Mandatory auction deposit rules under recovery law cannot be ignored; non-compliance makes the sale ineffective in law.

A remand expressed in open terms allowed the High Court to examine the validity of the auction sale because the earlier order had not finally decided whether the sale was vitiated by non-compliance with recovery rules. Section 29 of the RDDB Act was read as incorporating the Second and Third Schedules to the Income-tax Act subject to necessary modifications, and the phrase "as far as possible" did not permit disregard of mandatory requirements that were practicable in the recovery framework. Rule 57, requiring immediate deposit of 25% of the purchase money and payment of the balance within the stipulated time, was treated as mandatory; non-compliance rendered the auction ineffective in law.

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Issues: (i) Whether, on a remand confined to the rights of a bona fide purchaser, the High Court could also examine the validity of the auction sale. (ii) Whether the provisions governing deposit by an auction purchaser under Rule 57 of the Second Schedule to the Income-tax Act, 1961, applied to recovery proceedings under Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 as mandatory requirements.

Issue (i): Whether, on a remand confined to the rights of a bona fide purchaser, the High Court could also examine the validity of the auction sale.

Analysis: The remand was expressed in open terms and permitted the parties to urge any contention available to them on facts and in law. The earlier order had not finally determined the question whether the auction was vitiated by non-compliance with the relevant recovery rules. In the absence of any conclusive finding limiting the scope of the remand, the High Court was competent to examine the validity of the auction sale.

Conclusion: The High Court was entitled to consider the validity of the auction sale.

Issue (ii): Whether the provisions governing deposit by an auction purchaser under Rule 57 of the Second Schedule to the Income-tax Act, 1961, applied to recovery proceedings under Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 as mandatory requirements.

Analysis: Section 29 incorporates the Second and Third Schedules to the Income-tax Act, 1961 and the relevant certificate proceedings rules, subject to necessary modifications and the phrase "as far as possible". That expression was held to accommodate only those provisions which are not practicable in the RDDB framework, not to confer a general discretion to disregard applicable recovery rules. Rule 57, which requires immediate deposit of 25 per cent of the purchase money and payment of the balance within the stipulated period, was treated as mandatory in character. Non-compliance renders the auction ineffective in law. The conflict suggested on the protection of a bona fide purchaser was not required to be resolved because the auction itself was held invalid.

Conclusion: Rule 57 applied mandatorily, and breach of its requirements rendered the auction sale void in law.

Final Conclusion: The challenge to the auction failed, the sale was held unenforceable for non-compliance with the mandatory recovery rules, and the appeal was dismissed.

Ratio Decidendi: When recovery provisions from the Income-tax Act are incorporated into the RDDB Act, the phrase "as far as possible" does not confer discretion to ignore mandatory procedural requirements that are practicable and applicable; breach of such requirements invalidates the auction sale.

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