Madras High Court
State Bank Of India vs P.K.Janardhanan on 4 August, 2021
W.P.No.1690 of 2016
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 04.08.2021
CORAM :
THE HON'BLE MR.SANJIB BANERJEE, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE P.D.AUDIKESAVALU
W.P.No.1690 of 2016
and W.M.P.No.1465 of 2016
State Bank of India
Ganapathy Branch,
Sathy Road, Coimbatore – 641 006
Rep. by its Authorised Officer. .. Petitioner
Vs.
1. P.K.Janardhanan
2. V.Shantha
3. The Registrar,
Debt Recovery Appellate Tribunal,
Egmore, Chennai - 600 008. .. Respondents
Prayer: Petition filed under Article 226 of the Constitution of India
seeking issuance of a writ of certiorari to call for the records of the
impugned order dated 10.07.2015 passed in M.A.No.227 of 2008 on
the file of the third respondent herein, and to quash the said
impugned order being grossly illegal, not tenable in law.
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For Petitioner : Mr.E.Om Prakash
Senior Counsel
for M/s.Ramalingam and Associates
For Respondents : Mr.K.K.Shivashanmugam
for 1st respondent
: Mr.V.Suresh
for M/s.Shivakumar and Suresh
for 2nd respondent
: Third Respondent (Tribunal)
ORDER
(Order of the Court was made by The Hon'ble Chief Justice)
The writ petition has, unfortunately, remained unattended to for
more than five years though it pertains to bank recovery proceedings
instituted in 2002 and involves orders of the years 2008 and 2015.
2. The petitioning bank questions the propriety of an order
dated July 10, 2015 passed by the Debt Recovery Appellate Tribunal
on the first respondent's appeal against an order dated September
18, 2008 passed by the Debts Recovery Tribunal, Coimbatore. The
first respondent, a guarantor in a run-of-the-mill bank transaction,
had appealed to the Presiding Officer of the Debts Recovery Tribunal
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under Section 30 of the then Recovery of Debts Due to Banks and
Financial Institutions Act, 1993, which has now been rechristened as
the Recovery of Debts and Bankruptcy Act, 1993.
3. The grievance that the first respondent carried to the
Presiding Officer was the impropriety on the part of the Recovery
Officer to sell a property in certificate recovery proceedings after the
petitioner herein had succeeded in establishing the quantum of debt
due from the borrower and the guarantor in proceedings under
Section 19 of the Act of 1993. The Presiding Officer discussed the
several aspects urged by the first respondent herein in great detail
before repelling the appeal on the ground that it was not
maintainable. The Presiding Officer held that in view of Section 29 of
the Act of 1993 and the application of the provisions of, inter alia, the
Second Schedule to the Income Tax Act 1961 in respect of sale of
properties conducted in certificate recovery proceedings, the first
respondent herein ought to have invoked Rule 61 to the Second
Schedule to the Act of 1961.
4. It is necessary in the present context to see Sections 29 and
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W.P.No.1690 of 2016
30 of the Act of 1993 and Rules 60, 61 and 62 of the Second
Schedule to the Act of 1961:
Act of 1993
"29. Application of certain provisions of Income
Tax Act.—
The provisions of the Second and Third Schedules to
the Income Tax Act, 1961 (43 of 1961), and the
Income Tax (Certificate Proceedings) Rules, 1962, as
in force from time to time shall, as far as possible,
apply with necessary modifications as if the said
provisions and the rules referred to the amount of
debt due under this Act instead of to the Income Tax
Act:
PROVIDED that any reference under the said
provisions and the rules to the “assessee” shall be
construed as a reference to the defendant under this
Act."
"30. Appeal against the order of Recovery Officer
(1) Notwithstanding anything contained in section 29,
any person aggrieved by an order of the Recovery
Officer made under this Act may, within thirty days
from the date on which a copy of the order is issued to
him, prefer an appeal to the Tribunal.
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W.P.No.1690 of 2016
(2) On receipt of an appeal under sub-section (1), the
Tribunal may, after giving an opportunity to the
appellant to be heard, and after making such enquiry
as it deems fit, confirm, modify or set aside the order
made by the Recovery Officer in exercise of his
powers under sections 25 to 28 (both inclusive)."
Rules in the Second Schedule to the Act of 1961
"60. 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 one and one-fourth per cent for every
month or part of the month calculated from
the date of the proclamation of sale to the
date when the deposit is made; and
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W.P.No.1690 of 2016
(b) for payment to the purchaser, as penalty,
a sum equal to five per cent 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."
"61. Application to set aside sale of immovable
property 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 the 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 a material irregularity in publishing or conducting
the sale:
Provided that
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W.P.No.1690 of 2016
(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 a defaulter under
this rule shall be disallowed unless the
applicant deposits the amount recoverable
from him in the execution of the certificate."
"62. Setting aside sale where defaulter has no
saleable interest.
At any time within thirty days of the sale, the
purchaser may apply to the Tax Recovery Officer to
set aside the sale on the ground that the defaulter had
no saleable interest in the property sold."
5. To complete the narration of events, the Debt Recovery
Appellate Tribunal, in its rather terse order of July 10, 2015, held that
the first respondent herein had a choice in either invoking Rule 60 or
61 of the said Rules in the Second Schedule to the Act of 1961 or
preferring an appeal to the Presiding Officer under Section 30 of the
Act of 1993. This was the appellate tribunal's simple interpretation of
the non-obstante clause appearing at the beginning of Section 30 of
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the Act of 1993.
6. Two judgments, which are completely irrelevant in the
context, have been cited on behalf of appearing parties: a judgment
reported at (2013) 9 SCC 460 (C.N.Paramasivam v. Sunrise Plaza)
where the discussion pertains to the modifications referred to in
Section 29 of the Act of 1993, and another, a Division Bench
judgment of this Court reported at 2017-1-LW 577 (S.Reshma v.
Debt Recovery Tribunal), which also dwelt on such aspect of Section
29 of the Act of 1993.
7. Section 29 of the Act of 1993 provides for the procedure as
laid down in, inter alia, the Second Schedule to the Act of 1961 to be
applicable in respect of the relevant matters under the Act of 1993.
Section 29 is under Chapter V of the Act of 1993, which is intituled
"Recovery of Debt determined by Tribunal" and contains sections
which carry headings as "Modes of Recovery of Debts", "Validity of
Certificate and Amendment thereof", and "Other Modes of Recovery".
Chapter V of the Act of 1993 spans Sections 25 to 30A.
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8. The non-obstante clause in Section 30 of the Act of 1993, in
its simplest form and plain meaning, permits any person aggrieved
by an order of the Recovery Officer to prefer an appeal against the
relevant order, notwithstanding any other remedy that may have
been provided to the person aggrieved in such regard in Section 29 of
the Act of 1993 itself. Since Section 29 of the Act of 1993 embraces
the provisions of, inter alia, the Second Schedule to the Act of 1961
within its fold in the widest terms, all of the provisions in the relevant
Second Schedule, which can be seen to apply to the steps taken by
the Recovery Officer, would be applicable, with necessary
modifications. In other words, the provisions of, inter alia, the
Second Schedule to the Act of 1961 would not apply stricto sensu,
but the substance thereof would apply with the necessary
modifications being read into the provisions as if by way of a legal
fiction. Thus, to such extent, the sale provision envisaged in Rule 56
of the said Second Schedule and other provisions pertaining to the
challenge to the sale under Rules 60, 61 and 62 would be attracted in
respect of recovery proceedings before the Recovery Officer under
the Act of 1993.
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9. If a borrower or a guarantor misses the bus in paying the
amount covered by the certificate and the sale is conducted by the
Recovery Officer, Rule 60 of the Second Schedule to the Act of 1961
permits such person to approach the Recovery Officer within 30 days
of the date of sale and upon depositing the sale price to require the
sale not to be completed or effected. Similarly, Rule 61 of the
Second Schedule to the Act of 1961 permits the defaulter as defined
therein or any person whose interests are affected by the sale to
approach the Recovery Officer if the ground of prejudice is that the
defaulter had not been served any notice to pay arrears or there was
a material irregularity in publishing or conducting the sale. Although
it is irrelevant in the context, in view of the Proviso to the relevant
provision, the applicant also must demonstrate the prejudice suffered
before the application for setting aside the sale of the immovable
property may be received by the Recovery Officer. Rule 62 of the
Second Schedule to the Act of 1961 permits the ground of lack of
saleable interest to be taken, but only by the purchaser. It is also
necessary to see Rule 63 of the said Schedule as it provides for
confirmation of sale on two conditions: that such confirmation of sale
would be made after the time for setting aside the sale under the
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previous Rules had expired or where the application was made and
disallowed; and, upon the full payment of the purchase money having
been received. Thus, no confirmation of sale can be made without
both the conditions being met. To boot, the confirmation of sale
would be an order since Rule 63(1) of said Schedule provides that the
relevant official shall "make an order confirming the sale". Even the
Proviso to the Rule refers to the confirmation of sale being an order.
10. Thus, when a defaulter - where the defaulter is the person
who has defaulted making payment in terms of the certificate - or
any other person who has an interest in the immovable property,
seeks to apply for setting aside the sale of the property under Rule
60 of the Second Schedule to the Act of 1961, it is implicit that the
person in essence accepts the obligation to discharge the certificate
amount.
11. On the other hand, Rule 61 of the Second Schedule permits
a ground of irregularity to be asserted without depositing any money,
unless the applicant is a defaulter within the meaning of the word as
used in the provision. It is possible, in terms of Rule 61 of the said
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Schedule, for either the defaulter or any person whose interests are
affected by the sale of the property to apply, but the requirement of
deposit is only on the defaulter in terms of the Proviso to such Rule.
12. Section 30 of the Act of 1993, when read in the ordinary
course, gives an impression that any order of the Recovery Officer
may be challenged as long as what is challenged may be regarded as
an order and, loosely speaking, an order would be a decision that
affects or tends to affect the rights of any person, unless the activity
is statutorily regarded as an order. It is necessary to confine what
the word "order" would imply in Section 30 of the Act of 1993, since
every order of adjournment issued by the Recovery Officer may not
be understood to be appellable to the Presiding Officer.
13. However, returning to the issue involved in the present
case, the apparent choice that the procedure under Second Schedule
to the Act of 1961 and the appellate provision under Section 30 of the
Act of 1993 gives to any person who wishes to challenge a sale is not
as wide or unconditional as it appears to be. It cannot be reasonably
said that to apply under Rule 60 of the Second Schedule a person has
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to make a deposit, whereas the alternative remedy of resorting to an
appeal under Section 30 of the Act of 1993 before a superior forum
may be without deposit of any money at all. That would be irrational.
Similarly, if a defaulter were to challenge the sale under Rule 61 of
the said Schedule which would require a deposit to be made, the
defaulter may not wriggle out of the obligation by resorting to the
appellate provision under Section 30 of the Act of 1993.
14. The two provisions or the two routes of challenge are
qualitatively different. Just as a defendant suffering an exparte
decree has the choice to go before the trial court and have the
decree set aside by indicating sufficient grounds that prevented him
from presenting himself in court at the time that the suit was decreed
exparte, such defendant also has an alternative remedy of preferring
an appeal against the decree. In such a case, as in the present, the
quality of the challenge before either fora would be different. In the
exparte decree case, the grounds for not being able to attend court
on the relevant date when the suit was scheduled to be taken up may
not be urged, but other grounds may be urged in appeal touching
upon the reasons proffered in support of the decree to allow the
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claim. Even the jurisdiction of the trial court may be assailed in such
appeal, but the sufficiency of the cause for the defendant’s non-
appearance before the trial court on the relevant date may not be
cited as a ground, as such ground may be urged only under Order IX
Rule 13 of the Code of Civil Procedure.
15. In the present case, a defaulter who has failed to make the
payment within time after a certificate has been issued against him
or any other person who is interested in the property within the
meaning of the expression in Rules 60 or 61 of the said Schedule may
resort to the appellate provision of Section 30 of the Act of 1993 to
question the authority of the Recovery Officer or the like, but not to
seek the setting aside on the same grounds as in Rules 60 or 61 of
the said Schedule. Similarly, when a purchaser prefers an appeal
from an order of sale, the ground under Rule 62 of the said Schedule
may not be urged in such appeal under Section 30 of the Act of 1993,
though other grounds not covered by Rule 62 may be cited in course
of such appeal.
16. Indeed, the apparent anomaly created by the non-obstante
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clause in Section 30 of the Act of 1993 is somewhat attempted to be
cured by the introduction of Section 30A in the relevant Chapter.
Such Section now provides that where an appeal is preferred against
an order of the Recovery Officer under Section 30 by any person from
whom the amount of debt is due, such appeal shall not be entertained
unless fifty per cent of the amount due has been deposited.
17. However, the present matter has to be assessed without
reference to Section 30A of the Act of 1993, which has been
introduced subsequent to the appeal being preferred under Section
30 by the first respondent herein and even after the further appellate
order of the Debt Recovery Appellate Tribunal was made on July 10,
2015. Section 30A was introduced to the Act of 1993 with effect from
September 1, 2016. In the present case, there is no doubt that as a
guarantor to the transaction, the liability of the first respondent
herein was co-extensive with that of the principal-debtor. In any
event, the certificate may have also provided for recovery of the debt
from the first respondent herein.
18. The grounds carried by the first respondent in the appeal
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filed under Section 30 of the Act of 1993 pertained to the non-
publication of a notice for sale in the language of the district, within
the meaning of the relevant expression in Rule 52(2) of the said
Schedule to the Act of 1961. Though the Debts Recovery Tribunal
recorded the submission of the bank that a publication in the local
language had been made, it rendered no finding on such aspect since
it found that the appeal before it was not maintainable. However, the
appeal was found to not be maintainable not on the ground that the
grounds under Rules 60 and 61 had been urged, but merely on the
ground that the appeal would not lie in such a situation without the
appellant exhausting the remedy under Rules 60 and 61 of the said
Schedule.
19. Similarly, in the Debt Recovery Appellate Tribunal order of
July 10, 2015, it noticed the non-obstante clause at the beginning of
Section 30 of the Act of 1993 and proceeded to opine that it was open
to a person in the position of the first respondent herein to opt either
to apply under Rules 60 or 61 of the said Schedule or to appeal under
Section 30 of the Act of 1993. This was not a reasonable
interpretation of the relevant provisions. Ordinarily, two alternative
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remedies for the same purpose would not be available. At the very
least, the considerations relevant to avail either remedy must be
distinct, though the effect upon obtaining the remedy may be the
same. Just like the effect of an appeal or a review against the same
order may be identical, qualitatively a review is different from an
appeal and the grounds that may be urged in either case are distinct.
It is thus that an application for setting aside an order of sale may be
made in the circumstances recognised in Rules 60 or 61 or 62 of the
Second Schedule to the Act of 1961; but such circumstances must
not be cited when availing the appellate remedy under Section 30 of
the Act of 1993. The appeal must be on different grounds than the
purposes indicated in Rules 60 or 61 or 62 of the Rules of the said
Second Schedule.
20. Accordingly, since it is evident from the records that the
first respondent herein carried grounds which ought to have been
urged under Rule 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
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W.P.No.1690 of 2016
to urge the same grounds. However, the situation would have been
different if grounds other than those available in Rules 60 and 61
were urged by a similarly placed person by way of an appeal.
21. By virtue of Section 29 of the Act of 1993, the provisions of,
inter alia, the Second Schedule to the Act of 1961 would apply, with
necessary modifications in respect of recovery of debt determined by
the Tribunal. In terms of the scheme recognised in Chapter V of the
Act of 1993, it is the Recovery Officer who would be entitled to take
steps to recover the amount of debt specified in a certificate issued
by the Tribunal. Part III of the Second Schedule to the Act of 1961
provides for attachment and sale of immovable property. Thus, by
operation of law, the provisions of Part III of the Second Schedule to
the Act of 1961 would apply to recovery proceedings in respect of any
certificate issued by the Tribunal. Rule 60 of the said Rules, which
permits an application for setting aside of sale to be made, and Rule
61 of the said Rules, which also provides for an application for setting
aside the sale of an immovable property on other grounds, contain
the similar expressions, "has been sold in execution of a certificate".
The expression "has been sold" does not imply that the sale has to be
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completed, in the sense that the confirmation of sale would have
been made. Such expression, "has been sold" and even the
expression "of the sale" in Rule 62 of the said Rules refer to the sale
by auction, where the highest bidder has been identified, and the sale
has been made in favour of such highest bidder, but no confirmation
of the sale has been made.
22. Rule 63 of the said Rules, which immediately follows the
three Rules - 60, 61 and 62 - which provide for setting aside the sale
in different circumstances, mandates that the confirmation of sale
would be made when "no application is made for setting aside the
sale under the foregoing rules or where such an application is made
and disallowed". The confirmation of the sale, in terms of Rule 63(1)
of the said Rules, makes the sale absolute. What such provision
implies is that upon the sale becoming absolute, the Recovery Officer
has no means to reopen it.
23. The use of the expression "any person aggrieved by an
order of the Recovery Officer made under this Act" in Section 30 of
the Act of 1993 would suggest any order which prejudices the rights
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of any person. In such sense, the sale of an immovable property by
the Recovery Officer would be any "order" within the meaning of such
word used in the relevant expression. However, the grounds for
challenging such order may not be the grounds under which an
application for setting aside the sale may be made under Rules 60, 61
or 62 of the said Rules in the Second Schedule to the Act of 1961.
24. For the foregoing reasons, the order dated July 10, 2015
passed by the Debt Recovery Appellate Tribunal cannot be sustained
and the same is set aside. The order dated September 18, 2008
passed by the Debts Recovery Tribunal, Coimbatore is restored, but
on completely different grounds as indicated hereinabove.
25. As a consequence, the sale which has long been concluded
in favour of the second respondent auction-purchaser can no longer
be touched by the first respondent and will be regarded to have been
finally closed.
W.P.No.1690 of 2016 is disposed of. There will be no order as
to costs. Consequently, W.M.P.No.1465 of 2016 is closed.
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(S.B., CJ.) (P.D.A., J.)
04.08.2021
Index : Yes
sasi
To:
The Registrar,
Debt Recovery Appellate Tribunal,
Egmore, Chennai - 600 008.
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W.P.No.1690 of 2016
THE HON'BLE CHIEF JUSTICE
AND
P.D.AUDIKESAVALU, J.
(sasi)
W.P.No.1690 of 2016
04.08.2021
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