale becomes only a pretence. In S.J.S. Business Enterprises (P) Ltd., case also
the Apex Court underlined the need for publicity to ensure maximum participation of bidders which in turn requires that a fair and practical time to
be given to the purchasers for the purpose of effective participation in the sale. Such being the legal position, we do not find any illegality committed
by the Debts Recovery Appellate Tribunal in passing the impugned order. The subsequent events narrated above also would show that there was
no attempt on the part of the Recovery Officer to procure the maximum price for the property. Therefore, we do not see any reason to interfere
with the order of the Debts Recovery Appellate Tribunal.
In the result, both the civil revision petitions are dismissed. In view of our finding that the order of the Debts Recovery Appellate Tribunal do
not call for interference, there is no need for separate orders in the writ petition and accordingly, the Writ Petition is also disposed of.