Kusum Pamecha vs Oriental Bank Of Commerce And Ors.

P.K. Bhasin, J

The appellant is aggrieved by the order dated 28.2.2014 passed by the Debts Recovery Tribunal, Jaipur (DRT) rejecting her appeal filed under Section 30 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, 'the RDDBFI Act') against the order dated 20.11.2012 passed by the Recovery Officer in Execution Application No. 41/2005, whereby her objection petition under Rule 61 of the Second Schedule of the Income Tax Act, 1961 was rejected. The relevant facts which need to be noticed for the disposal of this appeal filed by the unsuccessful objector/certificate-debtor in a petition under Section 19 of the RDDBFI Act are as under:

"(A) Sometime in the year 1997 Oriental Bank of Commerce (hereinafter to be referred as 'the Bank') through its branch in Nathdwara (Rajasthan) had granted Cash Credit facility of Rs. 7,50,000/- to one Company by the name of Glorius Marbles Pvt. Ltd. (hereinafter to be referred as 'the borrower Company') of which the present appellant was one of the Directors. To secure the repayment of the loan the appellant had given her personal guarantee and had also created an equitable mortgage of her residential property in District Rajasmand, Rajasthan in favour of the Bank. Since the borrower Company defaulted in repayment of the loan amount the Bank had filed a civil suit for recovery of Rs. 8,41,609.26 in the Court of District Judge, Rajsamand (Rajasthan) on 25.11.2000. That suit for recovery (registered as Suit No. 27/2001) was filed against the borrower Company, the appellant as one of the guarantors and three other guarantors out of whom the husband of the present appellant was one of them. That suit came to be decreed in favour of the Bank with the passing of a preliminary mortgage decree on 29.3.2003 and because of the defendants in the suit not making the payment within the period granted under the preliminary decree final decree came to passed on 3.9.2004. Subsequently the Bank moved an application under Section 34-A of the RDDBFI Act before the DRT, Jaipur for a recovery certificate and in those proceedings the defendants/judgment debtors remained ex parte and finally recovery certificate was issued on 7.10.2005 for a sum of Rs. 13,91,867/- and interest as per the decree already passed. The recovery certificate was forwarded to the Recovery Officer attached to the DRT.

(B) In due course of time the Recovery Officer attached one residential plot of the appellant/guarantor which she had mortgaged in favour of the Bank and that property was finally auctioned on 20.10.2008. Respondent No. 2 herein Sunil Thapadia was the highest bidder. However, before the auction was held the borrower Company and the appellant being a director and guarantor along with other guarantors had filed one writ petition in the Rajasthan High Court, Jaipur Bench (being CWP No. 5906/2008). That writ petition came to be disposed of by a consent order on 21.8.2008. While fixing the date of auction on 20.10.2008 the High Court had given the writ petitioners the liberty to approach the Bank with buyers for purchase of the goods which had been hypothecated also with the Bank. Before the said auction date the writ petitioners were supposed to clear the Bank's dues and in case of default the attached property was to be sold. It appears that the borrower Company could not clear the Bank's dues within the given period and so auction was held on 20.10.2008 and respondent No. 2 herein Sunil Thapadia was the successful bidder and the property was sold for Rs. 24.10 lacs. The appellant then filed another writ petition in Rajasthan High Court at Jaipur (being CWP No. 12401/2008). Because the interim relief granted by the High Court in that writ petition, in which the auction purchaser was also impleaded as a respondent, sale in his favour could not be finalised. However, that writ petition came to be finally dismissed vide order dated 8.11.2011 of the High Court. It appears that before the High Court a prayer had been made by the appellant herein that she may be permitted to raise objections before the Recovery Officer. In respect of that prayer the High Court had observed that "As regards submission regarding objection which could be raised before Recovery Officer (DRT) the petitioner is always at liberty to avail if so advised."

(C) Thereafter the appellant filed one application under Rule 61 of the Second Schedule of the Income Tax Act before the Recovery Officer for setting aside the sale of her residential house claiming that some immovable property belonging to the borrower Company was sold for the recovery of some dues of Rajasthan State Financial Corporation for a sum of Rs. 45,91,111/- and that money was lying with the Collector to whom the Bank/respondent No. 1 herein) had also approached for claiming its dues out of the money which had been realised from the sale of the borrower Company's property. However, no money could be obtained by the Bank from there since the borrower Company had already challenged the auction in the year 2007 by way of a writ petition in Rajasthan High Court (Jodhpur Bench) and interim relief against release of that money to anyone was granted by the High Court.

(D) The appellant moved another application also before the Recovery Officer invoking Rule 66 also of the Second Schedule of the Income Tax Act praying for deferment of the proceedings for the confirmation of the sale etc. in favour of the auction purchaser Sunil Tapadia as she wanted to settle the claim of the Bank. The Recovery Officer, however, dismissed both these applications filed by the appellant herein vide his orders dated 17.5.2012 and 3.7.2012 respectively and the sale in favour of the auction purchaser came to be confirmed on 3.7.2012 and sale certificate also came to be issued in his favour on 11.7.2012.

(E) The appellant then filed one appeal under Section 30 of the RDDBFI Act before the DRT, Jaipur (being Appeal No. 14/2012) challenging the rejection of her aforesaid two applications moved before the Recovery Officer. That appeal, in which the auction purchaser Sunil Thapadia was also a party, came to be allowed vide order dated 18.7.2012 of the DRT and the matter was remanded back to the Recovery Officer for a fresh decision after deposit of the amount as was required to be deposited under Rule 61(b) of the Second Schedule of the Income Tax Act and because of non-deposit of which amount the objection petition of the appellant/objector under Rule 61 was rejected by the Recovery Officer. The appellant deposited with the Recovery Officer the entire recoverable amount of Rs. 24,20,000/- on 18.7.2012. The Recovery Officer however, after hearing the parties, including the auction purchaser, once again rejected the request of the appellant for setting aside the sale of her property vide his order passed on 20.11.2012. The appellant once again approached the DRT, Jaipur with an appeal against the said order of the Recovery Officer. That appeal (being Appeal No. 22/2012) was, however, rejected by the DRT vide impugned order dated 28.2.2014."

The relevant portions of the order of the DRT are-produced below:

"9. I find that the R.O. has earlier vide order dated 17.5.12 passed in execution replication No. 41/05 has rejected the application of the Applicant filed under Section 61 of Second Schedule of Income-tax Act, 1961 on 3.2.2012 for setting aside the auction dated 20.10.2008 in respect of residential plot situated at Khasra No. 910, Village Javed, Kankroli on the ground that Appellant has not deposited the amount recoverable from him in execution of R.C. as required under Rule 61(b) of Second Schedule of Income-tax Act, 1961 which stipulates that -- "the applicant made by the defaulter under this rule shall be disallowed unless the applicant deposits the amount recoverable from him in execution of recovery certificate". Thus, as per Rule 61(b) of Second Schedule of Income Tax Act, 1961, the application of Applicant was rejected by the R.O. The Appellant filed an appeal No. 14/12 against the orders dated 17.5.2012 and 3.7.2012 passed by the R.O., DRT, Jaipur in execution application No. 41/05 and the Tribunal vide order dated 18.7.2012 set aside the orders dated 17.5.2012 and 3.7.2012 passed by the R.O. in E.A. No. 41/05 as the appellant as per directions of Tribunal has deposited the entire recoverable amount of Rs. 24.20 lac under Rule 61(b), the Tribunal remanded back the case to R.O. to decide the objections of the Appellant on merits after hearing all the parties before him. The R.O.-I, DRT, Jaipur thereafter vide order dated 20.11.12 considered the objections of the Appellant filed under Section 61 of Second Schedule of Income-tax Act, 1961 in Para 14 held as under--"In the present matter it is an admitted fact that auction was held on 20.10.2008 and Auction Purchaser has deposited the entire amount of sale proceeds within prescribed period but the sale could not confirmed in his favour up to May 2012 due to stay order passed by the Hon'ble Rajasthan High Court, Jaipur Bench, Jaipur in S.B.C.W.P. No. 12401/08. Thereafter, the sale was confirmed in favour of the Auction Purchaser. when the W.P. No. 12401/08 filed by the CD. No. 4 (Appellant) was dismissed on 8.11.2011 and also after rejecting of the objections filed by the CD. No. 4. The objections filed by the CD. No. 4 were rejected vide order dated 17.5.2012 and sale was confirmed in favour of the Auction Purchaser vide order dated 3.7.2012. The objections filed by the CD. No. 4 heard on merits as per directions of the Hon'ble P.O., DRT, Jaipur and Hon'ble Chairperson, DRAT, New Delhi. The CD. No. 4 has not raised any objection regarding service of demand notice or on the ground of material irregularities in publishing or conduction the sale. It is also an admitted fact that CD. No. 4 has not filed any objection for setting aside the sale within time limit of 30 days as prescribed under Rule 61 of Second Schedule of Income-tax Act, 1961. Although, he has deposited the recoverable amount of Rs. 24.20 lacs after a period of 4 years from the date of sale before the Presiding Officer during pendency of appeal under the provision or Order 34 Rule 5 of C.P.C.

The learned Counsel for the Auction Purchaser argued that provisions of C.P.C. are not applicable in the process of recovery under the RDDB & FI Act and facts of Judgment cited by the Counsel for CD. are entirely different than this matter hence, also not applicable. I agree with the contention of Auction Purchaser, therefore, I hold that the application filed by the CD. No. 4 is not covered under the provisions of Rule 61 of Second Schedule of Income-tax Act, 1961. The CD. has also not withdrawn the application filed under Rule 61. Hence, he is also entitled to make or prosecute an application under Rule 60 under the circumstances the objections filed by the CD. No. 4 are hereby rejected."

I have carefully considered the impugned order dated 20.11.2012 passed by R.O.-I, DRT, Jaipur. Admittedly, the Appellant has filed the application under Section 61 of Second Schedule of Income tax Act, 1961 on 3.2.2012 and requested to set aside the auction dated 20.10.2008 of residential plot situated at Khasra No. 910, Village Javed, Kankroli.

Rule 61 under which the appellant has filed the objections stipulates as under:

"Application to set aside sale of immovable property on ground of non-service of notice or irregularity--Where immovable property has been sold in execution of a certificate, the defaulter or any person whose interests are affected by the sale, may at any time, within thirty days from the date of the sale, may at any time, within thirty days from the date of the sale, apply to the Tax Recovery Officer to set aside the sale of the immovable property on the ground that notice was not served on the defaulter to pay the arrears as required by this Schedule or on the ground of a material irregularity in publishing or conducting the sale:

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

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

I find that although the Appellant has deposited the recoverable amount under execution of certificate under Rule 61(b) of Second Schedule of Income-tax Act, 1961 pursuant to order dated 18.7.2012 passed by the Tribunal in Appeal No. 14/12 wherein the R.O. was directed to hear the objections of the Appellant afresh filed under Rule 61 of Second Schedule of Income-tax Act, 1961. The appellant has not raised any objection regarding service of demand notice for payment of arrears or ground of martial irregularities in publishing or conducting the sale, I, therefore, hold that the R.O. vide order dated 20.11.2012 has rightly rejected the objections of the appellant filed under Rule 61 of Second Schedule of the Income-tax Act, 1961 as the appellant has failed to establish non-receipt of notice or show any material irregularity in publishing or conducting the sale. The appellant is merely harping on the point that since she has paid the entire recoverable amount of Rs. 24.20 lacs Under Order 34 Rule 5, C.P.C. the auction shall be set aside and the order dated 20.11.2012 passed by the R.O. be quashed. This contention of the Appellant is devoid of merit and out of context as the Appellant has only challenged the order dated 20.11.2012 rejecting her objections filed under Rule 61 of Second Schedule of Income-tax Act, 1961.

I hold that Recovery Officer has rightly rejected the objection application of the appellant filed under Rule 61 of Second Schedule of Income-tax Act, 1961. I, therefore, dismiss the appeal. The Recovery Officer is directed to return the amount of Rs. 24.20 lacs deposited by the Applicant, to the applicant. The appeal of the appellant is disposed of accordingly."

The appellant, however, did not give up her fight for getting back her property and so she filed the present appeal before this appellate Tribunal invoking Section 20 of the RDDBFI Act and she has impleaded not only the original auction purchaser Sunil Thapadia as respondent No. 2 but other persons also to whom Sunil Thapadia had sold her house sometime in the year 2014, as respondents 3 to 7.

Having narrated the background facts considered to be essential for the disposal of the present appeal, I now proceed to consider the submissions made by the learned Counsel for the parties.

The learned Counsel for the appellant had mainly submitted that this is case where without any justification appellant's property has been sold in execution of the recovery certificate inasmuch as the assets of the principal borrower Company had already been sold in auction for the recovery of the dues of Rajasthan State Financial Corporation for Rs. 45,91,111/- and that a part of that money could have been appropriated towards the satisfaction of the recovery certificate in the present case, but the Bank did not care to get its share realised from the said amount. It was also contended that this was the point raised before the Recovery Officer also but in the impugned order the same has not been dealt with and even the DRT in appeal has not dealt with this objection of the appellant.

Learned Counsel for the Bank and the respondents 3 to 7 who had purchased the property in question from the auction purchaser on the other hand submitted that this is a meritless appeal and sound reasons had been given by the Recovery Officer as well as the DRT while not accepting the appellant's objection petition under Rule 61.

In my view, for this reason urged by the Counsel for the appellant the present appeal cannot be allowed. It has been the admitted case of the appellant throughout that the money which was realized from the sale of the properties belonging to the borrower Company (which has not Been impleaded by the appellant in this appeal) has till date not been allowed to be released in favour of anyone by the Hon'ble Rajasthan High Court which, as noticed already, had in the writ petition filed in the year 2007 by the borrower Company directed not to be released. That writ petition, I was told during the course of hearing, is still pending in the High Court. If that be so, there was no occasion for the Bank to have approached the Collector, with whom the money is lying, with a request for release of the amount covered under the recovery certificate issued by the DRT, Jaipur, in the present case. The appellant herself was a Director in the borrower Company and if she was so much concerned for the release of the amount lying with the Collector in Rajasthan to be appropriated towards the satisfaction of the recovery certificate in the present case, she herself could have approached the Hon'ble High Court with a prayer for vacation/modification of the stay order which had been granted by it in the writ petition of the borrower Company. For reasons best known to the appellant only, she did not approach the Hon'ble High Court for the said relief and, therefore, she was not justified in objecting to the sale of her property in execution of the recovery certificate issued against her also at the instance of the Bank and rightly the Recovery Officer as well as the DRT did not accept the appellant's objection petition under Rule 61 of the Second Schedule to the Income Tax Act.

I am also of the view that in any event the appellant could have filed an objection before the Recovery Officer for setting aside of the sale of her property after depositing the amount of money as provided under Rule 61 (b) within a period of 30 days from the date of the sale. Admittedly, she did not invoke Rule 61 within the said period prescribed under the rules and, therefore, the Recovery Officer was fully justified in not entertaining her objection petition. The Recovery officer was also right in observing that the objector had not sought setting aside of the sale on the ground that no notice was served upon her to pay the arrears as required under Rule 2 of the Second Schedule to the Income Tax Act of on the ground that there was any material irregularity in publishing or conducting the sale. The Hon'ble High Court of Rajasthan had observed while dismissing the appellant's writ petition that the, attempt of appellant (writ petitioner) was only to delay the recovery of Bank's dues. The aforesaid facts show that whatever steps the appellant took after rejection of her writ petition by filing objection petition before the Recovery Officer were also aimed at delaying the closure of this litigation pending for almost two decades. For the aforesaid reasons, I find this appeal to be highly frivolous and misconceived one and, therefore, it is liable to be dismissed with cost. This appeal is accordingly dismissed with costs quantified at Rs. 30,000/-.