TaxTMI 
TaxTMI 
2004 (4) TMI 17
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....961, is applicable in execution of a recovery certificate issued under section 19(7) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993? (for short "RDB Act"). To answer these questions, it is necessary to set out the facts. Petitioner No. 1 is a partner of petitioner No. 2, a firm registered under the provisions of the Indian Partnership Act, 1932. Respondent No. 1 is a nationalised bank which instituted proceedings for recovery of its dues. Respondent No. 2 is a proprietary firm of respondent No. 3. They are original defendants Nos. 1 and 2. Respondents Nos. 4 and 5 are original defendants Nos. 3 and 4. It is not in dispute that a suit being Suit No. 1523 of 1994 was filed by respondent No. 1 against respondents Nos. 2 to 5 on the original side of this court. In this suit, the plaintiffs claimed a decree in the sum of Rs. 50,01,885.40. It is the case of respondent No. 1 that on November 3, 1988, an agreement to lease was entered into by City Industrial and Development Corporation (CIDCO) in favour of respondent No. 2. The lease was in respect of property being warehouse plot No. 177, admeasuring 900 sq. mtrs. situate at Kalamboli, Vashi, Navi Mumbai ....
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.... rights, title and interest in the said property in favour of petitioner No. 2 with a condition to register the lease deed on or before November 3, 2000. It is the case of the petitioners that on October 8, 2002, they came to know that the said property was put up for auction on October 10, 2002, pursuant to directions of the Recovery Officer of DRT II, Mumbai. This action was taken in pursuance of the order dated August 30, 2002, passed by the Recovery Officer attaching the said property. Being aggrieved by these actions, petitioner No. 2 filed an intervention application exhibit 79. That application was heard by the Recovery Officer, DRT, Mumbai. By an order dated February 4, 2003, the Recovery Officer rejected the said application. Aggrieved by this rejection, the petitioner preferred an appeal being Appeal No. 16 of 2003 before the Presiding Officer, DRT, Mumbai. The learned Presiding Officer after hearing the parties, dismissed the said appeal by an order dated December 4, 2003. Thus he confirmed the order of the Recovery Officer, rejecting the intervention application of the petitioner herein. Being aggrieved and dissatisfied with the order of the Presiding Officer date....
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....ion of Shri Naphade is that the right, title and interest in the immovable property does not come to an end merely because a restraint is placed by a court of law on its alienation or disposal. If this being the legal position, then there was no impediment in respondent No. 2 transferring the said property in favour of the petitioners. He contends that admittedly, the said property belongs to CIDCO and what is granted in favour of respondent No. 2 is a leasehold right. Such leasehold rights have been duly assigned by respondent No. 2 in favour of the petitioners with prior concurrence and transfer of CIDCO. That being the case, it cannot by any stretch of imagination be said that respondent No. 2 had no right in law to effect the transfer. That apart, contends Shri Naphade, pendency of proceedings either before this court or the DRT was not known to the petitioners herein. They are neither parties to these proceedings nor are they aware of the injunction order dated March 6,1998. They are bona fide purchasers for value without notice. Therefore, the transaction in their favour could not have been nullified by the courts below in the manner done in the instant case. It is contend....
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....ent No. 1 has not been granted. If this relief is expressly denied, then in execution of a money decree, the said property could not have been auctioned at all. These are issues which could not have been conclusively decided in proceedings before the Recovery Officer and, therefore, it is necessary to afford an opportunity to the petitioners to approach the civil court and till that time, auction be stayed is the last contention of Shri Naphade. In support of his contention, Shri Naphade has relied upon a decision of the Supreme Court in the case of Tax Recovery Officer v. Gangadhar Vishwanath Ranade [1998] 234 ITR 188; [1998] 6 SCC 658. He also relied upon the decision of the Lahore High Court in the case of Lal Chand v. Sohan Lal, AIR 1938 Lahore 220. He also relied upon a decision of the Supreme Court in the case of Krishan Kumar Narula v. State of Jammu and Kashmir, AIR 1967 SC 1386. Shri Naphade urged that the decision of the Lahore High Court is still good law, inasmuch as it has been followed subsequently and he relied upon a Division Bench decision of the Orissa High Court in the case of Pranakrushna v. Umakanta Panda, AIR 1989 Orissa 148. On the other hand, Shri Kulk....
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....ted and defeated. If parties are allowed to agitate such issues again in a suit, then recovery of bank dues, which are also public monies, would be unduly delayed resulting in virtual break-down of the economy. Therefore, he submits that this is a fit case where we should not exercise our writ jurisdiction and dismiss the petition. He says that conduct of the petitioners disentitles them from any discretionary and equitable reliefs. For proper appreciation of the rival contentions, it is necessary to refer to some relevant statutory provisions. The RDB Act is an Act to provide for establishment of Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions. The Statement of Objects and Reasons leading to enactment of the RDB Act, 1993, states that locking up huge amounts of public money in litigation prevents proper utilisation and recycling of funds for the development of the country. It notes the fact that banks and financial institutions experience considerable difficulties in recovering loans and enforcement of securities charged with them. Existing procedure for recovery of debts due to banks and financial institutions has blocked a ....
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....nded the constitution of a Special Tribunal in 1981 for recovery of debts due to banks and financial institutions stated in its report that the exclusive jurisdiction of the Tribunal must relate not only in regard to the adjudication of the liability but also in regard to the execution proceedings. It stated in annexure XI of its report that all 'execution proceedings' must be taken up only by the Special Tribunal under the Act. In our opinion, in view of the special procedure for recovery prescribed in Chapter V of the Act, and section 34, execution of the certificate is also within the exclusive jurisdiction of the Recovery Officer. Thus, the adjudication of liability and the recovery of the amount by execution of the certificate are respectively within the exclusive jurisdiction of the Tribunal and the Recovery Officer and no other court or authority much less the civil court or the company court can go into the said questions relating to the liability and the recovery except as provided in the Act ... Section 22 of the RDB Act, in our view, gives sufficiently wide powers to the Tribunal and the Appellate Tribunal to decide such questions of priorities, subject only to the....
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....vestigation, the Tax Recovery Officer is satisfied that, for the reason stated in the claim or objection, such property was not, at the said date, in the possession of the defaulter or of some person in trust for him or in the occupancy of a tenant or other person paying rent to him, or that, being in the possession of the defaulter at the said date, it was so in his possession, not on his own account or as his own property, but on account of or in trust for some other person, or partly on his own account and partly on account of some other person, the Tax Recovery Officer shall make an order releasing the property, wholly or to such extent as he thinks fit, from attachment or sale. (5) Where the Tax Recovery Officer is satisfied that the property was, at the said date, in the possession of the defaulter as his own property and not on account of any other person, or was in the possession of some other person in trust for him, or in the occupancy of a tenant or other person paying rent to him, the Tax Recovery Officer shall disallow the claim. (6) Where the claim or an objection is preferred, the party against whom an order is made may institute a suit in a civil court to esta....
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....path treaded by the courts below was, in our view, out of their bounds. Unhesitatingly, we upset all the three orders of the courts below and reject the application of the assignees for impleadment under Order 22, rule 10 of the Civil Procedure Code." We cannot be unmindful and ignorant of the importance of this aspect, which has been repeatedly emphasised by the Supreme Court. We would be failing in our duty if we do not abide by the ratio laid down in the aforesaid decisions. That apart, in the case of Ramchandra Ganpat Shinde v. State of Maharashtra, AIR 1994 SC 1673; [1995] 82 Comp Cas 276, the Supreme Court in paras. 12 and 13 has observed as under: "Mr. Justice Arthur T. Vanderbilt in his The Change of Law Reforms 1955 at pages 4 and 5, stated that: '... it is the courts and not in the Legislature that our citizens primarily feel the keen, the cutting edge of the law. If they have respect for the work of their courts, their respect for law will survive the short comings of every other branch of the Government; but if they lost their respect for the work of the courts, their respect for the law and order will vanish with it to the great detriment of society.' Respe....
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.... was not a party. It cannot gain an advantage in derogation of the rights of the parties, who were litigating originally. If the right of sub-tenancy is recognised, how is status quo as of September 15, 1988, maintained? Hence, the grant of sub-lease is contrary to the order of status quo. Any act done on the teeth of the order of status quo is clearly illegal. All actions including the grant of sub-lease are clearly illegal." In our view, therefore, if the facts in the present case are appreciated in the light of the decisions of the Supreme Court, it is clear that during the pendency of the order of injunction issued by this court on March 6, 1998, respondent No. 2 has created a sub-lease in favour of the petitioners herein. It is of considerable significance that respondents Nos. 2 to 4 did not appear either to oppose the O.A. or during the proceedings, initiated by the petitioners herein. Their silence on the material aspect of violation of injunction order is eloquent enough. We cannot hold that the conclusion of the courts below to the effect that power to transfer the said property was subject to the injunction order issued by this court, is in any way vitiated by error o....
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....s case. It is his submission that the said order does not bind the world at large. He submits that ownership rights are neither taken away nor restricted in any manner by orders of injunction or other preventive directions. He submits that the transfer in favour of his client was thus neither invalid nor illegal, leave alone null and void. For the reasons already recorded above, we find it difficult to accept this contention of Shri Naphade. The decision of the Supreme Court in the case of Krishan Kumar Narula v. State of Jammu and Kashmir, AIR 1967 SC 1368 has no application. There, the Supreme Court was distinguishing an order of stay from an order of injunction. The distinction was made in the context of consequences upon breach and violation of such orders. It is in that context that the Supreme Court observed that the order of stay is qua a court, whereas an order of injunction reaches and touches a party to the lis. These observations cannot be applied when it is noticed that during the pendency of an order of injunction, immovable property, which is the subject matter of restraint or injunction, is transferred. When this course is admittedly adopted, then there is no choice ....
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....or is perverse. A prohibitory order has the effect of placing a restriction on powers of disposition and respondent No. 2 could not have legally created a sublease in favour of the petitioners. That apart, the learned chairperson of the DRAT has observed that the petitioners produced no evidence in support of their claim or objection to show that on the date when the property was attached, they had some interest in or they were possessed of the property in question. They did not tender any evidence to support the claim or objection. Therefore, it is clear that the transfer had no legal effect. In view of our conclusion that the transfer was illegal, strictly speaking it is not necessary to go into other aspects and deal with the contentions of Shri Naphade. In the light of the aforesaid discussion, the answer to question No. 1 is that the transfer is illegal and cannot be recognised. Consequently, the transferee gets no valid title nor does he acquire any right or interest in the immovable property. Mr. Naphade's reliance upon the decision of the Lahore High Court, subsequently followed, according to him, is misplaced. Considering the view of the Supreme Court in matters of this....
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....d the same meaning. Whenever, the Legislature says as far as practicable, as far as possible it conveys one and the same meaning. If the purpose of the RDB Act is to expediently recover public monies in a summary manner then an interpretation which would advance this purpose should be placed on section 29 of the RDB Act. So interpreted and considered, in our view, it will not be possible to read the provisions of the Second Schedule and more particularly rule 11 in their entirety in section 29. They will have to be read as far as possible and with such modifications as the facts and circumstances of a case and the nature of an investigation require. Though it is not possible or advisable to lay down a general rule in this behalf. However, rule 11 need not be completely adhered to by the Recovery Officer always. If the contentions of Shri Naphade are accepted, it would result in investigation of claim or objection to attachment and sale never achieving any finality in proceedings under the RDB Act. If the outcome of such investigation is made subject to another round of litigation by way of civil suit, then the very purpose of establishing Tribunals and creating machinery for speedy....