TaxTMI 
TaxTMI 
2017 (8) TMI 749
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....y the appellant's deceased wife Smt. Amaravathy Somasundaram, who was a defaulter under the Income Tax personally as well as in her capacity as the Director of a company. Proceedings were initiated against her for recovery of the tax due and notice under Rule 2 of the IInd Schedule to the Income Tax Act, 1961 was issued intimating her that in default of payment of the amount specified in the certificate within 15 days, steps would be taken to realise the dues in terms of the Schedule. That notice was issued on 16.5.1990. Tax was not paid and, therefore, on 3.8.1990, 5.25 Acres of land in Thrissur district was attached by Ext. P10. After completing all procedural formalities, on 12.5.1995 property was sold in terms of Rule 52. 3. In the auction, the property was purchased by late T.A.Moideen (hereinafter referred to as the Purchaser). On 12.5.1995 itself purchaser deposited 25% of the bid amount in compliance with Rule 57. While the sale was taking place, the defaulter had moved this court by filing O.P.No.7180/95 and this court passed order dated 12.5.1995 itself staying further proceedings pursuant to the sale. Initially, the stay order was for one month, and was extended thereaf....
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....to the fact that the purchaser had expired on 11.7.2002, at a time when further proceedings pursuant to the sale were stayed by this court. According to him, the stay was vacated only on 18.12.2005 and in such a situation, the rigor of Rule 57 or 58 requiring deposit within the time specified cannot be imported into the case. He also contended that if at all the appellant was aggrieved, the remedy available to was to apply under Rule 60 and 61 of the Schedule to set aside the sale. 8. The learned counsel appearing for the third respondent, the wife of the deceased purchaser, adopted the contentions of the Standing Counsel for the Revenue and also contended that having regard to the fact that the third respondent is in possession of the properties since 2005 and the appellant, who has not taken recourse to Rule 60 and 61, cannot be heard to contend that he is aggrieved by the sale in question. It was also argued that since the property was transferred when the matter was pending consideration of this court, the appellant has ceased to have locus standi to maintain challenge against the sale in question. 9. We have considered the submissions made. Admittedly, the assessee, the dece....
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....s that the full amount of purchase money payable shall be paid by the purchaser to the Tax Recovery Officer on or before the 15th day from the date of sale of the property. 13. Rule 58 providing for consequences of default in complying with Rule 51 show that on default of payment within the period mentioned in Rule 57, the deposit may, if the Tax Recovery Officer thinks fit, after defraying the expenses of the sale be forfeited to the Government, and the property shall be resold and the defaulting purchaser shall forfeit all claims to the property or to any part of the sum for which it may subsequently be sold. These Rules, it is to be noted are mandatory not only its language but also makes it to be so explicit by providing consequences for its non compliance. 14. Reference to Rule 60 and 61 are also necessary in this case and, therefore, we extract these provisions also for reference; Rule 60. Application to set aside sale of immovable property on deposit-- (1) Where immovable property has been sold in execution of a certificate, the defaulter, or any person whose interests are affected by the sale, may, at any time within thirty days from the date of the sale, apply to th....
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.... of which the sale was ordered with interest thereon at the rate prescribed. In addition, for payment to the purchaser, as penalty, a sum equal to 5% of the purchase money, but not less than one rupee shall also be deposited. Rule 61 provides application to set aside sale of immovable property on ground of non service of notice or other irregularity. 16. Once sale is validly completed, the sale is required to be confirmed in terms of Rule 63 and sale certificate is to be issued under Rule 65. Rule 86 provides for an appeal and in terms of this Rule, an appeal from any original order passed by any Tax Recovery Officer, not being an order which is conclusive, shall lie to the Principal Chief Commissioner (w.e.f.1.6.13) or the Chief Commissioner or Principal C (w.e.f.1.6.13) or Commissioner. 17. A reading of these provisions of the IInd Schedule to the Act show that the requirement of deposit of 25% as contemplated in Rule 57(1) immediately after a person is declared to be the purchaser and also deposit of the balance purchase money on or before 15th day of date of sale of the property in terms of Rule 57(2), are mandatory in character. 18. The provisions contained in Rule 57, 58, ....
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.... and 85, the Court has the discretion to forfeit the deposit but it was bound to re-sell the property with the result that on default the purchaser forfeited all claim to the property. These provisions leave no doubt that unless the deposit and the payment are made as required by the mandatory provisions of the rules, there is no sale in the eye of law in favour of the defaulting purchaser and no right to own and possess the property accrues to him. 10. In two cases decided by the Calcutta High Court, viz., Munshi Md. Ali Meah v. Kibria Khatun (1), and Sm. Annapurna Dasi v. Bazley Karim Fazley Moula (2), the sale was held to be no sale where the purchaser had failed to deposit the balance of the purchase-money as required by rule 85. A similar view was taken by a Division Bench of the Allahabad High Court in Nawal Kishore and Others v. Buttu Mal and Subhan Singh (3). The provisions of rule 86 were held to be mandatory in another decision of the same Court, Haji Inam Ullah v. Mohammad Idris (4), and it was held that the Court was bound to re-sell the property upon default irrespective of any application being made by any party to the proceedings. The case of Bhim Singh v. Sarw....
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.... present case there was no sale and the purchasers acquired no rights at all. 19. These principles have been followed in Balram son of Bhasa Ram v. Ilam Singh and others [AIR 1996 SC 2781], it was again held thus: 10. It is also to be noted that the duty to pay the full amount of purchase money the prescribed period of 15 days from the date of sale of the property is cast on the purchaser by virtue of Rule 85 of Order XXI and therefore, the entire responsibility to make full compliance of the mandatory provision is his. The proviso to Rule 85 is enacted for the benefit of the purchaser when he is the decree-holder and is entitled to the advantage of any set off under Rule 72. The proviso giving this benefit to the decree-holder purchaser merely relieves him of the requirement of depositing that amount of which he is entitled to claim set off, but it does not relieve him of they duty to deposit the full amount taking advantage of the set off. Any mistake made while claiming the set off which results in failure to deposit the full amount of purchase money within 15 days of the date of sale renders the decreeholder purchaser liable to the same adverse consequences which would ensu....
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....ount of purchase money payable shall be paid by the purchaser to the Tax Recovery Officer on or before the fifteenth day from the date of the sale of the property." 28. It is clear from a plain reading of the above that the provision is mandatory in character. The use of the word "shall" is both textually and contextually indicative of the making of the deposit of the amount being a mandatory requirement. xx xx xx xx 32. In the light of the above we see no reason to hold thatRules 57 and 58 of the Income Tax Rules are anything but mandatory in nature, so that a breach of the requirements under those Rules will render the auction non-est in the eyes of law. 22. It is in the light of these binding principles that we have to appreciate the case before us. Admittedly, the sale was on 12.5.1995. On 12.5.95 purchaser was declared to be successful and, therefore, she deposited 25% of the purchase money and thus complied with Rule 57(1). She ought to have deposited the balance amount within 15 days thereafter. It is the contention of the Department and the purchaser that the interim order passed by this court on 12.5.95 in O.P.7180/95 prevented the authorities from accepting the b....
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....ault as contained in Rule 58 and explained by the Apex Court in the judgments referred to above. This means that the confirmation of sale, ordered on 29.3.2005 is of a void sale and the sale certificate issued on 30.9.2005 being a dependent order is also void and is of no consequence. 24. It was argued before us that if at all the appellant wanted to avoid the sale, the remedy available was to take recourse to Rule 60 or 61 of the Rules by making an application to set aside the sale and not an appeal under Rule 86. We are unable to accept this contention. Apex Court has repeatedly held that confirmation of sale in contravention of Rule 57 and 58 is void and that as a result of the default committed by the purchaser or his legal heirs, the sale itself is wiped out, to borrow the expression used by the Apex Court. In a case where a sale held under Order XXI of CPC pursuant to a decree which was a nullity, there is no question of any party having to resort to the provisions of Rule 89 and 90 of Order XXI C.P.C. to have the sale set aside and any claim based on a void sale can be resisted without having the sale set aside. This principle has been recognized by the Apex Court in its ju....
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....proprietary interest in the property to maintain an appeal under Rule 86 of the Rules. Therefore, according to the respondents, not only the appeal filed by her before the Commissioner but also the writ petition and the writ appeal are liable to be dismissed for want of locus standi. 29. Admittedly, it was the default of the deceased defaulter which led to the sale and the consequential proceedings. It was the defaulters property, which came to be proceeded against and was ultimately sold. According to the Revenue, such a sale is hit by Rule 16 of the Rules in the IInd Schedule which reads thus: 16. Private alienation to be void in certain cases-- (1) Where a notice has been served on a defaulter under rule 2, the defaulter or his representative-in-interest shall not be competent to mortgage, charge, lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer, nor shall any civil court issue any process against such property in execution of a decree for the payment of money. (2) Where an attachment has been made under this Schedule, any private transfer or delivery of the property attached or of any interest therein and....