Rule 66 compliance in recovery sale failed, but completed arrangements were not disturbed and the sale was not voided.

A sale of a company's immovable properties was examined against Rule 66 of the Second Schedule to the Income-tax Act, read with section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act. The record did not show compliance with the statutory prerequisites for a Rule 66 sale, including a valid postponement order, authorisation for private sale, or observance of the attached safeguards, so the transaction was not treated as a valid statutory recovery sale. However, because the sale had been acted upon, secured creditors had been paid, and workmen and statutory dues had been settled, the Court declined to unsettle the completed arrangements and refused to declare the sale void under sections 536(2) and 537 of the Companies Act.

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Issues: Whether the impugned sale of the company's immovable properties could be treated as a sale under Rule 66 of the Second Schedule to the Income-tax Act, 1961 read with section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and whether the sale should be declared void under sections 536(2) and 537 of the Companies Act, 1956.

Analysis: The sale documents and surrounding proceedings did not show compliance with the requirements of Rule 66. The record did not establish that the Recovery Officer had passed an order postponing sale to enable the defaulter to raise the amount, or that a certificate was granted authorising a private sale under that rule, or that the statutory safeguards attached to such a sale were followed. The transaction was therefore not treated as a statutory sale under the recovery proceedings. At the same time, the Court noted that the sale had been acted upon, the secured creditors' dues had been settled, and payments had also been made to a large number of workmen and statutory authorities. In that background, although the transaction was held not to be a valid Rule 66 sale, the Court declined to unsettle the completed arrangements and refused to declare the sale void.

Conclusion: The sale was not accepted as a valid statutory sale under Rule 66, but the prayer to set aside or nullify the sale was rejected.

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