K. Kutaguptan v. The Canara Bank/ T.S.Vijayan/ Sandhya Asokan/ The Recovery Officer, Ernakulam
[Citation -2017-LL-1206-14]

Citation 2017-LL-1206-14
Appellant Name K. Kutaguptan
Respondent Name The Canara Bank/ T.S.Vijayan/ Sandhya Asokan/ The Recovery Officer, Ernakulam
Court HIGH COURT OF KERALA AT ERNAKULAM
Relevant Act Income-tax
Date of Order 06/12/2017
Judgment View Judgment
Keyword Tags period of limitation • immovable property • loan transaction
Bot Summary: As per Rule 68B of the Second Schedule to the Income Tax Act, 1961, which has been made applicable to proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 by Section 29 thereof, the sale has to be conducted within a period of 3 years. 68B. No sale of immovable property shall be made under this Part after the expiry of three years from the end of the financial year in which the order giving rise to a demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has become conclusive under the provisions of section 245-I or, as the case may be, final in terms of the provisions of Chapter XX: Provided that where the immovable property is required to be re-sold due to the amount of highest bid being less than the reserve price or under the circumstances mentioned in rule 57 or rule 58 or where the sale is set aside under rule 61, the aforesaid period of limitation for the sale of the immovable property shall stand extended by one year. Applying the above principles to the case at hand Section 29 of the RDDB Act incorporates the provisions of the Rules found in the Second Schedule to the Income-tax Act for purposes of realisation of the dues by the Recovery Officer under the RDDB Act. The W.A.60/2010 17 expressions as far as possible and with necessary modifications appearing in Section 29 have been used to take care of situations where certain provisions under the Income-tax Rules may have no application on account of the scheme under the RDDB Act being different from that of the Income- tax Act or the Rules framed thereunder. The provisions of the Rules, it is manifest, from a careful reading of Section 29 are attracted only in so far as the same deal with recovery of debts under the Act with the modification that the 'amount of debt' referred to in the Rules is deemed to be one under the RDDB Act. Proviso to Section 29 further makes it clear that any reference to the assessee under the provisions of the Income-tax Act and the Rules shall be construed as a reference to the defendant under the RDDB Act. For instance Rules 86 and 87 W.A.60/2010 18 under the Income-tax Act do not have any application to the provisions of the RDDB Act, while Rules 57 and 58 of the said Rules in the Second Schedule deal with the process of recovery of the amount due and present no difficulty in enforcing them for recoveries under the RDDB Act.


IN HIGH COURT OF KERALA AT ERNAKULAM PRESENT: HONOURABLE MR.JUSTICE K.SURENDRA MOHAN & HONOURABLE MRS. JUSTICE MARY JOSEPH WEDNESDAY, 6TH DAY OF DECEMBER 2017/15TH AGRAHAYANA, 1939 WA.No. 60 of 2010 IN WP(C).1867/2008 AGAINST JUDGMENT IN WP(C) 1867/2008 of HIGH COURT OF KERALA DATED 23-11-2009 APPELLANT(S)/PETITIONER: K.KUTAGUPTAN, AGED 61 YEARS, S/O.APPUGUPTAN, KUNIYANGITTIL HOUSE, CHETHALUR, MANNARKKAD, PALAKKAD DISTRICT. BY ADVS.SRI.B.JAYASANKAR SRI.C.S.ULLAS SRI.P.CHANDRASEKHAR RESPONDENT(S) RESPONDENTS: 1. CANARA BANK, REP. BY ITS MANAGER, SULTANPET BRANCH, PALAKKAD DISTRICT. 2. SRI.T.S.VIJAYAN, S/O.SRI. T.S.ASOKAN, R/O.85, CHANDRA NAGAR,, PALAKKAD. 3. SMT.SANDHYA ASOKAN, W/O.T.S.ASOKAN, CHANDRANAGAR, PALAKKAD DISTRICT. 4. RECOVERY OFFICER, D.R.T., ERNAKULAM. R2 BY ADV. SRI.P.S.APPU R1 BY ADV. SRI.E.K.NANDAKUMAR R2 BY ADV. SRI.C.A.ANOOP R2 BY ADV. SMT.A.B.MOLY R2 BY ADV. SRI.JIBU P THOMAS R1 BY ADV. SRI.P.GOPINATH MENON R2 & R3 BY ADV. SRI.K.JAYAKUMAR (SR.) R2 & R3 BY ADV. SRI.P.B.KRISHNAN R2 & R3 BY ADV. SMT.GEETHA P.MENON R2 & R3 BY ADV. SRI.N.AJITH R2 & R3 BY ADV. SRI.P.B.SUBRAMANYAN R2 BY ADV. SRI.T.C.SURESH MENON R4 BY ADV. SRI.N.NAGARESH, ASSISTANT SOLICITOR GENERAL THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 06-12-2017, COURT ON SAME DAY DELIVERED FOLLOWING: C.R. K. SURENDRA MOHAN & MARY JOSEPH, JJ. ----------------- W.A. No. 60 of 2010 ----------------- Dated this 6th day of December, 2017 JUDGMENT Surendra Mohan, J. appellant is writ petitioner in W.P.(C) No. 1867 of 2008. He challenges judgment of learned Single Judge dated 23.11.2009 dismissing writ petition. He had filed writ petition seeking declaration that Ext.P1 sale proceedings were void in view of Rule 68B of Second Schedule to Income Tax Act, 1961 ('IT Act' for short) and consequential order setting aside sale of his property and allowing him to pay entire purchase money within period of one month. writ petition was filed in following circumstances: appellant is absolute owner of extent of 6.08 acres of land comprised in Sy. No. 360/4 of W.A.60/2010 2 Thachanattukara-II Village in Mannarkkad Taluk of Palakkad District. son-in-law of appellant had availed loan from 1st respondent Bank. immovable property of appellant mentioned above was furnished as security for loan transaction, creating mortgage in respect of same. His son-in-law committed default in repayment of loan amount. 1st respondent thereupon preferred O.A. No. 202 of 2001 before Debts Recovery Tribunal, Ernakulam ('DRT' for short). appellant was 2nd defendant in said proceedings. O.A. was allowed and Tribunal issued Recovery Certificate No. 1463 authorising Recovery Officer to recover amount due from defendants therein. appellant is 2nd certificate debtor before Recovery Officer, Debts Recovery Tribunal, Ernakulam in D.R.C. 1463. property of appellant was A schedule property in said proceedings. property was sold by 4th respondent Recovery Officer on 21.11.2007 for amount of W.A.60/2010 3 Rs.18,10,000/-. Respondents 2 and 3 are purchasers of property. 2. According to appellant, O.A. was allowed on 27.2.2004. Recovery Certificate was issued on 6.5.2004. sale of property was on 21.11.2007. Therefore, sale was conducted after lapse of 3 years and 7 months from end of financial year in which order giving rise to demand for recovery was passed. As per Rule 68B of Second Schedule to Income Tax Act, 1961, which has been made applicable to proceedings under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ('Debt Recovery Act' for short) by Section 29 thereof, sale has to be conducted within period of 3 years. In view of above, it was contended that sale was vitiated and liable to be set aside. 3. writ petition was contested by respondents. It was contended on behalf of Bank that W.A.60/2010 4 provisions of Second Schedule to IT Act would apply to proceedings before Debts Recovery Tribunal only to extent permissible in terms of Section 29 of Debts Recovery Act. Therefore, interpretation sought to be placed on provisions thereof by appellant was unsustainable. 4. learned Single Judge considered respective contentions, found that provisions of Rule 68B of Second and Third Schedules to IT Act would apply only as far as possible with necessary modifications. It was noticed as added reason for negativing his claim that, absolutely no amount was paid by appellant towards debt due to Bank. learned Single Judge found that there was no infirmity in sale warranting interference therewith and dismissed writ petition. This appeal is against said judgment. W.A.60/2010 5 5. According to Adv. P. Chandrasekhar, who appears for appellant, Rule 68B of Second and Third Schedules to IT Act has been made applicable to proceedings under Debt Recovery Act by Section 29 thereof. Consequently, provisions of Income Tax (Certificate Proceedings Rules), 1962 (hereinafter referred to as 'IT Rules' for short) also became applicable. detailed procedure for conduct of sale of immovable property has been stipulated by said Rules. Therefore, as per Rule 15, there has to be attachment of property, to be followed by proclamation and sale, after fixing reserve price. Attachment and sale have been stipulated by Rules in Second and Third Schedules of IT Act from Rule 48 onwards. In present case, it is contended that, none of procedures contemplated have been complied with. Therefore, sale is void and liable to be set aside. W.A.60/2010 6 6. Apart from above, sale is vitiated, having been conducted after expiry of time limit stipulated by Rule 68B of Second and Third Schedules to IT Act. According to learned counsel, O.A. was allowed on 27.2.2004. Limitation would start to run from said date. Therefore, it is contended that sale ought to have been conducted before 27.2.2007. But, sale was conducted only on 27.11.2011 long after expiry of period stipulated by provision. In view of above, it is contended that sale is void and liable to be set aside. learned counsel has further contention that property that was sold was much more valuable than amount for which it was purchased by respondents 2 and 3. property is more than 6 acres in extent. It was not necessary for such large extent of property to have been sold, to satisfy certificate debt. It was therefore incumbent on 4th respondent to have sold only portion of property. W.A.60/2010 7 counsel also disputes valuation of property. On above grounds, he seeks interference with judgment of learned Single Judge. 7. Senior Advocate Sri.K. Jayakumar appears for respondents 2 and 3. learned Senior Counsel points out that period stipulated by Rule 68B of Second and Third Schedules to IT Act is not to be computed from date on which order was passed by DRT. limitation would commence to run only from end of financial year in which order is passed. Going by stipulations in provision, order became final only on 31.3.2005. three year period would end only on 31.3.2008. Since sale was conducted on 21.11.2007, it is contended that sale was perfectly within period stipulated by statutory provision. Therefore, there are no grounds to interfere with same, it is contended. W.A.60/2010 8 8. With respect to infirmities pointed out in procedure, it is contended that, all procedures had been complied with and that sale conducted was proper. learned Senior Counsel therefore seeks dismissal of appeal. 9. Heard. Before considering main contention that has been put forward by counsel for appellant, it is necessary to take note of few other circumstances leading up to filing of writ petition from which this appeal arises. As already noticed above, O.A. was allowed by DRT on 27.2.2004. Thereafter, various proceedings were instituted by appellant as well as his son-in-law against said order of DRT. I.A. No. 1177 of 2004 was filed by son-in-law to set aside order that was passed ex-parte. However, said application was dismissed by DRT on 4.10.2004. said order was made subject matter of challenge before this Court in W.P.(C) No. 188 of W.A.60/2010 9 2005. contention there was that notice in O.A. had been served only on appellant herein and not on son-in-law. plea was rejected. W.A. No. 1854 of 2005 filed against said judgment was dismissed on 26.9.2005, for default. M.J.C. No. 257 of 2005 was filed for restoring appeal. However, same was dismissed on 31.10.2005. 10. Thereafter, appellant filed W.P.(C) No. 8110 of 2006 before this Court alleging that he had no notice of proceedings in O.A. filed by Bank. This Court directed DRT to consider and pass orders on petition filed by appellant before said forum. Meanwhile, son-in-law of appellant approached Debts Recovery Appellate Tribunal ('DRAT' for short) by filing appeal. auction proceedings were stayed on condition that amount of Rs.3 Lakhs was paid on 21.3.2006, further amount of Rs.2 Lakhs before 31.3.2006 and amount of Rs.15 Lakhs within 3 months from 28.4.2006. However, no deposit was made as W.A.60/2010 10 contemplated by interim order. Thereafter, on 3.4.2006 on finding that conditions had not been complied with, DRAT directed deposit of amount of Rs.50,000/-, failing which appeal would stand rejected. Since said order was not complied with, appeal was dismissed. said order of DRAT was challenged by son-in-law of appellant before this Court in W.P.(C) No. 14251 of 2006. This Court admitted appeal and granted interim order adjourning sale on condition that amount of Rs.5 Lakhs was deposited on or before 7.6.2006. said condition was also not complied with. writ petition was thereafter dismissed on 4.7.2006. However, it was directed by this Court that sale if any conducted shall not be confirmed for period of 45 days and further directed petitioner to approach Bank for settlement of entire dues. said opportunity was also not utilized. W.A.60/2010 11 11. appellant's son-in-law thereafter filed W.P. (C) No. 37986 of 2007 seeking direction to consider and dispose of application filed under Rule 61 of Second and Third Schedules to IT Act without insisting for deposit of amount sought to be recovered. However, said writ petition was dismissed by judgment dated 23.11.2009. What appears from above proceedings is that though appellant and his son-in-law had been challenging proceedings for recovery of amount due from them, by instituting various proceedings, they have not made any payment towards dues, despite being granted number of opportunities to do so. We are told that even to this date, they have not made any payment towards amount due from them. 12. main contention put forward before us is that sale is vitiated for reason of not having been conducted within time stipulated by law. For purpose W.A.60/2010 12 of considering above contention, it is necessary to examine statutory provision. Rule 68B of Second and Third Schedules to IT Act is extracted hereunder for convenience of reference. Time limit for sale of attached immovable property. 68B. (1) No sale of immovable property shall be made under this Part after expiry of three years from end of financial year in which order giving rise to demand of any tax, interest, fine, penalty or any other sum, for recovery of which immovable property has been attached, has become conclusive under provisions of section 245-I or, as case may be, final in terms of provisions of Chapter XX: Provided that where immovable property is required to be re-sold due to amount of highest bid being less than reserve price or under circumstances mentioned in rule 57 or rule 58 or where sale is set aside under rule 61, aforesaid period of limitation for sale of immovable property shall stand extended by one year. W.A.60/2010 13 (2) In computing period of limitation under sub-rule (1), period- (i) during which levy of aforesaid tax, interest, fine, penalty or any other sum is stayed by order or injunction of any court; or (ii) during which proceedings of attachment or sale of immovable property are stayed by order or injunction of any court; or (iii) commencing from date of presentation of any appeal against order passed by Tax Recovery Officer under this Schedule and ending on day appeal is decided, shall be excluded: Provided that where immediately after exclusion of aforesaid period, period of limitation for sale of immovable property is less than 180 days, such remaining period shall be extended to 180 days and aforesaid period of limitation shall be deemed to be extended accordingly. (3) Where any immovable property has been attached under this Part before 1st day of June, 1992, and order giving rise to demand of any tax, interest, fine, penalty or any other sum, for recovery of which immovable property has been attached, has also become W.A.60/2010 14 conclusive or final before said date, that date shall be deemed to date on which said order has become conclusive or, as case may be, final. (4) Where sale of immovable property is not made in accordance with provisions of sub-rule (1), attachment order in relation to said property shall be deemed to have been vacated on expiry of time of limitation specified under this rule. above provision mandates that, no sale of immovable property shall be made under this part; i) after expiry of three years, ii) from end of financial year in which order giving rise to demand of any tax, interest, fine, penalty or other sum, for recovery of which immovable property has been attached, iii) has become conclusive under provisions of Section 245-I or, as case may be, final in terms of provisions of Chapter XX. It is clear from above provision that, period of 3 years stipulated therein is to commence from end of financial year in which order becomes conclusive or final. W.A.60/2010 15 In present case, though O.A. was allowed by DRT on 27.2.2004, we notice that, order had not become final on said date. This is for reason that, appellant was entitled to file appeal against said order under Section 20 of DRT Act. period stipulated for filing appeal is 45 days from date on which copy of order is received by him. Therefore, order could become final only after expiry of period prescribed for filing appeal. said period expired only on 13.4.2004. Since financial year in which order has become final, namely, 13.4.2004, has expired only on 31.3.2005, three year period stipulated by Rule 68B above expired only on 31.3.2008. Admittedly, sale was conducted on 27.11.2007. Therefore, sale was conducted within time stipulated by Section 68B of Second and Third Schedules to IT Act. It is necessary to further notice that, auction proceedings had remained stayed as per orders of W.A.60/2010 16 DRAT as well as this Honourable Court, for varying periods. said periods are also necessary to be excluded going by terms of Rule 68B. Even without doing that, it has to be held that sale was conducted within time stipulated by statutory provision. It is held so. 13. other question that arises for consideration is whether in view of section 29 of DRT Act, all provisions of IT Rules would become applicable to proceedings before DRT. above aspect has been considered by Apex Court in Paramsivan C.N. v. Sunrise Plaza Tr.Partner ((2013) 9 SCC 460). After considering scope of Section 29, Apex Court has held in paragraph 21 of said decision as follows: 21. Applying above principles to case at hand Section 29 of RDDB Act incorporates provisions of Rules found in Second Schedule to Income-tax Act for purposes of realisation of dues by Recovery Officer under RDDB Act. W.A.60/2010 17 expressions "as far as possible" and "with necessary modifications" appearing in Section 29 have been used to take care of situations where certain provisions under Income-tax Rules may have no application on account of scheme under RDDB Act being different from that of Income- tax Act or Rules framed thereunder. provisions of Rules, it is manifest, from careful reading of Section 29 are attracted only in so far as same deal with recovery of debts under Act with modification that 'amount of debt' referred to in Rules is deemed to be one under RDDB Act. That modification was intended to make position explicit and to avoid any confusion in application of Income-tax Rules to recovery of debts under RDDB Act, which confusion could arise from literal application of Rules to recoveries under said Act. Proviso to Section 29 further makes it clear that any reference "to assessee" under provisions of Income-tax Act and Rules shall be construed as reference to defendant under RDDB Act. It is noteworthy that Income-tax Rules make provisions that do not strictly deal with recovery of debts under Act. Such of rules cannot possibly apply to recovery of debts under RDDB Act. For instance Rules 86 and 87 W.A.60/2010 18 under Income-tax Act do not have any application to provisions of RDDB Act, while Rules 57 and 58 of said Rules in Second Schedule deal with process of recovery of amount due and present no difficulty in enforcing them for recoveries under RDDB Act. Suffice it to say that use of words "as far as possible" in Section 29 of RDDB Act simply indicate that provisions of Income-tax Rules are applicable except such of them as do not have any role to play in matter of recovery of debts recoverable under RDDB Act. argument that use of words "as far as possible" in Section 29 is meant to give discretion to Recovery Officer to apply said Rules or not to apply same in specific fact situations has not impressed us and is accordingly rejected. It has been further reiterated in paragraph 26 as follows: 26. It is, therefore, reasonable to hold that phrase "as far as possible" used in Section 29 of RDDB Act can at best mean that Income-tax Rules may not apply where it is not at all possible to apply them having regard to scheme and context of legislation. W.A.60/2010 19 In view of above binding dictum of Apex Court on point, it has to be held that, to extent indicated therein, provisions of IT Act and Rules are applicable. 14. Though elaborate contentions have been advanced before us pointing out various alleged procedural lapses in leading up to auction that was conducted, we do not find any material or evidence to support said contentions. We notice that property was already mortgaged to Bank. Therefore, there was no necessity for attachment thereof before sale, as contended. Though it is contended that there was no proclamation, fixation of reserve price etc., as contemplated by IT Rules, there is no material on record to support any of said contentions. Therefore, said contentions have to fail. Since, we have already found on facts that sale conducted was within time stipulated by statutory provision, we do not find any grounds to interfere with judgment appealed against or to W.A.60/2010 20 grant any of reliefs sought for, except to clarify that legal position as indicated by Apex Court in Paramsivan C.N. v. Sunrise Plaza Tr.Partner (supra) shall apply. For foregoing reasons, appeal fails and is accordingly dismissed. Sd/- K. SURENDRA MOHAN JUDGE Sd/- MARY JOSEPH JUDGE sb K. Kutaguptan v. Canara Bank/ T.S.Vijayan/ Sandhya Asokan/ Recovery Officer, Ernakulam
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