TaxTMI 
TaxTMI 
2013 (9) TMI 1225
X X X X Extracts X X X X
X X X X Extracts X X X X
....State Insurance Corporation (for short 'ESI'), Employees' Provident Fund Organization (for short 'EPFO'), the Commercial Taxes Department of the State Government, the Tamil Nadu Industrial Investment Corporation (for short 'TIIC') and various banks including Punjab Nation Bank (for short 'PNB'), Indian Bank, ICICI Bank Limited, etc., The Company owed huge amount towards salary, statutory and other benefits to the workmen and also the employees of the Co- operative Society. 3. The company owns vast extent of lands and other properties at Madurai as well as Kodaikanal. The textile mill with its surrounding area is situated in about 15 acres of land worth about several crores of rupees. The company owns a guest house in Madurai town that would also fetch several crores. The company also owns an extent of 3.95 acres in old survey No.25/6/4 and 25/6/5 and new Town Survey No.21 in Kodaikanal. The said land consists of two lots. The laid with the bungalow is situated in an extent of 1 acre and 25.46 cents. The remaining vacant land measures 2 acres, 69.54 cents. We are concerned in this case about the land and bung....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, Chennai, to convene a meeting of the representatives of the ESI Corporation, EPFO, Commissioner for Commercial Taxes, PNB, and ICICI Bank as well as Commissioner of Labour to arrive at a consensus for selling the properties of MTML. It is also directed that once the properties are sold, they should apportion the realized amount to satisfy the various claims with due proportion to each of the claimants. A further direction was issued that the said exercise shall be completed within a period of twelve weeks. Various properties of the MTML were the subject matter in the said writ petitions. 9. EPFO challenged the common order dated 08.09.2008 in respect of W.P.(MD)No.1476 of 2005 and 9809 of 2007 in writ appeal W.A.(MD)Nos.556 and 557 of 2009. Their grievance was that they have their own machinery for recovery of the Provident Fund dues and therefore, they do not want to abide by any direction of the Secretary to the Tamil Nadu Government, Commercial Taxes and Registration Department. 10. The Division Bench excluded the EPFO from the directions issued by the learned Single Judge in the common order dated 08.09.2008 in W.P.(MD)No.1476 of 2005 and 9809 of 2007 etc.,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; The deposit, after defraying the expenses of the sale, be forfeited to the Employees' Provident Fund and the defaulting purchaser shall forfeit all rights to the property. 15. One Sheik Dawood of Madurai offered to pay a sum of Rs. 2.48 crores. He was declared as the highest bidder. He also deposited a sum of Rs. 87 lakhs out of the total purchase amount of Rs. 2.48 crores. But he failed to deposit the balance amount on the plea that there were encumbrances in the properties, since two sale deeds in Document No.2441 of 2009 to an extent of 30 cents and in Document No.2442 of 2009 to an extent of 11.070 cents were executed with regard to the property concerned in the proclamation of sale. 16. In these circumstances, EPFO filed W.P.(MD)No.11726 of 2010 seeking a direction to the Sub Registrar, Kodaikanal, to cancel the registration of documents in Document Nos.2441 and 2442 of 2009 executed by one Vaigai Durai, being the power agent of MTML, in favour of his wife Panchasheelagandhi. 17. At the time of filing of the writ petition, the Inspector General of Registration, the Sub Registrar of Kodaikanal, Vaigai Durai and Panchasheelagandhi, were alone made as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n from the MTML. 19.3. In the affidavit dated 30.07.2012, he stated that the company owns the mill and the surrounding areas measuring 15 acres worth about Rs. 25 Crores and more. It is also averred that the company owns a guest house in Madurai Town that alone is worth about Rs. 10 cores. He also undertook to clear the entire dues payable to the EPFO within three weeks. 19.4. He relied on a Full Bench judgment of this Court reported in (2011) 2 MLJ 569 (Latif Estate Line India Ltd. V. Hadeeja Ammal) for the proposition that there is no provision either in the Registration Act or in the Transfer of Property Act for cancelling a sale deed. He averred that no writ can be issued to the second respondent - Sub Registrar to cancel the sale deeds. 20. The fourth respondent, the wife of the third respondent, filed a counter-affidavit and an additional counter-affidavit. The fourth respondent, the purchaser of the property by way of sale deeds executed by her husband, the third respondent, averred that MTML, having appointed her husband as power agent, cannot now question the sale deeds executed by the third respondent being its power agent.&nbs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e housing plots before the property was attached by the EPFO and the Commercial Taxes Department. 21.3. However, the property measuring 1 acre and 25.46 cents consisting of the bungalow is intact and no sale was made by the company and the said land measuring 1 acre and 25.46 cents was brought for sale by the EPFO, which is the subject matter of this writ petition. 21.4. It is stated that the Director of MTML AL.Lakshmanan executed a general power of attorney dated 03.07.2009 in favour of Thiru.Vaigai Durai-the third respondent in the writ petition insofar as the property in 1 acre and 25.46 cents at Kodaikanal. It was executed only for discharging the liabilities of the company. In the said power of attorney, the attachment of the property made by the EPFO had been clearly mentioned. Thus, the MTML had no dishonest intention to fraudulently sell the properties of the company. 21.5. The power agent-the third respondent very well knew about the dues of the MTML to be paid to EPFO and the Commercial Taxes Department, as the same were specifically mentioned in the power deed. But the third respondent executed two sale deeds date....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... direction to the first respondent - EPF Organization to conduct fresh auction sale of the property measuring 125.46 cents in Kodaikanal referred to above and to forbear the first respondent EPF organization from confirming the sale held on 07.07.2010 in favour of the second respondent, the highest bidder. 23. M.P.(MD)Nos.2 to 6 of 2012 in W.P.(MD)No.8972 of 2012 are filed by various unions seeking to implead them as respondents in W.P.(MD)No.8972 of 2012. Heard the learned counsels appearing for the petitioners in M.P.(MD)Nos.2 to 6 of 2012 in W.P.(MD)No.8972 of 2012. In order to decide the issues involved in these writ petitions, they are not necessary parties. Moreover, the company has filed an affidavit stating that after settling the amount payable to EPF Organization from the amount realized in the fresh auction sale, in the event of ordering fresh auction sale, the balance amount shall be paid to the workmen. Hence, these miscellaneous petitions in M.P.(MD)Nos.2 to 6 of 2012 in W.P.(MD)No.8972 of 2012 are DISMISSED. 24. Since the issues involved in both the writ petitions are common, the writ petitions have been taken up for hearing together and dispo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nion, (1997) 9 SCC 377 in this regard. 27.4. The learned counsel for the petitioner more importantly asserted that the facts are not in dispute, i.e., the third respondent executed sale deeds pursuant to the power deed executed by MTML in his favour. The power deed itself makes it clear that the properties that are sold now are attached by EPFO. The other undisputed fact is that the power was given to the third respondent to discharge the liabilities by sale of the properties covered by the power deed. When the facts are not in dispute, this Court can very well issue direction under Article 226 of the Constitution, particularly, when the third respondent's action is nothing, but fraud. 27.5. The learned counsel for the petitioner further submitted that the alienation of the property that has been under attachment is void. The attachment of the property in issue was statutorily made by EPFO pursuant to Section 8-B read with Section 8-C of the EPF Act. The attachment was not made pursuant to any order of civil court. On the other hand, the attachment was made by the Recovery Officer of EPFO pursuant to the statutory power given to him under Section 8....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndent was the highest bidder, who offered to buy the property at 2.48 crores and also deposited Rs. 87 lakhs immediately. But he failed to deposit the balance purchase amount within 15 days from the date of sale, as per the proclamation of sale. Since the fifth respondent did not comply with the conditions stipulated in the proclamation of sale, a fresh sale shall be conducted by the Recovery Officer. 27.9. The learned counsel fairly stated that though the fifth respondent is not entitled to get back the amount deposited towards 25% of the bid amount, since he did not pay the balance amount within a period of 15 days from the date of sale of the property, the petitioner is willing to refund the entire amount after defraying the sale expenses out of the sale proceeds of the fresh auction sale to be held. 27.10. Likewise, the learned counsel has fairly submitted that though the prayer was to cancel both the sale deeds in document Nos.2441 and 2442 of 2009, the EPFO was not pressing its claim against document No.2442 of 2009, since the same is not part of the lands measuring 1 acre and 25.46 cents mentioned in the sale proclamation dated 04.06.2010, as th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and the sale proceeds could be utilized to pay the dues payable to EPFO and the balance shall be paid to the workmen by issuing necessary direction by this Court to the Commissioner of Labour, to disburse the amount, after ascertaining with the MTML and various trade unions. In this regard, he has brought to the notice of this Court, the prayer in W.P.(MD)No.8972 of 2012. 32.1. The learned counsel for the sixth respondent relied on the following judgments: (1)(2005) 12 SCC 364 - Himadri Coke & Petro Ltd., V. Soneko Developers (P) Ltd. And others; (2)2010 (3) CTC 372 - C.N.Paramasivam and another v. Sunrise Plaza, rep. By its partner, Kalyanasundaram and others; (3)2011 (6) CTC 858 - Sri anbalayam Textiles Private Ltd., rep. By its Chairman P.Veerasamy V. The Chairman-cum-Managing Director, T.N. Industrial Investment Corporation Ltd. And others; and (4)2011 (6) CTC 349 - P.Kumaran V. The Debts Recovery Appellate Tribunal and Others; 33. I have considered the submissions made by either side. 34. It is not in dispute that the sixth respondent-MTML has to pay statutory dues to various statutory bodies and Commercial Taxes Department and banks. The company owns pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....over the amount specified therein from the establishment or, as the case may be, the employer by one or more of the modes mentioned below:- (a) attachment and sale of the movable or immovable property of the establishment or, as the case may be, the employer; (b) arrest of the employer and his detention in prison; (c) appointing a receiver for the management of the movable or immovable properties of the establishment or, as the case may be, the employer: Provided that the attachment and sale of any property under this section shall first be effected against the properties of the establishment and where such attachment and sale is insufficient for recovery the whole of the amount of arrears specified in the certificate, the Recovery Officer may take such proceedings against the property of the employer for recovery of the whole or any part of such arrears. (2) The authorised officer may issue a certificate under sub-section (1), notwithstanding that proceedings for recovery of the arrears by any other mode have been taken. 8-C. Recovery officer to whom certificate is to be forwarded. (1) The authorised officer may ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tificate within fifteen days from the date of service of the notice and intimating that in default steps would be taken to realise the amount under this Schedule. 9. General bar to jurisdiction of civil courts, save where fraud alleged. Except as otherwise expressly provided in this Act, every question arising between the Tax Recovery Officer and the defaulter or their representatives, relating to the execution, discharge or satisfaction of a certificate, or relating to the confirmation or setting aside by an order under this Act of a sale held in execution of such certificate, shall be determined, not by suit, but by order of the Tax Recovery Officer before whom such question arises : Provided that a suit may be brought in a civil court in respect of any such question upon the ground of fraud. 12. Removal of attachment on satisfaction or cancellation of certificate. Where- (a) the amount due, with costs and all charges and expenses resulting from the attachment of any property or incurred in order to hold a sale, are paid to the Tax Recovery Officer, or (b) the certificate is cancelled, the atta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Sale fixed a reserve price at Rs. 2,43,29,000/- (Rupees two crores forty three lakhs and twenty nine thousand only). The proclamation declared that the MTML was the defaulter and to pay Rs. 1,88,03,061/- (Rupees one crore eighty eight lakhs three thousand and sixty one only). 43. Clauses (iv) and (vii) of the proclamation of sale are relevant and the same are extracted hereunder : "(iv) The highest bidder shall be declared to be the purchaser of any lot provided always that his legally qualified to bid and provided further that "the amount bide by him is not less than the reserve price" it shall be in the discretion of the undersigned to decline acceptance of the highest bid when the price offered appears so clearly inadequate so to make it inadvisable to do so. ...... (vii) In the case of immovable property, the person declared to be the purchaser shall pay immediately after such declaration a deposit of twenty five percent on the amount of his purchase money to be officer conducting the sale and in default of such deposit, the property shall forthwith be put up again and resold. The full amount of the purchase money payable shall be pai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....011 (6) CTC 858 ; and (4)P.Kumaran V. The Debts Recovery Appellate Tribunal and Others reported in 2011 (6) CTC 349; 46. The only impediment now is that the third respondent has executed two sale deeds in the meantime by selling some lands of MTML and in one of the sale deeds, 30 cents out of 125.46 cents was sold and as stated above, 125.46 cents was brought to sale by issuing proclamation of sale of 04.06.2010. The third respondent is the power agent of MTML. The general power of attorney dated 03.07.2009 was issued by Mr.AL.Lakshmanan, Managing Director, MTML. The recitals of the general power of attorney document is extracted hereunder: "Whereas I am the Managing Director of M/s.Mahalakshmi Textile Mills Ltd., located at Pasumalai, Madurai-625 004, who is in physical possession of the Schedule mentioned properties for and on behalf of the Mills. And whereas this spinning Mill has been closed and the company has become defunct. And whereas since the Schedule property is located at Kodaikanal which is under attachment made by Employees Provident Fund Department, and also Tamilnadu State Sales Tax Departme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....documents connected with the schedule mentioned properties. 5. He shall pay the ascertained amount to the Employees provident fund and sales tax and get the schedule mentioned properties relieved from attachment." 48. Therefore, the third respondent, power agent, was well aware of the fact that the property in respect of which he was given power was attached by the EPFO. That is, the properties covered by the power deed was attached by EPFO before the execution of power deed. 49. At this juncture, it is relevant to take note of the submission made by the learned counsel for the third respondent that MTML sold the properties that were attached by EPF and that therefore, the sale deeds executed by him in favour of his wife also could not be interfered with. 50. As stated above, MTML filed counter-affidavit that MTML did not sell any portion of 125.46 cents and sale was made by MTML only from 2 acres and 69.54 cents in 1987, i.e., before attachment. The paragraph 6 of the counter- affidavit of MTML was extracted hereinabove in this regard. We are not concerned with various sales that took place in respect of 2 acres 69.54 cents. We are c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment under Sections 8-B and 8-G of the EPF Act read with Rules under the Second Schedule to the Income Tax Act of the property measuring 125.46 cents was intact, the sale deeds executed by the third respondent in document No.2441 of 2009 for the lands measuring 30 cents out of 125.46 cents shall be void as declared by Rule 16(2) of the Second Schedule to the Income Tax, 1961. 54.2. In this regard, the following four decisions, namely, (I) Division Bench judgment of the Andhra Pradesh High Court in Kapurchand Shrimal vs Tax Recovery Officer, Hyderabad, reported in 1967 64 ITR 1 [AP], (II) Judgment of the Apex Court in Nancy John Lyndon Vs. Prabhati Lal Chowdhury and others reported in (1987) 4 SCC 78, (III) Judgment of this Court in Palani Gounder (Decd.) and Others V. Income Tax Revenue Department and others, reported in 1998 (229) ITR 59 (Mad.) and (IV) Judgment of this Court in Abdul Jamil and 5 Others Vs. The Secretary, Income-Tax, reported in 1998 (1) CTC 547 are dealt with hereunder: (I) A Division Bench of the Andhra Pradesh High Court in the judgment in Kapurchand Shrimal vs Tax Recovery Officer, Hyderabad, reported in 1967 64 ITR 1 [AP] held in categorical terms that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n it cannot be said that the appellant is totally prohibited from carrying on the business. The restriction placed under the rule is a reasonable restriction. The contention of Sri. D. Narasa Raju is that the restriction does not seem to be reasonable but is most unreasonable as the prohibition is indefinite, not restricted to any period, and there is no standard laid down when the permission is to be given and the authority has an absolute and uncontrolled power. From the mere fact that the prohibition is indefinite and some restriction are placed on dealing with the properties under this rule, it cannot be said that absolute and uncontrolled power is given to the authorities, when it has clearly laid down how and in what manner the power has to be exercised. Further, article 19(1)(g) refers to practicing any profession or carrying on any occupation, trade or business, and it is only if those rights are interfered with, the question of affecting the fundamental rights would arise. Rule 16(1) only refers to the competency of the defaulter in mortgaging or creating a charge, leasing or otherwise dealing with property belonging to him. There is, therefore, no question of the fundamen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the permission of the Tax Recovery Officer. In the view we are taking, we cannot accept the contention of the learned counsel, Sri. D. Narasa Raju, that rule 16 imposes an unreasonable restriction." (II) The Apex Court judgment in Nancy John Lyndon Vs. Prabhati Lal Chowdhury and others reported in (1987) 4 SCC 78: (i) This case does not arise out of the attachment or sale made under the rules of the Second Schedule to the Income Tax Act. It arose out of the sale of property made in contravention of Section 64 of the Code of Civil Procedure. The appellant before the Apex Court filed an execution petition before the First Sub Judge at Alipore in West Bengal on 31.07.1970, pursuant to a decree of a civil court, for attachment of the land belonging to the judgment-debtor. On 03.08.1970, the attachment of the property of the judgment-debtor was made by the executing court. Thereafter, on 14.09.1970 judgment-debtor sold a portion of the attached property to another person. The property was brought to sale by the execution court by issuing a proclamation of sale. At this juncture, the purchasers filed an application for release of the property from at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es, though no attachment of the property was made, this Court held that there is a prohibition under Rule 16(1) of the Second Schedule to the Income Tax Act that the defaulter shall not be competent to mortgage, charge or lease or otherwise deal with any property belonging to him except with the permission of the Recovery Officer, if notice was served on the defaulter to pay arrears. (vi) In this regard, the following passages from the said judgment in 1998 (229) ITR 59 (Mad.) are extracted hereunder : "The Second Schedule to the Income-tax Act is a detailed and self- contained Schedule which deals fully with the modes for the recovery of tax arrears. Rule 2 of the Second Schedule provides that when a certificate is received by the Tax Recovery Officer from the Income-tax Officer for the recovery of arrears under the Schedule, the Tax Recovery Officer shall cause to be served upon the defaulter a notice requiring the defaulter to pay the amount specified in the certificate within 15 days from the date of service of the notice and intimating that in default steps would be taken to realise the amount under the Schedule. Rule 16(1) of the same Schedule provides that when a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as ascertained and certificate of due was issued. In this case, after issuing notice by the Authorised Officer, the Recovery Officer also effected attachment long back to the sale made by the third respondent. Therefore, the sale shall be void. (IV) The judgment of this Court in Abdul Jamil and 5 Others Vs. The Secretary, Income-Tax, reported in 1998 (1) CTC 547 : (i) This case is identical to the case reported in 1998 (229) ITR 59 (Mad.), referred to above. In that case, the person who purchased the property pleaded that he was an innocent purchaser from the defaulter and being the bonafide purchaser, the purchase made by him from the defaulter shall be protected due to Section 53 of the Transfer of Property Act. But the said contention was rejected by this Court. (ii) In that case, the purchaser purchased the property from the defaulter on 27.06.1968. Before the sale was effected, the certificate was issued by the Income Tax Officer for recovery on 17.02.1965 and three more certificate were issued on 20.01.1966, 16.03.1967 and 18.07.1968. As stated above, the purchase took place on 27.06.1968 long after the issue of certifi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lable for the EPFO is before this Court and no remedy is available before the civil court, as there is a specific bar to approach the civil court in this regard. The relevant provisions are extracted above. Hence, the Full Bench judgment is of no use to the learned counsel for the third respondent. 57. In view of the aforesaid conclusions, it is not necessary for cancellation of those sale deeds and I have no hesitation to declare that those sale deeds are void following the judgments of the Apex Court, Andhra Pradesh High Court and this Court referred to above. 58. The Recovery Officer, in view of the settled position of law in those judgments, can proceed very well by issuing fresh proclamation of sale in relation to the property measuring 125.46 cents at Kodaikanal. 59. The submissions of the learned counsel for the petitioner/EPFO that the EPF authorities are willing to return the amount deposited by the fifth respondent, the highest bidder, at the time of fresh auction sale subsequent to proclamation of sale, after defraying the sale expenses that was incurred in the process of proclamation of sale dated 04.06.2010 and the EPF authorities would be sati....