IN THE HIGH COURT OF JUDICATURE AT MADRAS
THE HONOURABLE MR.JUSTICE P.K.MISRA
THE HONOURABLE MR.JUSTICE K.K.SASIDHARAN
C.R.P.NPD.No.518 of 2006 and
C.R.P.PD.No.1842 of 2005 and
W.P.No.536 of 2006
C.M.P.Nos.3873/2006 & 20595/2005 &
V.C.M.P.Nos.289/2006 & 296/2006 &
M/s.Hanu Reddy Realty India Pvt.Ltd.,
rep. by its Director,
New No.18, Bishop Wallers Avenue East,
Chennai-600 004. : Petitioner
3.M/s.Global Trust Bank
No.63, Dr.Radhakrishnan Salai,
Chennai-600 004. : Respondents
Civil Revision Petition filed under Article 227 of the Constitution of India against the order dated 20.02.2006 passed by the Chairperson, the Debts Recovery Appellate Tribunal, Chennai in I.N.No.315 of 2005. For Petitioner : Mr.T.R.Rajagopalan, SC
For RR-1 and 2 : Mr.Sathish Parasaran
For 3rd Respondent : Mr.K.V.Babu
Mr.Chirla Hanumantha Reddy
Rep. by his Power of Attorney Holder
Mr.Chirla Suresh Reddy,
(Impleaded in I.A.No.211 of 2005) : Petitioner
Proprietor of Aarti Exports.
2.The Global Trust Bank Ltd.,
Now known as the Oriental Bank of Commerce,
No.63, Dr.Radhakrishnan Salai,
3.The Vyshya Bank Ltd.,
185, Anna Salai,
(RR-4 to 6 impleaded as per
order of this Court
dated 29.10.2007 made in
C.M.P.No.9879/2006) : Respondents
Civil Revision Petition filed under Article 227 of the Constitution of India against the order dated 01.12.2005 passed by the Chairperson, the Debts Recovery Appellate Tribunal, Chennai in M.A.No.124 of 2005. For Petitioner : Mr.T.R.Rajagopalan, SC
For 1st Respondent : Mr.Sathish Parasaran
For 2nd Respondent : Mr.K.V.Babu
For 3rd Respondent : Mr.K.Sukumaran
For RR-4 and 5 : Mr.K.Venkatasubramanian
W.P.No.536 of 2006:
142 Ranka Park Apartments,
I Block, 4th Floor,
New Richmond Circle,
Bangalore-560 027. : Petitioner
Debts Recovery Appellate Tribunal,
Debts Recovery Tribunal-I,
3.Oriental Bank of Commerce,
(Formerly Globe Trust Bank Ltd.,)
No.63, Dr.Radhakrishnan Salai,
4.Vyshya Bank Ltd.,
Mount Road Branch,
185, Anna Salai,
Chennai - 600 002.
5.Chirala Hanumantha Reddy,
Rep. by his Power of Attorney Holder,
Mr.Chirala Suresh Reddy,
No.33 Poes Garden,
Chennai - 600 086.
6.Hanu Reddy Reality India P. Ltd.,
Rep. by its Director
18 Bishop Wallers Avenue (East),
Chennai - 600 004.
8.Mr.A.Anil Kumar Bokdia,
S/o.Mr.J.Amar Chand Bokdia
9.Mrs.Anitha Devi Bokdia,
W/o.Mr.A.Anil Kumar Bokdia
(RR-8 and 9 impleaded as per
order of this Court dated
31.03.2006 made in
W.P.M.P.No.6910/2006) : Respondents
Writ Petition filed under Article 226 of the Constitution of India praying for the issue of a Writ of Certiorari to call for the records relating to the order dated 28.07.2005 in Appeal No.2/2005 on the file of the Debts Recovery Tribunal-I, Chennai and the order dated 01.12.2005 in M.A.No.124/2005 on the file of the Debts Recovery Appellate Tribunal, Chennai, quash the same. For petitioner : Mr.Sathish Parasaran
For 3rd Respondent : Mr.S.Vasudevan
For RR-5 and 6 : Mr.T.V.Sekar
For RR-8 and 9 : Mr.A.Jyothi Rani
These civil revision petitions are directed against the order dated 01.12.2005 in M.A.No.124 of 2005, whereby the Debts Recovery Appellate Tribunal modified the order dated 28.07.2005 in Appeal No.2/2005 on the file of the Debts Recovery Tribunal-I, Chennai, with respect to the property in item No.1 in the auction notice held on 18.11.2004 (C.R.P.No.1842 of 2005) and the order dated 20.02.2006 in I.N.No.315/2005 and I.A.No.91/2006, whereby the Debts Recovery Appellate Tribunal directed to take steps to auction the property in item No.3 of the auction notice (C.R.P.No.518 of 2006).
2. W.P.No.536 of 2006 has been filed by the defaulter for issue of a Writ of Certiorari calling for the orders dated 28.07.2005 in Appeal No.2/2005 as well as the order dated 01.12.2005 in M.A.No.124 of 2005 which is the subject matter of C.R.P.No.1842 of 2005 and to quash the same.
3. For the purpose of appreciating the facts in all the three matters, the factual details as found in C.R.P.No.518 of 2006 is referred to here under:
The third respondent in C.R.P.No.518 of 2006, namely M/s.Global Trust Bank, Chennai filed O.A.No.1481 of 1998 before the Debts Recovery Tribunal-I, Chennai against the respondents 1 and 2 (hereinafter referred to as defaulters) for recovery of a sum of Rs.13,17,43,056.58 with future interest at the rate of 24% per annum and the said original application was allowed as per order dated 27.12.2002 and a recovery certificate for the said sum was issued by the Tribunal. In pursuance of the recovery certificate No.35/2003 issued by the Tribunal, three items of property were brought to sale and for better appreciation, the details of property offered for sale are scheduled here under: "Item No.1:- Survey Nos.43/1,43/1A,43/1B Maduravoyal Village of an extent of 1.33 acres of the land and building situated at 307, Door No.165, Poonamallee High road, Aarthi Nagar, Maduravoyal, Chennai-102. (Known as Aarthi Towers) UPSET PRICE: RS.6,00,00,000/- (Rupees six crores only)
Item No.2:- All that piece and parcel of land measuring 2560 sq.ft. built up area including common wall marked as Plot No.9, at premises No.19, Door No.36, (Block No.1), Vuppatur Avenue Off, Flower road, Old No.11, Kilpauk, Chennai. UPSET PRICE: RS.49,00,000/- (Rupees forty nine lakhs only)
Item No.3:- Agricultural land admeasuring 21.09 acres or thereabouts in Chingleput Registration District and Walajabad Sub Registration District in No.149, Pappanguli Village in S.Nos.1,1(P), 2/1, 2/2A, 3/2A1, 3/2A2,3/28 (Part), 3/2B, 3/2C1, 3/2B(P), 3/3A, 11/2, 11/3, 12/1b1, 21, 22/2, 24/6b, 241, 256/5A, 256/5B & 256/6. UPSET PRICE: RS.67,00,000/- (Rupees sixty seven lakhs only)"
4. The recovery certificate issued by the Debts Recovery Tribunal bearing No.35/2003 and the consequential order of attachment and proposed sale of property as published in 'Daily Thanthi' dated 16.10.2004, fixing the auction on 18.11.2004 were challenged by the defaulter before the Debts Recovery Tribunal-I, Chennai in Appeal No.2 of 2005.
5. The Recovery Officer proposed to sell all the three items of property on 18.11.2004. However, item No.2 in the auction notice alone was sold on 18.11.2004. As there were no bidders in respect of item Nos.1 and 3, the sale was postponed to a subsequent date. However, no specific date was mentioned in the said proceeding. Subsequently, as per proceedings dated 01.12.2004, item Nos.1 and 3 were brought to sale on 15.12.2004 and on the said date, item No.1 in the auction notice measuring an extent of 1.33 acres situated at Maduravoyal Village in Chennai was sold. However, item No.3 was not sold on the said date and as per the proceedings of the Recovery Officer, in order to enable the petitioner to inspect the property and to verify the documents, the sale was postponed to 17.12.2004 at 04.30 p.m. The sale proceeding was taken upon on 17.12.2004 and the sale of item No.3 was made in favour of the petitioner for a sum of Rs.67,10,000/- and the purchaser has deposited 25% of the bid amount by way of demand draft. However, the balance was not paid on account of stay granted by this Court against confirmation of sale.
6. So far as C.R.P.No.1842 of 2005 is concerned, the same relates to item No.1 of the property and the upset price was fixed at Rs.6 crores and the auction, which was originally scheduled on 18.11.2004, was adjourned, without specifying any date and time and subsequently on 15.12.2004 the sale was made in favour of the petitioner for a sum of Rs.6,00,10,000/-.
7. The appeal preferred by the defaulter before the Debts Recovery Tribunal-I at Chennai was disposed of as per order dated 28.07.2005, whereby the appeal was partly allowed. As per the said order, the Debts Recovery Tribunal made certain changes in the sale proceedings in respect of item No.1, but permitted the Recovery Officer to issue the sale certificates in respect of other properties as per rules.
8. The order dated 28.07.2005 in Appeal No.2 of 2005 was challenged by the defaulter before the Debts Recovery Appellate Tribunal, Chennai in M.A.No.124 of 2005 and the petitioners in the civil revision petitions filed application to implead as party and they were also heard in the matter.
9. The Debts Recovery Appellate Tribunal, as per order dated 01.12.2005, directed to bring the item No.1 of the property for sale fixing the upset price at Rs.6,00,10,000/- after giving due publication and the petitioner was also permitted to take part in the auction. The petitioner was also permitted to withdraw the amount deposited by him earlier with accrued interest, if any, and accordingly modified the order dated 28.07.2005 on the file of the Debts Recovery Tribunal-I, Chennai. The said order is challenged in C.R.P.No.1842 of 2005 by the auction purchaser, who was impleaded as a party before the Debts Recovery Appellate Tribunal. Similarly, the Debts Recovery Appellate Tribunal, as per order dated 20.02.2006, directed to bring item No.3 of the property for sale fixing the Upset price at Rs.67,10,000/- and the petitioner was also permitted to take part in the auction. The said order is challenged in C.R.P.No.518 of 2006. The appellant in Appeal No.2 of 2005 on the file of the Debts Recovery Tribunal-I, Chennai has preferred the writ petition in W.P.No.536 of 2006 challenging the order dated 28.07.2005 in Appeal No.2 of 2005 on the file of the Debts Recovery Tribunal-I, Chennai as well as the order dated 01.12.2005 in M.A.No.124 of 2005 on the file of the Debts Recovery Appellate Tribunal, Chennai. The order of the Debts Recovery Appellate Tribunal dated 01.12.2005 is challenged on the ground that the sale in respect of item Nos.2 and 3 were not set aside in the said proceeding, while setting aside the sale in respect of item No.1 of the property. The petitioner in the Civil Revision Petition is referred to hereinafter as the petitioner and the petitioner in the writ petition is referred to as the defaulter.
10. We have heard Thiru.T.R.Rajagopalan, learned Senior Counsel appearing for the petitioners in C.R.P.Nos.1842/2005 and 518/2006 and Thiru.Sathish Parasaran, learned counsel appearing for the first respondent in C.R.P.No.1842 of 2005 and respondent Nos.1 and 2 in C.R.P.No.518 of 2006 as well as the petitioner in W.P.No.536 of 2006 and Thiru.K.V.Babu, learned counsel appearing for the bank.
11. The learned Senior Counsel appearing for the petitioner in both the civil revision petitions contended that the order of the Debts Recovery Appellate Tribunal is perse erroneous and is liable to be set aside for more than one reason. According to the learned Senior Counsel, once a sale by way of auction is made by the Recovery Officer, the same could be set aside only by resorting to the proceedings as contemplated under Rules 60 and 61 of the Income Tax Recovery Rules in II Schedule by filing an application to set aside the sale within 30 days after fulfilling the pre-conditions stipulated therein. It is his contention that the Tribunal has gone beyond the pleadings and prayer made by the defaulter and interfered with the auction sale conducted by the Recovery Officer and according to him, the very application before the Debts Recovery Appellate Tribunal is not maintainable and the defaulter has got other remedies available as per law and as such, prayed for setting aside the order of the Appellate Tribunal.
12. Thiru.Sathish Parasaran, learned counsel appearing for the defaulter vehemently contended that the whole procedure adopted by the Recovery Officer is wrong and in fact fraud has been committed by the Recovery Officer in confirming the auction in favour of the petitioner, he being an international real estate broker and to facilitate the confirmation of sale in favour of the petitioner, the sale was adjourned to a subsequent date without fixing a definite date and at the instance of the petitioner, the auction was adjourned by two days again and without giving any publicity, the property was sold in favour of the petitioner. As such, according to the counsel, the Appellate Tribunal is justified in interfering with the fraudulent sale and as such, prayed for rejecting the revisions.
13. We have gone through the order of the Debts Recovery Appellate Tribunal as well as the documents filed on either side to substantiate their contentions in the respective civil revision petitions and in the writ petition.
14. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is a self-contained Code enacted for the purpose of establishment of Tribunals for expeditious adjudication. Section 19 of the Act permits application to be made by the Banks and Financial Institutions to recover any debt from any person and the order passed by the Debts Recovery Tribunal is made appealable before the Appellate Tribunal under Section 20 of the Act. Chapter V of the Act deals with mode of recovery of debt on receipt of a recovery certificate by the Recovery officer from the Tribunal. As per Section 29 of the Act, the provisions of the second and third schedule to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962, as in force from time to time with the necessary modifications, if any, is made applicable to a proceeding under Act 51 of 1993.
15. The present controversy relates to the manner of conduct of auction and the procedure adopted by the defaulter to set aside the sale effected by the Recovery Officer.
16. Admittedly, the auction was scheduled to be held on 18.11.2004 in respect of the three items of property shown in the auction notice. Since there were bidders only for item No.2, the said property was sold for a sum of Rs.62 lakhs and in the auction proceedings recorded by the Recovery Officer, it is stated that there are no bidders and hence, the same is postponed to a subsequent date. However, the Recovery Officer has not fixed any specific date or time to conduct the auction, which is a mandatory requirement under Rule 15(1) of the II Schedule to the Income Tax Act, 1961. The Recovery officer has power to postpone or adjourn the sale. But while doing so, duty is cast on him to adjourn the sale to a specified date and time and to give wide publicity so as to enable the prospective purchasers to take part in the auction on the adjourned date. Though there is no entry on 18.11.2004 in the proceeding with regard to the adjourned date of auction, surprisingly the Recovery Officer has recorded a proceeding on 01.12.2004 stating that the properties will be sold in public auction at 04.30 p.m. on 15.12.2004. The Appellate Tribunal, after going through the records of the auction proceedings, found that there is another proceeding on the very same date containing the very same wordings and in the said proceeding, it is ordered that the proceedings whereby the auction is adjourned to 15.12.2004 shall be put up in the notice board of the Tribunal and the bank was directed to paste a copy of the notice on the premises of the property. However, in the other proceedings dated 01.12.2004, there is no such endorsement about the requirement of publication of the notice either in the notice board or in the subject matter of the sale. Naturally, the Tribunal observed that it is not clear as to what warranted the Recovery Officer to make two proceedings on the very same date with respect to the very same matter. On 15.12.2004 item No.1 was sold in favour of the petitioner for a sum of Rs.6,00,10,000/- which was just Rs.10,000/- over and above the upset price fixed for the sale of the said item.
17. The auction with respect to item No.1 was made on 15.12.2004 and the auction with respect to item No.3 was postponed by two days so as to enable the petitioner to verify the documents. Subsequently on 17.12.2004 the auction was confirmed in the name of the petitioner for a sum of Rs.67,10,000/- which was also just Rs.10,000/- over and above the upset price.
18. It is the contention of the learned counsel for the defaulter that the whole auction was a drama stage managed by the Recovery Officer to favour the petitioner which is substantiated by the fact that by adjourning the auction sale on 18.11.2004, there was no proceeding recorded by the Recovery Officer fixing the sale to a specified date and time. According to the learned Counsel, the factum of recording suo motu proceeding twice on 01.12.2004 shows that the Recovery Officer was creating documents to appear as if the auction was adjourned to a specific date to be taken up on 15.12.2004 at 04.30 p.m and due publicity was given so as to enable the prospective purchasers to take part in the auction. It is also on record that the petitioner has paid only 25% of the bid amount in respect of item No.3 and the remaining amount was kept with them, as according to the petitioner, the confirmation of sale was stayed by this Court.
19. There is no material available on record to show that the sale was adjourned on 18.11.2004 to a specific date. The Recovery Officer is dealing with the property of defaulters and guarantors and merely because the property to be auctioned belongs to the defaulter did not cloth with any right on the Recovery Officer to sell the property in the manner suitable to him and when there is a prescribed procedure which mandates that the auction sale has to be conducted in a particular manner, the Recovery Officer is bound to conduct the same in accordance with the said procedure, failing which the whole proceedings are liable to be set aside. The observation of the Tribunal with regard to the defect in the procedure adopted by the Recovery Officer cannot be termed to be a perverse finding without any material. The Appellate Tribunal found that the petitioners alone participated in the auction on 15.12.2004 which also made the Tribunal to doubt the manner in which the auction was conducted by the Recovery Officer. Therefore, we are in agreement with the conclusion arrived at by the Appellate Tribunal that the sale made on 15.12.2004 and 17.12.2004 in respect of item Nos.1 and 3 respectively are vitiated and are liable to be set aside.
20. The other contention of the learned Senior Counsel appearing for the petitioner pertains to the maintainability of the application before the Debts Recovery Appellate Tribunal to set aside the auction sale. According to the learned Senior Counsel, the procedure prescribed under the Income Tax Rules with respect to sale has to be followed and the remedy of the aggrieved party is not to file an appeal before the Debts Recovery Appellate Tribunal.
21. The Schedule-II to the Income Tax Act which is made applicable to a proceeding under Act 51 of 1993 contains provisions to file application to set aside the sale of immovable property. Section 60(1) permits an application to be made to set aside the sale of immovable property on deposit of the amount specified in the confirmation of sale along with a sum equivalent to 5% of purchase money payable to the auction purchaser. Section 61 enables an application to be filed to set aside the sale of immovable property on ground of non-service of notice or irregularity and a person aggrieved by the sale in execution of a certificate may apply to the Tax Recovery Officer to set aside the sale on the ground that notice was not served on the defaulter to pay the arrears as required or on the ground of material irregularity in publishing and conducting the sale. There is no condition for pre-deposit for making an application under Section 61 unlike an application under Section 60 which requires payment of the amount shown in the proclamation of sale along with 5% of the purchase money payable to the auction purchaser.
22. The learned counsel for the defaulter contended that there is a difference in the procedure of auction as contemplated by the Income Tax Act 1961. Sale of property which is the subject matter of the proceedings of the Debts Recovery Tribunal is made by the Tribunal itself through the Recovery Officer who is an officer appointed by the Central Government for each Tribunal under Section 7(1). The Recovery Officer is a functionary under the Debts Recovery Tribunal and he shall function as per the direction of the Presiding Officer of the Tribunal. On the other hand, the Recovery Officer under the Income Tax Act is not functioning under the Income Tax Officer, who makes the assessment and as such, the learned counsel contended that it is not possible to file an application before the Recovery Officer inasmuch as the very sale is deemed to be made by the Tribunal itself acting through its officer functioning as Recovery Officer.
23. The Apex Court in R.N.Jadi & Brothers vs. Subhashchandra reported in 2007(9) Scale 202 observed that the procedural law is always sub-serving to the akin of justice and held thus: "9. All the rules of procedure are the handmaid of justice. The language employed by the draftsman of processual law may be liberal or stringent, but the fact remains that the object of prescribing procedure is to advance the cause of justice. In an adversarial system, no party should ordinarily be denied the opportunity of participating in the process of justice dispensation. Unless compelled by express and specific language of the Statute, the provisions of the CPC or any other procedural enactment ought not to be construed in a manner which would leave the Court helpless to meet extraordinary situations in the ends of justice.
10. The mortality of justice at the hands of law troubles a Judge's conscience and points an angry interrogation at the law reformer.
11. The processual law so dominates in certain systems as to overpower substantive rights and substantial justice. The humanist rule that procedure should be the handmaid, not the mistress, of legal justice compels consideration of vesting a residuary power in judges to act ex debito justiciae where the tragic sequel otherwise would be wholly inequitable - justice is the goal of jurisprudence-processual, as much as substantive. [See Sushil Kumar Sen v. State of Bihar (1975 (1) SCC 774].
12. No person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner for the time being by or for the Court in which the case is pending, and if, by an Act of parliament the mode of procedure is altered, he has no other right than proceed according to the altered mode. [See Blyth v.Blyth (1966 (1) AII E.R 524 (HL)]. A procedural law should not ordinarily be construed as mandatory, the procedural law is always subservient to and is in aid to justice. Any interpretation which eludes or frustrates the recipient of justice is not to be followed. [See Shreenath and Anr v. Rajesh and Others (AIR 1998 SC 1827)].
13. Processual law is not to be a tyrant but a servant, not an obstruction but an aid to justice. Procedural prescriptions are the handmaid and not the mistress, a lubricant, not a resistant in the administration of justice."
24. The provision regarding setting aside the sale as provided under the Debts Recovery Tribunal Act is akin to that of a proceeding under Order 21 Rule 89 of the Code of Civil Procedure.
25. In Challamane Huchha Gowda v. M.R.Tirumala reported in 2004(1) SCC 453, the Apex Court held thus:
"9. Execution is the enforcement by the process of the court of its orders and decrees. This is in furtherance of the inherent power of the Court to carry out its orders or decrees. Order 21 CPC deals with the elaborate procedure pertaining to the execution of orders and decrees. Sale is one of the methods employed for execution. Rule 89 of Order 21 is the only means by which a judgement-debtor can escape from a sale that has been validly carried out. The object of the rule is to provide a last opportunity to put an end to the dispute at the instance of the judgement-debtor before the sale is confirmed by the court and also to save his property from dispossession. Rule 89 postulates two conditions: they are depositing: (1) of sum equal to five percent of the purchase money to be paid to the purchaser, (2) of the amount specified in the proclamation of sale less any amount received by the decree-holder since the date of such proclamation, in the court. If these two conditions are satisfied the court shall make an order for setting aside the sale under Rule 92(2) of Order 21 CPC on an application made to it. In other words, then there will be compliance with the court's order or decree that is sought to be executed. Because the purpose of Rule 21 is to ensure the carrying out of the orders and decrees of the court, once the judgment-debtor carries out the order or decree of the court, the execution proceedings will correspondingly come to an end. It is to be noted that the Rule does not provide that the application in a particular form shall be filed to set aside the sale. Even a memo with prayer for setting aside sale is sufficient compliance with the said Rule. Therefore, upon the satisfaction of the compliance with conditions as provided under rule 89, it is mandatory upon the court to set aside the sale under Rule 92. And the court shall set aside the sale after giving notice under Rule 92(2) to all affected persons."
26. The impugned order of the Debts Recovery Appellate Tribunal has been passed in an appeal preferred against the order dated 28.07.2005 in Appeal No.2 of 2005 on the file of the Debts Recovery Tribunal-I, Chennai. The order impugned in Appeal No.2 of 2005 is nothing but the auction scheduled to be conducted by the Recovery Officer pursuant to the recovery certificate issued by the Debts Recovery Tribunal as well as the order dated 27.12.2002 in O.A.No.1481 of 1998. It is the contention of the learned Senior Counsel appearing for the petitioner that the irregularity of the sale was not an issue in Appeal No.2 of 2005 and as such, the Debts Recovery Appellate Tribunal erred in setting aside the auction sale on the ground of material irregularity, while exercising appellate jurisdiction against the order of Debts Recovery Tribunal in an appeal challenging the final order in the original application and consequent recovery proceedings on a totally different ground.
27. It is true that the appeal No.2 of 2005 pertains to the order passed by the Debts Recovery Tribunal regarding the issue of debt recovery certificate No.35/2003 and consequential order of attachment and the auction notification published in 'Daily Thanthi' dated 16.10.2004 whereby auction was scheduled to be conducted on 18.11.2004. While deciding the appeal, the Debts Recovery Tribunal found that the dues to the bank is to the tune of Rs.13 crores and as such indicated that in case opportunity is given to procure maximum price for the property from the prospective purchasers, then such an alternative has to be resorted to and ultimately the Tribunal directed the defaulter and Mr.Dhanavel, who offered Rs.6.26 crores for the property in item No.1, to deposit the said sum and also passed certain equitable orders in the interest of both the parties. The Debts Recovery Tribunal also permitted the Recovery Officer to issue sale certificate in respect of other properties as per rules. It is the said order which was challenged before the Debts Recovery Appellate Tribunal and when the order permitting the Recovery Officer to issue sale certificate was challenged in appeal, it cannot be said that the defaulter is not entitled to bring the material irregularity in conducting the auction sale before the appellate authority. In the present case, there is a glaring irregularity in the conduct of sale. The observation made by the Tribunal in its order in Appeal No.2 of 2005 to ascertain the feasibility of getting more amount for the property has not been taken note of by the Recovery Officer. There is nothing on record to show that the auction which was postponed on 18.11.2004 was made known to the general public so as to get better offers from the intending purchasers. The suo motu proceedings recorded by the Recovery Officer on 01.12.2004 stating that the sale will be held at 04.30 p.m. on 15.12.2004 appears to be a make belief affair. There is also nothing on record to show that the proceeding dated 01.12.2004 has been duly published. For reasons best known to the Recovery Officer, the sale was adjourned on 18.11.2004 without specifying any date. The fact that there was yet another proceeding on 01.12.2004 directing the bank to paste a copy of the notice on the premises of the property as well as in the notice board of the Debts Recovery Tribunal shows that the Recovery Officer has been trying to make the records clean so as to appear as if wide publicity was given to the sale scheduled to be held on 15.12.2004. When the sale was not adjourned to a specified date on 18.11.2004 and when the proceedings dated 01.12.2004 was not published in newspapers or in any other mode, it is really surprising to note as to how the petitioner came to know of the scheduled auction on 15.12.2004. When there was no other bidder other than the petitioner on 15.12.2004 for item No.3 instead of obliging the petitioner to adjourn the matter by two days and fixing the auction on 17.12.2004, the Recovery Officer should have again given wide publicity so as to enable other prospective purchasers also to take part in the auction or in case the Recovery Officer feels that no public notice could be given within two days, he should have adjourned the sale by a reasonable time so as to enable him to publish the sale notice to get better offers and for attracting more purchasers. The Recovery Officer is expected to sell the property for the maximum price and in case there is any balance money, the same has to be returned to the defaulter. Such being the case, the Recovery Officer should have taken all the possible efforts to get maximum price for the property and he should not have attempted to sell the property somehow and to conclude the proceedings at the earliest. Therefore, the findings of the Debts Recovery Appellate Tribunal to the effect that the whole proceeding appears to be a make belief affair cannot be said to be an erroneous finding or perverse so as to interfere in a proceeding under Article 227 of the Constitution of India.
28. The Apex Court considered the need for maximum public participation in the process of sale in the case of Chairman and Managing Director, Sipcot, Madras and others vs. Contromix Pvt. Ltd. by its Director (Finance) Seetharaman, Madras and another reported in 1995(4) SCC 595 and held thus: "In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold. This can be achieved only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer. Public auction after adequate publicity ensures participation of every person who is interested in purchasing the property and generally secures the best price. But many times it may not be possible to secure the best price by public auction when the bidders join together so as to depress the bid or the nature of the property to be sold is such that suitable bid may not be received at public auction. In that event, the other suitable mode for selling of property can be by inviting tenders. In order to ensure that such sale by calling tenders does not escape attention of an intending participant, it is essential that every endeavour should be made to give wide publicity so as to get the maximum price."
29. In Gajraj Jain V. State of Bihar and others reported in 2004(7) SCC 151, the Apex Court in the context of Section 29(1) of the State Financial Corporations Act, 1951 observed that the words "realisation of the property pledged, mortgaged, hypothecated" presuppose realisation of sale proceeds and application/appropriation thereof to liquidate the dues of the paramount charge-holder and from the surplus payment to persons entitled thereto and it is for this reason that the best possible price has got to be tried for under Section 29 of the Act and held thus: "Under Section 29(1) of the 1951 Act, where any industrial concern under a liability to the financial corporation makes any default in repayment of loan, the corporation is empowered to take over possession of the industrial concern and realise the property pledged, mortgaged, hypothecated or assigned to the corporation. Under Section 29(4), all costs, charges and expenses incurred by the corporation as incidental to such realisation of the property pledged, hypothecated or mortgaged shall be recovered firstly from the industrial concern and the balance shall be paid to the person entitled thereto. As stated above, a charge consists in the right of a creditor to receive the payment out of the proceeds of the realisation of property or fund charged with the debt. A bare reading of sub-sections (1) and (4) of Section 29 shows that it is similar to Section 69 of the TP Act under which it is stipulated that a mortgagee exercising the power of sale is a trustee of the surplus sale proceeds and after satisfying his own charge he holds the surplus for the subsequent encumbrancers and ultimately for the mortgagor. (See Rajah Kishendatt Ram v. Rajah Mumtaz Ali Khan.) Section 29(1) contemplates therefore, a sale for distribution of sale proceeds and not a sale for distribution of property charged with the debt. It also implies that the first charge holder must act in a manner which protects not only its own interest but also the interest of the subsequent charge-holder and the mortgagor. This in turn implies that the first charge-holder is bound to obtain the best possible price for the mortgaged assets and the best possible price must, in the context, mean the fair market value."
30. In Gajraj Jain case cited supra, the Apex Court found that there was collusion between the Bihar State Industrial Credit and Investment Corporation Limited and the respondent No.4, the purchaser of the property. The Apex Court held in the said judgment that in the absence of proper mechanism, the auction sale becomes only a pretence. Ultimately, the Apex Court found that the Corporation has misused its authority and power in breach of law by taking into account extraneous matters and by ignoring the relevant matters which has rendered all its actions ultra vires and set aside the sale with a direction to restore possession of the assets to the defaulter. The facts in the present case also shows that the Recovery Officer has not taken any effort to get the maximum price and in such circumstances, the observation of the Debts Recovery Appellate Tribunal with regard to the illegality conducted by the Recovery Officer cannot be said to be a finding not supported by any material.
31. During the course of hearing, the learned counsel for the defaulter submitted that the property in item No.1 was sold during the pendency of the present proceeding for a substantial amount much more than the offer given by the petitioner and the entire amount of Rs.765.85 lakhs was paid to the bank and the bank has also issued no dues certificate and returned the title deeds to the defaulter. According to the learned counsel, the defaulter was able to clear the entire arrears with the sale consideration received by way of sale of item No.1 alone. We do not propose to consider the subsequent sale made by the defaulter pending disposal of the proceedings except to take note of the fact that the property involved in this matter was sold for a huge sum than the amount offered by the petitioner. This also shows the worth of the property and it is also a justification for setting aside the sale made by the Recovery Officer on the ground that due publicity was not given to attract better offers and while adjourning the sale, it was not postponed to a specified date.
32. A perusal of the order impugned in the revision petition shows that the Debts Recovery Appellate Tribunal has considered the issue on the basis of relevant materials and as such, the said decision cannot be said to be unreasonable. While exercising the power of judicial review, this Court cannot act like an appellate authority. There is also material available with the Debts Recovery Appellate Tribunal for its various conclusions and those conclusions cannot be said to be perverse, or irrational, warranting interference by this Court by way of judicial review.
33. The Recovery Officer being a creature of the statute is obliged to act fairly and in a reasonable manner, while dealing with the property of the defaulters. As per the provisions of Act 51 of 1993, wide powers are given to the Recovery Officer including power of distraint and sale of property and when there are enormous powers conferred on an authority, the law expects much more responsibility from such authorities. The function of the Recovery Officer is not to sell the property for a paltry sum, but he should see that the property is sold for its maximum value which would otherwise be termed as market price and if there is any balance after discharging the dues to the bank or financial institutions, it should go to the defaulter. Merely because the defaulter is in arrears to the bank or financial institutions, it cannot be said that his property has to be sold irrespective of its worth, and he should not have the benefit of the balance sale consideration after meeting the liabilities. Therefore, utmost care has to be taken by the Recovery Officer in the matter of sale of the property of the defaulters and due publicity should be given for such sale as otherwise the property will be snatched away by the real estate agents by forming cartel, and there will be still balance to be paid to the bank and the defaulter will continue to be debtor through out his life. On the other hand, if an attempt is made by the Recovery Officer to get the maximum price for the property, it will be in the interest of both the bank as well as the defaulter. As noted earlier, the Recovery Officer is empowered to effect recovery by various modes as made mentioned under Section 25 of the Act and the said power coupled with the relevant provisions of the Income Tax Act, 1961 made applicable to recovery proceeding under Debts Recovery Tribunal Act, the Recovery Officer enjoins wide powers in the matter of sale of property. As per Section 63(1) of II Schedule to the Income Tax Act which is made applicable to the recovery proceedings under the Debts Recovery Tribunal Act, the confirmation of sale is also to be made by the Tax Recovery Officer.
34. In Navalkha & Sons v. Ramanya Das reported in AIR 1970 SC 2037, the Apex Court considered the importance of confirmation in the matter of sale of property and observed thus: "6. The principles which should govern confirmation of sales are well established. Where the acceptance of the offer by the Commissioners is subject to confirmation of the Court the offeror does not by mere acceptance get any vested right in the property so that he may demand automatic confirmation of his offer. The condition of confirmation by the Court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the Court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion. In Gordhan Das Chuni Lal v. Kanthimathinatha Pillai, AIR 1921 Mad 286, it was observed that where the property is authorised to be sold by private contract or otherwise it is the duty of the Court to satisfy itself that the price fixed is the best that could be expected to be offered. That is because the Court is the custodian of the interests of the Company and its creditors and the sanction of the Court required under the Companies Act has to be exercised with judicial discretion regard being had to the interests of the Company and its creditors as well. This principle was followed in Rathnasami Pillai v. Sabapathi Pillai. AIR 1925 Mad 318 and S.Soundararajan v. Mahomed Ismail M/s.Roshan and Co., AIR 1940 Mad 42. In A.Subbaraya Mudaliar v. K.Sundararajan, AIR 1951 Mad 986, it was pointed out that the condition of confirmation by the Court being a safeguard against the property being sold at an inadequate price, it will be not only proper but necessary that the Court in exercising the discretion which it undoubtedly has of accepting or refusing the highest bid at the auction held in pursuance of its orders, should see that the price fetched at the auction is an adequate price even though there is no suggestion of irregularity or fraud. It is well to bear in mind the other principle which is equally well settled namely that once the court comes to the conclusion that the price offered is adequate, no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale or offer already received. (See the decision of the Madras High Court in Roshan and Co.'s case, AIR 1940 Mad 42)."
35. The power to confirm the sale given to the Recovery Officer as per Section 63(1) of the Income Tax Act 1961 enjoins upon the recovery officer to see that the property is sold for the market price in a free auction made with wide publicity.
36. The provision relating to recovery proceeding is akin to that of a proceeding under Section 29 of the State Financial Corporations Act, 1951 which authorises the financial corporation to take possession of the assets of the defaulting company or business concern. The concept of best possible price is considered to be the dominant consideration for the sale under Section 29 of the State Financial Corporations Act, 1951, and as held by the Suprmeme Court in Gajraj Jain cited supra, if publicity and maximum participation is to be attained, then the bidders should know the details of the assets and in the absence of the proper mechanism, the auction sale becomes only a pretence. In S.J.S.Business Enterprises (P) Ltd., case also the Apex Court underlined the need for publicity to ensure maximum participation of bidders which in turn requires that a fair and practical time to be given to the purchasers for the purpose of effective participation in the sale. Such being the legal position, we do not find any illegality committed by the Debts Recovery Appellate Tribunal in passing the impugned order. The subsequent events narrated above also would show that there was no attempt on the part of the Recovery Officer to procure the maximum price for the property. Therefore, we do not see any reason to interfere with the order of the Debts Recovery Appellate Tribunal.
37. In the result, both the civil revision petitions are dismissed. In view of our finding that the order of the Debts Recovery Appellate Tribunal do not call for interference, there is no need for separate orders in the writ petition and accordingly, the Writ Petition is also disposed of. (P.K.M., J.) (K.K.S., J.)
1.The Debts Recovery Appellate Tribunal,
Debts Recovery Appellate Tribunal,
Debts Recovery Tribunal-I,
Order made in
C.R.P.NPD.No.518 of 2006 and
C.R.P.PD.No.1842 of 2005 and
W.P.No.536 of 2006