Tax recovery on stale demand is void: mandatory notice, corrected certificate, and pending dispute can defeat auction title.

A tax recovery certificate cannot be enforced on a demand that has ceased to exist or has been materially reduced; the recovery authority must revise the certificate, issue the necessary fresh notice, and proceed only on the correct recoverable amount. An auction conducted on an obsolete or inflated demand, or in breach of mandatory recovery procedure, is void and cannot confer protected title on purchasers who buy with notice of pending dispute. Where the property is treated by the revenue as HUF property, the HUF has locus to challenge the sale, and proceedings contrary to the prescribed method remain invalid.

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Issues: (i) Whether the writ petition by the HUF was maintainable and whether the petitioner had locus standi to challenge the auction sale; (ii) whether the recovery certificate, demand notice and consequent auction proceedings were vitiated for non-compliance with the statutory procedure and for proceeding on an obsolete or reduced demand; (iii) whether the auction purchasers acquired any protected title in view of the pendency of proceedings and the doctrine of lis pendens.

Issue (i): Whether the writ petition by the HUF was maintainable and whether the petitioner had locus standi to challenge the auction sale.

Analysis: The property sold in auction was treated by the revenue itself as property of the HUF, and the sale certificate described the properties as belonging to the HUF. In such circumstances, the HUF alone had the legal right to challenge the auction. The objection that the petition was not maintainable on the basis of rival claims by coparceners was rejected.

Conclusion: The objection to maintainability and locus standi was rejected in favour of the assessee.

Issue (ii): Whether the recovery certificate, demand notice and consequent auction proceedings were vitiated for non-compliance with the statutory procedure and for proceeding on an obsolete or reduced demand.

Analysis: The earlier ex parte order of the appellate tribunal had been recalled, so the recovery certificate founded on that order could not survive. The later tribunal order created a fresh liability, requiring a fresh demand notice before coercive recovery. The authorities were also bound to give effect to part-payments and subsequent reduction in demand under the recovery provisions, but they failed to revise the certificate and proceeded with auction on an inflated and stale demand. The omission to follow the mandatory recovery procedure, including proper notice and correct computation of the recoverable amount, rendered the proceedings illegal. Proceedings taken contrary to the prescribed method were treated as void.

Conclusion: The recovery proceedings and auction sale were held invalid and void in favour of the assessee.

Issue (iii): Whether the auction purchasers acquired any protected title in view of the pendency of proceedings and the doctrine of lis pendens.

Analysis: The challenge to the assessment and recovery was pending before the High Court, and the auction purchasers proceeded with knowledge of the litigation and the disputes concerning the demand and the property. In such circumstances, no equity or independent title could be created in their favour. The pendency of judicial proceedings meant the transactions were undertaken at their own risk and could not defeat the assessee's rights once the foundational tax demand was set aside.

Conclusion: No protected title accrued to the auction purchasers, and the doctrine of lis pendens operated against them in favour of the assessee.

Final Conclusion: The auction and all consequential transfers were quashed, the properties were ordered to be restored to the HUF, and the revenue was directed to return the auction price with interest and costs.

Ratio Decidendi: Where a tax recovery certificate is founded on a demand that has ceased to exist or has been materially reduced, the Tax Recovery Officer must give effect to the reduction and cannot proceed with coercive recovery on a stale or inflated demand; an auction conducted in breach of the mandatory recovery procedure is void and confers no protected title on purchasers who buy with notice of the pending dispute.

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