IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 03.12.2010 CORAM THE HONOURABLE MR.JUSTICE ELIPE DHARMA RAO AND THE HONOURABLE MR.JUSTICE M.VENUGOPAL W.P.No.10652 OF 2009 AND M.P.Nos.2 and 3 of 2009 M/s.Machine Tools & Accessories (P) Ltd., Rep. By its Director Balaji, No.105/19, Golden Flats, Mogappair Road, Mogapair West, Chennai-50. ....Petitioner Vs 1.The Debts Recovery Appellate Tribunal, Rep. By its Chairman, Chennai. 2.The Debts Recovery Tribunal-III, Rep. By its Presiding Officer, Chennai. 3.The Recovery Officer, The Debts Recovery Tribunal-III, Chennai. 4.The Recovery Officer, The Debts Recovery Tribunal-I, Chennai. 5.State Bank of India, Rep. By Branch Manager, Ambattur Industrial Estate Branch, Chennai 600 058. 6.M/s.Saravana Foundations Ltd., No.15 Giri Road, T Nagar, Chennai 600 017. ....Respondents https://hcservices.ecourts.gov.in/hcservices/ Prayer:Writ Petition filed under Article 226 of the Constitution of India praying for issuance of a writ of Certiorari to call for the records of the Respondents relating to the order dated 03.01.2007 of the Fourth Respondent D.R.C.No.175 of 2004 in O.A.No.152 of 2003 on the file of the Debts Recovery Tribunal I, the order dated 16.06.2008 of the second Respondent in Appeal No.38 of 2007, the order dated 23.04.2009 of the First Respondent in M.A.No.76 of 2009 and to quash the same and consequently direct the Respondents 1 to 4 to set aside the sale in favour of the sixth Respondent of the Petitioner's property described in the Schedule to the Writ petition and to direct the sixth Respondent to put the petitioner in possession of the petitioner's property described in the Schedule to the writ petition. For Petitioner : Mr.S.Parthasarathy Senior Counsel for M/s.Sai Bharath & Ilan For Respondents :Mr.Om Prakash for M/s.Ramalingam Associates for R5 Mr.John Acquinas for R6 O R D E R M.VENUGOPAL,J. The Petitioner has filed the Writ of Certiorari in calling for the records from the Respondents pertaining to the order dated 03.01.2007 of the Fourth Respondent (The Recovery Officer, The Debts Recovery Tribunal-I, Chennai) in D.R.C.No.175 of 2004 in O.A.No.152 of 2003, the order dated 16.06.2008 of the second Respondent (The Debts Recovery Tribunal-III, Chennai) in Appeal No.38 of 2007, the order dated 23.04.2009 of the First Respondent (The Debts Recovery Appellate Tribunal, Chennai) in M.A.No.76 of 2009 and to quash the same and consequently to direct the Respondents 1 to 4 to set aside the sale in favour of the sixth Respondent of the Petitioner's property described in the Schedule to the Writ petition and also to direct the sixth Respondent to put the petitioner in possession of the petitioner's property. 2.The case of the Petitioner is that it has availed financial facilities from the Fifth Respondent/Bank and the said borrowings have been secured by the Petitioner's immovable property situate in Ambattur Industrial Estate wherein the Petitioner's unit has been located. 3.Due to default committed by one major customer in taking delivery of the machines manufactured by the Petitioner, the Petitioner has fallen into financial difficulty and the Fifth Respondent/Bank projected Original Application O.A.No.152 of 2003 before the Debts Recovery Tribunal, Chennai wherein Exparte Final Order has been passed on 31.08.2004 in regard to sum of Rs.1,29,37,540.11p along with simple https://hcservices.ecourts.gov.in/hcservices/ interest at 11% p.a. from the date of filing of the Original Application and resultantly, D.R.C.No.175 of 2004 has been issued. 4.According to the Petitioner, there has been no proper service of summons on the Petitioner in O.A.No.152 of 2003 and that the Fifth Respondent/Bank has obtained an Exparte Decree and sought to enforce the same through the Fourth Respondent (Recovery Officer, Debt Recovery Tribunal I, Chennai). The Petitioner's land and factory measuring an extent of 16.52 grounds at 10/9, Third Main Road, Ambattur, Chennai has been brought to the auction by the Fourth Respondent and that the auction has been taken place on 23.03.2006 and that no proper auction has been held and further, no publicity and advertisement has been issued regarding the intended auction. 5.Added further, the Sixth Respondent has been the successful auction bidder for bid amount of Rs.4,10,00,000/- which is grossly lower than the market value of the property and as per the Rules of auction, the sixth Respondent has been required to pay 25% of sale amount immediately and the balance 75% within 15 days. 6.Admittedly, the Fourth Respondent has refused to default information in regard to the payment details made by the Sixth Respondent inspite of repeated demands by the Petitioner as per his Letter dated 28.08.2006 and 29.08.2006 under the provisions of the Right to Information Act and the Fourth Respondent has been issuing orders against the Petitioner in furtherance of an alleged sale in favour of the sixth Respondent. 7.The Petitioner filed W.P.No.40034 of 2006 praying for certiorarified mandamus to quash the order dated 31.08.2006 of the Fourth Respondent (Recovery Officer, Debts Recovery Tribunal No.1, Chennai) by which he has directed the Appellant to deliver the vacant possession and to direct him to furnish particulars pertaining to the alleged sale to the Petitioner as per Letter dated 28.08.2006. This Court passed an order in the aforesaid Writ Petition on 20.12.2006 by observing that the Petitioner has remedy by way of preferring an Appeal against the Fourth Respondent before the Debts Recovery Tribunal and further, this Court directed the Fourth Respondent to furnish the particulars of payment made by the bidder to the Petitioner within four weeks. 8.The Fourth Respondent (The Recovery Officer, Debts Recovery Tribunal I, Chennai) has not furnished the particulars in regard to the payments made by the sixth Respondent but issued a letter dated 02.01.2007 mentioning that the sixth Respondent made the entire sale consideration without informing the dates on which the payments have been made. Also, by an order dated 03.01.2007, the Petitioner has been directed to hand over the possession of the property on or before 17.01.2007. On 06.01.2007, the Petitioner has issued a Letter to the https://hcservices.ecourts.gov.in/hcservices/ Fourth Respondent specifically asking for the details as to when the 25% of the sale paid by the sixth Respondent and as to when the balance 75% sale amount has been paid. 9.The plea of the petitioner is that the sale itself is not according to law and that the details of payments made by the sixth Respondent have been withheld from the Petitioner deliberately since the sixth Respondent has not made the payments within the time prescribed by law and hence, the sale itself is null and void. The petitioner has come to know that the balance payment has been made by the sixth Respondent beyond the stipulated time of 15 days, only from the submissions made by the Respondents before this Court in the aforesaid Writ Petition and that the sale itself is not in accordance with law, etc., 10.After the establishment of Debts Recovery Tribunal No.III, when the Fourth and Third Respondents to whom the proceedings have been transferred, proceeded with the proceedings against the Petitioner in regard to delivery of the possession of the property and that the Petitioner filed Appeal No.38 of 2007 before the Second Respondent as against the order of the Fourth Respondent directing delivery of possession. The Second Respondent has been pleased to pass an order of stay dated 04.05.2007 directing the Fourth Respondent to furnish a Report as to the payments made by the Sixth Respondent. 11.Accordingly, the Fourth Respondent furnished a Report in and by which it is mentioned that the balance sum of Rs.3,11,16,010/- has been paid by the Sixth Respondent only on 23.06.2006 i.e., for a period of three months from the sale date. The balance payment has not been made within 15 days period as mentioned in Rule 57(2) of Schedule II of the Income Tax Act. Therefore, the sale itself is not valid. 12.The plea of the Petitioner is that the Fourth Respondent has no authority to receive any payment from the sixth Respondent beyond the stipulated period of 15 days. No one has been put on notice that the Fourth Respondent/Recovery Officer has any discretion to extend the time beyond 15 days. The extension of time after the conduct of auction is certainly prejudicial to the Petitioner's interest since for the the conduct of free and fair auction and to realise the best possible price for the property, an opportunity has been lost and if such a condition has been made known to the prospective bidders, there is a possibility to the property could have fetched a much higher sum. 13.The stand of the Petitioner is that no proper stamp duty has been paid in regard to the Sale Certificate issued in favour of the Sixth Respondent and hence, no further proceedings can be taken in furtherance of such invalid Sale Certificate. Therefore, the Appeal A.S.No.38 of 2007 should have been allowed by the Second Respondent, but the same has been dismissed on 16.06.2008 based on erroneous https://hcservices.ecourts.gov.in/hcservices/ grounds and on a wrong interpretation that the provisions of Second Schedule to the Income Tax Act have been made applicable only 'as far as possible' to the recovery proceedings as per the provisions of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 and also, as if the Recovery Officer has the discretion to extend the time even without any such specific power being conferred upon him. That apart, it has been held wrongly that the sale has not been challenged by the Petitioner by filing Application to set aside the sale as per Second Schedule to the Income Tax Act. 14.Feeling aggrieved against the order of the Second Respondent, the Petitioner preferred M.A.No.l76 of 2008 before the First Respondent and the same has been dismissed by order dated 23.04.2009. Now, the First Respondent has passed orders directing delivery of possession of the property by the Advocate Commissioner appointed for that purpose, to the Sixth Respondent and pending Appeal, the valuable machinery of the Petitioner have been removed hastily from the property of the Petitioner and dumped in undisclosed location by the Advocate Commissioner without any protection from the sun and rain. The machinery has not been the subject matter of the sale. The Second Respondent has issued far-reaching directions in favour of the sixth Respondent by exceeding his jurisdiction while dismissing the Appeal. 15.According to the Learned counsel for the Petitioner, the details of payment have not been given to the Petitioner by the Fourth Respondent and only as per the directions of this Court and only by the Report dated 08.05.2007, filed by the Debts Recovery Tribunal, the said details have been furnished by the Fourth Respondent and inasmuch as the Petitioner has been kept in dark, it could not be found fault with in regard to the non filing of an application for setting aside the sale as per Rule 61 of Schedule II of the Income Tax Act. 16.It is the further contention on the side of the Petitioner that 1 and 2 Respondents have wrongly held that the Appeals are not maintainable notwithstanding the fact that the sale is null and void totally since the Petitioner has not filed an Application under Rule 61 and also, the further observation that the Petitioner has not raised any objection, in regard to the alleged sale therefore, is estopped from questioning the sale, is not a correct one. 17.The Learned counsel for the Petitioner urges before this Court that the Judgments of the First Respondent and this Court in regard to the maintainability of Appeal without recourse to Rules 60 & 61 of the ITCP (Income Tax Certificate Proceedings) in cases wherein the sale itself is void having completely overlooked by Respondents 1 and 2 while dismissing the Appeal. 18.As regards the observation that the Appeal is barred by res https://hcservices.ecourts.gov.in/hcservices/ judicata, it is to be pointed out that the Petitioner has not furnished with the particulars at all and on 08.05.2007 only, the Petitioner has come to know of the delay by virtue of the Report filed by the Fourth Respondent and as such, the Appeals cannot be dismissed as barred by the principles of res judicata. 19.The Learned counsel for the Petitioner strenuously contends that the alleged sale is an illegal one and no proper auction has been conducted and a very valuable property has been sold for a lower price and even assuming that the Recovery Officer is vested with discretion for extension of time for payment of the balance amount, the same is to be exercised judiciously and for the reasons recorded in writing and such a power cannot be exercised even in the absence of any such request from the bidder, the borrower must put on notice and an opportunity must be given to him as to why the prayer ought not to be granted and in short, without following any such procedure, the Recovery Officer cannot extend the time and as such, the orders passed by the Respondents 1 and 2 are unsustainable. In pursuance of the order dated 23.04.2009 of the First Respondent, the Third Respondent has passed an order on 09.06.2009 stating that the possession has been handed over to the sixth Respondent on 28.05.2009 even without any notice to the Petitioner inasmuch as the Learned counsel for the Petitioner prays for allowing the Writ Petition in furtherance of substantial cause of justice. 20.The Learned counsel for the Fifth Respondent/Bank contends that the Petitioner cannot ask for a consequential relief of directing the Respondents to set aside the sale of the property in favour of the sixth Respondent because such a power is unknown to law and indeed, the property has been sold on 23.03.2006 and also that the Petitioner has not questioned the auction sale dated 23.03.2006 and as such, he cannot seek for the said relief as a consequential one on this amount. 21.Continuing further, it is the submission of the Learned counsel for the Fifth Respondent that the Bank has filed O.A.152/2003 on the file of the Debts Recovery Tribunal-1, Chennai against the Petitioner for a recovery of an amount of Rs.1,29,37,540.11p in regard to the default committed by the Petitioner as to the facilities availed by it. As a matter of fact, the Petitioner has not appeared before the Court and the Debts Recovery Tribunal-I has passed an Exparte final order dated 31.08.2004. 22.According to the Learned counsel for the Fifth Respondent, the Petitioner has not taken any steps to set aside the Exparte final Order and to contest the matter and that the petitioner has brought the secured asset for a public auction sale through the Fourth Respondent/Recovery Officer, (Debts Recovery Officer I, Chennai) on 23.03.2006 and that the Managing Director has been personally present during the auction proceedings and that the Sixth Respondent has been https://hcservices.ecourts.gov.in/hcservices/ declared as a higher bidder and the Sale Certificate has been issued in its name on 30.06.2006. Thereafter, the Fourth Respondent/Recovery Officer, (Debts Recovery Officer I, Chennai) has passed an order dated 18.07.2006 under Rule 39 of the Income Tax (Certificate Proceedings) Rules 1962 read with Section 29 of the Debts Recovery Tribunal Act informing about the sale of property to the sixth Respondent and directing the Petitioner to vacate the Petitioner within seven days. 23.Expatiating his admissions, the Learned counsel for the Fifth Respondent contends that the Petitioner by means of its Letter dated 28.08.2006 has accepted the auction sale and also on 29.08.2006, it has sought further time to remove all the machinery and to hand over the possession of the property and from the said sale, it is clear that the Petitioner has not challenged the auction sale but only seeking time to hand over possession of the property and by virtue of an order dated 18.07.2006, vide an order dated 31.08.2006, the Fourth Respondent has given a further time to the Petitioner to vacate the property and as against this, the Petitioner filed W.P.No.40034 of s006 to quash the order dated 31.08.2006 of the Fourth Respondent and also seeking a Reply to its letter dated 28.08.2006 and the said writ petition stands dismissed by this Court observing that without questioning the earlier order dated 18.07.2006, the Petitioner cannot challenge the subsequent order dated 31.08.2006, 24.The plea of the Fifth Respondent/Bank is that the Petitioner has not questioned the auction sale of the property and thereby admitting the sale of the property and as such, it cannot seek for a direction much less consequential direction to set aside the sale of the property in favour of the sixth Respondent and in the order dated 03.08.2007 of the Fourth Respondent granting viz., one final opportunity to the Petitioner to hand over the vacant possession of the property to the Fifth Respondent on or before dated 17.01.2007 failing which it has been ordered that the entire property along with machinery and movables will be handed over to the Sixth Respondent at his risk and cost. To the said order, the Petitioner sent a reply dated 06.01.2007 to the Fourth Respondent asking for particulars about the sale proceeds but he has not mentioned about the sale of the property to the sixth Respondent. 25.Proceeding further, it is the contention of the Learned counsel for the Fifth Respondent/Bank that the Petitioner filed A.S.38 of 2007 on the file of the Second Respondent seeking to set aside the order of the Fourth Respondent dated 03.01.2007 and obtained an interim order and even in this Appeal, the Petitioner has not questioned the auction of the property and the Fourth Respondent has filed a detailed Report in the aforesaid Appeal with reference to the entire facts of case and on receipt of the Report filed by the Fifth Respondent, the second Respondent has dismissed A.S.No.38 of 2007 on 16.06.2008 as not maintainable holding that the Petitioner has filed the said Appeal https://hcservices.ecourts.gov.in/hcservices/ without following the procedures enjoined in Rule 61 of the Income Tax (Certificate Proceedings) Rules and that apart, the Second Respondent has issued directions to the Fourth Respondent to take expeditious steps for getting delivery of the possession of the property to the sixth Respondent by employing police force if necessary, without any further loss of time and that the Petitioner has preferred further Appeal in M.A.76 of 2009 before the First Respondent and the First Respondent by order dated 23.04.2009 has dismissed the Appeal thereby confirming the order of the Second Respondent. 26.The contention of the Learned counsel for the Fifth Respondent/Petitioner is that the Third Respondent has passed an order confirming the handing over of the property to the Sixth Respondent and also, allowing the prayer of the petitioner for release of portion of sale proceeds towards the outstanding dues and that the Petitioner has requested only for extension of time to hand over the property and also seeking for the details of payments made by the sixth Respondent and as to the amount that has been lying with the Fourth Respondent as a surplus one and all action of the Petitioner goes to show that it admitted the auction of the sale to the Sixth Respondent and now by means of consequential relief, the Petitioner cannot seek a direction to set aside the sale of the property in favour of the Auction Purchaser. 27.The Learned counsel for the Fifth Respondent/Bank submits that the petitioner without challenging the auction sale dated 23.03.2006 as per law within the time framed, after a lapse of more than 3 years from the sale date, it is challenging the same in this writ petition, which is not legally a valid one. 28.The core contention advanced on behalf of the Fifth Respondent/Bank is that the subsequent proceedings included the auction sale of the property in favour of the sixth Respondent have been done properly by following the Rules. 29.The Learned counsel for the Fifth Respondent/Bank submits that only after waiting for years together, the vacant possession has been taken and handed over to the Sixth Respondent and all the Respondents have acted only within the Rules and regulations and that the sale cannot be construed as null and void after more than three years and without challenging the same in the manner known to law and in short, the Petition is a misconceived one. Also, the Petitioner has acquiesced the auction sale of the property and therefore, now is estopped from raising the plea of the validity of the sale. 30.The Learned counsel for the Sixth Respondent submits that the Sixth Respondent is a bonafide Auction Purchaser in the public auction https://hcservices.ecourts.gov.in/hcservices/ conducted by the Recovery Officer, Debts Recovery Tribunal I, Chennai pursuant to a Recovery Certificate issued by the Hon'ble Presiding Officer and further, the impugned order in the writ petition is the order of the Fourth Respondent/Recovery Officer, Debts Recovery Tribunal 1, Chennai and that the Petitioner has been represented by the Managing Director S.Kannan, has been granted one final opportunity to hand over the land and building to the Manager of the Fifth Respondent/Bank on or before 17.01.2007 failing which the possession of land and building along with the machinery and other movables are to be handed over to the Auction Purchaser at the risk and cost of the Petitioner/Company and since the property has been sold in auction to the Sixth Respondent, who is the successful bidder in the Auction on 23.03.2006 and after removing the movables by due process of law, the possession has been handed over to the Sixth Respondent and as such, the relief against the said order dated 03.01.2007 does not survive. 31.It is the contention of the Learned counsel for the Sixth Respondent that the Petitioner in W.P.No.40034 of 2006 has challenged the order dated 31.08.2006 passed by the Recovery Officer for handing over possession of the property mentioned in the Schedule of the writ petition and this Court has dismissed the said writ petition on 20.12.2006 and as such, the Petitioner cannot challenge a consequential order dated 03.01.2007 passed by the Fourth Respondent/Recovery Officer, Debts Recovery Tribunal I, Chennai. 32.According to the Learned counsel for the Sixth Respondent, by the original order dated 18.07.2006 passed by the Fourth Respondent/Debts Recovery Tribunal, the Petitioner has been directed to hand over the possession of the writ schedule property and further directed by the order dated 01.08.2006 and subsequent orders have been passed by the Recovery Officer and the Petitioner without challenging the original order initial orders relating to handing over of the possession of the property, it cannot challenge the consequential order dated 03.01.2007 passed by the Fourth Respondent and in fact, the Petitioner is making an endeavour to circumvent or nullify the previous order of the Fourth Respondent in regard to the handing over of the possession which cannot be permitted in law. 33.The plea of the sixth Respondent is that the Petitioner is attempting to set aside the sale and confirmation of sale in favour of the Sixth Respondent even without challenging the same before the Second Respondent (Debts Recovery Tribunal III) and indeed, the prayer in Appeal 38 of 2007 is only to set aside the sale dated 03.01.2007 passed by the Recovery Officer and not the auction sale and confirmation sale in favour of the sixth Respondent. 34.The principal contention of the Learned counsel for the Sixth Respondent is that what the Petitioner cannot achieve directly he cannot achieve the same indirectly. https://hcservices.ecourts.gov.in/hcservices/ 35.The Learned counsel for the Sixth Respondent submits that Rule 60 and 61 II Schedule to the Income Tax Act is a condition precedent for filing any application to set aside the sale and an application to set aside the sale is to be filed within 30 days from the date of sale and on deposit of the amount as required under the Rules and only to get over the aforesaid rules, the Petitioner has opted to challenge the order of Recovery Officer in handing over possession of the property, knowing fully well that the auction is in pursuance of a Recovery Certificate by means of a final order in O.A.152 of 2003 for recovery of the Bank dues. 36.It is the contention of the Learned counsel for the Sixth Respondent that a wide