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Judgment
S. Ravi Kumar, J
This Appeal is preferred against order dated 2.9.2014 in Appeal No. 01/2014 on the file of Debts Recovery Tribunal, Pune (D.R.T.). Appellants herein are the successful bidders in sale conducted on 18.12.2013 (hereinafter referred to as auction purchasers). First respondent herein is the Bank which advanced money (hereinafter referred to as the certificate creditor). Third respondent herein is Borrower which availed loan from the Bank for which second respondent, fourth respondent and fifth respondent herein stood as guarantors (hereinafter referred to the certificate debtors). Sixth and seventh respondents are the second and first charge holders, respectively, of the mortgaged property.
Brief facts leading to this Appeal are as follows.
Certificate creditor filed Original Application (O.A.) No. 235/2005 for recovery of money which was allowed and in pursuance of which Recovery Proceedings (R.P.) No. 42/2012 are initiated. In the R.Ps. sale was conducted on 18.12.2013 in which auction purchasers purchased mortgaged property for Rs. 2,04,24,000/-. On 13.1.2014 one of the certificate debtors i.e. second respondent herein moved application before the Recovery Officer to set aside the sale dated 18.12.2013 contending that subsequent to sale, certificate debtors and certificate creditor entered into a compromise before expiry of 30 days period provided for confirmation of sale and as per the consent terms, certificate debtors paid a sum of Rs. 1.75 crores on 10.1.2014 to certificate creditor and the remaining amount which is in the deposit form before the Hon'ble High Court of Bombay in Company Petition No. 620/2005 which amount was received by certificate creditor and thereby the total agreed amount of Rs. 2,10,47,453/- is paid. It is also contended that certificate debtor is enclosing demand draft for Rs. 10,21,200/- being 5% of the purchase money payable to the auction purchasers and, therefore, the sale has to be set aside. Auction purchasers filed application on 22.1.2014 to confirm the sale and issue sale certificate. Learned R.O. disposed of these two application through a common order dated 6.2.2014 and rejected the application of certificate debtor to set aside the sale and allowed the application of auction purchasers for confirmation of sale and ordered for issuance of sale certificate. Aggrieved by the said order dated 6.2.2014 one of the certificate debtors i.e. second respondent herein preferred Appeal before learned Presiding Officer, D.R.T., Pune, under Section 30 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the RDDB & FI Act) and the Tribunal below on a consideration of contentions and rival contentions of both parties allowed the Appeal and set aside the order of the R.O. dated 6.2.2014 and set aside the sale and consequently annulled sale certificate issued through order dated 6.2.2014, Aggrieved by the said order, auction purchasers preferred present Appeal.
Heard both sides.
Advocate for appellant submitted that Tribunal below erred in considering the application of certificate debtors without deposit of amount mentioned in the Sale Proclamation as required under Rule 60 of Second Schedule to Income Tax Act. He further submitted that the Tribunal below erred in treating the amount tendered by certificate debtors to the certificate creditor as compliance of deposit required under Rule 60 of Second Schedule to Income Tax Act. He further submitted that the Tribunal below erred in taking into account no objection given by certificate creditor without considering the fact that the application to set aside sale cannot be entertained without making deposit. He submitted that the action of the certificate debtors and certificate creditor is nothing but negligence and abuse of process of law which is not rightly appreciated by the Tribunal below. He further submitted that appellants have deposited full auction amount along with poundage fee within time. He further submitted that such successful auction cannot be cancelled without fulfilling conditions of Rule 60 of Second Schedule to Income Tax Act. He submitted that as the sale is cancelled without following rules under the under the Second Schedule to Income Tax Act, therefore, impugned order is liable to be set aside.
On the other hand, Advocate for certificate debtors submitted that as per the Rules, the sale can be confirmed only after expiry of 30 days period and the certificate debtors have every right to pay back the money within the said 30 days period and to compensate the auction purchaser additional amount of 5% of the sale amount has to be deposited and the certificate debtors have fully complied with it. It is further submitted that the purpose of deposit of the entire sale proclamation money under Rule 60 of Second Schedule to Income Tax Act is to provide such payment to the decree-holder and here the certificate debtors have paid back entire amount to the decree-holders who have reported no objection, therefore, auction purchasers cannot accrue any right till the sale is confirmed. It is further submitted that it is settled proposition of law that unless and until confirmation of sale, no right or interest whatsoever accrues in favour of the auction-purchaser. It is submitted that the R.O. can only confirm the sale after expiry of 30 days period and before that day the decree-holder received entire money and full satisfaction is reported, therefore, R.O. has no power to confirm the sale particularly when the required 5% of the amount is deposited to compensate auction-purchaser. It is submitted that Tribunal below considered all these aspects and rightly set aside the order of the R.O. and that there are no grounds to interfere with such a reasoned order.
Advocate for certificate creditor i.e. Bank supported arguments of Advocate for certificate debtors and submitted that purpose of making deposit is only to protect the interest of decree-holder. It is further submitted that as per Section 29 of the RDDB & FI Act, the provisions of the Second and Third Schedules to the Income-tax Act, 1961 have to be applied, as far as possible, with necessary modifications as if the said provisions and the rules referred to the amount of debt due under the RDDB & FI Act instead of to the Income-tax, therefore, considering the facts of this case there is no need to deposit sale proclamation money since the consent terms were already entered by that time. It is also submitted that the Hon'ble High Court recognized the consent terms through order dated 24.1.2014 in Company Petition No. 620 of 2005 and permitted the Bank to withdraw Rs. 35,27,453.
The main argument of the Advocate for auction purchaser is that without depositing the money as required under Rule 60 of the Second Schedule to the Income Tax Act, the sale cannot be set aside. It is not in dispute that Rules under Second Schedule to Income Tax are applied for the sale of properties in recovery proceedings by virtue of Section 29 of the RDDB & FI Act, which reads as follows:
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.
From a reading of above provision, it is clear that provisions of Second and Third Schedule to the Income Tax Act shall be applied as far as possible with necessary modification. Second Schedule to Income Tax Act deals with procedure for recovery of taxes. When' a default is committed power is vested to sell the property of the defaulter for recovery of taxes. Under Rule 60, application to set aside the sale by defaulter can be made within 30 days from the date of sale by depositing the amount specified in the proclamation of sale together with interest and penalty equal to 5% of the purchase money payable to purchaser. Rule 63 deals with confirmation of sale. According to this Rule, when no application is made for setting aside the sale, the Tax Recovery Officer shall make an order confirming the sale. According to this Rule when such an application is made and the same is disallowed then the Tax Recovery Officer shall make an order confirming the sale. Here in the present case, it is not in dispute that before expiry of 30 days period, one of the certificate debtors moved an application with a request to set aside the sale. It appears that auction purchasers were also made as party to the said application and they also filed their reply to the said application from which it is clear that auction purchaser has knowledge of application being filed to set aside the sale. In spite of that auction purchasers also filed application on 22.1.2014 to confirm the sale during the pendency of that application. When Rule 63 of the Second Schedule to Income Tax Act contemplates that order of confirmation of sale can be only made after dismissal of the application filed to set aside the sale. Auction purchaser cannot invoke remedy for confirmation before deciding the application to set aside sale. Even as per Rule 89 of Order 21, C.P.C. where immovable property has been sold in execution of a decree, application to set aside the sale has to be made only on deposit of sum equal to 5% of the purchase money payable to the auction purchaser and the money specified in the proclamation of sale payable to the decree-holder. In the very same Rule it is indicated that while making such deposit for money payable to the decree-holder, the amount received by decree-holder after date of proclamation has to be deduced from the amount specified in the sale proclamation. So intention of selling the property of the certificate debtor is only to recover the money due to the certificate creditor and then pay it back to the decree-holder viz. certificate creditor. When the certificate creditor has received back the entire amount before the expiry of 30 days period contemplated in Rule 63 of the Second Schedule to Income Tax Act for confirmation of the sale the R.O. cannot confirm the sale and bound to set aside sale as per Sub-rule (2) of Rule 63. Even otherwise, when the certificate creditor has already received the entire amount then to whom this bid amount would be paid by the R.O. is a question remains without answer. The contention of auction purchasers that once the property was sold, the certificate debtors and certificate creditor cannot enter into a compromise is not a well founded argument when the law provides 30-days time to pay back the money due to the certificate creditor. The learned P.O. has elaborately dealt with this aspect and came to a right conclusion for setting aside the impugned order of the R.O. dated 6.2.2014 below Exhs. 42 and 52 in R.P. No. 42/2012. The very condition to deposit 5% of the sale money is to compensate the auction purchasers for the inconvenience caused to auction purchaser and when such amount is deposited before the expiry of 30 days period, the objection of the auction purchasers to set aside the sale is not tenable and the Tribunal below was right in setting aside the sale and that there are no grounds to interfere with the findings recorded in order dated 2.9.2014 in Appeal No. 01/2014.
In view of my above observations and findings, it is held that the Appeal is devoid of merits and is liable to be dismissed. In the result, Appeal is dismissed, but under the circumstances without costs.
All Miscellaneous Applications, if any, are dismissed as infructuous.