AI Structured Summary
Not yet generated for this judgment
Judgment
S.N.H. Zaidi, J
This appeal impugns the order dated 20.9.2011 of the learned Presiding Officer of DRT-I, Delhi passed in Appeal No. 17/2011 whereby opportunity has been given to the appellants to deposit the amount, in compliance of Rule 61 of the Second Schedule to the Income Tax Act, 1961 (for short, the I.T. Act). Briefly stated, the relevant facts are that an application (O.A. No. 83/2003) filed by the respondent Bank under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, the Act) against the defendants for the recovery of Rs. 12,99,537/- along with interest, was allowed by the DRT on 23.11.2009 and the defendants, including the present appellants, were directed to pay the claimed amount along with pendente lite and future interest @ 10% per annum with quarterly rests. A recovery certificate was accordingly issued and the Recovery Officer, in the proceedings of R.C. No. 159/2000, issued sale proclamation for auction sale of three properties which were mortgaged with the Bank. The CD Nos. 5 and 6 (appellants herein), who were the mortgagors of two properties, filed pre-sale objections on 18.8.2010. alleging, inter alia, that the movable and immovable properties of the principal borrower should initially be put to sale and a property of the principal borrower had been sold for Rs. 21.45 lacs as against the outstanding dues of Rs. 25.5 lacs and the balance amount could be recovered by selling the charged assets, viz., the plant, machinery and stocks of the principal borrower which would fetch not less than Rs. 10-15 lacs and as such their (appellants') property be not put to sale and the proposed auction sale be stayed. The auction was, however, not stayed and one of the mortgaged properties of the appellants bearing No. 17, Fancy Enclave, Ghaziabad (U.P.) was successfully sold, whereas the auction in respect of the other property failed. The appellants then filed post-sale objections under certain rules of the Second Schedule to the I.T. Act before the Recovery Officer for setting aside the sale of the aforesaid property on almost similar grounds as were taken in pre-sale objections. It was also alleged that as against one person, who was declared as the highest bidder, the sale certificate had been issued in favour of two persons. The Recovery Officer, by order dated 9.3.2011, dismissed both the pre and post sale objections. The appellants challenged the order of the Recovery Officer in Appeal No. 17/2011 before DRT-I Delhi, wherein the learned PO of the DRT, vide order dated 27.4.2011, directed the parties to maintain the status quo of the property and, as an interim measure, by the impugned order dated 20.9.2011, gave an opportunity to the appellants to deposit an amount equivalent to the sale consideration of the property in question in compliance of Rule 61 of the Second Schedule to the I.T. Act. Feeling aggrieved with that order, the appellants have filed this appeal.
I have heard Mr. Amit Dhall and Mr. Sanjeev Bhandari for the appellants, Ms. Seema Gupta for respondent No. 1 Bank and Ms. Usha Mahant for all other respondents, except respondent No. 3, and perused the record.
Though the learned Counsel for the appellants also made submissions qua the orders dated 23.2.2011 and 9.3.2011 of the Recovery Officer passed in the recovery proceedings, but since an appeal against the final order dated 9.3.2011, preferred under Section 30 of the Act, is already pending which is to be heard and disposed of by the DRT, it would not be proper for this Tribunal to express any opinion in respect of the said orders. In this appeal, therefore, the submissions of the parties Counsel qua the impugned order dated 20.9.2011 shall only be considered.
Mr. Bhandari submitted that for the recovery of the amount due on the Certified Debtors (CDs), the mortgaged property and hypothecated assets of the principal borrower should have initially been put to sale before the properties of the appellants, who are only the guarantors and mortgagers It is also submitted that an immovable property of the principal borrower was sold for Rs. 21.45 lacs as against the due amount of Rs 25.5 lacs, as shown in the proclamation of sale, and as such the balance of the amount due could have been realised by selling the hypothecated assets of the borrower which would have fetched not less that Rs. 10 to 15 lacs. It has been pointed out that in the auction proceedings of the property bearing No. 17, Block-D, Fancy Enclave, Ghaziabad, (UP) only one person was declared as the highest bidder, but the sale certificate has been issued in the names of two persons.
Ms. Seema Gupta, on the other hand, submitted that all the aforesaid pleas were raised by the CD/appellants before the Recovery Officer and have also been taken in the appeal before the DRT. It has, however, been pointed out by her that the appellants are jointly and severally liable for the payment of the due amount and the confirmation of the sale of Gokulpuri property of the principal borrower in 21.45 lacs was subject to the orders of the DRAT Delhi as a dispute was raised by the Punjab National Bank with respect to that property.
Indisputably, the procedure for the recovery of tax by sale of immovable property, as given in Rules 52 to 68-B of the Second Schedule to the I.T. Act. also applies to the recovery of debt due under the Act, by virtue of Section 29 of the Act. So far as the question of setting aside the sale of the property in question is concerned, admittedly the sale of the property was successfully held on 19.8.2010 and the sale certificate was issued. Rules 60 to 62 of the said Schedule, as extracted below, lay down the grounds on which the sale of an immovable property can be set aside:
Application to set aside sale of immovable property on deposit:--
(1) Where immovable property has been sold in execution of a certificate, the defaulter, or any person whose interests are affected by the sale, may, at any time within thirty days from the date of the sale, apply to the Tax Recovery Officer to set aside the sale, on his depositing--
(a) the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered with interest thereon at the rate of fifteen percent per annum, calculated from the date of the proclamation of sale to the date when the deposit is made: and
(b) for payment to the purchaser as penalty, a sum equal to five percent of the purchase-money, but not less than one rupee.
(2) Where a person makes an application under Rule 61 for setting aside the sale of his immovable property, he shall not, unless he withdraws that application, be entitled to make or prosecute an application under this rule.
Application to set aside sale of immovable properly on ground of non-service of notice or irregularity--Where immovable property has been sold in execution of a certificate, such Income-tax Officer as may be authorised by the Chief Commissioner or Commissioner in this behalf, the defaulter, or any person whose interests are affected by the sale, may, at any time, within thirty days from the date of the sale, apply to the Tax Recovery Officer to set aside the sale of immovable property on the ground that notice was not served on the defaulter to pay the arrears as required by this Schedule or on the ground of material irregularity in publishing or conducting the sale: Provided that--
(a) no sale shall be set aside on any such ground unless the Tax Recovery Officer is satisfied that the applicant has sustained substantial injury by reason of the non-service or irregularity; and
(b) an application made by defaulter under this rule shall be disallowed unless the applicant deposits the amount recoverable from him in execution of the certificate.
Setting aside sale where defaulter has no saleable interest--At any time within thirty days for the sale, the purchaser may apply to the Tax Recovery Officer to set aside the sale on ground that the defaulter had no saleable interest in the property sold.
It appears that the appellants had moved the application for setting aside the sale before the Recovery Officer, in the form of objections, under Rules 57,58,59 and 61 of the said Schedule. However, except Rule 61, other rules have no relevance to the circumstances of the case as they relate to deposit by purchaser and resale in default, procedure in default of payment and authority to bid. Rule 61. as quoted above, does provide for setting aside the sale on the ground of non-service of notice or irregularity. In para 4 of the application, the CD/appellants had taken the ground that proper steps were not taken by the Bank to serve them with the mandatory notice for settling the sale proclamation. Since the order whereby the application/objections of the CD/appellants was disposed of by the Recovery Officer is the subject matter of Appeal No. 17/2011 and the grounds on which the sale has been assailed are to be considered in the said appeal, which is pending before the DRT. therefore, as stated earlier, expression of any opinion in respect of that order may prejudicially affect the interest of any party in that appeal.
Clause (b) of Rule 61 of the Second Schedule to the I.T. Act provides for dismissal of the application made under this rule unless the amount recoverable from the applicant is deposited by him. The language of the provision is clear and carries no ambiguity. Admittedly the CD/appellants had not deposited any amount in compliance of this clause. The deposit of amount recoverable from the appellants, in accordance with the order of the DRT passed in the OA, was mandatory for them for the maintainability of their application filed under the said rule. Since appeal is an extension and continuation of the original proceedings, the amount can also be deposited in appeal. In view of these circumstances, the impugned order cannot be said to be suffering with any infirmity or error in law, as the DRT, observing that the compliance of Rule 61 is mandatory, has only given the appellants an opportunity to deposit that amount.
As no other ground qua the impugned order has been raised by the appellants, in view of the above discussion, this appeal has no force and is liable to be dismissed. The appeal is accordingly, dismissed. Copy of order be given to the parties as per law and one copy be sent to the DRT concerned.