2001 (11) TMI 21 - HC - Income Tax

Court upholds Recovery Officer's actions & Income-tax Rules validity under RDB Act. Failure to comply led to petition dismissal.

The court dismissed the writ petition seeking to restrain the Debt Recovery Tribunal from recovery actions and declaring certain Income-tax Rules null and ... Banks And Financial Institutions - Recovery Of Debt - in order to achieve the object for which the Act has been enacted, namely, expeditious recovery of the dues of banks and financial institutions, Parliament has not only fixed a time schedule but also made a departure from the normal provision of the Code of Civil Procedure. Therefore, the contention of the petitioners that the provisions of the Income-tax Rules' are ultra vires the Constitution cannot be accepted. - For the reasons discussed above, the writ petition lacks merit and is dismissed Issues Involved:1. Restraint on Debt Recovery Tribunal from recovery actions.2. Declaration of certain Income-tax Rules as null and void.3. Legality of the Recovery Officer's actions and compliance with the law.4. Validity of rules 48 to 51 of the Income-tax Rules.Detailed Analysis:1. Restraint on Debt Recovery Tribunal from recovery actions:The petitioners sought a writ of mandamus to restrain the Debt Recovery Tribunal, Allahabad, from taking any action to recover Rs. 93,88,386 with interest, including coercive measures. The petitioners argued that the Recovery Officer did not comply with legal requirements, making the proceedings and orders illegal. However, the court noted that a decree for the amount had already been passed by the Debt Recovery Tribunal, Jabalpur, and there was no impediment for the bank to execute the decree and recover the amount. The petitioners had filed an appeal, but it was not registered due to non-compliance with section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act), which requires the deposit of seventy-five percent of the debt amount.2. Declaration of certain Income-tax Rules as null and void:The petitioners also sought a declaration that rules 48 to 51 of the Income-tax Rules were null and void. They argued that these rules did not provide an opportunity for a hearing to the defaulter or judgment-debtor, unlike the Civil Procedure Code, which could cause serious injury to the judgment-debtor. The court examined the validity of these rules in light of the RDB Act and found that the Act provided a different and expedited procedure for the recovery of debts, distinct from the Civil Procedure Code. The court emphasized that the RDB Act aimed at expeditious recovery of debts due to banks and financial institutions, thus justifying the departure from the normal civil procedure.3. Legality of the Recovery Officer's actions and compliance with the law:The petitioners contended that the Recovery Officer's actions, including the attachment and sale of properties, were illegal due to non-compliance with legal procedures. The court noted that the Recovery Officer had issued a certificate for attachment and sanctioned the sale of the mortgaged properties, following the procedures laid down in the Third Schedule to the Income-tax Act, as applied by the RDB Act. The court found that the petitioners had the right to appeal against the Recovery Officer's orders under section 30 of the RDB Act, and the availability of this alternative remedy made the writ petition under article 226 of the Constitution not maintainable.4. Validity of rules 48 to 51 of the Income-tax Rules:The petitioners argued that rules 48 to 51 of the Income-tax Rules were unconstitutional because they did not provide for a hearing before the sale proclamation, unlike the Civil Procedure Code. The court rejected this argument, noting that the RDB Act specifically provided a different procedure for the recovery of debts to ensure expeditious adjudication and recovery. The court highlighted that the Act was designed to address the inefficiencies and delays in the traditional civil court process for recovering debts due to banks and financial institutions. The court concluded that the provisions of the Income-tax Rules, as applied by the RDB Act, were not ultra vires the Constitution.Conclusion:The court dismissed the writ petition summarily at the admission stage, finding no merit in the petitioners' arguments. The court upheld the legality of the Recovery Officer's actions and the validity of the Income-tax Rules as applied by the RDB Act, emphasizing the Act's objective of expeditious recovery of debts due to banks and financial institutions.