Sandip Sickhand vs Bank Of Baroda And Ors

S. Ravi Kumar, J

This Appeal is preferred against order dated 30.09.2015 in Appeal No. 13/2010 on the file of Debts Recovery Tribunal No. Ill, Mumbai (the Tribunal below). Brief facts leading to this Appeal are as follows.

Appellant herein filed application before the Recovery Officer (R.O.) in Recovery Proceeding (R.P.) No. 468/2004 on the file of Debts Recovery Tribunal No. III, Mumbai, contending that he is a bona fide purchaser of attached Flat No. 402, Green Acres Building, Nargis Dutt Road, Pali Hill, Bandra (West), Mumbai-400050, which application was opposed by the Applicant Bank i.e. Bank of Baroda and on consideration of contentions and rival contentions of both sides, R.O. allowed the application directing the Applicant Bank to obtain appropriate orders from the Civil Court to evict the Appellant herein and until then execution proceedings are kept in abeyance. Aggrieved by the said order the Bank preferred Appeal No. 13/2010 before Presiding Officer, Debts Recovery Tribunal No. III, Mumbai. The Ld. P.O. on examination of material on record allowed the Appeal and set aside order of the R.O. dated 18.09.2007, consequently rejected application of Intervener i.e. Appellant herein. Aggrieved by the order of the Ld. P.O. present Appeal is preferred.

Heard both sides.

Advocate for Appellant submitted that the P.O. failed to appreciate that there is no valid mortgage on the disputed flat created in favour of first Respondent Bank (Bank of Baroda). It is further submitted that the original title deeds in respect of the flat were with the borrower (Respondent No. 3) himself which were handed over to Appellant in the year 2007, which was rightly recorded by the RO. It is further submitted that when there was no mortgage created in favour of Bank, proceeding further on the flat is not warranted and the Ld. P.O. wrongly interpreted Rule 11 of Second Schedule to Income Tax. It is further submitted that all the issues relating to the said flat have to be decided by the executing court only which is the R.O. rightly allowed the claims and, therefore, R.O. rightly allowed the claim and the order of the Tribunal below is contrary to law.

On the other hand, Advocate for Bank submitted that from the pleadings it is specific case of Appellant that he purchased the disputed flat as per Agreement to Sale dated 05.05.2007, whereas the attachment against the said flat was on 17.01.2002. He submitted R.O. proceeded beyond his powers, which was rightly set aside by the Tribunal below and that there are no grounds to interfere. It is further submitted that when the purchase itself was long after attachment, the Appellant cannot be termed as bona fide purchaser and for that reason the Tribunal below was pleased to set aside the order of the R.O. which is absolutely correct.

I have perused the material papers including order of the R.O. dated 18.09.2007 and the impugned order dated 30.09.2015 with reference to submissions of both sides. Before proceeding further it may be relevant to examine Rule 11 of Second Schedule to Income Tax Act which empowered the R.O. to conduct inquiry. The said Rule is as follows:

"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 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."

From a bear reading of above Rule it is very clear that when an objection is made to the attachment or sale of any property which is in execution of a certificate, the R.O. shall proceed to investigate the claim or objection and as per Sub-Rule 4 of Rule 11, if the R.O. is satisfied that the property was not in possession of the certificate debtor on the date of attachment, he shall make an order to that effect and then release the property from such attachment.

Ld. Advocate for the Appellant referred to Section 47 of Civil Procedure Code (C.P.C.) to support his contention that Court executing the decree can determine the questions, but that Section deals with the questions relating to discharge or satisfaction of the decree and in such scenario whether any person is or is not representative of a party, shall also has to be determined by the Court executing the decree. Purpose of this Rule 11 or Section 47 or Order 21, Rule 58 of C.P.C. is to make sure that the property that was put to sale is that of Certificate Debtor as we call it here, and Judgment Debtor as called in Civil Courts. So if the third party or claimant establishes that the property put to sale does not belong to Certificate Debtor, then the attachment made over such property has to be raised and that property has to be released. This is the purpose of inquiry that has to be conducted by the Court executing decree, here the R.O. But in this case, the R.O. has directed the parties to produce original title deeds relating to the property and examined them and gave his finding as to the genuineness of those documents, which is not the scope of inquiry under Rule 11 of Second Schedule to Income Tax Act. When a claim application is made, it is the duty of the R.O. under Rule 11 to conduct inquiry to know as to who is in possession of the property as on the date of attachment. In this case it is not in dispute that attachment was on 17.01.2002. From the own case of Appellant Claimant, he was not at all concerned with this property as on that date. It is the specific case of Appellant that he was in need of accommodation, so he started looking out for suitable residential flats since July 2006 and after making necessary enquiries with the office bearers of the said Co-operative Housing Society, Brokers and Advocates, and after satisfying that the property was free from encumbrances he entered into Memorandum of Understanding on 16.04.2007 and thereafter obtained registered document on 05.05.2007. Forgetting this pleading the RO. examined the issue of mortgage and as he felt that the original title deeds were not with the Bank, he accepted the claim of Intervener Appellant. As rightly pointed out by Advocate for Bank RO. exceeded his jurisdiction and he has no power to examine the correctness of mortgage. His job was to execute the Recovery Certificate and realize money by taking necessary steps indicated in Section 25 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the RDDB&FI Act). Even if it is a simple money decree when the property of Certificate Debtor is attached in execution, any transactions thereafter are always subject to that attachment and person who purchased such property after attachment cannot claim any independent rights.

Ld. Advocate for Appellant relied on judgment of Hon'ble Supreme Court in Tax Recovery Officer II, Sadar, Nagar V/s. Gangadhar Vishwanath Ranade reported in (1998) 6 SCC 658 to support his argument that the R.O. has power to conduct inquiry. Here the power of R.O. to conduct inquiry is not the issue, but the issue is, what was the scope of inquiry under Rule 11. Even the Hon'ble Supreme Court in the above referred decision has reiterated that the RO. has to examine as to who is in possession of the property and in what capacity as on the date of attachment. In that case Hon'ble Supreme Court held that the R.O. can attach the property in possession of Assessee or a person in possession of such property on behalf of the Assessee, but the R.O. cannot declare a transfer made by the Assessee in favour of third party as void and for such relief the Department has to invoke Rule 11(6) by filing a Suit. Here the facts are very clear, as on the date of attachment the Appellant is not in possession, it is not even his case. On the other hand he purchased the disputed property nearly 5 years after attachment.

Advocate for Appellant also relied on following decisions (i) decision of High Court of Bombay in Jagjivan Dhondiram Kirad V/s. Gopal Vinayak Joshi reported in 1955 BCI (O) 102, (n) decision dated 13.05.2016 in W.P. (C) No. 4538/2015 of Delhi High Court in Rajinder Kumar Malhotra V/s. Indian Bank & Ors. and (iii) decision of High Court of Bombay in Keshrimal Jivji Shah & Anr. V/s. Bank of Maharashtra & Ors. reported in 2004 (3) Mh.L.J. 893. These decisions are not applicable to the facts of this case for the simple reason that on the date of attachment, Appellant was not in possession and he has not even acquired any right or even had any intention of acquiring rights in that property on that date, therefore, Ld. P.O. rightly set aside the order of the R.O. who travelled beyond scope of inquiry under Rule 11 of the Second Schedule to Income Tax Act and exceeded his powers. On a consideration of entire material, I am of the view that there are no grounds to interfere with such a well reasoned order of the Ld. P.O.

For the reasons stated above, I am of the view that Appeal is devoid of merits and is liable to be dismissed.

Accordingly, Appeal is dismissed as devoid of merits, but under the circumstances without costs.

All Miscellaneous Applications, if any, are dismissed as infructuous.