TaxTMI 
TaxTMI 
2016 (4) TMI 267
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....propriate writ directing the 1st Respondent - Bank to accept an amount of Rs. 3.03 crores from the Petitioners as a One Time Settlement (for short, the "OTS") of all its outstanding dues and claims as mentioned in its letter dated 20th September, 2005 alongwith such interest and from such date as this Court may deem fit. This Writ Petition was admitted on 11th November, 2014 and the hearing of the same was expedited. This is how the Writ Petition has come up for hearing and final disposal before us. Since Petitioner No.2 appeared in person, we have heard him at length. He has also filed verbose written arguments which we shall deal with later in this judgment. 2. The brief facts giving rise to the present controversy and which are not really in dispute are that Petitioner No.1 is a Private Limited Company incorporated under the Companies Act, 1956 and has availed of various credit facilities sanctioned by Respondent No.1 (Respondent - Bank). Petitioner No.2 is a Director of Petitioner No.1. The credit facilities availed of by the Petitioners were inter alia secured by creation of an equitable mortgage of an immovable property bearing Plot No.125 situated at Government Industrial....
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....r the Recovery Certificate. Admittedly, the Petitioners could not comply with the requisitions of the demand notice and therefore the Recovery Officer on 15th October, 2004 attached the mortgaged property. Thereafter and in furtherance thereof, on 12th May 2005, the Recovery officer issued a proclamation of sale fixing the auction sale of the mortgaged property on 27th June, 2005. On the date when the mortgaged property was fixed for sale (i.e. 27th June, 2005) the bids received by intending purchasers were opened at around 4.30 p.m. On opening the bids, the Recovery Officer found that the offer of IPCA Laboratories Ltd. (Respondent No.2 herein) was the highest at Rs. 3.21 crores. However, before this bid could be accepted by the Recovery Officer, he was informed of an order of interim injunction passed by the Industrial Court restraining the Bank from selling the mortgaged property. However, a copy of the order was not made available to the Recovery Officer. In view thereof, the Recovery Officer, in all fairness did not accept the bid on that date and deferred the same. Thereafter, the Respondent - Bank approached the Industrial Court and the Industrial Court vide its order dated ....
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....cation. 9. Being aggrieved by this order of the Recovery Officer dated 27th September 2005, the Petitioners directly approached this Court in its writ jurisdiction. This Writ Petition was withdrawn with liberty to file an appeal under section 30 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (for short, the "RDDB Act") before the DRT. 10. Pursuant to the aforesaid liberty, the Petitioners approached the DRT by filing an appeal under section 30 of the RDDB Act challenging the order dated 27th September, 2005 passed by the Recovery Officer. Since the appeal was filed beyond the time period prescribed, the Petitioners moved a Miscellaneous Application for condonation of delay which was initially rejected by the DRT on 19th December, 2005. Being aggrieved by this order, the Petitioners approached the DRAT and filed a Miscellaneous Application praying for interim reliefs. In this Miscellaneous Application, the DRAT, by its order dated 4th January, 2006 directed the Petitioners to deposit a sum of Rs. 3.05 Crores with the Respondent - Bank on or before 9th January, 2006. Admittedly, this amount was not deposited with the Respondent - Bank as directed by ....
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.... and /or 61 that the application for deferment of confirmation of sale was filed. In other words, it was the contention of the Respondents that the application for deferment of confirmation of sale was filed to thwart the recovery proceedings without having to deposit a single farthing that would have otherwise been required to be deposited by the Petitioners under rule 60 and / or 61 of the Second Schedule to the Income Tax Act, 1961. The DRT, after hearing the parties, by a detailed order dated 19th September, 2008 dismissed the appeal filed by the Petitioners under section 30 of the RDDB Act. 12. Being aggrieved by this order of the DRT, the Petitioners approached the DRAT raising several contentions. One of the primary contentions raised was that the OTS sanctioned by the Respondent - Bank was contrary to the RBI guidelines dated 3rd September, 2005. It was the contention of the Petitioners that the OTS sanctioned by the Respondent - Bank on 16th September, 2005 giving them time to make payment of 3.03 crores by 20th September, 2005 was communicated to them only on 21st September, 2005. This made it impossible for the Petitioners to comply with the conditions of the OTS as t....
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..... (v) Since the mortgaged property has lost its original shape and cannot be returned to the Petitioners in its original form, an appropriate writ of monetary compensation be issued to the auction purchaser (Respondent No.2 herein). 15. Before we deal with the arguments that have been canvassed on behalf of the Petitioners, it would be important to note the scope of the appeals that were filed before the DRT as well as the DRAT. As mentioned earlier, one Mrs Anjali Bhide (Defendant No.3 to the Original Application and wife of Petitioner No.2) on 27th September, 2005 moved an application before the Recovery Officer inter alia praying that the confirmation of sale be stayed / deferred at least for one month. There was no challenge laid to the sale of the mortgaged property. This application of Mrs Anjali Bhide was rejected by the Recovery Officer. Being aggrieved thereby, the Petitioners directly approached this Court in its writ jurisdiction. After this Writ Petition was heard for some time, the same was withdrawn with liberty to file an appeal under section 30 of the RDDB Act before the DRT. As per the said liberty, the Petitioners filed an appeal before the DRT and als....
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.... now for the first time, in the Writ Petition and by giving a complete go-by to rules 60 and/or 61 of the Second Schedule to the Income Tax Act, 1961 that the Petitioners have sought to assail the sale confirmed in favour of Respondent No.2. Keeping this factual background in mind, we shall now deal with the arguments of the Petitioners. 17. The first argument canvassed on behalf of the Petitioners was that the Recovery officer could not have opened the bids received for sale of the mortgaged property on 27th June, 2005 as there was a stay order granted by the Industrial Court and the same was in operation on the said date. Firstly, we find that no such argument was canvassed on behalf of the Petitioners either before the DRT or the DRAT in the appeals filed by the Petitioners under the provisions of the RDDB Act. This argument is being canvassed for the first time before us in the Writ Petition. On this ground alone we would be justified in rejecting this argument. However, since Petitioner No.2 argued in person, we have examined this issue from the record and we find that even otherwise this argument has no merit. The roznama of Recovery Proceedings No.348 of 2003 clearly esta....
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....e do not think that it would be fair to allow the Petitioners to canvass this argument for the first time before us in our writ jurisdiction. Be that as it may, even otherwise, we find that in the facts of the present case, the reliance placed on the aforesaid rule is wholly misplaced. Rule 15 of the Second Schedule to the Income Tax Act, 1961 reads as follows:- "Adjournment or stoppage of sale - 15(1) The Tax Recovery Officer may, in his discretion, adjourn any sale hereunder to a specified day and hour and the officer conducting any such sale may, in his discretion, adjourn the sale, recording his reasons for such adjournment; Provided that, where the sale is made in, or within the precincts of, the office of the Tax Recovery Officer, no such adjournment shall be made without the leave of the Tax Recovery Officer; (2) Where a sale of immovable property is adjourned under sub-rule (1) for a longer period than one calendar month, a fresh proclamation of sale under this Schedule shall be made unless the defaulter consents to waive it. (3) Every sale shall be stopped if, before that lot is knocked down, the arrears and costs (including the costs of....
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....ry of which the sale was ordered with interest thereon at the rate of fifteen per cent per annum, calculated from the date of the proclamation of sale to the date when the deposit is made; and (b) for payment to the purchaser as penalty, a sum equal to five per cent of the purchase-money, but not less than one rupee. (2) Where a person makes an application under rule 61 for setting aside the sale of his immovable property, he shall not, unless he withdraws that application, be entitled to make or prosecute an application under this rule." (emphasis supplied) 22. Rule 60(1) of the Second Schedule to the Income Tax Act, 1961 clearly stipulates that where an immovable property has been sold in execution of the certificate, the defaulter or any person whose interests are affected by the sale may, at any time within 30 days from the date of the sale, apply to the Recovery Officer to set aside the sale on his depositing the amount specified in the proclamation of sale with interest thereon as more particularly stipulated in the said rule as well as penalty equal to 5% of the purchase money which would be paid to the purchaser. Rule 60(2) stipulates that where a pe....
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....applicant deposits the amount recoverable from him in the execution of the Certificate. 25. The provisions of rules 60 and 61 are clear and unambiguous. In a nutshell, these rules provide that a defaulter is not allowed to challenge the sale of the immovable property sold in execution of a Recovery Certificate unless an application for setting aside the sale is preferred before the Recovery Officer and the amount sought to be recovered under the Recovery Certificate is deposited with the Recovery Officer. In the facts of the present case, as mentioned earlier, no such application was ever preferred by the Petitioners and no deposit has been made. The reason for the same is not far to see. It is because the Petitioners were aware that before their application to set aside the sale could be entertained by the Recovery Officer, they would be required to deposit the decretal amount. Since they had no intention to deposit the decretal amount, the Petitioners preferred not to challenge the sale of the mortgaged property but instead only made an application for deferment of the confirmation of sale. Having chosen this course of action all throughout, we cannot permit the Petitioners to....
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....ther hand, the confirmation of sale is done by the Recovery officer under rule 63. Rule 63 stipulates that where no application is made for setting aside the sale under the foregoing rules or where such an application is made and disallowed by the Recovery Officer, he shall (if the full amount of the purchase money has been paid) make an order confirming the sale and thereupon the sale shall become absolute. In the facts of the present case, it has been found as a matter of fact by the authorities below that the application for deferment of sale made by the wife of Petitioner No.2 on 27th September, 2005 was after the sale was already confirmed in favour of the auction purchaser (Respondent No.2). It is in this light that the authorities below have held that there was no question of deferring the confirmation of sale. Even otherwise rule 63 and which deals with confirmation of sale, clearly provides that where no application for setting aside the sale under rules 60, 61 and / or 62 is preferred, or where such an application is made and disallowed by the Recovery Officer, the Recovery Officer shall (if the full amount of the purchase money has been paid) make an order confirming the....
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.... sanction of the OTS was communicated to the Petitioners only on 21st September, 2005 thereby making it impossible to make payment by the due date mentioned in the sanction letter. He submitted that this sanction of the OTS was no sanction at all and was clearly violative of the RBI guidelines dated 3rd September, 2005 that mandated nationalised banks to enter into one time settlement schemes for recovery of NPAs below Rs. 10 crores and which was required to be implemented by all public sector banks. The further submission of the Petitioners was that the actions of the Bank by giving the Petitioners only four days' time to make payment under the said OTS was clearly violative of Article 14 of the Constitution of India inasmuch as to several other parties, time to make payment under their respective OTS' was ranging from two months to six months. In this view of the matter, the Petitioners submitted that the Respondent - Bank be ordered and directed to accept the amount of Rs. 3.03 crores from the Petitioners towards the OTS. 29. To appreciate these arguments, it would be necessary to reiterate a few facts. It is not in dispute that this is not the first time that the Respond....
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.... mobile phone on the very same day (i.e. 16th September, 2005) by one Mr Bhaskar A. Mahajan, Deputy General Manager, Mumbai City Region, of the Respondent - Bank. Petitioner No.2 was informed of the approval of the OTS and that he had to deposit the OTS amount of Rs. 3.03 crores by 20th September, 2005. The reason for delay in sending the letter approving the OTS was because the letter was not signed by the chairman and therefore the same could not be communicated on the very same date. These facts have been accepted by authorities below and nothing has been brought to our notice to hold that these findings of fact are perverse requiring interference in our writ jurisdiction. Even otherwise, we find from the record that even as late as on 4th January 2006, the DRAT, by an interim order had granted an opportunity to the Petitioners to deposit this amount of Rs. 3.05 crores. Admittedly, the same was not deposited. The totality of all these facts would clearly lead to an inference that the Petitioners never had any intention of honouring any settlement arrived at with the Respondent - Bank and these arguments are being canvassed only to somehow thwart the sale of the mortgaged propert....