Kerala High Court
Dr. Mathew Antony vs Oriental Bank Of Commerce on 22 October, 2024
Author: D. K. Singh
Bench: D. K. Singh
OP (DRT) NO. 88 OF 2017 and
OP (DRT) NO. 64 OF 2018
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"C.R."
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE D. K. SINGH
TUESDAY, THE 22ND DAY OF OCTOBER 2024 / 30TH ASWINA, 1946
OP (DRT) NO. 88 OF 2017
AGAINST THE ORDER DATED 12.07.2017 IN OTHERS NO.40 OF 2016 OF DEBT RECOVERY
TRIBUNAL, ERNAKULAM
PETITIONER/S:
DR. MATHEW ANTONY,
AGED 60 YEARS
S/O ANTONY, RESIDING AT KOLLAMKULAM HOUSE, P.B.NO.26, KANJIRAPPALLY,
KOTTAYAM-686 507.
BY ADVS.
DINESH R.SHENOY
EBIN MATHEW
K.K.JYOTHILAKSHMY
A.JOSEPH GEORGE
RESPONDENT/S:
1 ORIENTAL BANK OF COMMERCE
BRANCH M.G.ROAD, ERNAKULAM-682011
2 P.J.CHACKO
S/O P.D.JOSEPH, PUTHUPARAMBIL, 31ST MILE, MUNDAKKAYAM P.O, KOTTAYAM
DISTRICT-686513.
3 D.SUDHAKARAN,
RECOERY OFFICER,DEBT RECOVERY TRIBUNAL,ERNAKULAM,PIN 682 036
OP (DRT) NO. 88 OF 2017 and
OP (DRT) NO. 64 OF 2018
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BY ADVS.
SRI.KAROL MATHEWS SEBASTIAN ALENCHERRY
SRI.P.P.KURIEN
SRI.V.V. SIDHARTHAN SR.
SRI.D.G.VIPIN; SRI SAJI P JOSEPH
THIS OP (DEBT RECOVERY TRIBUNAL) HAVING FINALLY HEARD ON 22.10.2024, ALONG WITH OP
(DRT).64/2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
OP (DRT) NO. 88 OF 2017 and
OP (DRT) NO. 64 OF 2018
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE D. K. SINGH
TUESDAY, THE 22ND DAY OF OCTOBER 2024 / 30TH ASWINA, 1946
OP (DRT) NO. 64 OF 2018
AGAINST THE ORDER/JUDGMENT DATED 15.12.2017 IN OTHERS NO.861 OF 2012 OF DEBT
RECOVERY APPELLATE TRIBUNAL, CHENNAI
PETITIONER/S:
DR. MATHEW ANTONY,
AGED 61 YEARS
S/O. ANTONY, RESIDING AT KOLLAMKULAM HOUSE, PB NO. 26, KANJIRAPPALLY,
KOTTAYAM - 686507
BY ADVS.
DINESH R.SHENOY
EBIN MATHEW
P.ROHIT PREMANANDAN SHENOY
RESPONDENT/S:
1 ORIENTAL BANK OF COMMERCE,
BRANCH M.G.ROAD, ERNAKULAM,PIN - 682016
2 MS. AMROK SHIPPING P LTD.,
G-177, PANAMPILLY NAGAR, KOCHI - 682036ERNAKULAM REPRESENTED BY THE
OFFICIAL LOQUIDATORHIGH COURT OF KERALA, (WRONGLY SHOWN AS REPRESENTED
BY ITS MANAGING DIRECTOR, ALEX ANTONY)
3 GEORGE ANTONY ,
AGED 55 YEARS
S/O. ANTONY MATHEW, 25, DD VILLAGE, THAMMANAM, ERNAKULAM -
OP (DRT) NO. 88 OF 2017 and
OP (DRT) NO. 64 OF 2018
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682032.(WRONGLY SHOWN AS DIRECTOR, M/S. AMROK SHIPPING (P) LTD., G-177,
PANAMPILLY NAGAR, KOCHI - 36,ERNAKULAM
4 ALEX ANTONY
M91G 395, PANAMPILLY NAGAR, ERNAKULAM, COCHIN - 682036, (WRONGLY SHOWN
AS MANAGING DIRECTOR M/S. AMROK SHIPPING (P) LTD. G-177 PANAMPILLY NAGAR,
KOCHI - 682036, ERNAKULAM)
5 JACOB ANTONY @ JACOB K.A.,
AGED 54 YEARS
S/O. ANTONY MATHEW, 674, NANDIKRUPA, 9-4, MARUTI LAYOUT, 10-HENNUR CROSS,
KALYAN NAGAR, BANGALORE - 560043, KARNATAKA, (WRONGLY SHOWN AS
DIRECTOR, M/S. AMROK SHIPPING (P) LTD., -177, PANAMPILLY NAGAR, ERNAKULAM -
682036)
BY ADV SHRI.SAJI P.JOSEPH, SC, ORIENTAL BANK OF COMMERCE
SRI V V SIDHARTHAN SR ADV. SRI VIPIN D G
THIS OP (DEBT RECOVERY TRIBUNAL) HAVING FINALLY HEARD ON 22.10.2024, ALONG WITH OP
(DRT).88/2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
OP (DRT) NO. 88 OF 2017 and
OP (DRT) NO. 64 OF 2018
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JUDGMENT
"C.R."
[OP (DRT) Nos.88/2017, 64/2018]
Heard Mr Dinesh R Shenoy, learned Counsel for the petitioner and
Mr V V Sidharthan, learned Senior Advocate; Mr Saji P Joseph and Mr
Vipin D G learned Counsel for the respondents.
2. These two OP (DRTs) have been filed by one Dr Mathew
Antony arising out of the proceedings under the provisions of the
SARFAESI Act and the Rules made thereunder and the Orders passed by
the Debts Recovery Tribunal and the Debts Recovery Appellate Tribunal.
2.1 In OP(DRT) No.64/2018, the challenge is to Ext.P8 order dated
15.12.2017, whereby the Debts Recovery Appellate Tribunal dismissed
the appeal on the ground of non-compliance with the directions dated
15.11.2017 for making a pre-deposit of Rs.50 lakhs in two instalments.
The Tribunal dismissed the appeal as the petitioner herein and appellant
before the Tribunal did not comply with the order of pre-deposit.
OP (DRT) NO. 88 OF 2017 and
OP (DRT) NO. 64 OF 2018
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2.2 In OP (DRT) No.88/2017, the challenge is to the order dated
12.07.2017 passed by the Debts Recovery Tribunal-2, Ernakulam, and the
order dated 12.04.2016 passed by the Recovery Officer in I.A.
No.700/2010 in DRC No.1503/OBC/EKM in O.A. No.71/2002. The
challenge also concerns the order/certificate issued by the Recovery
Officer after the sale of the secured asset was completed.
2.3 The facts are common in both the O.P.(DRT), except for some
minor differences.
3. According to the petitioner, he is a Doctor by profession and
served abroad in Libya from 1996 to 2004. In 2005 he moved to Saudi
Arabia. M/s Amrok Shipping Private Limited had applied for a business
loan from the respondent Bank and offered the properties of Mr George
Antony, Mr Alex Antony, Mr Jacob Antony and the petitioner. These four
persons are brothers. On 09.10.1997, Mr Alex Antony and the petitioner
deposited their title deeds to create an equitable mortgage in favour of
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the Bank and they also executed a memorandum of deposit of the title
deed and vide letter dated 07.05.1997 they executed a letter confirming
deposit of title deeds. The properties mortgaged to the Bank by Mr Alex
Antony, and the petitioner comprised 2.448 hectares (2.70 hectares as
per Encumbrance Certificate and Valuation Report) in Resurvey
No.325/5, Block No.14 (Old Sy. No.1/1A) and 2.62 hectares in Resurvey
No.325/4, Block No.14 (Old Sy. No.1/1A) of Kanjirappilly Village and sub-
district in Kottayam District. These properties had come to the share of
Mr Alex Antony and the petitioner as per Partition Deed No.1869/1988
of the SRO Kanjirappally. The said partition deed was executed between
the legal heirs of the late Antony, the father of the petitioner and other
brothers.
3.1 According to the petitioner, when the petitioner was abroad
the property documents were taken from the petitioner's wife, who had
a restricted Power of Attorney for the creation of a mortgage over the
petitioner's properties without his knowledge and consent. A power of
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OP (DRT) NO. 64 OF 2018
2024:KER:78480
attorney in favour of his wife did not contain any power to mortgage the
properties, and no concurrence was taken from the petitioner either
before or after the alleged creation of the mortgage.
4. The Bank filed O.A. No.71/2002 before the Debts Recovery
Tribunal Ernakulam under Section 19(1) of the Recovery of Debts Due to
Banks and Financial Institutions Act 1993 for recovery of a sum of
Rs.1,31,47,825.53 with interest at the rate of 17% per annum from the
defendants in the Original Petition including the M/s Amrok Shipping
Private Limited and the petitioner who was arrayed as the 5th defendant
in the Original Petition.
4.1 The defendants entered appearance on 03.05.2002 and sought
adjournment from time to time to file a written statement. But a written
statement was never filed even after a lapse of more than 22 months.
The said O.A. was decreed on 19.03.2004 for Rs.1,19,22,838.53 with
interest thereon at the rate of 13% per annum from 22.01.2002 to the
date 19.03.2004 and after the decree at the rate of 12% per annum till
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realisation with appropriate costs from the defendants jointly and
severally and by sale of the scheduled properties.
5. A Review Application came to be filed as R.A. No.3/2012 in
O.A. No.71/2002 seeking review of the final order dated 19.03.2004
passed in O.A. No.71/2002 under Section 22 of the Recovery of Debts Due
to Banks and Financial Institutions Act 1993 read with Rule 5A of the
Debts Recovery Tribunal (Procedure) Rules 1993. It was stated on behalf
of the petitioner that at the time of availing of the loan by M/s Amrok
Shipping Private Limited from the Bank, the petitioner's wife was caused
to affix her signature on some blank printed forms and a few blank
papers at the instigation of Mr George Antony, the brother of the
petitioner, stating that she would be only a witness. The wife of the
petitioner had never intended to and was not authorised to mortgage
the property to the Bank at all. The petitioner was not aware of the
aforesaid loan or mortgaging his properties. It was also stated that at
the time of taking the loan, the brothers had taken away some papers
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belonging to the petitioner, including the title deeds of the properties
and handed them over to the Bank.
5.1 It was further stated that at the time of filing the Original
Application, the Company had already been wound up as per the winding
up order dated 07.03.2001 in Company Petition No.27/1999 and Company
Petition No.42/2000 of the Kerala High Court. The Tribunal, however,
dismissed the said Review Application vide order dated 16.08.2012 noting
that there was nothing on record to show that the Order passed in O.A.
No.71/2002 was vitiated by any fraud. The Tribunal also did not find any
mistake or error apparent on the face of the order. The Tribunal noted
that the counsel engaged by the petitioner in the Original Application
was participating all along in the O.A. proceedings. Therefore, the
Review Application was held to be not maintainable in law or facts.
Hence, the Review Application came to be dismissed.
6. The petitioner filed an appeal, AIR No.861/2012 before the
Debts Recovery Appellate Tribunal at Chennai. The Appellate Tribunal
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had directed the petitioner vide order dated 15.11.2017 to make a pre-
deposit of Rs.50 lakhs in two instalments. The petitioner did not comply
with the said pre-deposit. Therefore, the appeal stood dismissed on
15.12.2017, which is the order impugned in O.P.(DRT) No.64/2018.
7. The petitioner filed I.A. No.700/2010 in DRC 1503/OBC/EKM
praying to declare the sale deed dated 24.09.2009 and all other
proceedings in DRC No.1503/OBC/EKM before the Recovery Officer as
illegal, invalid, null and void ab initio. Therefore, the auction sale should
not be confirmed. The ground taken by the petitioner was that he was
not served with any of the notices in O.A. and the mandatory notices
required under Rule 2 and Rule 53 of the Second Schedule to the Income
Tax Act 1961 were not served on him. The Recovery Officer dismissed the
said I.A. vide order dated 18.03.2010 on the ground that the petitioner
did not comply with the provisions of Rule 61 of the Second Schedule to
the Income Tax Act 1961 as the petitioner did not deposit the amount
recoverable from him in the execution of the certificate instead he has
OP (DRT) NO. 88 OF 2017 and
OP (DRT) NO. 64 OF 2018
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filed a petition under Section 22(1) of the Recovery of Debts Due to Banks
and Financial Institutions Act 1993 read with Section 47 of CPC. In the
absence of the requisite compliance of Rule 61, the Recovery Officer held
that the petition filed by the petitioner was not maintainable.
7.1 Rule 61(b) of the Second Schedule to the Income Tax Act
prescribes the procedure for hearing the application made by a
defaulter. The application is not maintainable unless the applicant
deposits the amount recoverable as given in the execution of the
certificate. In the absence of such mandatory compliance, the
application was found to be not maintainable.
7.2 The petitioner did not stop there. He filed I.A. No.2591/2010
in DRC 1503 in O.A.71/2002, praying to review or recall the order dated
18.03.2010 passed by the Recovery Officer. The said Review Application
was dismissed vide order dated 11.10.2010 holding that the order dated
18.03.2010 passed by the Recovery Officer did not suffer from any
mistake apparent on the face of the record.
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OP (DRT) NO. 64 OF 2018
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8. Challenging the order dated 11.10.2010 passed in I.A.
No.2591/1010 in DRC 1503 in O.A. No.71/2002, the petitioner had filed
Appeal No.27/2011 before the Debts Recovery Tribunal, Ernakulam. The
said Appeal was allowed by order dated 25.10.2013 by the Debts Recovery
Tribunal Ernakulam and remitted the matter back to the Recovery
Officer for fresh disposal in accordance with the law after affording an
opportunity of hearing to both parties. The Recovery Officer was
directed not to confirm the auction sale already held till a fresh order is
passed on remand.
9. The petitioner thereafter approached this Court by filing OP
(DRT) No.9/2015 (O). This Court, vide judgment dated 08.07.2015,
disposed of the said OP (DRT), observing that the Recovery Officer should
decide the maintainability of the application at the initial stage of the
proceedings inasmuch as the question of maintainability should be
decided on a question of law. If the maintainability was to be adverted
to with reference to any evidence, the said issue should be decided along
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with other issues during the final hearing. The parties were directed to
appear before the Recovery Officer on 02.08.2015.
9.1 On remand, the Recovery Officer again dismissed I.A.
No.700/2010 in DRC No.1503 in O.A. No.71/2002 vide Order dated
12.04.2016 as not maintainable. Thereafter, on 22.04.2016, the certificate
of sale of immovable properties was issued, and the sale was executed in
favour of the auction purchaser, Mr P J Chacko. The possession of the
properties was handed over. Against the order passed by the Recovery
Officer, the petitioner has filed OP(DRT) No.88/2017 (the connected
case).
10. The respondents have contended that the petitioner had no
right or interest in the matter. Neither the petitioner nor any of the
other defendants challenged the final order passed in the Original
Application. It is also pointed out that the petitioner had assigned the
mortgaged properties in favour of a third person, and without disclosing
these facts, he approached this Court. The petitioner is prosecuting
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these Original Petitions on behalf of the person in whose favour he had
assigned the mortgaged property during the pendency of the
proceedings.
11. Learned Counsel for the petitioner submits that the impugned
order in O.P.(DRT) No.64/2018 suffers from illegality inasmuch as per the
unamended Section 21 of the Recovery of Debts and Bankruptcy Act 1993
there was absolute discretion with the Tribunal to waive off the entire
statutory pre-deposit and the Tribunal had proceeded on the basis of the
amended Act, which does not apply in the instant case.
11.1 What has to be considered is the Debts Recovery Appellate
Tribunal (Procedure) Rules 1994. Rule 9 of the Debts Recovery Appellate
Tribunal (Procedure) Rules 1994 was amended with effect from
04.11.2016. However, under the unamended Rule, there was no
discretion vested in the Appellate Tribunal to reduce the amount of pre-
deposit from 50% to 25%. By way of substitution, Rule 9 now empowers
the Appellate Tribunal for reasons to be recorded in writing to reduce
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the amount to be deposited up to 25%.
12. Even if the contention of the petitioner is accepted that the
unamended Section 21 of the Recovery of Debts and Bankruptcy Act 1993
provided discretion to the Appellate Tribunal to waive off the amount of
pre-deposit of 50% for reasons to be recorded, the impugned order would
suggest that the Tribunal had not exercised the said discretion on the
facts of the case. Therefore, the Tribunal directed the petitioner to
deposit Rs.50 lakhs instead of 50% of the amount, as provided under
unamended Section 21 of the Recovery of Debts and Bankruptcy Act
1993.
13. In view of the aforesaid facts, I do not find that the Tribunal
had committed any error of law or jurisdiction in dismissing the appeal
filed by the petitioner. The petitioner never challenged the order dated
15.11.2017, whereby the petitioner was directed to deposit Rs.50 lakhs in
two instalments but has come before this Court against the final order
whereby the appeal has been dismissed for non-compliance with the
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order dated 15.11.2017.
13.1 Even otherwise, on facts, it can be seen that the petitioner has
assigned the property in favour of the third person and the petitioner is
indulging in protracted litigation to espouse the cause of the third
person in whose favour he has assigned the rights. The sale has already
been confirmed, the certificate has already been issued, the property has
been registered in the name of the auction purchaser, and the possession
has been delivered. Therefore, I do not find that this petition has any
merit even otherwise. This Court is exercising its revisional jurisdiction
under Article 227 of the Constitution of India; the Court has to see
whether there is any error apparent on the face of the record, of facts or
law, or is there any jurisdictional error. From the perusal of the order
passed by the Tribunal, this Court does not find that there is any error
apparent on the face of the record, either in fact or law or of jurisdiction,
which requires interference by this Court.
Therefore, the O.P.(DRT) No.64/2018 is hereby dismissed.
OP (DRT) NO. 88 OF 2017 and
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14. This O.P.(DRT) has been filed challenging the order dated
12.07.2017 passed by the Debts Recovery Tribunal-2, Ernakulam, and the
order dated 12.04.2016 passed by the Recovery Officer in I.A.
No.700/2010 in DRC No.1503/OBC/EKM in O.A. No.71/2002. The
challenge also concerns the orders/certificates issued by the Recovery
Officer after the sale of the secured asset was complete.
15. From a catena of decisions of the different jurisdictional High
Courts, including the Supreme Court, it is well settled that an application
to set aside the sale of an immovable asset is not maintainable unless the
defaulter makes a pre-deposit as mandated under Rule 61(b) of the
Second Schedule of the Income Tax Act 1961.
16. I am not interested to verbose this judgment by citing all the
decisions on the issue, except a few decisions mentioned hereunder:
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Nazims Continental v. The Indian Overseas Bank1
16.1 The Division Bench of the Madras High Court has held that
the application to set aside the sale is not maintainable unless the
defaulter under unamended Rule 61 of the Second Schedule of the
Income Tax Act until the condition prescribed under sub-rule (b) of Rule
61 is complied with.
16.2 Paragraphs 12, 13, 14, 19 and 23 of the said judgment are
extracted hereunder:
12. From Rule 60, it will be evident that application to set aside sale of
immovable property on any ground can be made by the defaulter or any
person, whose interests are affected by the sale, within 30 days from the
date of sale. In such case, the amount specified in the proclamation of
sale with interest thereon @ 15% p.a., from the date of proclamation of
sale to be deposited apart from payment of penalty @ 5%.
Per contra, under Rule 61, any person, whose interests are affected, may,
apply within 30 days to set aside the sale of immovable property only on
the ground of 'non-service of notice' or 'irregularity' and has to show
that notice was not served on the defaulter to pay the arrears as required
2009 (3) LW792; MANU/TN/1130/2009
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by the schedule or on the ground of a material irregularity in publishing
or conducting the sale. However, no sale can be set aside on any of such
ground unless the recovery officer is satisfied that the applicant has
sustained "substantial injury" by reasons of non-service or irregularity.
Such application made by defaulter under Rule 61 is to be disallowed
unless the DEFAULTER deposits the amount recoverable from him in the
execution of the certificate. (Emphasis added).
13. Therefore, 'in the case of a defaulter', for filing a petition under Rule
61 to set aside the sale of immovable property, the defaulter is required
to deposit the 'amount recoverable from him in the execution of the
certificate', as distinguished from the 'amount specified in the
proclamation of sale' as stipulated under Rule 60. Under Rule 61, only if
a person, whose interests is affected by sale, but is not a defaulter, is not
liable to make any pre-deposit to set aside the sale of immovable
property.
14. Similar matter fell for consideration before a Division Bench of this
Court in Sakura Prime Tanning Co. v. Central Bank of India and Ors. in
W.P. No. 14581/06, disposed of on 28th Sept., 2007, wherein the Court
held as follows:
3. The provisions of the Second Schedule to Income Tax Act, 1961 is
applicable in this case in view of Section 29 of the Recovery of Debts
due to Banks and Financial Institutions Act, 1993. Rule 60 to the
Second Schedule of Income Tax Act, 1961, while postulates time
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limit to file application to set aside the sale, under Clause (b) of
Proviso to Rule 61 to the Second Schedule of the Income Tax Act,
1961, an application made by the defaulter under the rule cannot be
allowed unless the defaulter deposits the amount recoverable from
them in the execution of the certificate.
In another case of Indian Bank v. Stanfrose Agvet Farms W.P. No.
19833/07 and analogous cases, a Division Bench, by its unreported
judgment dated 10th March, 2008, held as follows:
13. Under Section 30 of the RDB Act, 1993, appeal can be preferred
against the order of the Recovery Officer within 30 days' from the
date on which copy of such order is issued. As the borrowers
intended to challenge the auction-sale pursuant to the order passed
by the Recovery Officer, it was open for them to prefer such appeal
under Section 30, but such appeal could have been only before the
DRT and not before the DRAT.
14. Under Section 29 of the RDB Act, 1993, the provisions of Second
and Third Schedule to the Income Tax Act, 1961 are applicable, as
far as possible. Under Rule 60 of the Second Schedule to the Income
Tax Act, 1961, it is mandatory to deposit the amount specified in the
proclamation of sale as that for the recovery of which sale was
ordered with interest thereon, at the rate prescribed under the said
Rules for setting aside the sale of immovable property.
*** *** ***
*** *** ***
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19. In the case of Union of India v. Delhi High Court Bar Association
MANU/SC/0194/2002: [2002]2SCR450, the Supreme Court noticed
Section 29 anc Section 30 substituted vide Amendment Act 2000 and held
as follows:
30. By virtue of Section 29 of the Act, the provisions of the Second
and Third Schedules to the Income Tax Act, 1961 and the Income Tax
(Certificate Proceedings) Rules, 1962, have become applicable for
the realisation of the dues by the Recovery Officer. Detailed
procedure for recovery is contained in these Schedules to the
Income Tax Act, including provisions relating to arrest and
detention of the defaulter. It cannot, therefore, be said that the
Recovery Officer would act in an arbitrary manner. Furthermore,
Section 30, after amendment by the Amendment Act, 2000, gives a
right to any person aggrieved by an order of the Recovery Officer, to
prefer an appeal to the Tribunal. Thus now an appellate forum has
been provided against any orders of the Recovery Officer which may
not be in accordance with law. There is, therefore, sufficient
safeguard which has been provided in the event of the Recovery
Officer acting in an arbitrary or an unreasonable manner. The
provisions of Sections 25 and 28 are, therefore, not bad in law.
20. In view of the provisions of law and finding of the Court and
discussions made above, we hold that the recovery officer has also
jurisdiction to entertain an application under Rules 60, 61 and 62 of Part-
III of 2nd Schedule to the Income Tax Act and in case any person is
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aggrieved against such order, may prefer appeal under Section 30 of the
Act, 1993. As the defaulter or any person whose interests are affected by
sale is supposed to pay the pre-deposit amount under Rule 60 and a
defaulter required to pay pre-deposit amount under Rule 61 except the
person whose interests are affected due to non-service of notice on
defaulter to pay the arrears or material irregularity in publishing or
conducting the sale should apply under Rule 61 or the purchaser, who
may file application under Rule 62, who are not liable to pre- deposit any
amount, in such case, for preferring an appeal under Section 30 of Act,
1993, against an order of recovery officer under Rules 60, 61 or 62, no pre-
deposit amount required to be deposited.
*** *** ***
23. So far as W.P. No. 13210/08 is concerned, the borrower is the
petitioner. He raised the question of upset price of valuation of property
and jurisdiction of the recovery officer under Rules 60 and 61 of Part-III
of II Schedule to Income Tax Act. They preferred application under Rule
61 of Part-III of II Schedule to Income Tax before the recovery officer to
set aside the sale without compliance of pre-deposit amount. For the said
reason, amount having not deposited as per Rule 61, the application to
set aside was dismissed against which they preferred appeal before the
Debts Recovery Appellate Tribunal, which has also been dismissed by the
Appellate Tribunal vide impugned order dated 6th May, 2008.
First of all, it is the appellant, who preferred appeal under Rule 61 and,
therefore, they cannot say the recovery officer has no jurisdiction to pass
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order under Rule 61 and the appeal to set aside the sale is only
maintainable under Section 30 of the Act, 1993.
We have already held that an application to set aside sale is also
maintainable under Rule 61, but we have also held that a defaulter, such
as borrower, is required to pre- deposit the amount in view of proviso to
Rule 61. The petitioners being the defendant-borrowers, as they failed to
comply by pre-depositing the amount, we hold that the recovery officer
rightly rejected the application under Rule 61 preferred by borrowers
and the Appellate Tribunal rightly affirmed the same."
P Shuyjaath Raheed v. State Bank of India2
17. The same view has been reiterated by the Division Bench of
the Madras High Court in paragraphs 10 and 17 of the judgment, which
reads thus:
"10. The applicability of the provisions of Second Schedule to the Income
Tax Act, 1961 in accordance with Section 29 of the Recovery of Debts Due
to Banks and Financial Institutions Act, 1993, particularly with reference
to Rules 60 & 61 came up for
consideration before a Division Bench of this Court in Nazims Continental
& others v. The Indian Overseas Bank, Triplicane Branch and others,
MANU/TN/1130/2009: 2009 (3) LW 792. S.J. Mukhopadhaya, J. (as His
2012 (3) CTC 724; MANU/TN/1516/2012
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Lordship then was) while narrating the relevant provisions of the
Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the
Income Tax Act and the Income Tax (Certificate Proceedings) Rules, 1962
in the context of the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002, has held as follows:
12. From Rule 60, it will be evident that Application to set aside sale of
immovable property on any ground can be made by the defaulter or
any person, whose interests are affected by the sale, within 30 days
from the date of sale. In such case, the amount specified in the
proclamation of sale with interest thereon @ 15% p.a., from the date
of proclamation of sale to be deposited apart from payment of penalty
@ 5%.
Per contra, under Rule 61, any person, whose interests are affected,
may, apply within 30 days to set aside the sale of immovable property
only on the ground of 'non-service of notice' or 'irregularity' and has
to show that notice was not served on the defaulter to pay the arrears
as required by the Schedule or on the ground of a material irregularity
in publishing or conducting the sale. However, no sale can be set aside
on any of such ground unless the Recovery Officer is satisfied that the
Applicant has sustained "substantial injury" by reasons of non-service
or irregularity. Such Application made by defaulter under Rule 61 is to
be disallowed unless the DEFAULTER deposits the amount recoverable
from him in the execution of the certificate.
(Emphasis added).
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13. Therefore, 'in the case of a defaulter', for filing a Petition under
Rule 61 to set aside the sale of immovable property, the defaulter is
required to deposit the 'amount recoverable from him in the execution
of the certificate', as distinguished from the 'amount specified in the
proclamation of sale' as stipulated under Rule 60. Under Rule 61, only
if a person, whose interests is affected by sale, but is not a defaulter, is
not liable to make any pre-deposit to set aside the sale of immovable
property.
14. Similar matter fell for consideration before a Division Bench of this
Court in Sakura Prime Tanning Company v. Central Bank of India &
Ors. in W.P. No. 14581/06, disposed of on 28th Sept., 2007, wherein the
Court held as follows:
(3) The provisions of the Second Schedule to Income Tax Act, 1961 is
applicable in this case in view of Section 29 of the Recovery of Debts
due to Banks and Financial Institutions Act, 1993. Rule 60 to the
Second Schedule of Income Tax Act, 1961, while postulates time
limit to file Application to set aside the sale, under Clause (b) of
Proviso to Rule 61 to the Second Schedule of the Income Tax Act,
1961, an Application made by the defaulter under the rule cannot be
allowed unless the defaulter deposits the amount recoverable from
them in the execution of the certificate.
In another case of Indian Bank v. Stanfrose Agvet Farms, W.P. No.
19833/07 and analogous cases, a Division Bench, by its unreported
judgment dated 10th March, 2008, held as follows:
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13. Under Section 30 of the RDB Act, 1993, appeal can be preferred
against the order of the Recovery Officer within 30 days' from the
date on which copy of such order is issued. As the borrowers
intended to challenge the auction-sale pursuant to the order passed
by the Recovery Officer, it was open for them to prefer such Appeal
under Section 30, but such Appeal could have been only before the
DRT and not before the DRAT.
14. Under Section 29 of the RDB Act, 1993, the provisions of Second
and Third Schedule to the Income Tax Act, 1961 are applicable, as
far as possible. Under Rule 60 of the Second Schedule to the Income
Tax Act, 1961, it is mandatory to deposit the amount specified in the
proclamation of sale as that for the recovery of which sale was
ordered with interest thereon, at the rate prescribed under the said
Rules for setting aside the sale of immovable property.
The Division Bench has also relied upon a plethora of decisions and has
ultimately held that the deposit of amount is a mandatory requirement
in the following words:
20. In view of the provisions of law and finding of the Court and
discussions made above, we hold that the recovery officer has also
jurisdiction to entertain an Application under Rules 60, 61 & 62 of
Part-III of 2nd Schedule to the Income Tax Act and in case any
person is aggrieved against such order, may prefer Appeal under
Section 30 of the Act, 1993. As the defaulter or any person whose
interests are affected by sale is supposed to pay the pre-deposit
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amount under Rule 60, and a defaulter required to pay pre-deposit
amount under Rule 61, except the person whose interests are
affected due to non-service of notice on defaulter to pay the arrears
or material irregularity in publishing or conducting the sale should
apply under Rule 61 or the purchaser, who may file Application
under Rule 62, who are not liable to pre-deposit any amount, in such
case, for preferring an Appeal under Section 30 of Act, 1993, against
an order of recovery officer under Rules 60, 61 or 62, no pre-deposit
amount required to be deposited.
*** *** ***
17. The further reliance placed by the learned Counsel for the Petitioners
on the judgment of the Supreme Court in Chinnammal v. P. Arumugham,
MANU/SC/0321/1990: 1990 (1) SCC 513, is again of no help to the case of
the Petitioners. That was a case where the Supreme Court has
distinguished between the decree-holder, who is himself an auction
purchaser, and the third party auction purchaser and in those
circumstances, the Supreme Court has held that the third party auction
purchaser is unaffected and he does not lose the property by subsequent
reversal or modification of the decree. It is true that in this case
Respondents 5 & 6 are third parties and the records show that they are
purchasers having known about the litigation. But their rights cannot be
said to be affected, especially when the confirmation of the sale itself is
yet to be made and Petitioners have not acted as per the Rule, as elicited
above, especially the Rules in the Second Schedule to the Income Tax Act,
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1961, particularly Rule 60, which contemplates the mandatory
requirement of deposit. Therefore, the third party purchasers' right in
the present case will be affected only in cases where the defaulter
performs his conduct in accordance with law. There is absolutely nothing
to presume the abuse as repeatedly contended by the learned Counsel for
the Petitioners by relying upon Section 22 of the Recovery of Debts Due
to Banks and Financial Institutions Act, 1993, inasmuch as in the public
auction Respondents 5 & 6 having been the highest bidders have not only
paid the initial payment, but also the subsequently paid the balance
amount in full. Unless and until it is shown with concrete evidence that
the First Respondent/Bank is in cahoots with Respondents 5 & 6 or in any
event the property has been sold below the upset price, one cannot come
to a conclusion that there is a mala fide intention. Therefore, the
judgments which are relied upon by the learned Counsel for the
Petitioners cannot be pressed into service on the facts and circumstances
of the present case. At the risk of repetition it has to be reiterated that
what the learned Counsel for the Petitioners sought before the Debts
Recovery Appellate Tribunal has been granted and in accordance with
that the proceedings before the Recovery Officer is pending and it is
always open to the Petitioners to challenge the order to be passed by the
Recovery Officer, if so advised."
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State Bank of India v. Janardhanan3
18. This Court has also taken a similar view in its judgment in
paragraph 20, which is extracted hereunder:
"20. Accordingly, since it is evident from the records that the first
respondent herein carried grounds which ought to have been urged under
R.61 of the Second Schedule to the Act of 1961 and since the invocation of
such Rule would have required the first respondent to make the pre-
deposit, it was not open to the first respondent to bypass such provision
and choose the appellate route to urge the same grounds. However, the
situation would have been different if grounds other than those available
in R.60 and R.61 were urged by a similarly placed person by way of an
appeal."
Janatha Textiles v. Tax Recovery Officer4
19. The Supreme Court, in its judgment, has held that the rights
of the auction purchaser in the property are to be protected, and if there
is an uncertainty of confirmation of the sale in favour of the auction
purchaser, the sale of the property would not fetch market value or fair
2021 KHC 5222
2008 (12) SCC 582; MANU/SC/2670/2008
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price of the property. Paragraph 26 of the judgment reads thus:
"26. Law makes a clear distinction between a stranger who is a bona fide
purchaser of the property at an auction sale and a decree-holder
purchaser at a court auction. The strangers to the decree are afforded
protection by the court because they are not connected with the decree.
Unless the protection is extended to them the court sales would not fetch
market value or fair price of the property."
20. On confirmation of the sale, it becomes absolute, and the
judgment debtor would not have any right and title over the property.
Considering the long-drawn litigation and the facts of the case, I am of
the view that O.P.(DRT) No.88/2017 also does not have any merit, which
is hereby dismissed.
Result:
In view of the above discussions both O.P.(DRTs) stand dismissed.
All Interlocutory Applications regarding interim matters stand closed.
Sd/-
D. K. SINGH
JUDGE
jjj
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APPENDIX OF OP (DRT) 64/2018
PETITIONER EXHIBITS
Exhibit P7(a) TRUE PHOTOCOPY OF I.A.NO.975/2013 IN APPEAL NO.861/2012, DEBT
RECOVERY APPELLATE TRIBUNAL, CHENNAI.
Exhibit P7(b) TRUE PHOTOCOPY OF ORDER DATED 17/11/2017 IN A.R.NO.861/2012,
DEBT RECOVERY APPELLATE TRIBUNAL, CHENNAI.
EXT.P3: COPY OF THE SUMMONS FROM SAID TO HAVE BEEN ISSUED TO THE
PETITIOENR/REVIEW APPLICANT (FROM THE DRT, ERNAKULAM IN
EXT.P4: COPY OF ACKNOWLEDGMENT CARD SAID TO BEFOR THE NOTICE
ISSUED TO THE PETITIONER/REVIEW APPLICANT IN DRC 1503/OBC.
EXT.P5: COPY OF ACKNOWLEDGMENT CARD SAID TO BEFOR THE NOTICE
ISSUED TO THE PETITIONER/REVIEW APPLICANT INDRC 1503/OBC.
EXT.P1: COPY OF PROCEEDINGS SHEET OF DRT, ERNAKULAM IN OA NO.
71/2002 FROM 3/5/2002 TO 5/3/2004.
EXT.P7: COPY OF THE APPEAL MEMORANDUM 861/2013, DEBT RECOVERY
APPELLATE TRIBUNAL, CHENNAI
EXT.P8: COPY OF THE ORDER DATED 15/12/2017 DISMISSING THE APPEAL NO.
861/2012 BY THE DEBT RECOVERY APPELLATE TRIBUNAL, CHENNAI
EXT.P6: COPY OF FINAL ORDER DATED 19/3/2004 IN OA NO. 71/2002, DEBT
RECOVERY TRIBUNAL, ERNAKULAM
EXT.P2: COPY OF THE MEMORANDUM OF REVIEW PETITION IN RA NO. 3/2012
IN OA NO. 71/2002, DEBT RECOVERY TRIBUNAL, ERNAKULAM
R1A TRUE COPY OF THE FINAL ORDER IN OA NO.71/2002 DATED 19.03.2004
R1B TRUE COPY OF THE ORDER IN RA NO.3/2012 IN OA NO.71/2012 DATED
16.08.2012
R1C TRUE COPY OF THE ORDER IN I.A. NO.700/2010 IN DRC NO.1503 IN OA
NO.71/2012 DATED 18.03.2010
R1D TRUE COPY OF THE ORDER IN IA NO.2591/2010 IN DRC NO.1503 IN OA
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NO.71/2012 DATED 11.10.2010
R1E TRUE COPY OF THE ORDER IN APPEAL NO.27/2011 DATED 25.10.2013
R1F TRUE COPY OF THE JUDGMENT IN OP (DRT) NO.9/2015 DATED
08.07.2015
R1G TRUE COPY OF THE RECOVERY CERTIFICATE DATED 22.04.2016
ISSUED IN FAVOUR OF THE AUCTION PURCHASER.
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APPENDIX OF OP (DRT) 88/2017
PETITIONER EXHIBITS
Exhibit P23 TRUE PHOTOCOPY OF REPORT OF VALUATION OF THE IMMOVABLE
PROPERTY OF JOSEPH K ANTONY BY K.A.THOMAS, CHARTERED
ENGINEER.
EXHIBIT P2 TRUE PHOTOCOPY OF APPEAL NO. 3/2016, DEBT RECOVERY
TRIBUNAL-1, ERNAKULAM.
EXHIBIT P3 TRUE PHOTOCOPY OF ACKNOWLEDGMENT CARD DATED 4/8/2014
EXHIBIT P4 TRUE PHOTOCOPY OF ACKNOWLEDGMENT CARD DATED30/3/2005
EXHIBIT P5 TRUE PHOTOCOPY OF SUMMONS DATED 10/10/2002 IN OS NO.
71/2002, DEBT RECOVERY TRIBUNAL, ERNAKULAM.
EXHIBIT P1 TRUE PHOTOCOPY OF ORDER DATED 12/7/2017 IN TR.APPEAL NO.
40/2016 (FOREMERLY APPEAL NO.3/2016), DRT-11, KERALA AT
ERNAKULAM.
EXHIBIT P7 TRUE PHOTOCOPY OF ORDER DATED 24/9/2009 IN WPC 26799/2009,
HIGH COURT OF KERALA.
EXHIBIT P8 TRUE PHOTOCOPY OF VALUATION REPORT DATED 13/1/1997 ISSUED
BY FEBI CONSULTANTS, KALOOR.
EXHIBIT P9 TRUE PHOTOCOPY OF JUDGMENT DATED 13/9/2010 IN WPC NO.
30611/2010, HIGH COURT OF KERALA
EXHIBIT P10 TRUE PHOTOCOPY OF CERTIFICATE DATED 9/12/2014 ISSUED BY
BRANCH MANAGER, ORIENTAL BANK OF COMMERCE.
EXHIBIT P6 TRUE PHOTOCOPY OF ORDER DATED 24/9/2009 IN DRC NO. 1503 IN
OA NO. 71/2002, RECOVERY OFFICER, DEBT RECOVERY TRIBUNAL,
ERNAKULAM.
P11 TRUE COPY OF ORDER DATED 18.04.2016 SAID TO HAVE BEEN PASSED
BY THE 3RD RESPONDENT IN IA NO.1154/2016 IN DRC NO.1503, DRT-I,
ERNAKULAM
P12 TRUE PHOTOCOPY OF SALE CERTIFICATE DATED 22.04.2016 IN DRC
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1503 IN O.A. 71/2002, DEBT RECOVERY TRIBUNAL, ERNAKULAM
P13 TRUE PHOTOCOPY OF PROCEEDINGS BEFORE THE RECOVERY OFFICER
DATED 18.04.2016 AND 19.07.2017 PASSED BY THE 3RD RESPONDENT IN
DRC 1503, DRT-1, ERNAKULAM
P14 TRUE PHOTOCOPY OF THE ORDER OF DELIVERY OF IMMOVABLE
PROPERTY TO CERTIFIED PURCHASER DATED 19.07.2017
R2 H TRUE COPY OF ORDER OF CONFIRMATION OF SALE PASSED BY THE
RECOVERY OFFICER ON 18.04.2016
P2I TRUE COPY OF THE CAVEAT OP NO.231/2016 FILED BEFORE THE DEBT
RECOVERY TRIBUNAL, ERNAKULAM
