IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 21.06.2011 CORAM THE HONOURABLE MR.JUSTICE K.CHANDRU W.P.NOs.8686 and 15582 of 2010 and M.P.Nos.1,1,2 and 2 of 2010 Union Bank of India, rep by its Chief Manager, Kochi Main Branch Mattanchery, Kochi-682 002 .. Petitioner in W.P.No.8686 of 2010 Mahavir Plantations Pvt. Ltd., rep by its Director, Prospect P.O., Naduvattam, Nilgiris-643 224. .. Petitioner in W.P.No.15582 of 2010 Vs. 1.The Recovery Officer, Employees Provident Fund Organisation, Regional Office, Dr.Balasundaram Road, Coimbatore-641 018. 2.M/s.Mahaveer Plantations Pvt. Ltd., rep by its Director, 24/1551, Indira Gandhi Road, Kochi-682 003, Kerala. 3.R.Mathaian (R-3 impleaded as per order dt.30.7.2010 in M.P.No.3 of 2010 in WP.8686/10) .. Respondents in W.P.No.8686 of 2010 1.Employees' Provident Fund Organization, rep by its Regional Provident Fund Commissioner, Regional Office, Bhavishya Nidhi Bhawan, P.B.No.3875, Dr.Balasundaram Road, Coimbatore-641 018. 2.The Recovery Officer, Employees Provident Fund Organisation, Regional Office, Bhavishya Nidhi Bhawan, P.B.No.3875, Dr.Balasundaram Road, Coimbatore-641 018. https://hcservices.ecourts.gov.in/hcservices/ 3.Archana Industries, represented by R.Madhaian P.B.No.4403, 707,Avinashi Road, Coimbatore 641 018. .. Respondents in W.P.No.15582 of 2010 W.P.No.8686 of 2010 is preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorari to call for the records pertaining to the sale notice dated 19.2.2010 in TN/RO-CBE/694A/Recovery/2010 issued by the Recovery Officer, Employees Provident Fund Organisation, the first respondent and to quash the same. W.P.No.15582 of 2010 is preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorarified mandamus to call for the records relating to the order of the 2nd respondent herein in proceedings Ref.No.TN/RO- CBE/694-A/Recovery/2010, dated 25.5.2010, quash the same and consequently set aside the sale of 144 acres in Survey Nos.391/1, 391/2, 389/3, 390, 388, 335, 374/1, 374/2, 374/3, 381/2, 381/3, and 372 of tea plantation belonging to the petitioner in favour of the 3rd respondent and further direct the respondents to refund to the 3rd respondent the sale consideration of Rs.4.41 Crores paid by the 3r respondent. For Petitioners : Mr.A.V.Arun in W.P.No.8686 of 2010 Mrs.Nalini Chidambaram, SC for Mr.R.Parthiban in W.P.No.15582 of 2010 For Respondents : Mr.V.Vibhishanan for R-1 in W.P.No.8686 of 2010 and RR1 and 2 in W.P.No.15582 of 2010 Mrs.Nalini Chidambaram, SC for Mr.R.Parthiban for R-2 in W.P.No.8686 of 2010 Mr.K.M.Vijayan, SC for Mr.A.S.Balaji, for R-3 in both writ petitions - - - - COMMON ORDER Both writ petitions came to be posted on being specially ordered by the Hon'ble Chief Justice vide his order dated 19.4.2011. 2.It is a peculiar case where one writ petitioner is a nationalised Bank which gave sticky advance to a plantation owner and the second writ petitioner is that plantation management which is a chronic defaulter of all dues towards various labour legislations. They have come to this court challenging the action https://hcservices.ecourts.gov.in/hcservices/ initiated by the PF Department in having recovered the amounts due to them by invoking the execution power conferred on them by virtue of Section 8 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952. 3.In the first writ petition in W.P.No.8686 of 2010, the petitioner is the Union Bank of India challenges the sale notice dated 19.2.2010 issued by the recovery officer, EPF Organisation and seeks to set aside the same. In that writ petition, this court on 27.4.2010 had directed telegraphic notice to be issued to the plantation management and notice was directed to be taken by the Standing Counsel for the PF Department. Pending the writ petition, no interim order was granted. Subsequently, the third respondent herein was impleaded by the petitioner by filing M.P.No.3 of 2010. It was ordered by this court on 30.7.2010. On notice from this court, on behalf of first respondent, a counter affidavit, dated 10.6.2010 was filed and on behalf of second respondent, a counter affidavit, dated 25.4.2011 was filed. The third respondent purchaser has filed a counter affidavit, dated 25.4.2011. 4.Even while that writ petition was pending, the plantation owners had filed the second writ petition in W.P.No.15582 of 2010, challenging the recovery notice dated 25.5.2010 issued by the second respondent Recovery Officer and to set aside the sale of 144 acres in various survey numbers of tea plantation belonging to the petitioner company in favour of the third respondent purchaser and to direct the refund to the third respondent the sale consideration of Rs.4.41 crores paid by the third respondent. When that writ petition came up on 20.7.2010, this court had recorded that a sum of Rs.74,32,807/- was paid by the petitioner as found in the proclamation of sale and that an interim injunction was granted restraining the third respondent purchaser from altering the nature of properties and dealing with the properties by way of sale, lease, etc. A counter affidavit, dated Nil (September, 2010) was filed by respondents 1 and 2. The purchaser has also filed an application in M.P.No.3 of 2010 to vacate the interim order together with supporting counter affidavit, dated 1.9.2010. The petitioner has also filed a reply affidavit, dated 13.11.2010. 5.Heard the arguments of Mr.A.V.Arun for Union Bank of India, Mrs.Nalini Chidambaram, learned Senior Counsel appearing for Mr.R.Parthiban, counsel for M/s.Mahavir Plantation Private Ltd., Mr.V.Vibhishanan, learned Standing Counsel for PF Department and Mr.K.M.Vijayan, learned Senior Counsel appearing for Mr.A.S.Balaji, learned counsel appearing for the purchaser M/s.Archana Industries. 6.The short question that arises for consideration is whether the sale of a portion of the estate of petitioner Plantation to an extent of 144 acres to satisfy the dues payable by the plantation owner towards PF claims is liable to be set aside by this Court? 7.When the PF Organisation had issued a proclamation of sale, dated 23.12.2009 bringing the landed properties of the https://hcservices.ecourts.gov.in/hcservices/ petitioner to an extent of 144 acres in various survey numbers for sale towards the claim for recovery of the amount due to the PF Department which worked out to Rs.10,33,03,049/-, a public notice was also issued in Dinamalar, dated 8.1.2010 and followed by a further notice, dated 16.2.2010. In the notice it was indicated that the reserve value of the property was Rs.4,32,00,000/- and dues payable by the plantation was Rs.10,33,03,049/-. The auction was fixed on 18.2.2010. It was at that stage, the plantation management filed a writ petition being W.P.No.3363 of 2010, challenging the proclamation of sale. This court by an order dated 19.2.2010 had dismissed the writ petition. It was stated in the said order that the earlier petitioner had filed W.P.No.767 of 2010 questioning the auction sale of estate on the ground that in respect of the earlier proceedings, they had filed a special leave petition and that the special leave petition was likely to come up at any time. Therefore, this court had passed an order on 1.2.2010 in that writ petition that the department should wait for the outcome of the decision by the Supreme Court. After the disposal of the writ petition, the plantation management cleverly withdrew the special leave petition pending before the Supreme Court. This fact came to light when the plantation management filed the subsequent writ petition challenging the auction fixed on 18.2.2010 pursuant to the proclamation of sale dated 23.12.2009. 8.The auction purchaser paid Rs.10 lakhs towards EMD amount and successfully participated in the auction. He being the highest bidder for Rs.4.41 Crores, he was declared as a successful bidder. He had also paid Rs.1,00,25,000/- towards 25 % of the bid amount on the very same day. Subsequently, as per the auction condition, on 8.3.2010, the purchaser had also paid Rs.3,30,75,000/- being the balance amount. The purchaser also paid Rs.4,41,010/- towards foundation charges. 9.When W.P.No.3363 of 2010 came up, this court took exception to the conduct of the petitioner and also held that if there are any material irregularities in the auction notice, the Act provides for sufficient safeguards. It was also observed that the petitioner cannot successfully stall the public notice. After public auction was postponed to 24.3.2010 as per the earlier terms and conditions, the plantation owner filed a writ appeal in W.A.No.324 of 2010 challenging the dismissal of the writ petition. The petitioner plantation also filed a writ petition in W.P.No.5406 of 2010 to set aside the proclamation of sale dated 23.12.2009. Both the writ appeal and the writ petition were heard by a division bench and a common order was passed on 20.4.2010. In paragraph 2 and 3, the division bench had observed as follows: "2.An interim order was passed by this court earlier and today after the matter was heard for some time, Mrs.Nalini Chidambaram states that the appellant will work out its remedy before the Recovery Officer under Schedule II of the Income Tax Act as applicable to the recovery of Provident Fund. She further states that an amount of Rs.74,32,807/- had been deposited by the appellant before the Provident Fund office. https://hcservices.ecourts.gov.in/hcservices/ 3.The appellant will apply under the relevant provisions within one week from today and the officer will decide the application within 30 days from the receipt thereof after hearing the 3rd respondent and after hearing all concerned. The protection granted by our order dated 23rd March 2010 will continue for a period of 30 days. Both the writ appeal and the writ petition stands disposed of by this order. Connected miscellaneous petitions are closed. There shall be no orders as to the costs." 10.Pursuant to the direction, the plantation owner filed a petition under Rule 61 of the Income Tax Rules, 1961 to set aside the sale of immovable properties of the plantation on the ground of material irregularities and the issuance of notice for sale and the conduct of sale. The Recovery Officer pursuant to the direction, passed the impugned order, dated 25.5.2010 and refused to set aside the sale made in favour of the purchaser, third respondent herein and it had become the subject matter in the second writ petition. 11.Mr.A.V.Arun, learned counsel for the Bank submitted that the plantation was enjoying various credit facilities with the bank and had created an equitable mortgage by depositing of title deeds in respect of 708 acres of land in Kottur village on 14.11.1975. Subsequently, the firm was converted into a company and was dealing with the bank. In the year 1991, the company had become sick. The properties of the company were mortgaged on 10.01.1990 to an extent of 1398.08 acres in Aryanad village by deposit of title deeds. Since the accounts of the plantation owner became irregular, the petitioner bank had filed a suit in O.S.No.200 of 1996 before the Sub Judge, Nedumangad for recovery of Rs.10,22,82,983.72 together with interest. The suit was subsequently transferred to the Debts Recovery Tribunal, Chennai after its formation and was renumbered as TA No.1050 of 1997. Subsequent of the formation of the Debts Recovery Tribunal, Ernakulam, the same was transferred to that court. On 1.2.2001, the Debts Recovery Tribunal had allowed the claim of the bank and had issued recovery certificate dated 13.9.2001. As against the same, the plantation management filed an appeal before the Debts Recovery Appellate Tribunal with an application to condone the delay. Since the DRAT had refused to condone the delay, a petition was filed before the High Court of Kerala in O.P.No.32788 of 2002. The division bench of the Kerala High Court had dismissed the OP on 08.10.2003. Thereafter, the plantation owner moved the Supreme Court with SLP(C)No.23695 of 2003. 12.During the pendency of these proceedings, the bank had moved the recovery officer of the DRT and brought sale of two residential flats mortgaged with the bank and recovered a sum of Rs.4.79 crores. In the meanwhile, the SLP was dismissed on 11.4.2005 by the Supreme Court. The plantation owner also filed an application before the BIFR under the provisions of Sick Industrial Companies (Special Provisions) Act, 1958. The said reference was registered by the BIFR. In view of the registration of the reference, the recovery https://hcservices.ecourts.gov.in/hcservices/ proceedings had been stayed. Subsequently, the BIFR had rejected the reference on the ground that the plantation cannot be taken as industries. Aggrieved by the same, the plantation owner filed an appeal before the appellate authority in appeal No.106 of 2007. The appellate authority by an order dated 14.1.2009 set aside the order of the BIFR and remanded the matter to the BIFR. As against the order of remand, the bank had filed a writ petition before the Kerala High Court being W.P.No.14105 of 2009. The order of the appellate authority was stayed. There was also other proceedings pending before the settlement officer and that an appeal is pending before the District Court, Udhagamandalam. This court is not concerned with the same. 13.But, in the meanwhile, the PF authorities have brought the properties for auction towards satisfying their dues. Hence it was contended that the sale notice issued by the PF Department was illegal and contrary to Rule 55 of the Second Schedule to the Income Tax Act, 1961. The particulars of auctions ale should have been notified to the Bank. In any event, when the sale had taken place on 22.02.2010, the particulars of successful bidder was not notified to the Bank. It was also contended that the bank must be involved in any sale process so as to secure fair price of the land sold. 14.Refuting the stand of the bank, it was submitted by the PF Department that Rule 15 of the Income Tax Rules was scrupulously followed and that due notice was given about the sale. It was also published in the national dailies including Economic Times. The reserve price was categorically mentioned at Rs.Rs.4,32,00,000/-. The plantation owner had attended the hearing on 09.12.2009 pursuant to the notice issued as per Rule 53 of the Second Schedule of the Income Tax Act and that the transactions of the entire affairs were transparent. 15.On behalf of the plantation owner, it was submitted that under Section 69 of the Transfer of Properties Act, the bank being the mortgagee is entitled to bring the property for sale. After sale out of sale proceeds, the dues of the PF Department can be satisfied. The Recovery Officer constituted under the Debts Recovery Tribunal Act has exclusive jurisdiction to sell the property. Since the DRT Act is the subsequent Central Act, they have primacy of jurisdiction to deal with the property. 16.However, the purchaser third respondent contended that he was an innocent purchaser. Pursuant to the public notice, he had participated in the sale and after being the highest bidder, he is entitled to have the sale confirmed in his favour. He is also entitled to take possession of properties. Because of the interim order, he could not take possession of properties and he was unable to deal with the property. He had already sunk more than Rs.4.54 crores. Hence he prayed for dismissal of the writ petitions. 17.Mrs.Nalini Chidambaram, learned Senior counsel further elaborated her submission in W.P.No.15582 of 2010. The learned Senior Counsel had stated that the sale was made pursuant to the https://hcservices.ecourts.gov.in/hcservices/ proclamation of sale, dated 23.12.2009. The recovery of the sum was only indicated as Rs.74,32,807/- as on 25.1.2010. Therefore, the sale cannot be for more amount that what was indicated therein. But the petitioner as per their own admission had paid a sum of Rs.4607114/- for a period from November, 2001 to August, 2007. These facts were not taken note of. Hence the sale had suffered material irregularities. 18.These allegations were refuted in the counter affidavit. In page 25 of the counter it was averred as follows: "...Eventhough the proclamation of sale for Rs.7432807/- along with the balance PF dues of Rs.23867943/-, arrear penal damages of Rs.3123914/- and arrear interest of Rs.235009/- which have been shown in the appropriate column of the proclamation of sale, the petitioner cannot be allowed to pick up certain recovery certificates for his advantage and isolate others, especially when the first charge created under Section 11(2) of the EPF Act, is existing always on the assets of the defaulter." 19.With reference to recovery notice, the department had referred to proclamation of sale, dated 23.12.2009 referring various recovery certificates issued therein covering the entire sale. Though the petitioner had disputed the receipt of those notices, the very same proclamation of sale also finds place in the typed set. There is no communication ever made by the management that they did not receive such notices. About the alleged payment made before sale by the employer and that there was no necessity to auction the property, in paragraph 34(VI) of the counter, it was averred as follows: "VI.....Without prejudice to the above, it is submitted that the petitioner's claims of payment of rs.393600/- in between 24.03.2008 and 23.12.2009 and further payment of Rs.549000/- between 23.12.2009 and 23.02.2010 do not tally with the details furnished by him on 23.03.2010, which is as follows: Sl.No. Amount Remitted Date of Payment Remarks 1 294710 12.01.2005 / 16.05.2005 Payment is made prior to 24.03.2008 Total (A) 294710 https://hcservices.ecourts.gov.in/hcservices/ Sl.No. Amount Remitted Date of Payment Remarks 2 3 4 5 6 7 Total(B) 51048 52199 97172 148437 44744 73857 467457 23.07.2008 11.08.2008 10.09.2008 03.10.2008 17.11.2008 07.01.2009 Payment made between 24.03.2008 and 23.12.2009. 8 9 10 11 12 Total(C) 100202 81518 110374 26779 146919 465792 18.01.2010 18.01.2010 20.01.2010 20.01.2010 17.02.2010 Payment made between 23.12.2009 and 23.02.2010 13 14 15 Total(D) 83682 56037 8109 147828 25.02.2010 25.02.2010 25.02.2010 Payment made after 23.02.2010 Grand Total 1375787 20.With regard to the contention that they had paid the entire amount, in paragraph 34(VIII)B of the counter, it was stated as follows: "....It is denied that the petitioner paid the entire amount as specified in the proclamation of sale before 30 days. The petitioner has taken a illusory umbrage in clause 19 of terms and conditions of sale. The proclamation of sale is for realisation of a arrear of Rs.34659673 (Rs.6757097/- and cost & charges of Rs.675710/-, balance arrear PF dues – Rs.23867943/-, Arrear Penal Damages – Rs.3123914/-, arrear interest – Rs.235009/-) which has been shown in the appropriate https://hcservices.ecourts.gov.in/hcservices/ places in the proclamation of sale. When the arrear payable by the petitioner was Rs.34659673/-, the petitioner cannot isolate the certificates and say that certified amount payable is Rs.6757097/- only. He cannot simply ignore the fact of other certified arrears for which 326.51 acres of land had been attached and the Division Bench of this Hon'ble Court had allowed to auction the properties by order dated 17.09.2009 especially when the wordings of clause 19 is that "before 30 days if the entire arrear is paid by the defaulter then, the sale will become automatically cancelled." In the case of the petitioner certified arrears are Rs.34659673/- as stated above, the Division Bench of this court has permitted to sell 326.51 acres of land by order dated 17.09.2009, the respondents have held up the sale in view of the sale 144 acres by including the other certified dues in the proclamation of sale. The petitioner has not deposited the entire arrear amount even now." 21.Further, with reference to defence based on Section 8E of the EPF Act, in paragraph 34(VIII)C, it was averred as follows: "...It is pertinent to point out that the law makers have not been unmindful to the defaults arising out of bona fide reasons and to accommodate such bona fide reasons only the said section has been incorporated. The said section does not confer the petitioner with a licence of making PF payments at his whims and fancies spread over an indefinite and long time span. The contributions payable by the establishment pertains to the year 1998 onwards. The establishment has been in lavish enjoyment of time from the year 1998 till the year 2009 by stalling the recovery action through protracted litigations. A willful defaulter who has been flagrantly violating the labour laws for years together and who is interested in getting the issue of non- payment of Provident fund contributions, including the amount deducted from the hard earned wages of employees, locking them up in vexatious litigations, thereby purposefully preventing the social security benefits to thousands of hapless employees reaching them and enjoy cannot take any refuge on the said section...." 22.With reference to the lack of transparency in sale, in page 45 of the counter it was stated as follows: "E... The property has been got valued by the Panel Valuer who is also an approved valuer with the Tea Board and also IT department. The valuer has considered all relevant factors, including the claim of cultivation of the organic tea and its un-maintained nature and its status in the revenue records, while opining the value for the property. As per his opinion, the property of 144 acres could have fetched Rs.4.32 crores in the market, and he had recommended the upset price for the sale to be fixed at less by 25% of the said price. However, keeping the best interest of realisation of https://hcservices.ecourts.gov.in/hcservices/ provident fund dues and the interest of the petitioner only, the Recovery Officer had fixed Rs.4.32 crores as reserve price. F)For the above reasons, it is absolutely unfair to allege that the property has been sold at a throw away price. Moreover, had the petitioner been much interested in the property and hopeful of fetching imaginary and fancy price of Rs.45 Crores, the petitioner could have well approached the Recovery Officer for a private sale of 144 acres or even a lesser portion under the ITCP rules, which he has never done." 23.With respect to the allegation that the sale price was low, in pages 46 and 47, it was stated as follows: "H)...Further it is humbly submitted that the petitioner has referred to transactions recorded in 2003. The respondents had also access to few transactions held in 2005. One of such transactions is between M/s.Kothari Industrial Corporation Limited and M/s.Adderly Estate Limited as on 30.05.2005 wherein 536.16 acres with plantations and building have been sold @ Rs.8.50 crores i.e. Rs.1.58 lakh per acre. Another transaction is between M/s.Kothari Industrial Corporation Limited and M/s.Glenworth Estate Limited dated 22.10.2005 of 1148 acres, buildings, factory etc. for Rs.22 crores i.e. Rs.1.91 lakh per acre. In the sale of 144 of acres of the petitioner (no plant and machinery), Rs.4.41 crores have been fetched i.e. Rs.3.06 lakh per acre against the guideline value of just Rs.1.70 lakh per acre. Therefore, on any count, it cannot be said that the property is either undervalued or sold in an unreasonably low price." 24.With reference to the proclamation of sale was not valid and there was violation of Rule 53 of the Second Schedule of the Income Tax Act, in page 51 of the counter, it was averred as follows: "There has been no violation of the rule 53 of Second Schedule to the IT Act, 1961. The Recovery Officer had clearly has mentioned all the mandatory requirements as per rule 53 of Second Schedule of IT Act. The sale proclamation dated 23.12.2009 clearly specifies the amount for which it has been drawn including the claims on the property for sale. It is submitted that on one hand the petitioner is alleging that the amount for which the proclamation of sale has been made as only 6757097/- whereas on the other hand he is trying the project the inclusion of claim of Rs.34659673 in the column 5 under the head "claims if any which are attached to the property and any other particulars having a bearing on its nature and value" as "not due". The above attempt clearly reveals the manipulative tactics of the petitioner. It is submitted that the above said amount includes the arrears for which the Second Bench of this Hon'ble Court has ordered to https://hcservices.ecourts.gov.in/hcservices/ proceed with the sale by the order dated 17.09.2009." It was also contended that the respondents have only sold 144 acres out of 8300 acres owned by the plantation. 25.Since in the reply affidavit once again similar contentions were raised, this court is not inclined to accept the same. 26.Mrs.Nalini Chidambaram, learned Senior Counsel also referred to a non obstane clause found under Section 34 of the Recovery of