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Judgment
ORDER
Aggrieved by the order passed by Learned Presiding Officer, DRT-I, Chennai on 18.06.2024 in Appeal No.1/2024 in MA 135/2022 in TRC No.2/2022, this Appeal is filed by Appellants.
Appellants, the Legal Representatives (LRs) of deceased A.S.R. Surya Prakash, filed MA 135/2022 before Recovery Officer, DRT-II, Chennai seeking a prayer not to attach the property for recovery of loan amount from Certificate Debtors till title is decided and with a prayer to raise the attachment ordered.
It is the case of the Appellants that some persons from DRT, came to the property in dispute on 06.04.2022 and pasted the warrant of attachment of immovable property. On going through the records, it was found that Certificate Debtors availed loan facilities from Certificate Holder Bank and failed to pay Rs.109,94,28,325.82p in terms of DRC No.537/2016.
The property concerned in the warrant belongs to A.S.R. Surya Prakash vide document Nos. 399/1981 and 1297/1995. On his death on 02.12.2019, Appellants are in possession and enjoyment of the property. During his life time, A.S.R. Surya Prakash availed loan of Rs.5.50 Lakhs from M/s. Park Town Benefit Fund by mortgaging the property vide document No.1508/1995. M/s. Park Town Benefit Fund, vide letter dated 19.10.2001 informed that it had accepted the OTS offer of Rs.7.25 Lakhs submitted by Late A.S.R. Surya Prakash and acknowledged the payment receipt of Rs.50,000/- paid by him and also granted time till 20.11.2011 for paying the balance amount. Subsequently, Late A.S.R. Surya Prakash received a letter from M/s. Vamana Auctioneers informing that property would be sold through public auction on 27.03.2002. Later, it was informed that 3rd Respondent, P.S. Krishnamurthy purchased the property in an auction conducted on 27.03.2002.
There had been no auction held on 27.03.2002. Respondent No.3 is the relative of one of the Directors of M/s Park Town Benefit Fund and colluding with Officials and Directors of M/s. Park Town Benefit Fund, fraudulently registered the sale deed in his name as if he participated in auction on 27.03.2002.
Aggrieved by the registration, A.S.R. Surya Prakash filed Suit in CS No.21/2004 before Hon’ble High Court of Madras against Respondent No.3 and two others. Interim order was granted in favour of A.S.R. Surya Prakash. The Suit was later transferred to City Civil Court and numbered as OS No. 12047/2010. Said Suit was dismissed for default on 25.07.2019. A.S.R. Surya Prakash filed restoration Application on 24.08.2019. When it was pending for numbering, he died of heart attack on 02.12.2019.
Thereafter, Appellants filed IA 2/2021 for restoring the Suit. When the Suit filed for declaration of title is pending, the order passed for attaching the property is not legal. Thus, the aforesaid Application in MA 135/2022 was filed for the reliefs stated above. That Application was dismissed by the Recovery Officer on 19.06.2023. Against the said dismissal, Appellants filed the Appeal No.01/2024 before DRT-I, Chennai. Learned Presiding Officer also dismissed the Appeal. In the said circumstances, this Appeal is filed.
Learned Counsel for Appellants submitted that both the Recovery Officer and Learned Presiding Officer, DRT-I, Chennai have not considered the valid ground raised by the Appellants as to the claim of their title and possession of the property. When Civil Suit is pending, the order of Recovery Officer cannot be considered as conclusive. Order of Recovery Officer is subject to only the outcome of the Civil Suit. Criminal complaint was registered against the Respondent No.3. Respondent Bank had sanctioned loan to the borrower without verifying the credentials.
In support of his submissions, the copy of the order passed in IA 3/2022 in OS No.12047/2010 is filed to show that the restoration Application was filed and the Suit was restored to file. Copy of the Plaint in CS No.21/2004 is filed to show that Late A.S.R. Surya Prakash sought prayer to declare the sale deed executed by M/s. Park Town Benefit Fund on 07.05.2002 and registered as document No.1742/2002 in favour of Defendant No.2, P.S. Krishnamurthy is fraudulent, null and void and not valid and binding and consequential relief of permanent injunction restraining 2nd Defendant therein from interfering with his possession and enjoyment of the property and restraining them from alienating or encumbering the property.
It is now claimed that this Suit is still pending, though it was initially dismissed for default. Appellants have also produced the judgement in CS No.589/2006 filed by P.S. Krishnamurthy against A.S.R. Surya Prakash seeking relief against the declaration that P.S. Krishnamurthy is the owner of the property in ‘A’ Schedule and directing the Defendant to deliver vacant possession of the portion in respect of ‘B’ Schedule property and for other reliefs. This order shows that the Suit was dismissed for default.
It is the submission of Learned Counsel for Appellants that the Suit filed by Appellants is still pending and the Suit filed by P. S. Krishnamurthy against A.S.R. Surya Prakash was dismissed. Rule 11 (6) of II Schedule to Income Tax Act, 1961 makes it abundantly clear that where a claim or an objection is preferred, and if an order is passed against a party, he may institute a Suit in a Civil Court to establish his right. Only subject to the result of such Suit, the order of Recovery Officer shall be conclusive. When that is the legal position, the dismissal of the Application by Recovery Officer and Learned Presiding Officer is not in accordance with law. Thus, he seeks to set aside the orders passed by them and for allowing this Appeal.
In reply to this submission, it is submitted by Learned Counsel for 1st Respondent Bank that it is not disputed by Appellants that A.S.R. Surya Prakash availed loan facility from M/s. Park Town Benefit Fund and he failed to pay the OTS amount. On his failure to make payment, M/s. Park Town Benefit Fund sold the property in auction and P. S. Krishnamurthy was the successful bidder. Sale was confirmed in his favour and sale deed was executed. Mr. P.S. Krishnamurthy was one of the Directors of M/s. Thangam Steels Ltd., and in the recovery proceedings, his property was attached for realizing the loan due to the Bank. The attachment was ordered in accordance with law. Learned Counsel for 1st Respondent Bank disputed the claim of the Appellants that the Suit in OS No.12047/2010 is pending.
Considered the rival submissions and perused the records.
As narrated above, Appellants, as Legal Representatives of deceased A.S. R. Surya Prakash filed MA 135/2022 before Recovery Officer, DRT-II, Chennai with a prayer seeking not to attach the property concerned in MA 135/2022 for recovery of loan amount from Certificate Debtors till title is decided and with a prayer to raise attachment ordered. On dismissal of this Application, they filed Appeal No. 01/2024 in MA 135/2022 in TRC No.02/2022. MA 135/2022 was filed under Rule 11 of Part –I, of the II Schedule to Income Tax Act, 1961. For understanding the lis involved in this Appeal, it is required to extract the Rule 11 of the II Schedule to Income Tax Act, 1961:-
“11.Investigation by Tax Recovery Officer- (1) Where any claim is preferred to, or any objection is made to the attachment or sale of, any property in execution of a certificate, on the ground that such property is not liable to such attachment or sale, the Tax Recovery Officer shall proceed to investigate the claim or objection :
Provided that no such investigation shall be made where the Tax Recovery Officer considers that the claim or objection was designedly or unnecessarily delayed.
(2)Where the property to which the claim or objection applies has been advertised for sale, the Tax Recovery Officer ordering the sale may postpone it pending the investigation of the claim or objection, upon such terms as to security or otherwise as the Tax Recovery Officer shall deem fit.
(3)The claimant or objector must adduce evidence to show that—
(a ) (in the case of immovable property) at the date of the service of the notice issued under this Schedule to pay the arrears, or
(b ) (in the case of movable property) at the date of the attachment, he had some interest in, or was possessed 31 of, the property in question.
(4)Where, upon the said investigation, the Tax Recovery Officer is satisfied that, for the reason stated in the claim or objection, such property was not, at the said date, in the possession of the defaulter or of some person in trust for him or in the occupancy of a tenant or other person paying rent to him, or that, being in the possession of the defaulter at the said date, it was so in his possession, not on his own account or as his own property, but on account of or in trust for some other person, or partly on his own account and partly on account of some other person, the Tax Recovery Officer shall make an order releasing the property, wholly or to such extent as he thinks fit, from attachment or sale.
(5)Where the Tax Recovery Officer is satisfied that the property was, at the said date, in the possession of the defaulter as his own property and not on account of any other person, or was in the possession of some other person in trust for him, or in the occupancy of a tenant or other person paying rent to him, the Tax Recovery Officer shall disallow the claim.
(6)Where a claim or an objection is preferred, the party against whom an order is made may institute a suit in a civil court to establish the right which he claims to the property in dispute; but, subject to the result of such suit (if any), the order of the Tax Recovery Officer shall be conclusive.”
This Rule deals with Investigation by Tax Recovery Officer. Rule 11 (6) makes it clear that where any claim is preferred to, or any objection is made to the attachment or sale of, any property in execution of a certificate, on the ground that such property is not liable to such attachment or sale. The claimant or objector must adduce evidence to show at the date of the attachment, he had some interest in, or was possessed of, the property in question. Upon the investigation, the Recovery Officer, for the reasons to be recorded in writing, release the property from attachment or sale or disallow the claim. The party against whom an order is made, may institute a suit in a Civil Court to establish the right which he claims to the property in dispute, subject to the result of such suit (if any), the order of the Tax Recovery Officer shall be conclusive.
In the case before hand, admittedly, A.S.R. Surya Prakash availed loan facility of Rs.5.50 Lakhs from M/s. Park Town Benefit Fund by mortgaging his property. He has not paid OTS offer of Rs.7.25 Lakhs in its entirety, therefore, M/s. Park Town Benefit Fund through M/s. Vamana Auctioneers, sold the property through public auction on 27.03.2002. Respondent No.3, Mr. P. S. Krishnamurthy was the successful bidder. Against the sale, A.S.R. Surya Prakash filed Suit in CS No.21/2004 before Hon’ble High Court. Later it was transferred to the City Civil Court and numbered as OS No.12047/2010.
After restoration of the Suit on 06.10.2023, Appellants filed IA 5/2024 for condoning the delay of 1370 days in filing the Petition to set aside the abatement caused by the death of the Plaintiff, IA 6/2024 to set aside the abatement and IA 7/2024 to implead the Legal Representatives of deceased Plaintiff namely A.S.R. Surya Prakash. These Applications have been dismissed on 11.07.2025 by Learned IV Additional Judge, City Civil Court, Chennai. Though it is submitted by Appellants that against the orders passed in these Interlocutory Applications, a CRP is filed. The CRP number and the status of said CRP have not been made known to this Tribunal. If at all CRP, if any, filed by Appellants, is allowed and the Suit is restored, then, the order passed by Recovery Officer would be final, subject to the outcome of OS No.12047/2010. If the OS No.12047/2010 is not restored, then, the order of the Recovery Officer is the final order.
In this view of the matter, this Appeal is disposed with following observations:
If OS No.12047/2010 is restored, then, the order of the Recovery Officer as confirmed by Learned Presiding Officer would become final, subject to the outcome of the decision made in OS No.12047/2010.
ii) If OS No.12047/2010 is not restored, then, the order passed by the Recovery Officer as confirmed by Learned Presiding Officer, is the final order.
iii) In case OS No.12047/2010 is restored, Appellants are directed to implead the Respondent Bank as party in the Suit for effective and binding adjudication.
Accordingly, this Appeal is disposed. Both the parties shall bear their own costs. All pending IAs, if any, stand closed.