M/S BHARAT DAIRY AND OTHERS V. ORIENTAL BANK OF COMMERCE AND OTHERS

WRIC/11866/2008

AI Insights

The case revolves around the challenge by M/S Bharat Dairy and others against the auction of their properties by the Oriental Bank of Commerce due to default in loan repayments. The petitioners contested the valuation and the auction process at various judicial levels, including the Debts Recovery Tribunal (DRT) and the Debts Recovery Appellate Tribunal (DRAT), before reaching the High Court. The primary legal contention was the alleged undervaluation of the properties and the procedural compliance with the Income Tax Act, 1961, specifically concerning the deposit requirements to contest the auction sale. The High Court's decision emphasized the non-compliance with procedural requirements and the insufficiency of evidence to prove the properties were sold at a price below their market value.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 726686 (HC-ALLAHABAD)
• Appeal Type: Others
• Pronouncement Date: 03-07-2019
• Assessment Year: misc
• Other Referred Cases: Lal Chand v. VIIIth ADJ and Anr., Nani Gopal v. T. Prasad Singh, Bhanu Pratap Singh and Anr. v. Board of Revenue, Chandan Singh v. State of U.P., Vimal Kumar Sharma v. D.M. / Collector, Gautam Budh Nagar, Pravesh Kumar Sachdeva v. State of U.P. & Anr., Gajraj Jain v. State of Bihar and Anr., Desh Bandhu Gupta v. N.L. Anand & Rajendra Singh, SS Daya Nanda v. K. S. Nagesh Rao, Jai Gopal Kansal & Anr. v. Indian Bank Anr., Prestige Light Ltd. v. State Bank of India
• Laws Referred To: Recovery of Debt due to Banks and Financial Institutions Act, 1993, Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: TARUN VARMA; B P SINGH; F A ANSARI; P S BAGHEL; VIVEK K SINGH; VIVEK KUMAR
• Assessee Lawyers: ANIL DHAKA; ANIL ADITYA; H R MISHRA
• Keywords: Auction of property; Debt Recovery; Ex-parte Judgment; Non compliance; Valuation dispute
• Section: 25; 19; 30; 29

Judgement Text

"1 Reserved On:- 22.05.2019 Delivered On:- 03.07.2019 Case :- WRIT C No.- 11866 of 2008 Petitioner :- M/S Bharat Dairy And Others Respondent :- Oriental Bank Of Commerce And Others Counsel for Petitioner :- Anil Kumar Dhaka, Anil Kumar Aditya, H.R.Mishra Counsel for Respondent :- Tarun Varma, B.P.Singh, F.A.Ansari, P.S.Baghel, SC, Vivek K.Singh, Vivek Kumar Hon'ble Siddharth,J. 1. Heard Sri H.R. Mishra, learned Senior Advocate, assisted by Sri Anil Kumar Aditya and Sri Anil Kumar Dhaka, learned Counsels for the petitioners, Sri Tarun Verma, learned Counsels for the respondent-bank and Sri B.P. Singh, learned Senior Advocate, assisted by Sri Vivek Kumar Singh, learned Counsel for the respondent nos. 4 to 6. 2. The petitioners have approached this Court challenging the judgment and order dated 04.01.2008 passed by Debts Recovery Appellate Tribunal, Allahabad in Appeal No. R-768 of 2007 whereby it has refused to set aside the order dated 27.11.2006 passed by D.R.T., Lucknow dismissing the Appeal No. 8 of 2005 filed by the petitioners and confirming the order dated 18.10.2005 passed by the Recovery Officer in DRC No. 34 of 2004 rejecting the objection of the petitioners against auction of their property by Recovery Officer. 3. The petitioner no. 1 is a proprietorship firm of petitioner no. 2, Indrajeet Singh, who has died during the pendency of this petition and has been substituted by his legal heirs and representatives. Petitioner no. 3 is 2 the father of petitioner no. 2 who has also died during the pendency of this writ petition and has been substituted by this legal heirs and representatives. 4. The respondent no. 1 in this writ petition, Oriental Bank of Commerce, filed an Original Application before the Debt Recovery Tribunal, Lucknow (hereinafter referred to as DRT), under Section 19 of the Recovery of Debt due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as “Act of 1993”), which was registered as Original Application No. 110 of 2002 for recovery of sum of rupees 16,55,294/-. From the petitioner the Original Application was decided by the DRT vide ex-parte judgment and order dated 15.10.2004. Petitioners filed an application before DRT praying for setting aside the aforesaid ex- parte decree but the same was rejected. The respondent no. 1 initiated recovery proceedings against the petitioners by way of RC No. 38 of 2004 for executing the order of DRT dated 15.10.2004. 5. In pursuance of recovery certificate issued by the Recovery Officer the following properties of the petitioners were auctioned on 08.08.2005 :- (1) Half area of Milk factory, including land situated on a plot No. 130, area 0.195 hectares, situated in village Gangadhadi, Pargana Khatauli, Tehsil Jansath, District- Muzaffarnagar, U.P. along with plant, machinery and super structure. Total area auctioned being 975 square meter. (2) Agricultural land of Khata No. 103, Khet no. 311 area 1.2526 hectare situated in village Achheja, Pargana and Tehsil Dadri, District- Gautam 3 Budh Nagar. (3) 1/3 share in agricultural land of Khata no. 628, Khet no. 196 admeasuring 0.3850 hectares situated in Village Achheja, Pargana and Tehsil – Dadri, District- Gautam Budh Nagar. 6. The respondent nos. 2 to 6 are the auction purchaser of the property of the petitioners and sale certificates dated 18.10.2005 were issued in their favour by the Recovery Officer regarding the auction sale of the immovable properties of petitioners. Petitioners filed their objection before Recovery Officer stating that the properties have been auctioned at a very low price in collusion with the Advocate Commissioner and the auction purchaser. Along with their objection petitioners filed certified copies of the circle rates fixed by the Collector, Muzaffarnagar and Dadri. They also filed a copy of sale deed dated 01.12.2005 of the land situated adjacent to the land of the petitioners at Muzaffarnagar to show that the valuation of the land of milk factory of petitioners cannot be less than Rs. 3,000/- per square meter. The Recovery Officer by his order dated 18.10.2005 rejected the objection of petitioners and they preferred an Appeal No. 08 of 2005 before the DRT, Lucknow against the same on the ground that the cost of the building and land is much higher. They brought on record, certified copy of circle rate as well as the report of a valuer of the building. The DRT, Lucknow by its order dated 27.11.2006 dismissed the appeal of the petitioner on the ground that the provisions of rules 60 to 62 of Second Schedule to the Income Tax Act, 1961 are mandatory and have not been complied by the petitioner. On merits also it 4 did not found any force in their appeal. 7. Aggrieved by the order of the DRT, Lucknow, petitioners approached the Debts Recovery Appellate Tribunal, Allahabad (hereinafter referred to as DRAT). It found that petitioners did not complied the provisions of Rules 60-61 of the Second Schedule of the Income Tax Act, 1961 and Income Tax (Certificate Proceedings) Rules, 1962 by depositing the requisite amount within the period of prescribed by law and they have not been able to disclose any exact price of the property in question either in their objections before the Recovery Officer or DRT or even before, DRAT. The exampler sale deed and the circle rate brought on record were not found to be of any help to the petitioners. It has recorded the finding that the circle rates fixed by the Collector can never be taken as the market value of the landed property. Its relevance is only for registration of sale deed and for recovery of stamp duty by the revenue authorities. Regarding the copy of the sale deed of the land in the vicinity of the land of the petitioners, auctioned by the bank, the DRAT has recorded the finding that there is no independent evidence to prove the correct valuation of the property. The report of the valuer was also discarded by the DRAT on the ground that it is not reliable. It has further been found that in the third property, situated in Khata No. 628, plot no. 196 the petitioners have only 1/3 share. DRAT has found that the demand drafts produced before it regarding the decretal amount cannot be accepted at this stage and as per the law amount should have been deposited at the appropriate stage i.e., before Recovery Officer as per the 5 Rules. 8. Counter affidavit have been filed by respondent no. 1, Oriental Bank of Commerce, denying the averments made by the petitioners. It has been stated therein that the petitioners have neither complied the mandatory provisions of Second Schedule of Income Tax Act, 1961 nor filed any independent evidence to prove their case before Recovery Officer, DRT and DRAT hence no interference is called for in the present writ petition. Along with supplementary affidavit the respondent no. 1 has brought on record the valuation report of the plots of petitioners situated in village Achheja, Pargana and Tehsil Dadri, District- Gautam Budh Nagar which proves that the market value of the property (land + building) was found to be Rs. 3,29,000/- on 25.05.2004. 9. Another counter affidavit has been filed on behalf of respondent nos. 2 and 3 stating that they have purchased ½ area of plot no. 130, area 0.195 hectares situated in village Gangadhadi, Pargana Khatauli, Tehsil Jansath, District- Muzaffarnagar, U.P. being an area of 975 square meter and their names have been duly recorded in the revenue record. It has further been stated that petitioners were not inclined to prosecute the case before DRT and hence ex-parte judgment and decree was passed. The auction was conducted by Recovery Officer in accordance with law and there was no illegality therein. The circle rate of commercial and residential plots were brought on record by the petitioners when their land was agricultural surrounded by such lands. The private valuer report 6 submitted by the petitioner before DRAT found the rate of the land as Rs. 435 per square meter which comes to about Rs. 4,00,000/-. It has further been stated that in the writ petition it has not been brought on record by the petitioners. Finally, it has been stated that the respondent nos. 2 and 3 have purchased the plot measuring 0.143 hectares for an amount of Rs. 1,50,000/- on 20.12.2007 situated opposite to the plot of the petitioners and therefore the rate claimed by the petitioners is incorrect. 10. Respondent nos. 4 to 6 have also filed their counter affidavits stating that they had purchased 1/3 shares of petitioners in plot no. 196, area 0.3850 hectares and plot no. 311, area 1.2530 hectare and after purchase their names are duly recorded. 11. Learned counsel for the petitioners has submitted that the auction of property of petitioners was at a very meager amount and an exampler sale deed of the area was filed before the Recovery Officer along with their objections. It has been submitted that the dues of the respondent no. 1, bank, could have been satisfied by sale of only part of the property and reliance has been made upon in this regard on Apex Court's judgment in the case of Lal Chand v. VIIIth ADJ and Anr., AIR 1997 SC 216. It has been further submitted that court can take suo-moto judicial notice of the illegality committed by auctioning authority and reliance accordingly has been placed upon the judgment of the Apex Court in the case of Nani Gopal v. T. Prasad Singh, AIR 1995 SC 1917. It is settled principle of law that aution must be fair and after determination of the value of the 7 property it should be done and property cannot be auctioned at throw away price. Reliance on the judgment in the case of Bhanu Pratap Singh and Anr. v. Board of Revenue 2013 (10) ADJ 10 LB, Chandan Singh v. State of U.P. 2013 (119) RD 296, Vimal Kumar Sharma v. D.M. / Collector, Gautam Budh Nagar, 2008 (5) ADJ 719 DB and Pravesh Kumar Sachdeva v. State of U.P. & Anr. 2006 (4) ADJ 34 has been made in support of submission. 12. It has also been submitted that under Section 25 of the Act of 1993 the procedure for recovery of debts by attachment and sale of movable and immovable properties has been laid down but in the present case no procedure was followed. Section 29 of the aforesaid Act provides for application of certain provisions of Income Tax Act but relevant provision of Section 30 provides for filing appeal against order of recovery officer. In the present case, the ex-parte judgment and decree was passed for recovery and auction sale was conducted as such the appeal of the petitioner under Section 30 of the Act of 1993 was maintainable. The deposit of auction money was not required and the appellate court / DRT should have heard the appeal of the petitioners on merits which was filed under Section 30 of the Act of 1993. The order of DRT rejecting the appeal of the petitioner on the ground of non deposit is not in accordance with law as held by the Apex Court in the case of Gajraj Jain v. State of Bihar and Anr., 2004 STPL (LE) 33562 SC = AIR 2004 SC 3392, Desh Bandhu Gupta v. N.L. Anand & Rajendra Singh, 1993 STPL, 17672 = 1994 (1) SCC 139, SS Daya Nanda v. K. S. Nagesh Rao, 1997 STPL 8 (LE) 23285 SC = 1997 (4) SCC 459, Jai Gopal Kansal & Anr. v. Indian Bank Anr., 2019 (4) ADJ 197 and Prestige Light Ltd. v. State Bank of India, laws (Alld) 2011-7-42. It has finally been submitted that against the confirmation and conduct of sale by the Recovery Officer the petitioners had right to file recall / restoration application as well as an appeal under Section 30 of Act of 1993 and there was no requirement of deposit. In the present case, the petitioners filed their objections. The order confirming the sale has merged in the order rejecting objection of petitioner therefore in appeal filed under Section 30 Act of 1993, DRT was required to consider legality of the order rejecting their objection without insistence on the requirement of pre-deposit of any amount. The petitioners have already deposit Rs. 33,00,000/- as sale consideration and bank draft of Rs. 16,00,000/- is lying before DRAT. 13. Learned counsel for the bank has only submitted that the objections of the petitioners before the recovery officer was without compliance of the mandatory provision of Rule 60 of the IInd schedule of Income Tax Act, 1961 and therefore it was not maintainable and it is settled law that inadequacy of price cannot be a ground to challenge the auction. 14. Learned counsel for the respondent nos. 4, 5 and 6 has submitted that the petitioners initially did not complied with the statutory provisions of the Income Tax Act and subsequently raised the issue of inadequacy of the sale consideration. The appeal of the petitioner before DRT was not maintainable and the DRAT has considered all the grounds raised by the 9 petitioners. This court cannot determine the factual dispute regarding inadequacy of the price of the property sold in auction proceedings. The petitioners were required to be put to strict proof for the same which they utterly failed to do and therefore the writ petition preferred by them deserves to be dismissed. 15. Before proceeding to consider the rival submissions made by the counsels for the parties, it is necessary to reproduce Rule 60 & 61 of the Schedule II to the Income Tax Act 1961 which provide for the procedure for recovery of tax. 60. (1) Where immovable property has been sold in execution of a certificate, the defaulter, or any person whose interests are affected by the sale, may, at any time within thirty days from the date of the sale, apply to the Tax Recovery Officer to set aside the sale, on his depositing— ( a) [***] the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered, with interest thereon at the rate of [fifteen per cent per annum], calculated from the date of the proclamation of sale to the date when the deposit is made; and (b ) for payment to the purchaser, as penalty, a sum equal to five per cent of the purchase money, but not less than one rupee. (2) Where a person makes an application under rule 61 for setting aside the sale of his immovable property, he shall not, unless he withdraws that application, be entitled to make or prosecute an application under this rule. Application to set aside sale of immovable property on ground of non-service of notice or irregularity. 61. Where immovable property has been sold in execution of a 10 certificate, [such Income-tax Officer as may be authorised by the Chief Commissioner or Commissioner in this behalf], the defaulter, or any person whose interests are affected by the sale, may, at any time within thirty days from the date of the sale, apply to the Tax Recovery Officer to set aside the sale of the immovable property on the ground that notice was not served on the defaulter to pay the arrears as required by this Schedule or on the ground of a material irregularity in publishing or conducting the sale: Provided that— (a ) no sale shall be set aside on any such ground unless the Tax Recovery Officer is satisfied that the applicant has sustained substantial injury by reason of the non-service or irregularity; and (b ) an application made by a defaulter under this rule shall be disallowed unless the applicant deposits the amount recoverable from him in the execution of the certificate. Setting aside sale where defaulter has no saleable interest. 16. A perusal of the aforesaid Rules shows that where immovable properties of defendants have been sold in execution proceedings of decree of DRT, the defendants can apply for setting aside the sale of immovable property within a period of 30 days before the recovery officer as per rule 29 of the Act of 1993 by depositing the amount specified in the sale proclamation with interest thereon at the rate of 15 per cent per annum calculated from the date of the proclamation of sale to the date when the deposit is made along with penalty of 5 per cent of purchase money payable to the auction purchaser. In the present case, the application of the petitioners was under Rule 60 and 61 of the II Schedule 11 to the Income-tax Act praying for setting aside of sale. 17. The record of the DRC No. 38 of 2004 is before this Court which was summoned by this Court by the order dated 09.03.2018. 18. This court has gone through the record of the recovery case before the Recovery Officer and it is found that the Recovery Officer has proceeded with the recovery in accordance with the procedure. The provisions regarding attachment and sale of property given in Second Schedule of the Income Tax Act, 1961 have been duly followed. Two lots of properties were made. In the first lot 1/3 share of the petitioners in agricultural land of Khata No. 628, Khet No. 196/0.3850 hectares, Village- Achheja, Pargana and Tehsil Dadri, District- Gautam Budh Nagar and whole agricultural land of Khata No. 103, Khet No. 311/ 1.256 hectares situated in Village – Achheja, Pargana and Tehsil- Dadri, District- Gautam Budh Nagar were put up for auction against reserved price of Rs. 30,00,000/-. In lot no. 2 half area of plot no. 130/0.195 hectares, Village – Gangadhadi Pargana Khatauli, Tehsil Jansath, District- Muzaffarnagar, U.P. along with constructions, total area 975 square meters was put up for auction against reserved price of Rs. 3,00,000/-. The bank has submitted the valuation reports of both the lots before the Recovery Officer. As per the report of the valuer submitted by the bank the valuation of lot no. 1 was found by the Government Valuer as Rs. 33,14,160/-. The valuation of the second lot was found to be Rs. 3,29,000/- only by the valuer of the bank. No current valuation report to 12 the contrary was filed by the petitioners. They brought on record the circle rate of village Achheja which was Rs. 22,00,000/- per hectare regarding agricultural land and the report of the valuer of Bank had taken the rate as Rs. 24,00,000/- per hectares while calculating the value of the property of the first lot therefore the grievance of the petitioners that the property was sold at a lower price cannot be justified. It is settled law that the circle rates fixed by the Collector under Rule 4 of the U.P. Stamp (Valuation of Property) Rules, 1997 is not the market value of the property and market value has to be determined. The valuer has determined the price above the circle rate by Rs. 2,00,000/- more per hectare. 19. Regarding the property of lot no. 2 the petitioners brought on record the valuation report issued by Ashiyana Associates dated 03.07.2001 annexed with the objection. It shows that the rate of the land was found to be Rs. 435 per square meter and the cost of the land as Rs. 4,24,125/- however the valuer has found the value of the structure to be about 8.5 lakh and has valued the entire property at Rs 12,74,520.70/-. 20. This report is not of the government approved valuer and was brought on record in the year 2005 along with the objection of the petitioners, when the report is dated 3rd July, 2001, when the property was in good condition. The valuation report submitted by the bank is dated 10.06.2004 and it records that structure is unmaintained, appearance of the building is very poor and the value of the building has been found 13 to be only Rs. 1,63,100/- along with valuation of land at the rate of Rs. 170 per square meter coming to Rs. 1,65,750/-, total valuation of lot 2 was found to be Rs. 3,28,850/- rounded off to Rs. 3,29,000/-. 21. This court does not finds any material on record which may shock the conscience of the court to compel it to hold that substantial injustice has been caused to the petitioners on account of the low fixation of price by the Recovery Officer on the basis of the documents produced by the bank. The basic issue of non-deposit of the statutory amount as per Rule 60 of the IInd schedule to the Income Tax Act, 1961 is of importance. The counsel for the petitioners has placed before this court number of judgments of this court and the Apex Court but in none of the cases any court has held that the requirements of Rule 60 aforesaid can be waived. All the judgments are distinguishable on law and facts. The provision is mandatory in nature and therefore was required to be complied by the petitioners in case they were seriously challenging the auction of their property. The deposit of demand draft of the decretal amount before the DRAT was not in accordance with Rules and no benefit can be granted to the petitioners on this score. Therefore, on both the grounds of challenge i.e., the inadequacy of price and the non-compliance of Rule 60 of the IInd Schedule to the Income Tax Act, the petitioners have not been able to satisfy this court. From the record it also does not appears that if only one or two of the three properties of the petitioners had been sold it would have satisfied the decree of DRT. Reliance of the judgment of of the Apex Court in the case of Lal Chand (Supra) and Nani Gopal (Supra) is 14 not relevant for this case. None of the properties had such value which would have been sufficient to clear the dues of the Bank. After sale of all the three properties only an amount of Rs. 1,43,203/- was in excess and Recovery Officer sent letter dated 07.04.2006 to the petitioners to receive the excess amount. There was no exorbitant excess amount left which may lead to conclusion that all the properties were not required to be auctioned. Finally, petitioners have only challenged the judgment and order of DRAT in this petition and not the judgment and order of DRT and the order of Recovery Officer which were also passed against them. 22. Consequently, this writ fails and is accordingly dismissed. The parties shall bear their own costs. 23. The office is directed to remit back the records of cases before Recovery Officer, DRT and DRAT forthwith along with a copy of this order. Amount deposited by the petitioners before DRAT regarding these proceedings shall be refunded to them within six weeks from the date of production of certified copy of this order. Order date: 03.07.2019 Rohit "