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The Income- Tax Act, 1995
Section 29 in The Income- Tax Act, 1995
The Transfer of Property Act, 1882
Section 30 in The Income- Tax Act, 1995
Chinnammal & 4 Ors vs P. Arumugham & Anr on 17 January, 1990

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Madras High Court
P.Shuyjaath Raheed vs The State Bank Of India on 5 June, 2012

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 5.6.2012

CORAM

THE HON'BLE MR.JUSTICE P.JYOTHIMANI

AND

THE HONOURABLE MR.JUSTICE M.DURAISWAMY

C.R.P. (PD) Nos.936 and 937 of 2012

1.P.Shuyjaath Raheed

2.M.Imtiyaz Ahamed

3.Miya Mohammed Riyaz

4.Siraj Sultana

5.P.Arifa Bathool

6.P.Fareeda Jayser

7.P.Sayeeda Banu

8.P.Sajida Begam

9.P.Fahmeeda Jabeen

10.C.Sarvathara

11.C.Nusrathara

12.C.Irshad Ahmed .. Petitioners

in both CRPs.

Vs.

1. The State Bank of India

Vaniyambadi Branch

rep. by its Chief Manager

Vaniyambadi, Vellore District.

2. P.Khaleelur Rahman & Co., Bangalore

Regd. Office at No.6, Vepery High Road

Periamet, Chennai  3, rep. by its Partners.

3. P.Hafeezur Rahaman

4.R.R.Vasu @ Vijayashankar

5.P.Shafeeq Ahmed

6.P.Asif Ahmed .. Respondents

in both CRPs.

PRAYER in C.R.P.(PD) No.936 of 2012: Petition under Article 227 of the Constitution of India against the order of the Debts Recovery Appellate Tribunal, Chennai dated 21.12.2011 in R.A.No.88 of 2010.

PRAYER in C.R.P.(PD) No.937 of 2012: Petition under Article 227 of the Constitution of India against the order of the Debts Recovery Appellate Tribunal, Chennai dated 29.8.2011 in R.A.No.88 of 2010.

For Petitioners : Mr.T.M.Hariharan

For Respondents : Mr.E.Om Prakash

for M/s.Ramalingam Associates

for 1st respondent

Mr.K.A.Ramakrishnan

for 4th respondent

Mr.R.Thiagarajan

for respondents 5 and 6

O R D E R

P.JYOTHIMANI,J.

The revision in C.R.P. (PD) No.936 of 2012 has been filed against the order of the Debts Recovery Appellate Tribunal dated 21.12.2011 in R.A.No.881 of 2010, by which the Appellate Tribunal while dismissing the appeal filed against the order of the Debts Recovery Tribunal-III, Chennai in O.A.No.368 of 2007 as withdrawn, has granted liberty to the petitioners to seek relief before the Recovery Officer with respect to the proceedings under Second Schedule of the Income Tax Act, with a direction to the Recovery Officer to dispose of the same by following the procedure and giving opportunity to the parties and the revision in C.R.P. (PD) No.937 of 2012 has been filed against the earlier order of the Debts Recovery Appellate Tribunal dated 29.8.2011, wherein the Appellate Tribunal based on the representation of the learned counsel for the first respondent/bank that auction has been held and full consideration is yet to be paid by the auction purchasers, has directed the Recovery Officer to confirm the sale, while restraining him from issuing the sale certificate.

2.1. Let us get down to brass tacks. The second respondent (M/s.P.Khaleelur Rahman & Co., Bangalore) is a partnership firm, which primitively had six partners. The revision petitioners 1 to 3 and the third respondent were four partners. One partner  P.Khaleelur Rahman passed away prior to the proceedings on 8.10.1994 itself and petitioners 4 to 9 and the third respondent are his legal representatives. One other partner of the firm C.Jameelur Rahman, who was the fifth defendant before the Debts Recovery Tribunal in the Original Application, passed away pending the said proceedings and his legal representatives are petitioners 10 to 12.

2.2. Apropos of the availing of financial assistance by the second respondent/partnership firm from the first respondent/bank, four immovable properties were mortgaged in favour of the first respondent/bank, namely:

(i)An extent of 33250 Sq.Ft. of land in T.S.No.16, Pandit Jawaharlal Nehru Road, Vaniyambadi with a building constructed thereon in the name of "Wale Tannery" situated in New Door No.1507  'A' Schedule Property  stated to belong to Late P.Khaleelur Rahman; (ii)An extent of 0.86 Acres and 0.26 Acres of land in T.S.Nos.16/4 and 16/3, Katchery Road, Vaniyambadi  'B' Schedule Property  stated to belong to Late P.Khaleelur Rahman;

(iii)An extent of 0.36 Acres of land in R.S.No.14, Katchery Road, Amburpet, Vaniyambadi  'D' Schedule Property  stated to belong to the third respondent; and

(iv)An extent of 25870 Sq.Ft. of land in T.S.No.21/2C, an extent of 331 Sq.Ft. in T.S.No.24 and an extent of 4 Sq.Ft. in T.S.No.23, in all measuring 26205 Sq.Ft. in C.L.Hajee Abdul Subhan Street, Vaniyambadi with building thereon bearing Door No.1507-A  'C' Schedule Property  stated to belong to the third respondent and C.Jameelur Rahman, who was the fifth defendant in the original application.

2.3. It appears that in the year 1996, the first respondent/bank has filed a suit in O.S. (SR) No.6042 of 1996 before the Sub Court, Thirupathur for recovery of ` 2,76,00,824/- with future interest and for sale of the mortgaged properties and hypothecated movables. After the Debts Recovery Tribunal came into existence, it appears that first respondent/ bank has re-presented the papers before the Debts Recovery Tribunal-I, Chennai and the same was numbered as O.A.No.1001 of 1998.

2.4. The question of maintainability was raised by the petitioners 1, 3 and Jameelur Rahman (5th defendant in the Original Application) as a preliminary issue. The interlocutory application came to be disposed of stating that the preliminary issue can be decided along with the Original Application and that order came to be confirmed by the Debts Recovery Appellate Tribunal, Chennai and thereafter by this Court in C.R.P. (PD) No.733 of 2007 and ultimately, the Special Leave Petition filed against the order in the revision came to be dismissed by the Supreme Court.

2.5. It was thereafter the Original Application re-presented by the first respondent/bank came to be transferred to the Debts Recovery Tribunal-III, Chennai and was re-numbered as O.A.No.368 of 2007 and the Tribunal has passed a decree on 15.9.2009 for a sum of ` 2,67,43,091/- with interest at 9% per annum from the date of the original application and also ordered for sale of mortgaged properties, namely Schedules 'A' to 'D', stated above, apart from the movables stated in Schedules 'E' and 'F' to the original application.

2.6. It was against the decree passed by the Debts Recovery Tribunal dated 15.9.2009, an appeal was filed in R.A.No.88 of 2010 before the Debts Recovery Appellate Tribunal, Chennai, which has allowed the application filed by the petitioners for waiver of pre-deposit.

2.7. While the appeal was pending, the Recovery Officer issued a recovery certificate in DRC No.159 of 2009 in O.A.No.368 of 2007 for recovery of ` 5,46,73,245.77 on 26.11.2009. Pursuant to that, the Recovery Officer, Debts Recovery Tribunal-III, Chennai has issued a public notice for auction in R.P.No.186 of 2009 in DRC No.159 of 2009 for sale of four items of properties on 14.7.2011 in two lots  Lot-I consisting of immovable properties mentioned in Schedules A, B and D, for which the upset price was fixed at ` 2,33,00,000/-, and Lot-II consisting of immovable properties mentioned in Schedule 'C', for which the upset price was fixed at ` 2,45,00,000/-. On 13.7.2011, there was a direction issued by the Debts Recovery Appellate Tribunal to the Recovery Officer to proceed with the proposed auction, but not to confirm such sale till 29.8.2011.

2.8. In the auction, respondents 5 and 6 participated, who in fact have submitted a letter to the Recovery Officer dated 14.7.2011 stating that they are aware of the pending case and specifically declaring that the auction is subject to the cases pending in the competent court. Respondents 5 and 6 were declared as successful bidders in respect of Lot-I (Schedules  A, B and D) for ` 2,35,00,000/- and in respect of Lot-II (Schedule  C) for ` 2,85,50,000/-. It appears that respondents 5 and 6, apart from making the initial deposit, have also deposited the balance sale consideration of ` 3,95,58,020/- on 29.7.2011.

2.9. However, on 29.8.2011, on the basis of a representation made by the learned counsel for the first respondent/bank that full sale consideration has not been paid by respondents 5 and 6, the Debts Recovery Appellate Tribunal has directed the appeal to be posted on 14.10.2011, while directing the Recovery Officer to confirm the sale but not to issue the sale certificate. The said order dated 29.8.2011 is the subject matter of challenge in C.R.P.(PD) No.937 of 2012.

2.10. Pursuant to the said order dated 29.8.2011, it appears that the Recovery Officer has confirmed the sale in respect of Lot-I relating to Schedules A, B and D. However, the sale in respect of Lot-II relating to Schedule C was not confirmed owing to the reason that the fourth respondent (R.R.Vasu @ Vijayashankar) claiming himself to be the purchaser from the original partnership firm, namely the second respondent, moved the Recovery Officer to set aside the sale. That application filed by the fourth respondent came to be rejected, against which the fourth respondent has moved the Debts Recovery Tribunal-III, Chennai and the Debts Recovery Tribunal-III, Chennai, by an order dated 18.8.2011, has directed the fourth respondent to deposit the highest bid amount of ` 2,85,55,000/- and further sum of ` 8,44,770/- and ` 14,27,500/- in respect of Lot-II (Schedule C).

2.11. Respondents 5 and 6, whose sale in respect of Lot-I (Schedules A, B and D) stood confirmed by the Recovery Officer, have filed an impleading petition in the appeal filed by the petitioners in R.A.No.88 of 2010 before the Debts Recovery Appellate Tribunal.

2.12. Meanwhile, on 8.10.2011, the petitioners have addressed to the first respondent/bank offering to pay an amount of ` 5.50 Crores, being ` 19.50 Lakhs over and above the auction bid amount in respect of Lot-I and Lot-II, in order to save the properties. The first respondent/bank has replied on 19.10.2011 stating that since the matter is pending before the Debts Recovery Appellate Tribunal, such request cannot be entertained and also stated that, in fact, the sale proclamation made by the Recovery Officer was sent to the petitioners also and it was open to them to partake in the auction and, therefore, requested the petitioners to approach the appropriate forum.

2.13. Based on the said letter, the petitioners filed a memo before the Debts Recovery Appellate Tribunal, Chennai on 22.11.2011 stating that in respect of Lot-I (Schedules A, B and D) even though respondents 5 and 6 have deposited the payment, by dint of the order of the Debts Recovery Appellate Tribunal dated 29.8.2011, wherein the Appellate Tribunal has directed the Recovery Officer to confirm the sale but not to issue sale certificate, the sale is not completed. In respect of Lot-II (Schedule C) claimed to have been purchased by the fourth respondent from the second respondent/partnership firm, it was stated that such sale is not valid since the property belonged to the third respondent in his individual capacity and even though the fourth respondent was directed to deposit the amount, as stated above, no such deposit was made and therefore, in respect of both the lots, the sale has not been confirmed. It was further stated that the petitioners are offering ` 5.50 Crores, namely ` 30 Lakhs over and above the bid amount, and on such representation the first respondent/bank has directed the petitioners to approach the appropriate forum and, therefore, the memo has been filed to put a quietus to the litigation and they prayed for dismissal of the appeal as not pressed in the event of redressal of their grievances. The relevant portion of the memo is as follows: "11) Hence this Memo for this Hon'ble Appellate Tribunal to consider and pass appropriate orders taking into consideration of giving a quietus to the aforesaid Appeal on being withdrawn as 'Not Pressed' in the event of the Appellants' grievances are redressed as above."

2.14. Apart from filing such memo, the learned counsel for the petitioners has specifically stated before the Debts Recovery Appellate Tribunal that the petitioners will settle the entire dues to the first respondent/bank and the appeal may be dismissed as withdrawn, and sought permission to move the Recovery Officer by filing proper application. It was in those circumstances, the Debts Recovery Appellate Tribunal has passed the impugned order on 21.12.2011, which is challenged in C.R.P. (PD) No.936 of 2012, giving direction to the Recovery Officer to consider the case of the petitioners. The operative portion of the said order is as follows: "In view of the facts and circumstances of the case this RA is dismissed as withdrawn. The appellants are at liberty to file the necessary applications for seeking reliefs before the Ld. Recovery Officer with respect to the proceedings under II Schedule of the Income Tax Act and equally they shall stand entitled for being properly heard by the said Authority. The Ld. Recovery Officer shall upon filing of the said applications by the appellants take them on file and dispose of the same in accordance with law after due notice to parties concerned. Needless to say that the appellants would also be entitled to move necessary applications for seeking of interim reliefs before the Ld. Recovery Officer."

2.15. It is these two orders which are challenged by the petitioners on the following grounds:

(i)that the Recovery Officer has no jurisdiction to decide about the receipt of the entire amount thereby closing the decree passed by the Debts Recovery Tribunal;

(ii)that the memo filed by the petitioners is pursuant to the letter of the first respondent/bank dated 19.10.2011 and even as per the said memo seeking permission to withdraw the appeal, it was only subject to the redressal of the grievances of the petitioners and such grievances cannot be redressed by the Recovery Officer and therefore, even if the counsel has made a representation seeking opportunity to enforce their rights before the Recovery Officer, that cannot give jurisdiction to the Recovery Officer to decide about the decree passed by the Debts Recovery Tribunal; (iii)that the payment or deposit stated to have been made by respondents 5 and 6 in respect of Lot-I and the ownership claimed by 4th respondent in respect of Lot-II, are all unbeknownst to the petitioners and the first respondent is in cahoots with the said purchasers and that cannot be put against the petitioners and, hence, the impugned orders passed by the Debts Recovery Appellate Tribunal are on the misstatement of facts and cannot be pressed into service against the petitioners; (iv)that respondents 5 and 6 are not bona fide purchasers without notice of the proceedings and, therefore, they cannot claim to have any better title; and

(v)that while the memo consists of two portions, the Debts Recovery Appellate Tribunal has accepted only one portion of withdrawal of appeal and not decided about the other portion in respect of the offer made for payment of an amount ` 5.50 Crores and the Debts Recovery Appellate Tribunal having known that the Recovery Officer has no jurisdiction to decide the same, ought to have decided by itself.

3.1. Mr.T.M.Hariharan, learned counsel appearing for the petitioners would vehemently contend that inasmuch as the Recovery Officer has no jurisdiction to decide about the acceptance of the offer made by the petitioners for the purpose of full settlement of the decree passed by the Debts Recovery Tribunal, the orders of the Debts Recovery Appellate Tribunal are without jurisdiction, by relying upon the judgments in Megmala v. G.Narasimha Reddy, (2010) 8 SCC 383, S.P. Chengalvaraya Naidu v. Jagannath, (1994) 1 SCC 1, Muthavalli of Sha Madhari Diwan Wakf, S.J. Syed Zakrudeen v. Syed Zindasha, (2009) 12 SCC 280, and Hasham Abbas Sayyad v. Usman Abbas Sayyad, (2007) 2 SCC 355.

3.2. By referring to Section 22 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and Rule 22 of the Debts Recovery Appellate Tribunal (Procedure) Rules, 1994, he would contend that the said provisions confer power on the Debts Recovery Appellate Tribunal to give appropriate direction. In this regard, he would rely upon the decision in Chinnammal v. P. Arumugham, (1990) 1 SCC 513.

3.3. He has also referred to Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 which contemplates the adherence to the procedure enshrined in the Second and Third Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962 with necessary modifications. In this regard, he would rely upon the decisions in J.N.Krishnan v. The Branch Manager, Canara Bank and others, 2011 (4) CTC 698 and Philomina Jose v. Federal Bank Ltd., (2006) 2 SCC 608.

3.4. It is his further submission that even assuming that the Code of Civil Procedure is not applicable to the proceedings before the Debts Recovery Appellate Tribunal or Debts Recovery Tribunal, the well established principles of Transfer of Property Act, 1882 regarding mortgage, as stipulated under Section 60 of the Transfer of Property Act, cannot be ignored.

4.1. Per contra, it is the submission of Mr.R.Thiagarajan, learned counsel appearing for respondents 5 and 6 and Mr.K.A.Ramakrishnan, learned counsel appearing for the 4th respondent that the Debts Recovery Appellate Tribunal has acted only as per the memo filed by the petitioners. It is their submission that the petitioners have not sought any opportunity to file a fresh case and there was no application filed and it was only a memo for withdrawal, which was allowed by the Debts Recovery Appellate Tribunal.

4.2. The learned counsel have also brought to the notice of this Court the fact that pursuant to the impugned order passed by the Debts Recovery Appellate Tribunal, the petitioners have already moved the Recovery Officer by filing interlocutory applications and while such applications are pending, the present revisions have been filed and on that score these revisions are liable to be dismissed.

4.3. The learned counsel further submitted that as per the provisions of the Schedule to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962, the petitioners ought to have deposited the amount if they really intend to avoid the sale and inasmuch as such deposit has not been made, the petitioners are not acting bona fide. They would also rely upon the decision in Nazims Continental & Others v. The Indian Overseas Bank, Triplicane Branch and others, 2009-3-LW-792.

4.4. To substantiate the contention regarding the rights of the auction purchasers, they would rely upon the decision in Janatha Textiles & Others v. Tax Recovery Officer and another, 2009-2-LW-108.

4.5. According to them, the filing of the revisions is playing fraud on the court and while the petitioners have taken a specific stand before the Debts Recovery Appellate Tribunal to withdraw the appeal, they have chosen to challenge the order passed by the Appellate Tribunal dismissing the appeal as withdrawn.

4.6. They would also submit that redemption as claimed by the petitioners under Section 60 of the Transfer of Property Act is possible only before the sale is confirmed, by relying upon the decision in Mhadagonda Ramgonda Patil v. Shripal Balwant Rainade, (1988) 3 SCC 298.

4.7. To substantiate their contention that co-mortgagee is liable to pay the entire amount due, he would rely upon the decision in Chhaganlal Keshavlal Mehta v. Patel Narandas Haribhai, (1982) 1 SCC 223.

5. We have heard the learned counsel on both sides, referred to the orders passed by the Debts Recovery Appellate Tribunal which are challenged in these revisions and given our anxious thought to the issue involved in this case.

6. The decree passed by the Debts Recovery Tribunal in O.A.No.368 of 2007 is not in question. It is on fact clear that at request of the petitioners, who have filed memo before the Debts Recovery Appellate Tribunal, the Appellate Tribunal while permitting the petitioners to withdraw the appeal has directed the petitioners to approach the Recovery Officer for redressal of their grievances. It is also on record that pursuant to such direction as sought by the petitioners, they have in fact moved the Recovery Officer-III at Debts Recovery Tribunal-III, Chennai by filing I.A.Nos.594 and 595 of 2011 in D.R.C.No.159 of 2009 in R.P.No.186 of 2009 in O.A.No.368 of 2007 seeking grant of certificate to enable them to deposit the proposed mortgage amount of ` 5.50 Crores directly to the credit of D.R.C.No.159 of 2009 in R.P.No.186 of 2009 in O.A.No.368 of 2007. The said interlocutory applications were filed in December, 2011 and the same are pending. The petitioners having filed applications as per the impugned orders passed by the Debts Recovery Appellate Tribunal, have now challenged the impugned orders by way of revisions much after filing of the necessary applications before the Recovery Officer. These revisions have been filed in the end of February, 2012.

7. As stated above, it is no doubt true that the petitioners have filed a memo on 22.11.2011 the contents of which show that they are prepared to offer ` 5.50 Crores in full settlement of the entire decree amount passed by the Debts Recovery Tribunal and subject to the said grievance they wanted to withdraw the appeal. It is not in dispute that the petitioners have not deposited the said offered amount of ` 5.50 Crores. Even in the interlocutory applications filed before the Recovery Officer pursuant to the impugned order of the Debts Recovery Appellate Tribunal, they have only sought permission to pay the amount of ` 5.50 Crores and as on date such amount has not been deposited. On the other hand, the purchasers, namely respondents 5 and 6, who are no doubt aware of the pending litigation, have paid the entire amount of sale consideration, but sale certificate was not issued because of the interim order passed by the Debts Recovery Appellate Tribunal.

8. On a reference to the order passed by the Debts Recovery Appellate Tribunal dated 21.12.2011 challenged in C.R.P. (PD) No.936 of 2012, it is clear that it is on the representation made by the learned counsel appearing for the petitioners seeking an opportunity to enforce the rights of the petitioners before the Recovery Officer, the Appellate Tribunal passed the order. Inasmuch as the order itself is very comprehensive and permitted the petitioners to withdraw the appeal as dismissed with a direction as prayed for, it is relevant to extract the impugned order dated 21.12.2011, which is as follows: "Ld. Counsel Shri C.P.Shivamohan appearing on behalf of the appellants stated that the appellants are ready and willing to settle the matter with the respondent bank and that he has filed a memo enclosing a representation made by the appellants to the bank and added that the appellants will settle the entire dues of the bank if an opportunity is given to them and that this appeal is being withdrawn. Ld. Counsel prayed that the appellants may be given an opportunity to enforce their rights before the Ld. Recovery Officer through filing of proper applications as may be required and further prayed that the Ld. Recovery Officer may be directed to dispose of the said applications as warranted under law.

Heard the Ld. Counsel for the appellants.

In view of the facts and circumstances of the case this RA is dismissed as withdrawn. The appellants are at liberty to file the necessary applications for seeking reliefs before the Ld. Recovery Officer with respect to the proceedings under II Schedule of the Income Tax Act and equally they shall stand entitled for being properly heard by the said Authority. The Ld. Recovery Officer shall upon filing of the said applications by the appellants take them on file and dispose of the same in accordance with law after due notice to parties concerned. Needless to say that the appellants would also be entitled to move necessary applications for seeking of interim reliefs before the Ld. Recovery Officer."

9. The Debts Recovery Appellate Tribunal has only directed the petitioners to approach the Recovery Officer, pursuant to which, in fact, the petitioners have approached the Recovery Officer for redressal of their grievances and thereafter, it is not open, in our considered view, for the petitioners to turn around to say that the Recovery Officer has no jurisdiction. It is not as if against the order of the Recovery Officer there is no relief available to the petitioners.

10. Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, which is as follows:

"Section 29. Application of certain provisions of Income-tax Act. The provisions of the Second and Third Schedules to the Income-tax Act, 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:

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."

contemplates the applicability of the Income Tax (Certificate Proceedings) Rules, 1962 and the Second and Third Schedules to the Income Tax Act, 1961, which relate to the sale of the properties. Rule 60 of the Rules in the Second Schedule to the Income Tax Act, 1961, which relates to recovery, the procedure of which is directed to be applied as per Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is as follows: "Application to set aside sale of immovable property on deposit.

60. (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 per cent 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 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. A reading of the said Rule makes it abundantly clear that any person who seeks to set aside the sale of immovable property, being a defaulter in repayment, has to necessarily deposit the amount specified in the proclamation of sale and unless and until he deposits the said amount, there is no possibility for the authority under the Act to decide the appeal. Therefore, the contention of the learned counsel for the petitioners that even without deposit of the amount the Appellate Tribunal should have decided in their favour is totally fallacious.

11. 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 and 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, 2009-3-LW-792. S.J.Mukhopadhaya,J. (as His 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).

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 M/s.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.'" 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 and 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 u/s 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 u/s 30 of Act, 1993, against an order of recovery officer under Rules 60, 61 or 62, no pre-deposit amount required to be deposited."

12. In yet another decision in D.Duraisrinivasan v. The Registrar, Debts Recovery Appellate Tribunal and others (W.P.No.5485 of 2009, dated 3.12.2009), S.J.Mukhopadhaya,J. (as His Lordship then was) has followed the earlier decision and held as follows: "14. There is no allegation made that the purchaser defaulted in making payment within time. It is also not in dispute that no person including the petitioner filed any application to set aside the sale under Rule 60 or Rule 61 of Schedule-II to the Income Tax Act. Therefore, waiting for the prescribed period of 30 days, under Rule 62 of Schedule-II, as it was open for the Recovery Officer to confirm the sale under Rule 63 of Schedule-II, the said Officer rightly confirmed the sale on 30.8.2007."

13. Inasmuch as the petitioners have not availed the provisions of Rules 60 and 61 in the Second Schedule to the Income Tax Act, 1961, which includes the mandatory provision of deposit of amount, we are of the considered view that de hors the memo filed by the petitioners, inasmuch as the mandatory requirement of deposit has not been fulfilled and even as on date the amount has not been deposited by the petitioners, they are not entitled to claim any protection under any law. That was also the view expressed by the Supreme Court in Janatha Textiles & Others v. Tax Recovery Officer and another, 2009-2-LW-108, wherein the Supreme Court has held as follows: "16. The respondent Department in the counter-affidavit stated that the appellant Firm had alternate efficacious remedy by way of filing a petition under Rules 60 and 61 of the Second Schedule to the 1961 Act. The appellant ought to have availed of the statutory remedy for ventilating its grievances instead of filing a petition before the High Court."

14. The reliance placed by the learned counsel for the petitioners on various judgments, including Megmala v. G.Narasimha Reddy, (2010) 8 SCC 383 wherein it was held that no judgment of a court or no order of a Minister can be allowed to stand if it has been obtained by fraud, in the following words: "28. It is settled proposition of law that where an applicant gets an order/office by making misrepresentation or playing fraud upon the competent authority, such order cannot be sustained in the eye of the law. 'Fraud avoids all judicial acts, ecclesiastical or temporal.' (Vide S.P. Chengalvaraya Naidu v. Jagannath, (1994) 1 SCC 1.) In Lazarus Estates Ltd. v. Beasley, (1956) 1 QB 702 the Court observed without equivocation that: 'No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything.'" in the absence of any allegation of fraud on the facts and circumstances of the present case, cannot be made applicable to the facts of the present case by this Court.

15. The further reference to the judgment in Muthavalli of Sha Madhari Diwan Wakf, S.J. Syed Zakrudeen v. Syed Zindasha, (2009) 12 SCC 280, particularly with reference to paragraphs (12) and (13) relied upon by the learned counsel for the petitioners, which are as follows: "12. The reference was made only in respect of the amount of compensation. No reference has been made in regard to the right of persons to whom it was payable or apportionment of compensation amongst the persons interested. The claim of the first respondent has been noticed by us. He has laid his claim on the title of the property. He has prayed for proper and effective implementation of the decree passed by a civil court. He alleged mismanagement of the wakf property by the first appellant.

13. A Reference Court is not a court of original jurisdiction. It derives jurisdiction only in terms of the order of reference. The Act being a self-contained code, the manner in which the reference is to be made and the statement required to be made by the Collector has been specified in Section 19 of the Act. The lis between the parties to the reference meaning thereby a person interested and the State is with regard to the quantum of compensation. No other question can be raised therein. The Reference Court exercises a limited jurisdiction. It derives its jurisdiction from the terms of reference." has also no relevance to the facts of the present case. That was a case where the Supreme Court has held that the Reference Court under Section 18 of the Land Acquisition Act, 1894 derives jurisdiction only in terms of the order of reference.

16. The next judgment relied on by the learned counsel for the petitioners in Hasham Abbas Sayyad v. Usman Abbas Sayyad, (2007) 2 SCC 355 relates to the jurisdictional error. It was held that the principles of estoppel, waiver and acquiescence or even res judicata, being procedural in nature, would not confer jurisdiction on an authority which has no jurisdiction at all. On the facts of the present case, when it is admitted that the procedure contemplated under the Income Tax (Certificate Proceedings) Rules, 1962, stated above, are applicable to the Recovery Officer as well as the Tribunal and inasmuch as the petitioners have already approached the Recovery Officer and the Debts Recovery Appellate Tribunal itself has passed orders withdrawing the appeal on the specific request made by way of a memo by the petitioners, we do not think that the said judgment would give succour to the petitioners.

17. The reliance placed on a Division Bench judgment in J.N.Krishnan v. The Branch Manager, Canara Bank and others, 2011 (4) CTC 698 relates to a case of attachment stated to have been effected as per Rule 68-B of the Second Schedule to the Income Tax Act, 1961 on the face of Section 25(a) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 which also confers power on the Recovery Officer to attach and it was under such circumstances held that when the Act provides the power, there was no question of violation of the Rules. The operative portion being as under:

"22. The DRT does not contain any provision regarding limitation in the matter of sale of attached property. The provisions of Second and Third Schedule to the Income Tax Act and the Income Tax Certificate Proceeding, 1963, were made applicable to the Recovery proceeding under DRT Act only for the purpose of a fair and transparent procedure to be adopted by the Recovery Officer in the matter of Recovery of the Debts due to banks and Financial Institutions. In case the Recovery Officer is give a free hand without any kind of established procedure governing the Recovery proceedings, it would result in arbitrariness. It was only to regulate the proceedings the relevance Recovery Rules under the Income Tax Act were made applicable to a Recovery proceeding under the Debts Recovery Tribunal Act. The various other provisions of the Income Tax Act and the Recovery Rules cannot be imported to nullify the action taken by the Recovery Officer. Therefore, we are of the view that Rule 68-B dealing with time limit for sale of immovable property after the expiry of three years from the end of the financial year in which the order giving rise to a demand for recovery of which, the property has been attached by the Recovery Officer has no application to an attachment made by the Recovery Officer under Section 25 of the DRT Act. Accordingly, we reject the principal contention regarding the alleged violation of Rule 68-B." We see no reason as to how the said judgment is applicable to the facts of the present case.

18. The further reliance placed by the learned counsel for the petitioners on the judgment of the Supreme Court in Chinnammal v. P. Arumugham, (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 and 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, 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 and 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 and 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.

19. 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.

In such view of the matter, we hold that the impugned orders are neither perverse nor without jurisdiction and we see no earthly reason to interfere with the same. Accordingly, the revisions are dismissed. However, it is always open to the petitioners to workout their remedy after the Recovery Officer passes orders. No costs. Consequently, M.P.Nos.1 and 2 of 2012 in C.R.P. (PD) No.936 of 2012 and M.P.No.1 of 2012 in C.R.P. (PD) No.937 of 2012 are closed.

(P.J.M.J.) (M.D.J.)

5.6.2012

Index : Yes

Internet : Yes

Note to Office:

Issue order copy on 5.6.2012.

sasi

To:

The Registrar

Debts Recovery Appellate Tribunal

Chennai.

P.JYOTHIMANI,J.

AND

M.DURAISWAMY,J.

(sasi)

C.R.P. (PD) Nos.936 and 937 of 2012

5.6.2012