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Judgment
Ranjit Singh, J
These four Appeals are pending decision for quite some time. Though the challenge in all the four appeals is against a common order but all the appellants in these cases have different grievances to make. Accordingly, it will be appropriate to notice the challenge made in the respective Appeals separately so as to properly appreciate the submissions that have been advanced in these Appeals.
Appeal No. 265/2005 - Punsumi Device v. Manoj Kumar Agarwal.
Canara Bank (respondent No. 3) had filed O.A. for recovery of a sum of Rs. 2,69,58,520/- against the appellant Punsumi Device which is a partnership firm. Mr. V.K. Bhargava, Ms. Madhu Bhargava, Mr. Punit Bhargava, Ms. Shanti Bhargava and Col. Y. Bhargava were impleaded ad defendant Nos. 2 to 6 respectively with the plea that they were personal guarantors as well as had equitably mortgaged their properties mentioned in the O.A. filed by the Bank. As per the appellants, the Tribunal below, while deciding the O.A. had found the following properties mortgaged by defendant Nos. 2 to 6 referred to above:
S. No
Name & Address of Property
Defendant who mortgaged
1
Plot No. 501, Nemi Sarar, Beed Khatipura, Jaipur
Shri Vishnu Bhargava
2
Plot No. 502, Nemi Sarar, Beed Khatipura, Jaipur
Smt. Madhu Bhargava
3
Plot No. 503, Nemi Sarar, Beed Khatipura, Jaipur
Smt. Shanti Devi
4
Plot No. 512, Nemi Sarar, Beed Khatipura, Jaipur
Col. Yogendra Bhargava
-
The case set up by the appellants is that the Tribunal below specifically mentioned that Ext. A-121 was a letter of Ms. Madhu Bhargava, Ext. A-122, sale deed of agricultural land but the Tribunal did not include the properties bearing Khasra Nos. 325 and 327 in the list of mortgaged properties as these were not mortgaged. In this regard, reference is made to the judgment dated 11th June, 2002. The issue in these Appeals arises out of execution undertaken in respect of the decree that was passed in the O.A. filed by Canara Bank.
Canara Bank filed an application seeking execution and the properties mentioned above as mortgaged properties, like, 501, 502, 503, 512, Nemi Sagar, Beed Khatipura, Jaipur were put to auction and a sum of Rs. 83.41 lacs was recovered. Subsequently, on 7th November, 2003, two properties, namely, Khasra Nos. 325 and 327 were also auctioned. Against the said auction, Ms. Madhu Bhargava as well as one Mr. Vijay Kumar Jain filed objections. Mr. Vijay Kumar Jain is appellant in Appeal No. 342/2011 and his objections were on the ground that he had purchased this property from defendant Nos. 2 and 3, i.e. Mr. V. K. Bhargava and Ms. Madhu Bhargava through an agreement to sell dated 1st September, 1993. Dispute arose between the parties on account of this agreement to sell. The agreement contained an arbitration clause and accordingly the dispute arising between the parties was referred to three arbitrators who passed their Award on 15th April, 2001 in favour of Mr. Vijay Kumar Jain. Thus, the decree of specific performance was passed by the arbitrators.
The objection of Mr. Vijay Kumar Jain further was that the said decree was put to execution and sale deed was executed through Court. On this basis, Mr. Vijay Kumar Jain would contend that he was in possession of the agricultural land and came to learn about the auction from the servant of Mr. Shiv Diyal as he was in the U.S.A. On learning about the auction, he immediately filed his objections. He further submits that Mr. Navratan, the father of the auction purchaser himself wanted to purchase this property and had offered a handsome amount whereas the property has now been auctioned for a meagre amount. He had also raised an objection that the land being an agricultural land could not have been put to auction.
The objections filed by Mr. Vijay Kumar Jain were dismissed on 27th July, 2004. The R.O. held that the property was mortgaged and the agreement to sell did not create any right, title or interest in favour of Mr. Vijay Kumar Jain in the said property. The R.O. has further observed that earlier objections filed by Dr. Chaturvedi for another piece of land had been dismissed and accordingly the objection filed by Mr. Vijay Kumar Jain also deserved to be dismissed.
Mr. Vijay Kumar Jain appealed against this order passed by the R.O., being Appeal No. 37/2004 before the DRT, Jaipur. The Tribunal stayed further proceedings in the execution. Simultaneously, Mr. Vijay Kumar Jain also filed an application before the R.O. for reviewing its order dated 27th July, 2004.
In the meantime, the appellant judgment-debtor (JD) field an application before the R.O. stating that the Bank had entered into a compromise and One-Time Settlement with the borrower, which was accepted by the Bank, and pursuant thereto the entire amount of Rs. 1,47,32,000/- was paid by the judgment-debtor and thus the Recovery Certificate stood satisfied. The plea by the judgment-debtor was that the auction carried out in regard to the property bearing Khasra No. 327 be therefore cancelled.
Mr. Vijay Kumar Jain who had filed an Appeal against the order passed by the R.O. withdrew his Appeal with liberty to prosecute his review application before the R.O. The R.O., however, dismissed the review application on 6th July, 2005 by holding that whether property was mortgaged or not would be decided at the time of confirmation of sale. While dismissing the review application, the R.O. also observed that there was no error apparent on the face of record except the factum of creation of mortgage. MR. Manoj Kumar Agarwal, who was the auction purchaser, had submitted an application for issuance of sale certificate and for confirmation of sale. The R.O. dismissed this application on the ground that the property was not mortgaged, as such, the auction was bad for want of attachment in terms of Rules 61 and 62 of the Second Schedule to the Income-tax Act.
Mr. Vijay Kumar Jain filed and Appeal against the order so passed by the R.O. dismissing the review petition. Mr.Manoj Kumar Agarwal, on the other hand, had filed an Appeal against the order dismissing his application for confirmation of sale. Mr. Vijay Kumar Jain also filed an application for being impleaded as party respondent in Appeal filed by Mr. Manoj Kumar Agarwal. His plea was rejected by the Tribunal. The Tribunal below, vide its order dated 28th October, 2005, dismissed the Appeal filed by Mr. Vijay Kumar Jain while allowing the Appeal of Mr. Manoj Kumar Agarwal. It is against this order dated 28th October, 2005, that the present Appeals have been filed by the parties.
Appeal No. 342/2011 - Vijay Kumar Jain v. Canara Bank.
In this Appeal, Mr. Vijay Kumar Jain has not only prayed for setting aside the order dated 28th October, 2005 passed by the DRT, which is under challenge in Appeal No. 265/2005 as well, but has also prayed for allowing his review application which he had filed before the R.O. and has been dismissed vide order dated 6th July, 2005.
Appeal No. 290/2004 - Ajay Pal Singh v. Canara Bank.
Mr. Ajay Pal Singh has filed an Appeal to challenge the order dated 15th October, 2003 whereby the R.O. acting upon the execution petition filed by the decree-holder and pursuant to the Recovery Certificate had confirmed the sale of the property bearing No. 501 situated at Nemi Sagar Colony. The appellant Mr. Ajay Pal Singh claims to have filed an objection before the R.O. as soon as he learned about the auction proceedings of plot No. 501 situated in Nemi Sagar Colony, Jaipur. His plea before the R.O. was not that this plot did not belong to defendant Nos. 2 to 6 in the O.A. and thus the R.O. was not competent to direct the sale of the said property. The appellant claimed that the property solely belonged to him and he was neither a party to the recovery suit nor availed any loan from Canara Bank. He also relied upon the order passed by the District Judge, Jaipur confirming the sale and the legal right of the appellant in the aforesaid property and the direction issued to respondent No. 3, Mr. V.K. Bhargava to hand over the physical possession of the said property and direction to have the sale deed registered within two months from the date of decree. His grievance is that the R.O. ignored the provisions of the Act and in utter haste dismissed the said application with liberty to raise such objection after the sale of the aforesaid property. The appellant claims to have filed an objection against the sale, which was rejected on 15th October, 2003. The appellant had preferred the Appeal against the said order before the Tribunal below. It is stated that the Tribunal below in its order dated 28th November, 2003 failed to decide the core issue of Appeal and dismissed the Appeal without deciding the legal issue. Being aggrieved against the order dated 28th November, 2003, he has preferred the present Appeal.
Appeal No. 289/2004 - Grish Chandra Chaturvedi v. Canara Bank
Appellant Dr. Girish Chandra Chatruvedi had filed his Appeal to challenge the order dated 15th October, 2003. He had a grievance against order passed by R.O. confirming the sale of the property Nos. 502, 503 and 512 situated in Nemi Sagar Colony, Jaipur. He is also one of the objections who claim to have filed objections, when he came to know about the auction of the property noted above. His plea also was that the plots in question did not belong to respondent Nos. 2 to 6 and thus the R.O. could not have directed the sale of the said property by way of auction. He claimed to be the owner of the property. Being not a party to the recovery Suit or not a borrower, he had filed objections on the ground that the legal right qua the above said property had already been transferred in favour of the appellant through a sale agreement dated 25th August, 1993 for a consideration of Rs. 4.85 lacs. As per this appellant, only a balance amount of Rs. 35,000/- remained to be paid, which was agreed to the paid at the time of registration of the sale deed. This appellant had also relied upon the Award given by an arbitrator as the dispute arose over the agreement to sell The arbitrator is stated to have directed for handing over the possession of the property to this appellant once the appellant made the remaining payment. Objections, on these grounds were filed before the R.O. when the execution was pending. At this stage, even the execution of the Award was pending before the District Judge, Jaipur. The R.O. however, dismissed the stay application with liberty to raise such objections after the sale of the said property. Thus, the appellant again filed an objection against the order of sale which had been rejected by the R.O. vide his order dated 15th October, 2003. Aggrieved against the same, he challenged the order by filing an Appeal before the Tribunal below, which has been dismissed on 28th November, 2003. Grievance of the present appellant is also that the Tribunal below did not decide the core issue arising in the Appeal and, hence, the present Appeal to impugn the order passed by the R.O. as well as the Tribunal below.
Pleas by the Bank and Respondent Auction Purchaser
The Bank as well as the respondent auction purchaser has filed reply. The perusal of the reply would show that the Bank on 1st January, 2001 had filed O.A., for the recovery of Rs. 2,69,58,520/- against the appellant Punsumi Devices and others. This application was decided on 11th June, 2002 and Recovery Certificate was issued. During the pendency of the recovery case, immovable properties bearing Khasra Nos. 325 and 327 situated at village Nangal Jaisa Bohra were put to public auction on 7th November, 2003 under the order passed by the R.O., DRT, Jaipur. In his affidavit dated 6th March, 2006 filed by Mr. Raj Kumar, Chief Manager, Canara Bank had submitted before the Tribunal that before the sale could be confirmed by the R.O. the Bank had entered into a compromise with the appellants who have paid an amount of Rs. 2.2 crore along with Rs. 29,30,416/- on account of interest as full and final settlement of claim. It was further stated that since the full compromise amount had been recovered, the R.O. was liable to dispose of the Recovery Certificate as satisfied. It was accordingly pleaded that the issue whether property at Khasra Nos. 325 and 327 had been mortgaged with the Bank did not survive for consideration. The Bank accordingly pleaded that the Appeal may be disposed of with the direction to the R.O. and the Presiding Officer of the Tribunal below to dispose of the recovery case as satisfied.
The auction purchaser in his reply had stated that the prayer made before the Presiding Officer of the Tribunal for release of title deed and for seeking declaration that the property 1 Bigha 3 Biswas comprising Khasra No. 325 could not be sought from the Tribunal and thus this application deserved to be dismissed. As per the auction purchaser, the appellants had not projected the case in a correct perspective. The auction purchaser would urge that in judgment dated 11th June, 2002 all the seven properties were held to be mortgaged in favour of CH Bank and Recovery Certificate also provided that such amount shall be recovered from the JDs from the sale of mortgaged properties and hypothecated goods, plant and machinery and their personal properties. It was also mentioned in the impugned judgment that if redemption was not sought by making payment of the certified dues within a period of six months, then the R.O. was to initiate recovery proceedings under which four properties situated in Nemi Sagar Colony, Jaipur were to be ultimately sold. In respect of two properties, the auction purchaser emerged as the highest bidder in a public auction held on 7th November, 2003.
In response to the OTS proposal which had been advanced on behalf of the appellant, the auction purchaser would submit that at the time of auction this fact was not made known in any manner and thus the conceited adjustment between JDs and the Bank on the back of the answering respondent would be an attempt to overreach the process of law. The answering respondent would term the OTS to be a process to hoodwink the entire judicial system and put the CH Bank under serious loss without following due process of law.
The assertion by the appellant that the property Khasra No. 325 was not mortgaged with the CH Bank is denied. It is pointed out that during the execution proceedings the R.O. has also held that these properties were mortgaged and this aspect would get confirmation from the judgment dated 11th June, 2002 and the order passed by the Recovery Officer dated 27th July, 2004. The auction purchaser accordingly contended that the title deeds relating to these properties could not be claimed, these properties being charged/mortgaged and the execution proceedings of the Recovery Certificate dated 11th June, 2002 has not reached any final conclusion. Accordingly, the auction purchaser has prayed for dismissal of the Appeal.
Discussion
In view of the respective stand taken on behalf of the appellants and the auction purchaser, the issue which would arise for consideration would be in regard to the status of the properties which had been put to auction. In addition, the rights of the appellants like, Vijay Kumar Jain, Dr. Girish Chand Chaturvedi would also need to be considered as they had filed objections and had claimed that these properties had been purchased by them. Undisputed facts are that the Original Application filed by the Bank was decreed and a Recovery Certificate was issued. The Tribunal in its judgment dated 11th June, 2002 has held the appellant and other defendants jointly and severally liable. The Tribunal has further held that the Bank is entitled to recover the debt by sale of mortgaged properties and hypothecated goods, plant and machinery and the personal properties, defendants were given six months time to deposit the amount determined with interest @ 6% p.a. and in that event, the Bank was to return the original document to the defendants. If the defendants/appellants failed to deposit the amount within six months, they were held liable to pay the amount with interest @ 12% p.a. simple by sale of mortgaged property, hypothecated plant and machinery and personal property.
The case set up by the appellant is that during the pendency of the recovery proceedings they had entered into a One Time Settlement with the Bank, which was accepted and accordingly, the auction of the property which was held during this time needs to be set aside, especially so, when the said auction has so far not been confirmed. The appellants would also plead that the auction of two properties, namely, Khasra Nos. 325 and 327 could not have been held as these were not mortgaged properties and on this count also the auction of these properties held in favour of the auction purchaser is required to be interfered with.
19.The Counsel for the appellant has made a detailed reference to the manner in which the OTS proposal came to be accepted. As per the Counsel, first offer in this regard was made on 7th December, 2001 when JD sought settlement on payment of Rs. 149.50 lacs. The Bank asked the appellant JD to improve this offer and accordingly on 5th April, 2002 the appellant JD made an offer of Rs. 190 lacs. This was still not accepted and the appellant made yet another improved offer on 4th June, 2002 by offering a sum of Rs. 197 lacs. Obviously, this OTS proposal. The A.O. were being considered during the pendency of the Original Application came to be decreed on 11th June, 2002. The Bank did not accept the improved offer made by the appellant on 4th June, 2002. The same was further improved on 30th June, 2002 by changing some EMI payable. This still was unacceptable to the Bank, when the appellant made yet an other improved offer on 27th November, 2002 for Rs. 200 lacs. This again did not find favour with the Bank, when 6th O.T.S. proposal was made on 26th February, 2003 for Rs. 202 lacs. This was finally accepted on 8th May, 2003 with the rider that the appellant was asked to modify the payment schedule. Since the OTS proposal cold not be brought to finality, auction of plot Nos. 501, 502 and 503 was held on 5th August, 2003. On the next day, i.e., 6th August, 2003, the plot No. 512 was also auctioned. The auction of the remaining two properties was held on 7th November, 2013. The Counsel for the appellants would contend that mere fact that the auction of the properties was not held together would show that the two properties, namely, plot Nos. 325 and 327 were not mortgaged.
The plea as projected by the appellants is contested by the auction purchaser as well as by the Bank. It is noticed that the auction of all the properties was completed by 7th November, 2003. The OTS proposal which was under consideration finally came to be accepted on 25th July, 2005 and till then the Bank was well within its right to seek auction of the properties in question once the amount decreed had not been paid within a period of six months, as per the Recovery Certificate. It is on account of this OTS which was under consideration and seemingly accepted that the JD filed an application to urge that the auction proceedings had become infructuous as the JD had paid full amount and sale in favour of the auction purchaser had not been confirmed. The auction purchaser, on the other hand, filed an application before the Recovery Officer to confirm the sale in his favour. Both the applications were considered by the Recovery Officer and disposed of vide order dated 6th July, 2005.
The auction purchaser filed reply to the above noted application filed by the J.D. In his reply, the auction purchaser would contend that the JD did not file any objection to the notice of proclamation issued and had also not filed any objection as per Rule 60 of the Second Schedule to the Income-tax Act. The plea accordingly was that he had no locus to file this application and as such it was prayed that this application be dismissed.
The Bank did not file any reply to this application, but the Counsel representing the Bank stated before the R.O. that the compromise had been reached between the Bank and the J.D. The auction purchaser, however, in his application disclosed that he had deposited the entire amount and granting the sale certificate was the procedural act and was not a judicial act and accordingly prayed that the certificate be granted and sale be confirmed in his favour. In support of the plea the auction purchaser relied upon the judgment in the case of Shankuntala S. Tiwari v. Hem Chand M. Singhania, AIR 1987 SC 1823; Jauwad Ali v. State of U.P., AIR 2001 All. 86.
The plea by the appellant JD was that the auction held on 7th November, 2003 were erroneous as the said property had not mortgaged. As per the appellant, these properties could not have been put to auction without its attachment. The R.O. then went on to examine if the property auctioned on 7th November, 2003 in favour of the auction purchaser were mortgaged property or not. The Recovery Officer has held that the was only to execute the Recovery Certificate issued by the Tribunal and could not on its own alter or change the order passed by the Tribunal. Reference was made to that part of the judgment passed by the Tribunal where the points 5 and 6 were discussed by the Tribunal and the finding on these points returned. The plea by the appellants was that the Presiding Officer had noted the list of mortgaged properties were these two properties of Khasra Nos. 325 and 327 were not listed. The Recovery Officer considered this aspect and held that the Tribunal had clearly enumerated at serial Nos. 1 to 4 the properties which were kept in mortgage by the JD. On this basis, the Recovery Officer took a view that property bearing Khasra Nos. 325 and 327 were not mortgaged properties and these were required to be attached before putting these properties to auction. On this basis, the Recovery Officer declined the request of the auction purchaser for confirmation of sale in his favour and rejected his application. He then went on to consider the prayer made by the appellants on the basis of compromise/OTS proposal for withdrawing the Recovery Certificate. The Recovery Officer further observed that it was only the decree-holder Bank to inform the Recovery Officer whether compromise has been effected or not and directed the Bank to file an affidavit to this effect as to whether compromise had been effected or not and if the Bank wanted to withdraw the Recovery Certificate. The Recovery Officer also issued direction for initiating departmental/disciplinary proceedings against Manager of the Canara Bank for giving false information regarding Khasra Nos. 325 and 327.
Another application seeking review of the order dated 27th July, 2004 also came to be decided by the Recovery Officer. The objector had sought review of the order dated 27th July, 2004 whereby their objections were dismissed on the ground that there was no error apparent on the face of the record. The review was sought on the ground that the Recovery Officer had not taken note of Rule 11 of the Second Schedule to the Income-tax Act which was applicable and had erroneously come to the conclusion that Rules 60 and 61 of the said Schedule were applicable to the case in hand. The finding by the Recovery Officer that the property in question was mortgaged was also termed as erroneous and so also against the observations that the objector had no interest in the property in question. Reference was made to the arbitration Award which was termed as having binding force to urge that the objector had enough interest in the property concerned. The objector had also made reference to some case laws in support of his plea.
The decree-holder Bank, on the other hand, pleaded before the Recovery Officer that the Recovery Officer had no power to review its own order whereas Counsel for the auction purchaser prayed for dismissing the petition in limine as the order dated 27th July, 2004 did not suffer from any infirmity. While holding that the Recovery Officer had full power to adjudicate the review petition, he went on to hold that the impugned order did not suffer from any error apparent on the face of the record which would necessitate review of the said order. The application was accordingly dismissed.
The auction purchaser, obviously, felt aggrieved against the order passed by the Recovery Officer and accordingly filed an Appeal before the Tribunal below. The plea in the Appeal was that the Recovery Officer had committed serious mistake in observing that the property auctioned on the 7th November, 2003 were not mortgaged properties. As per the auction purchaser, the Recovery Officer was only required to execute the certificate issued and had no jurisdiction to dig out material from the record to interpret the judgment. In the Appeal, it was pointed out that the Recovery Officer had completely forgotten the order passed by his predecessor on 27th July, 2004 where it was held that the property in question was mortgaged and thus the order passed by the Recovery Officer on 6th July, 2005 was not within his competence. The appellants, however, took various objections in the reply filed in the Appeal. They even termed the Appeal filed with mala fide intention and strongly pleaded for upholding the order passed by the Recovery Officer, which was passed after due consideration of the judgment passed by the Tribunal below while allowing the Original Application.
The Tribunal below has observed that while rejecting the objection filed by the appellant Mr. Vijay Kumar Jain, the Recovery Officer has held on 27th July, 2004 that the property was mortgaged. The Appeal filed by Mr. Vijay Kumar Jain to challenge the order of the Recovery Officer was also dismissed. He then filed a review application before the Recovery Officer to review the order dated 27th July, 2004 which was also dismissed on 6th July, 2005. The Tribunal thus observed that it was unable to understand on what basis the Recovery Officer had held this property was not mortgaged with the CD Bank whereas the property was held mortgaged. There was no objection filed on behalf of Ms. Madhu Bhargava and others who has allegedly mortgaged this property. They never contended that the property was not mortgaged. The objector Mr. Vijay Kumar Jain became party on the basis of an agreement to sell The Tribunal observed that the agreement to sell did not confer any right in favour of Mr. Vijay Kumar Jain. The Tribunal has rightly observed that if the property had not been mortgaged as such an objection could have come from Ms. Madhu Bhargava.
The Tribunal had then referred to the finding returned in order dated 11th June, 2002. Reference is made to Exhibit A-121 which is a letter written by Ms. Madhu Bhargava and Exhibit A-122 which was sale deed regarding agricultural land. The deposit of these documents of title and execution of documents of deposit of title deed, according to the Tribunal, proved creation of mortgage. This fact had been proved by the evidence produced by the Bank. In this background, the Tribunal went on to hold that inadvertently due to some typographical mistake these properties had not been typed in the order passed by the Tribunal though seven properties had been mentioned as mortgaged properties. The Tribunal has observed, that in the order passed by the Tribunal in Original Application while discussing issue Nos. 5 and 6 of the Tribunal did not return any finding that these two properties bearing Khasra Nos. 325 and 327 were not mortgaged. It is also noticed that both the issues had been decided in favour of the Bank which is the certificate-holder. The Tribunal also examined Exhibit A-121 whereby the original title-deed had been deposited by Ms. Madhu Bhargava. She had also given a negative lien letter, which was on record, and undertaking that the property is an undertaking that the property is an agricultural land and after conversion of the same into industrial land she will file the permission thereof. She had also written letter that she will not demand title from the Bank till the Bank dues were paid. Besides she had also given an undertaking not to create any charge over the property without the consent of the Bank. On the basis of the documents and material on record the Tribunal below clarified that the property in question was mortgaged with the Bank. As per the Tribunal Recovery Officer had no occasion or power to say anything contrary to the judgment passed by the Tribunal which has decided issue Nos. 5 and 6 in favour of the Bank.
Another fact of significance which may need notice here is that the earlier Recovery Officer in its order 27th July, 2004 had clearly mentioned that the property was mortgaged and accordingly the present Recovery Officer had no jurisdiction to take a different view, especially so, when he himself has held while dismissing application filed by Mr. V. K. Jain, appellant, that the property was mortgaged. The Tribunal thus found that the order passed by Recovery Officer indicated that he had not applied his judicial mind to the facts on record and the earlier order passed by the Tribunal and Recovery Officer, as otherwise he could not have taken a view that the property was not mortgaged. Finding the impugned order dated 6th July, 2006 beyond the jurisdiction of the Recovery Officer as he had no power to ignore the finding returned by the Tribunal, the order was set aside. Directions were issued to the Recovery Officer to pass an order on the application of the auction purchaser regarding confirmation of sale in accordance with the provisions of law within 15 days, latest by 14th November, 2005. The Appeal was accordingly allowed. This order is now under challenge. The appellant, therefore, has filed the present Appeal to challenge this order passed by the Tribunal.
During the pendency of this Appeal, the appellant filed an application for release of title deed of the property Khasra No. 325 which according to the appellant was not auctioned. The plea raised in this application was that on one hand non-Applicant Bank was referring to and relying upon One Time Settlement with the appellant and on the other, was putting the property mortgaged to auction by way separate auction sale. Referring to the contention of the appellants that property Khasra Nos. 325 and 327 were not mortgaged and the fact that the during the recovery proceedings settlement had been arrived at between the parties for an amount of Rs. 2.02 crores plus interest on payment of which, the no due certificate had also been issued, prayer was made for release of the title documents.
This application was filed before the Tribunal with the grievance that the request for return of the title documents was declined on the ground that the said document was marked as exhibit before the Tribunal below. The appellant then filed a writ petition before the Rajasthan High Court and the High Court was pleased to direct the appellant to move an application before the Court concerned where the documents were adduced.
Appellant Mr. Punnet Bhargava had then filed an application before the Tribunal below for release of documents in respect of Khasra Nos. 325, but the Tribunal had adjourned the matter without passing any order on the ground that the appellant may seek clarification from this Tribunal where their Appeal was pending. The appellant accordingly moved this application before this Tribunal.
The Bank as well as the auction purchaser filed reply to the said application. The stand by the auction purchaser was that this property was very well mortgaged as was the finding returned by the Tribunal below. The Bank has also raised an objection about the maintainability of such an application terming the same to be without any substance. The Bank pointed out that the One Time Settlement had not been accepted by the Tribunal below and the order had been impugned by way of Appeal before this Tribunal, which is pending. The stand of the Bank, therefore, was that it was entitled to recover all the amount as per the Recovery Certificate. As per the Bank all the assets of the CD had been attached by the Recovery Officer and were liable to be sold and the sale proceeds realised and adjusted towards the dues. This stand of the Bank has been highlighted by the Council for the auction purchaser, in contrast to its earlier application filed seeking satisfaction of the Recovery Certificate.
Findings
The Counsel appearing for the parties have been heard. Ms. Shobha Gupta appearing for the appellant Punsumi Devices would submit that the Tribunal was obliged to discharge the recovery proceedings in view of the fact that the judgment-debtor and decree-holder had entered into a settlement and pursuant thereto the decree stood satisfied. The Counsel would also submit that the auction purchaser cannot have a better right over an owner or decree-holder when sale in his favour is yet to be confirmed. She would also challenge the sale on the ground that agricultural land for recovery of decretal amount is barred. In support of her submission that auction purchaser would get right only on confirmation of sale and until then his right is nebulous, the Counsel relied upon judgments in the case of Desh Bandhu Gupta v. N.L. Anand and Rajender Singh, (1994) 1 SCC 131; Padanthil Ruqmini Amma v. P.K. Abdulla, I (1996) CLT 443 = (1996) 7 SCC 668; Mohan Wahi v. Commissioner, Income-tax, Varanasi, III (2001) SLT 274 = (2001) 4 SCC 362; Chellamane Huchha Gowda v. M.R. Tirumala, VII (2003) SLT 578 = II (2004) CLT 109 (SC) = (2004) 1 SCC 453; Balakrishnan v. Malayandi Konar, II (2006) SLT 363 = (2006) 3 SCC 49 and Bogaram v. Mohanaram, AIR 1972 Raj. 116.
In fact, number of Written Submissions and large number of judgments have been left by the Counsel from time-to-time as the Counsel had been heard on more than one occasion. Each time new submissions and some judgments appear to have been put in the file. Some of these had earlier been cited whereas some have been added subsequently. The Counsel for the appellant, therefore, would further refer to case like Richpal Singh v. Davider Kaur Sethi, 1 (2008) BC 75 and Dr. Virendra Singh v. State Bank of India, IV (2006) BC 79. In both these cases the objections by the auction purchaser challenging the compromise proposal during the pendency of the Appeal were considered. The view taken is that the appellant being auction purchaser is a third party having no right to question the deed of compromise between the decree holder Bank and the JD borrower. It is held that the auction purchaser cannot have any say except that of his protection regarding his financial involvement as deposited on the basis of auction sale.
The Counsel for the Bank, however, has not made much submission and had remained contend by stating that the compromise was reached between the parties. The Counsel was unable to explain the varying stand that it adopted before the proceedings before the DRT and before this Tribunal. At one stage, the Counsel stood by the application which the Bank had filed on the basis of compromise to withdraw the proceedings but the Counsel was unable to reconcile the stand of the Bank while opposing the prayer for return of the properties.
The Counsel for the auction purchaser, however, has seriously contested the submission made by the appellants. He would rather press that the application filed by the auction purchaser for confirmation of the sale was bound to be allowed once the application under Order 21 Rules 89 to 91 was disallowed. In this regard, he has relied on case Janak Raj v. Gurdial Singh, AIR 1967 SC 608. The Counsel would further contend that the sale held in execution of money decree cannot be set aside except under Rules 89, 90 and 91 of Order 21. It is held in this case that recording of satisfaction of decree is not maintainable after sale had taken place even though the sale may not have been confirmed. In this regard reference is made to Kolluru Kantharao v. Tammana Narayana Murthi, AIR 1991 A.P. 24. The Counsel has also referred to Privy Council decision in the case of Nanhelal v. Umrao Singh, AIR 1931 P.C. 33, where it is held that adjustment after execution of sale between decree-holder and judgment-debtor would not affect purchaser's interest and so the sale cannot be set aside on the ground of adjustment. In this case also the adjustment between the decree-holder and the judgment-debtor came at the time before the confirmation of the sale, but it is held that it cannot nullify the decree by taking away the very foundation of Court's power to execute the decree. In fct, in Padanathil Ruqmini Amma's case (supra), the Court has held that if at a Court auction sale in execution of a decree, the properties were to be purchased by bona fide purchaser who is a stranger to the Court proceedings, the sale in his favour is protected. As per the Court restoration of the property can be ordered in favour of the judgment-debtor if decree-holder himself is auction purchaser and decree is set aside.
The Counsel would then refer to a decision of the Madras High Court in Machine Tools and Accessories (P) Ltd., v. The Debts Recovery Appellate Tribunal, Chennai, W.P. No. 10652/2009 decided 3rd December, 2010. In his case, the Petitioner before the Court had challenged the sale on the ground that it was not according to law. The Court in this case held that the petitioner has to follow Rules 60 and 61 of the Second Schedule to set aside the auction sale. As per Rule 60, this application is required to be filed within 30 days from the date of sale and Rule 61 requires that the amount specified in the proclamation of sale as that for recovery of which the sale was ordered alongwith interest thereon @ 15% p.a. will have to be deposited as pre-condition before projecting an application to set aside the sale. As per the Counsel, there is no such application seeking setting aside the auction in his favour and thus plea raised by the appellants would not be maintainable.
To challenge the right of the Vijay Kumar Jain, the Counsel would contend that mere agreement to sell will not create any interest of a person in the property which is put to auction to enable him to apply for setting aside such auction under Rule 60, especially, when his transaction was hit by Rule 16(1) read with Rules 51 and 48 of Second Schedule to the Income-tax Act. Counsel seeks supports in this regard from the case of K. Basavarajappa v. Tax Recovery Commissioner, Bangalore, (1996) 11 SCC 632, decided by the Hon'ble Supreme Court on 11th October, 1996. The Supreme Court in this case had held that the person having an agreement to sell could not be said to having any legal interest entitling him to move such an application. The Counsel would also make reference to Suraj Lamp and Industries Pvt. Ltd. v. State of Haryana, 183 (2011) DLT 1, where the Court has viewed that sale agreement/power of attorney/Will are not transfers or sales and that such transactions cannot be treated as completed transfers or conveyance.
The Counsel for the appellants would mainly submit that once the appellants had entered into an OTS with the Bank and the Bank had filed an application under Section 26(2) of the RDDBFI Act for withdrawal of the recovery proceedings, the Tribunal below was not justified in rejecting this prayer. The Counsel has been rather emphatic to urge that property bearing Khasra Nos. 325 and 327 were not mortgaged, and, in this regard, has referred to the finding by the R.O. and has found fault with the finding returned by the Tribunal below. As per the Counsel, the R.O. or the Tribunal below could not have interpreted the view expressed by the Tribunal while deciding OA to say that the Tribunal earlier had inadvertently not mentioned the said properties being mortgaged properties due to typographical mistake. On the other hand, the Counsel for the auction purchaser would contend that the R.O. went beyond his power and jurisdiction to go behind the decree passed by the Tribunal below holding that these two properties were not mortgaged.
The Counsel for the appellant would seek support from the case of Mohan Wahi (supra) to urge that confirmation of a sale would not be permissible where demand of tax for which Recovery Certificate was issued is reduced to nil by the higher authority before the confirmation of sale by the RTO. In this case, late Bhagwati Prasad owned a house at Varanasi. He had four sons and under his Will the house property devolved upon his sons. Two of his sons entered into a partnership dealing in import and sale of heavy machinery and road rollers. Because of labour unrest the business collapsed and the partners left Varanasi, Income-tax assessment of the partnership firm for the assessment years 1967-68 to 1969-70 were finalised. R.Cs. were issued in the year 1973-74 pursuant to which the house property was attached. Proclamation of sale of the property was issued setting out a demand of Rs. 30.82 lacs. The respondent before the Court made a bid for purchasing the property for Rs. 1.70 lacs which was the upset price. The bid was accepted. The auction purchaser deposited 1/4th of the money and the balance was also deposited within prescribed period of 15 days. The widow of third brother filed a Civil Suit before the Court of Civil Judge submitting that the share of the brother who were not partners could not have been attached and put to sale. The Civil Judge did not consider it proper to stay the auction sale but stayed the confirmation of the auction sale. In the Suit, the auction purchaser was also impleaded as party but the Suit ultimately was dismissed in default of appearance in January, 1998. Application for restoration was filed the next day and the Suit was restored in July, 1999. In the meantime, the firm agitated the manner in the hierarchy of the Income Tax Department. Their Appeal was dismissed. Appeals were filed before the Tax Appellate Tribunal which allowed all the Appeals. On being remanded, the Appeals were heard by CIT(A). Most of the matters relating to demand on account of tax, penalty and interest were resolved at the stage of CIT (Appeals). In the year 1989 several demands against the firm had stood wiped out and, therefore, reduced to nil. Income Tax Officer wrote to Commissioner of Income Tax the various demands raised against the firm had stood reduce to nil. The assessee firm wrote to Income Tax Officer that the refund was due and the Tax Recovery Officer may be advised for the cancellation of all the Recovery Certificates. In spite of the position the sale in favour of the auction purchaser was confirmed though in regard to the interest of P and S in the house property. The sale certificate was also issued. This order passed by the Tax Recovery Officer was put in issue before the CIT, but it dismissed the petition holding that the Tax Recovery Officer had no option but to accept the sale. The Petitioners, therefore, filed a writ petition challenging the order of the Tax Recovery Officer and that of the CIT. The Supreme Court, after referring to the provisions of Section 225, has considered the term 'reduced' in Sub-section (3) of the said section to hold it would include a case where the demand consequent upon an Appeal or any proceedings under the IT Act has been reduced to nil also. It is held that the Tax Recovery Officer is obliged to give effect to such reduction in demand and accordingly amend or cancel the certificate. As per the Court, the scheme of Part III of the Second Schedule indicates that the sale proceedings terminate on their becoming absolute whereafter all that remains to be done is the issuance of sale certificate. An order confirming the sale by the Tax Recovery Officer is a must. It is observed that the efficacy of the sale by public auction in favour of the highest bidder has been made to depend on the order of confirmation by the Tax Recovery Officer. The Court has observed that ordinarily if there is no application filed for setting aside sale under Rules 60, 61, or 62 and 30 days from the date of sale having expired, Tax Recovery Officer has to make an order confirming the sale. As per the Court, the combined effect of Section 225(3) of the Act and Rules 56 and Rule 63 of the Second Schedule is that if before an order confirming the sale is actually passed by the Tax Recovery Officer, the demand of tax consequent upon an order made in Appeal or other proceedings under the Act has been reduced to nil, the Tax Recovery Officer is obliged to cancel the certificate and as soon the certificate is cancelled, he shall have no power to make an order confirming the sale. The sale itself being subject to confirmation by the Tax Recovery Officer, would fall to the ground for want of confirmation.
Having given the legal position, the Court has further observed that no application either by the assessee or by auction purchaser or by anyone interest in the property was filed for setting aside the sale. On expiry of 30 days from the date of sale the Tax Recovery Officer could have passed an order confirming the sale. He, however, was injuncted by the Civil Court from confirming the sale. The order passed by the Civil Court ceased to operate when Suit was dismissed for want of present. Order confirming the sale was passed on 25th March, 1998. As per the Court, this order was passed being unmindful of the fact that the demand against the assessee had reduced to nil. This fact was in the notice of ITO. The Court has accordingly held that the Tax Recovery Officer could not have confirmed the sale. Otherwise, the Court has held that ordinarily in the absence of application under Rules 60, 61 or 62 having been made, or having been rejected if made, on expiry of 30 days from the date of sale, the Tax Recovery Officer shall pass an order confirming the sale.
The Court in this case has also considered the ratio of law in the case of Janak Raj (supra) and Sardar Govindrao Mahadik v. Devi Sahal, Air 1982 SC 389. In these cases, the Court has viewed that where the sale had taken place in execution of a decree the sale has to be confirmed notwithstanding the fact that after holding of sale, the decree was set aside. In Janakraj's case (supra), the sale was held in execution of an ex parte decree. Ex parte decree was set aside subsequent to the date of the sale but before an order confirming the sale was passed. The Hon'ble Court held that in the absence of an application for setting aside the sale having been moved on the ground available under Rules 89 to 91 of Order 21 of CPC, the Court could not have refused to confirm the sale. As held in this case, there may be cases in which apart from the provisions of Rules 89 to 91 of Order 21 of CPC the Court may refuse to confirm a sale, as for instance, where the sale is held without giving notice to the judgment-debtor, or where the Court is misled in fixing a reserved price or where there was no decree in existence at the time when the sale was held. In Sardar Govindrao's case (supra), Court has referred to the case of Janakraj (supra). The Court in this case has drawn distinction between a Court auction held in favour of a decree-holder and where the auction-purchaser is an outsider or a stranger. In the former case, on the decree ceasing to exist before the sale is confirmed, the sale may be refused to be confirmed in the latter case, equity in favour of the stranger should be protected and the judgment-debtor should be left to suffer for the default on his part for not obtaining stay of the execution of the decree from where it was under challenge.
In my view, the judgment in the case of Mohan Wahi would not apply to the facts in the present case. The ratio in the case of Janakraj and Sardar Govindrao (supra), in fact, seems to be applicable to the facts in the present case. Concededly, the appellant has not challenged the sale notice and has also not challenged the order passed in the O.A., leading to issuing of Recovery Certificate. The property was put to auction and the third party who is a stranger to the proceedings was a successful bidder. He sought confirmation of sale in his favour whereas the case of the appellant was that on account of a compromise the decree stood satisfied and so the certificate ought to have been withdrawn under Section 26 of the RDDBFI Act. Till this date of auction the OTS proposal was under consideration. As already noted the OTS proposal remained under consideration for nearly four years. The offer having been made on 30th June, 2002 remained under consideration where the appellant kept on increasing their offer with hardly any substantial increase of amount. Though the Counsel for the appellants would contend that the OTS proposal was accepted on 8th May, 2003 but this is a factually incorrect statement. Having said so, the Counsel herself stated that the appellants were asked to modify the payment schedule. Thus, it would clearly show that the OTS proposal had not been accepted by them. The properties in the meantime were put to auction on 5th August, 2003 and 6th August, 2003 and the two properties were subsequently put to auction on 7th November, 2003. Concededly, the OTS proposal was accepted on 25th July, 2005 by which time all the properties had been sold. This proposal was accepted after one year and 8 months of the sale of the properties.
To meet the objection that properties were put to auction in piecemeal manner to urge that the properties which were mortgaged were put to auction earlier whereas the properties which were not mortgaged were auctioned subsequently, the Counsel for the auction purchaser would contest the same and would point out that the Bank had put all the seven properties to auction on 19th February, 2003. Auction of some properties took place on 4th August, 2003 and some of the properties on 5th August, 2003 and one property was auctioned on 6th August, 2003. These two properties could not be auctioned earlier and ultimately were auctioned on 7th November, 2003.
The Counsel for the auction purchaser therefore would contend that once no objection was filed to the sale by way of auction, the R.O. had no option but to confirm the sale. The plea raised by the Counsel for the appellant that till the confirmation, the right of the auction purchaser is nebulous as held in the case of Deshbandhu Gupta (supra) is answered with the law laid down in the case of Janakraj (supra) where the Court has held that even if decree is set, aside the right of the auction purchaser would not be affected even if the sale is not confirmed in his favour. The Court in this case has viewed that the purchaser's title relates back to the date of sale and not confirmation of sale. The Court has held that there is no provision in the Code of Civil Procedure which provides that the sale is not to be confirmed if it be found that the decree under which the sale was ordered has been reversed before the confirmation of sale. It does not seem ever to have been doubted that once the sale is confirmed the judgment-debtor is not entitled to get back the property even if he succeeds thereafter in having the decree against him reversed. As per the Court, the question is whether the same result ought to follow when the reversal of the decree takes place before the confirmation of sale. The Court has accordingly held that there does not seem to be any valid reason for making a distinction between the two cases. As is observed, it is certainly hard on the defendant-judgment-debtor to have to lose his property on the basis of a sale held in execution of a decree which is not ultimately upheld. Once however it is held that he cannot complain after confirmation of sale, there seems to be no reason why he should be allowed to do so because the decree was reversed before such confirmation. The Court has further observed that ordinarily if no application for setting aside sale is made under any of the provisions of Rules 89 to 91 of Order 21, or when any application under any of these rules is made and disallowed, the Court has no choice in the matter of confirming the sale and the sale must be made absolute. The Court has further held that if it was the intention of the Legislature that the sale was not to be made absolute, because the decree had ceased to exist, we should have expected a provision to that effect either in Order 21 or in Part 11 of the Code of Civil Procedure of 1908 which contains Sections 36 or 17 (inclusive). In this regard only the Counsel has referred to the case of Kollru Kantharao (supra). The Privy Council in the case of Nanhelal (supra) has considered this question by posing a question as under:
Has the Court no jurisdiction to confirm the sale in view of the fact that the decree-holder has admitted satisfaction of the decree?
Another question posed in this regard is "Has any interest of title accrued to the purchaser under the auction sale and if so, could it be defeated by a compromise arrived at in his absence"?
The judgment-debtor and decree-holder pleaded before the Court that decree has been satisfied out of Court, the lower Court was bound to enter satisfaction under Order 21 Rule 2. It is held that it erred in refusing to follow the rule of own High Court. The Court in this case has held in Paras 13 and 14 thus:
"13. It appears from the record before Their Lordship that there had been considerable conflict of opinion in the Court of the Judicial Commissioner on this subject, though the only reported case is that of Nilkant v. Yashwant, in which Kotwal A.J.C. was of opinion that an adjustment between the decree-holder and the judgment-debtor come to at any time before confirmation of an execution sale nullified the decree, taking away "the very foundation of the Court's power to execute the decree, viz., the existence of a decree capable of execution".
Their Lordships are unable to concur in this reasoning. In the first place, Order 21 Rule 2 which provides for certification of an adjustment come to out of Court clearly contemplates a stage in the execution proceedings when the matter lies only between the judgment-debtor and the decree-holder, and when no other interests have come into being. When once a sale has been effected, a third-party interest intervenes, and there is nothing in this rule to suggest that it is to be disregarded. The only means by which the judgment-debtor can get rid of a sale, which has been duly carried out, are those embodied in Rule 89, viz., by depositing in Court the amount for the recovery of which the property was sold, together with five per cent, on the purchase money, which goes to the purchaser as statutory compensations, and this remedy can only be pursued within thirty days of the sale - see Article 166, Schedule I of the Indian Limitation Act, 1908. That this is so, is, in Their Lordships' opinion, clear under the wording of Rule 92, which provides that in such a case (i.e. where the sale has been duly carried out), if no application is made under Rule 89" the Court shall make an order confirming the sale and thereupon the sale shall become absolute". Their Lordships make no reference to cases under Rule 91 which has no application to the present case. They only desire to add that the view they have expressed above accords with the judgment of Mitchell A.J.C. in the present case, with that of the Calcutta Judges in Bibi Sharofan v. Mahomed Habibuddin (supra) and they think, with that Mitchell A.J.C. when it was under consideration in the present case whether leave should be given in India to appeal to His Majesty in Council."
Having considered the submissions made before me and the law cited, I am of the view that none of the appeals has any merit. The appellant company has mainly relied upon two issues. One of the issues is that two properties bearing Khasra Nos. 325 and 327 were not mortgaged. The second plea to challenge the auction is the right of the auction purchaser which remains nebulous till the sale is confirmed. I have considered the case laws cited before me. The judgment in the case of Deshbandhu Gupta clearly is not applicable in the present case. The issue in the said case arose because of prayer for impleadment. The application for setting aside the execution sale was primarily against decree-holder since he is a person at whose instance and benefit the execution proceedings were initiated and the sale was held to discharge his decreed debt. The Court accordingly held that he was the person entitled to be heard and since he is in-charge of publishing the notices and to conduct the sale, it is he that says before the Court the steps taken or the procedure followed in service of notice or conducting the sale and to establish that they have been done properly, regularly and in accordance with law. Commenting about the right of the auction purchaser, the Court observed that he gets a right only on confirmation of sale and till then his right is nebulous. He is said to have only right to consideration for confirmation of sale. The Court has further observed that if the sale is set aside, apart from the auction purchaser, the decree-holder is affected since the realization of his decree debt is put off and he would be obligated to initiate execution proceedings afresh to recover the decree debt. Accordingly, the Court has held that the decree-holder is the affected necessary party. The Court has further observed that the auction purchaser need to be impleaded as nominee of respondent as the property was purchased jointly at the Court sale, it is enough that one among them had been impleaded as a party. It is not necessary to implead all the joint purchasers.
Thus, in my view, that the observation of the Court in regard to the right of the auction purchaser is in the context of he being impleaded as party and which is not in the context of the present case. The issue has rightly been considered and dealt with in the cases of Janakraj, Sardar Govindrao and Nanhelal (supra). Once no application is made to challenge the sale held by way of execution, the Court has no choice but to confirm the sale. The Andhra Pradesh High Court in the case of Kolloru Kontharao (supra) has even held that recording of satisfaction of a decree not maintainable after sale had taken place even though sale is not confirmed. The Madras High court in the case of Machine Tools (supra) has observed that petitioner had to follow Rules 60 and 61 of the Second Schedule to the Income-tax Act, which is a condition precedent for projecting any application to set aside the auction sale in favour of the auction buyer. The challenge by the person who claims to have purchased the property also failed to make any deposit as required. In any event, they have claimed their right on the basis of agreement to sell which in no case will create any interest in the property to enable setting aside such auction. The ratio of law emerging from the case of Chellamane Huchha Gowda (supra) apparently is not attracted to the facts of this case as in the said case the judgment-debtor paid the decree amount within stipulated period of one month which was not looked into by the Courts below.
The issue that the person entering into agreement to sell does not have right was considered to an extent by the Hon'ble Supreme Court in the case of K. Basavarajappa v. Tax Recovery Commissioner, Bangalore (supra). The Court in this case has clearly held that the agreement to sell creates no interest in the property. This was also a case where after receipt of notice under Rule 2 of Schedule Second of the Income-tax Act defaulter had entered into an agreement to sell the property with the appellant before the Supreme Court. The appellant before the Supreme Court has also filed a suit for specific performance of the agreement. During the pendency of the Suit, the R.O. attached the defaulter's property and after necessary proclamation, put the same to auction sale. The successful bidder became the auction purchaser, but the appellant filed an application under Rule 60 for setting aside the sale. The appellant before the Apex Court annexed a letter from the general power-of-attorney-holder of the defaulter authorizing him to deposit the amount of tax arrears. This application was rejected by the department authority. This order was initially quashed by the Single Judge of the High Court in a writ petition filed jointly by the appellant and the general power-of-attorney-holder of the defaulter, but the said order was upheld by the Division Bench which held that the appellant's application was not maintainable. Against this two SLPs were filed jointly by the appellant and the general power-of-attorney-holder of the defaulter but during the proceedings, at the notice stage the latter withdrew from the contest and the appellant alone pursued the two appeals as the sole appellant. The appellant before the Supreme Court contended that his application, being backed up by the letter of the power-of-attorney-holder of the defaulter authorizing him to deposit the tax amount on his behalf, was perfectly maintainable. The plea was that he had interest in the property as his suit for specific performance was not only pending on the date of the auction sale but had got decree by consent on the very next day of moving such application. As per the appellant, once the full claim of the revenue was deposited, it could not insist on such a technicality that the appellant's application was not maintainable qua the auction purchaser. Rejecting this contention and dismissing the appeal, the Supreme Court held that the application was moved by the appellant and not by the defaulter or its power-of-attorney-holder. The letter annexed to the application could by no stretch of imagination be considered an application under Rule 60 of Income-tax Act moved by the defaulter or its power-of-attorney-holder. The Court has observed that the appellant was putting forward his own claim as prospective purchaser of the property. On the date of application he was not armed with any decree granting specific performance of the agreement. The contention of the auction purchaser was accepted that when equities are to be balanced between the two rival claimants, the prospective purchaser of the auctioned property under an agreement to sell on the one hand and the auction purchaser who had purchased the property in the tax recovery proceedings on the other, it has to be seen whether the appellant could claim any legal interest and even a preferential interest in the property which would entitle him to get the auction sale set aside. Rule 16(2) is noticed and is found clearly to have hit the said agreement. The Court found that by entering into such agreement to sell his property, the defaulter had clearly committed breach of Rule 16(1) and had bypassed the procedure laid down therein for getting permission of Tax Recovery Officer. The Court ultimately held that the appellant had no locus standi to move the application for getting the auction sale set aside. The Court also noticed that he had no legal interest in the said property on the date of application. As per the Court, it is axiomatic that mere agreement to sell creates no legal interest or right in the property which is the subject matter of the agreement. By mere agreement to sell a person gets no interest in the property put to auction to enable him to apply for setting aside such auction under Rule 60 of Second Schedule to Income-tax Act and especially when his transaction was hit by Rule 16(1) read with Rules 51 and 48 of the said Schedule. The Court finally held that he could not be said to be having any legal interest to entitle him to move such an application.
Accordingly, I am unable to accept the submission made by the Counsel for the appellants that the right of the auction purchaser is nebulous and he cannot seek confirmation of sale.
I cannot also accept the submission that the properties in question were not the mortgaged property. The earlier order passed by the Recovery Officer on 27th July, 2004 had clearly held that these properties were mortgaged. The order passed by the Tribunal below while deciding the O.A. is rather clear and is free from any doubt. While considering the issue whether the appellant had created any equitable mortgage in respect of the properties mentioned in the Original Application, the Tribunal has clearly considered Exhibits A-121 and A-122 which were sale deeds regarding agricultural land. The Tribunal has observed that the deposit of all these documents of title and the execution of the documents for deposit of title proved creation of mortgage. The Tribunal has further held that these documents were executed by Mr. V.K. Bhargava and Ms. Madhu Bhargava and Mr. Puneet Bhargava and these facts have been proved from statements of Mr. T. Rajendra, Mr. R. K. Mangwana who stated in the affidavits that all these defendants (appellants) had executed above documents to deposit the title deeds of their properties in the Bank as security to the loan given to the borrower company. In the impugned order the Tribunal has rightly noticed that the mortgage could be challenged only by those who executed them but not by the appellant like Mr. Vijay Kumar Jain who claims to have purchased this property. They were not the owner who have mortgaged these properties and thus had no locus to challenge the same. Once the persons who had mortgaged these properties have not come forward to challenge the mortgage, this plea could not have been entertained at the stage of recovery proceedings either on behalf of the appellant company or on behalf of the other appellants who are stated to be the purchasers of the properties.
The plea by the appellant that only four properties are mentioned in the order passed by the Tribunal while deciding the Original Application as the mortgaged properties, is totally misconceived and misplaced. While so pleading, the Counsel has conveniently ignored the finding recorded by the Tribunal where property Khasra Nos. 325 and 327 were also held to be mortgaged properties. Simply because of non-mentioning of these properties in one part of the judgment cannot itself be enough to say that these properties were not mortgaged. The R.O. while passing the order dated 6th May, 2005 has totally erred in holding that these properties were not mortgaged. In any case, he had no power or jurisdiction to go beyond the decree once the Tribunal has returned a finding that all the seven properties were mortgaged. The Counsel for the appellants has simply pleaded that in view of non-mentioning of these properties would show that these were held not to be mortgaged properties would be against the finding returned by the Tribunal. If so, the Tribunal was required to record that such properties were not mortgaged as specific finding and such conclusion cannot be drawn in the manner by inference as pleaded by the Counsel for the appellants that these properties are not mentioned at one part of the judgment so these were not mortgaged.
There is thus no merit in the appeals and these are therefore dismissed.