2005 (8) TMI 51 - HC - Income Tax

Court restores possession to applicant, criticizes respondents, emphasizes restitution principle.

GV. Films Ltd. Versus S. Priyadarshan And Another, GV. Films Ltd Versus Tax Recovery Officer.

GV. Films Ltd. Versus S. Priyadarshan And Another, GV. Films Ltd Versus Tax Recovery Officer. - [2006] 281 ITR 114, 202 CTR 127, 153 TAXMANN 559 Issues Involved:1. Setting aside the earlier order dated June 21, 2005, in O.A. No. 543 of 2005.2. Restoration of possession to the applicant-plaintiff.3. Applicability of Rule 39 or Rule 40 of the Income-tax (Certificate Proceedings) Rules, 1962.4. Jurisdiction of the civil court under Section 293 of the Income-tax Act.5. Conduct of the respondents in securing possession.6. Principle of restitution and maintaining the authority of the court.Issue-wise Detailed Analysis:1. Setting Aside the Earlier Order Dated June 21, 2005, in O.A. No. 543 of 2005:The applicant-plaintiff sought to set aside the order dated June 21, 2005, which closed the application for interim injunction based on a memo filed by the respondents. The court observed that the respondents' conduct in filing the memo and persuading the court to close the injunction application was not bona fide. The respondents had simultaneously worked with the Income-tax Department to secure possession of the property, which raised doubts about their bona fides. Consequently, the court found the applicant's prayer to set aside the earlier order justified and restored the interim injunction.2. Restoration of Possession to the Applicant-Plaintiff:The court directed the respondents and the Income-tax Department to restore possession of the suit schedule theatre to the applicant-plaintiff. The court emphasized that the respondents' conduct in securing possession through the Income-tax Department was not bona fide and was achieved by misdirecting the court. The court invoked the principle of restitution to restore the applicant to the position they were in before dispossession on July 13, 2005.3. Applicability of Rule 39 or Rule 40 of the Income-tax (Certificate Proceedings) Rules, 1962:The court noted that the dispute over whether Rule 39 or Rule 40 applied was central to the case. The applicant argued that Rule 40, which pertains to properties occupied by tenants, was applicable, making the dispossession illegal. The respondents and the Income-tax Department contended that Rule 39 applied, which allows the Tax Recovery Officer to secure possession. The court deferred a detailed analysis of this issue, stating it should be addressed in the main writ petition and related applications.4. Jurisdiction of the Civil Court under Section 293 of the Income-tax Act:The respondents argued that the civil court's jurisdiction was barred under Section 293 of the Income-tax Act concerning orders passed by the Income-tax Department. The court, however, found that the respondents' actions in securing possession without due process were not justified and that the civil court could intervene to restore possession and address the applicant's grievances.5. Conduct of the Respondents in Securing Possession:The court criticized the respondents for their conduct in filing a memo to close the injunction application while simultaneously working with the Income-tax Department to secure possession. The court found this conduct to be in bad faith and aimed at achieving possession by any means. The court emphasized that such behavior undermines the rule of law and must be curbed with an iron hand.6. Principle of Restitution and Maintaining the Authority of the Court:The court invoked the principle of restitution, which mandates restoring parties to their original position when an erroneous order is reversed. The court cited several precedents emphasizing that unlawful dispossession without due process cannot be condoned. The court ordered the restoration of possession to the applicant-plaintiff to maintain the authority of the court and prevent parties from exploiting the judicial process for unlawful gains.Conclusion:The court allowed the application to set aside the earlier order dated June 21, 2005, and restored the interim injunction. It directed the respondents and the Income-tax Department to restore possession of the theatre to the applicant-plaintiff. The court appointed an Advocate-Commissioner to oversee the restoration process and ensure compliance. The respondents were also ordered to reimburse the applicant for all expenses incurred in the process and to pay costs of Rs. 10,000 to the applicant-plaintiff.