Judicial discretion governs forfeiture of auction deposit; automatic forfeiture is not permitted on default in payment.

Forfeiture of an auction purchaser's deposit under rule 58 of the Second Schedule to the Income-tax Act is not automatic on default in payment under rule 57(2); the Tax Recovery Officer must exercise a judicial discretion and consider the relevant facts and circumstances. The impugned forfeiture order was defective because it treated forfeiture as a matter of course, ignored the pending rule 60 application and the plea that a further deposit had been made within time, and recorded no finding on the alleged third payment. The forfeiture order was quashed and the matter remitted for a fresh decision on whether forfeiture was warranted and, if so, to what extent.

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Issues: Whether forfeiture of the auction purchasers' deposit under rule 58 of the Second Schedule to the Income-tax Act was automatic on default in payment under rule 57(2), or whether the Tax Recovery Officer had discretion to consider the facts and circumstances before ordering forfeiture.

Analysis: Rule 58 of the Second Schedule is in pari materia with rule 86 of Order XXI of the Code of Civil Procedure and is identically worded. The governing principle is that, on failure to make the required payment within time, forfeiture of the deposit is not automatic; the authority has a discretion which must be exercised judicially. The impugned order proceeded on the footing that forfeiture followed as a matter of course and did not consider relevant circumstances, including the pending application under rule 60 and the purchasers' plea regarding further deposit made within the prescribed period. The order also recorded no finding on the alleged third payment. The matter therefore required reconsideration on the merits.

Conclusion: The forfeiture order could not stand and was quashed. The Tax Recovery Officer was required to decide afresh whether any forfeiture was warranted and, if so, to what extent.

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