Union of India (UOI) vs Dharamchand Jain

H.N. Devani, J.—This petition has been filed with the following prayers:

The Petitioners respectfully pray that:

(a) Your Lordships may be pleased to admit and allow the present petition.

(b) Be pleased to issue a writ of prohibition or any appropriate writ, order or direction, inter alia prohibiting the further proceedings in R.P. No. A-1258 in O.A. No. 40 of 2001 pending before the Recovery Officer, Debts Recovery Tribunal, Ahmedabad.

(c) Be pleased to issue a writ of certiorari or a writ in the nature of certiorari or other appropriate writ, order or direction, by quashing and setting aside the impugned order dated 15-5-2008, passed by the Shri Dharamchand Jain, Recovery Officer, Debts Recovery Tribunal, Ahmedabad in R.P. No. A-1258 in O.A. No. 40 of 2001, which is in flagrant violation of Law (Annexure "H" to the petition);

(d) Be pleased to issue a writ of mandamus or a writ in the nature of mandamus or other appropriate writ, order or direction, by holding that the proceedings initiated pursuant to the Order dated 15-5-2008 passed by the Shri Dharamchand Jain, Recovery Officer, Debts Recovery Tribunal, Ahmedabad in R.P. No. A-1258 in O.A. No. 40 of 2001 is not competent and therefore further be pleased to quash and set aside the impugned order (Annexure "H" to the petition) and/or the proceedings in R.P. No. A-1258 in O.A. No. 40 of 2001;

(e) Pending admission hearing and final disposal of the present petition be pleased to stay the implementation, operation and execution of the impugned order dated 15-5-2008 passed by the Shri Dharamchand Jain, Recovery Officer, Debts Recovery Tribunal, Ahmedabad in R.P. No. A-1258 in O.A. No. 40 of 2001 (Annexure "H" to the petition);

(f) Pending admission hearing and final disposal of the present petition be pleased to stay the implementation, execution and operation of direction No. 3 contained in the operative portion of the Order dtd. 15-5-2008 passed by the Shri Dharamchand Jain, Recovery Officer, Debts Recovery Tribunal, Ahmedabad in R.P. No. A-1258 in O.A. No. 40 of 2001;

(g) Pending admission hearing and final disposal of the present petition be pleased to stay all the further proceedings of R.P. No. A-1258 in O.A. No. 40 of 2001 which is now scheduled for further orders on 19-6-2008;

(h) Be pleased to grant any other and further relief as the nature and circumstances of the case may require.

The facts stated briefly are that Respondent No. 3 M/s. Parshwanath Industries was engaged in the manufacture of Organic Chemicals falling under Chapter-29 of the Schedule to the Central Excise Tariff Act, 1985 and was also availing of MODVAT facility. The Commissioner of Central Excise, Ahmedabad-III passed an order dated 6-12-2000 imposing penalty of Rs. 2,60,000/- as well as an order dated 22-12-2003 confirming duty demand of Rs. 40,68,735/- with equal amount of penalty against Respondent No. 3. Thus the total outstanding duties payable by Respondent No. 3 were to the tune of Rs. 1,02,37,470/-. On account of failure on the part of Respondent No. 3 to make payment of outstanding government dues, an order of attachment came to be made by Deputy Commissioner of Central Excise on 3-12-2004 under Rules 9 and 10 of the Customs (Attachment of Property of Defaults for Recovery of Govt. Dues) Rules, 1995.

The Respondent No. 2 Union Bank of India had filed proceedings before the learned Presiding Officer, Debt Recovery Tribunal, Ahmedabad, in respect of its outstanding dues from the Respondent No. 3, pursuant to which a recovery certificate dated 2-7-2002 came to be issued for the recovery of a sum of Rs. 93,78,786.84 plus Rs. 1,45,668/-, which was forwarded to the Recovery Officer attached to the Debt Recovery Tribunal, Ahmedabad. The Superintendent, Central Excise Department, Kalol, addressed a communication to the Recovery Officer, Debt Recovery Tribunal, Ahmedabad, pointing out outstanding dues of Rs. 1,02,37,470/- of the Central Excise Department. The Debt Recovery Tribunal issued notice dated 29-2-2008 for the purpose of sale of the property of Respondent No. 3 along with public advertisement in the daily Newspaper ''Gujarat Samachar'' on 21st March, 2008. In the said advertisement, against column No. 3 pertaining to the details of encumbrances to which the property was liable, it was mentioned ''not known''. Since in the advertisement the extent of value of outstanding government dues had not been mentioned, an application came to be made to the Recovery Officer to issue another advertisement cancelling the earlier tender notice. The Recovery Officer vide order dated 15-5-2008 rejected the objection raised by the Central Excise Department and also called upon the concerned officer who had signed the objections as to why action should not be taken against him under the provisions of the Contempt of Courts Act. Being aggrieved, the Petitioners have moved the present petition seeking the reliefs noted hereinabove.

Heard learned Advocates for the respective parties.

Ms. M.L. Shah, learned Standing Counsel for the Petitioners submitted that the notice issued by the Debt Recovery Officer proposing to initiate proceedings under the Contempt of Courts Act, 1971 is beyond jurisdiction, as the Recovery Officer of the Debt Recovery Tribunal is not a Court and that even otherwise, the Recovery Officer has no power to himself initiate contempt proceedings either u/s 10 of the Contempt of Courts Act, or under Article 215 of the Constitution of India. Inviting attention to the provisions of Section 7 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, it is submitted that the Recovery Officer is a Member of the Staff of the Tribunal and not a court. On the merits of the case, the learned Counsel accepts that the controversy involved in the present case stands concluded by the decision of the Supreme Court in the case of Union of India (UOI) and Others Vs. SICOM Ltd. and Another,

As can be seen from the impugned order dated 15-5-2008, the same is in two parts. In the first part of the order, which is on the merits of the case, the Recovery Officer has turned down the contention of the Central Excise Department regarding the revenue having priority over the dues of the Certificate-holder Bank. The second part of the order pertains to initiation of proceedings under the Contempt of Courts Act.

Insofar as the first part of the order is concerned, the order made by the Recovery Officer is in consonance with the principles enunciated by the Apex Court in the case of Union of India v. Sicom Limited (supra), wherein it has been held that a debt which is secured or which by reason of the provisions of a statute becomes the first charge over the property having regard to the plain meaning of Article 372 of the Constitution of India must be held to prevail over the crown debt which is an unsecured one.

Insofar as the challenge to initiation of contempt proceedings against the Officer who had signed the objection is concerned, the contempt proceedings per se are personal in nature. None of the Petitioners herein, who are parties in their official capacity can be said to be aggrieved by initiation of the contempt proceedings vide the impugned order. In case the Officer against whom the contempt proceedings have been proposed to be taken is aggrieved, it is open for him to take remedial action in accordance with law.

In the light of the aforesaid discussion, the petition fails and is accordingly rejected with no order as to costs. Notice is discharged. Interim relief granted earlier stands vacated.