IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 04.02.2008 CORAM: THE HONOURABLE MR.JUSTICE P.K.MISRA and THE HONOURABLE MR.JUSTICE K.K.SASIDHARAN C.R.P.NPD.No.518 of 2006 and C.R.P.PD.No.1842 of 2005 and W.P.No.536 of 2006 and C.M.P.Nos.3873/2006 & 20595/2005 & V.C.M.P.Nos.289/2006 & 296/2006 & W.P.M.P.No.619/2006 C.R.P.NPD.No.518/2006: M/s.Hanu Reddy Realty India Pvt.Ltd., rep. by its Director, Mr.C.Suresh Reddy, New No.18, Bishop Wallers Avenue East, Mylapore, Chennai-600 004. : Petitioner/ 2nd Respondent Vs. 1.Jignesh 2.R.K.Mayur 3.M/s.Global Trust Bank Mylapore Branch, No.63, Dr.Radhakrishnan Salai, Mylapore, Chennai-600 004. : Respondents/ Appellants and ISt Respondent Civil Revision Petition filed under Article 227 of the Constitution of India against the order dated 20.02.2006 passed by the Chairperson, the Debts Recovery Appellate Tribunal, Chennai in I.N.No.315 of 2005. For Petitioner : Mr.T.R.Rajagopalan, SC For Mr.T.V.Sekar For RR-1 and 2 : Mr.Sathish Parasaran For 3rd Respondent : Mr.K.V.Babu https://hcservices.ecourts.gov.in/hcservices/ C.R.P.PD.No.1842/2005: Mr.Chirla Hanumantha Reddy Rep. by his Power of Attorney Holder Mr.Chirla Suresh Reddy, (Impleaded in I.A.No.211 of 2005) : Petitioner/ Auction Purchaser Vs. 1.Ramesh Chand, Proprietor of Aarti Exports. 2.The Global Trust Bank Ltd., Now known as the Oriental Bank of Commerce, No.63, Dr.Radhakrishnan Salai, Mylapore Branch, Chennai-600 004. 3.The Vyshya Bank Ltd., Mount Road, 185, Anna Salai, Chennai-600 002. 4.C.Ravindran 5.Mrs.R.Shivasakthi 6.S.Subash Chand (RR-4 to 6 impleaded as per order of this Court dated 29.10.2007 made in C.M.P.No.9879/2006) : Respondents/ Appellant and Respondents Civil Revision Petition filed under Article 227 of the Constitution of India against the order dated 01.12.2005 passed by the Chairperson, the Debts Recovery Appellate Tribunal, Chennai in M.A.No.124 of 2005. For Petitioner : Mr.T.R.Rajagopalan, SC For Mr.T.V.Sekar For 1st Respondent : Mr.Sathish Parasaran For 2nd Respondent : Mr.K.V.Babu For 3rd Respondent : Mr.K.Sukumaran For RR-4 and 5 : Mr.K.Venkatasubramanian https://hcservices.ecourts.gov.in/hcservices/ W.P.No.536 of 2006: Rameshchand, Proprietor, Arti Exports, 142 Ranka Park Apartments, I Block, 4th Floor, Lalbagh Road, New Richmond Circle, Bangalore-560 027. : Petitioner Vs. 1.The Registrar, Debts Recovery Appellate Tribunal, Chennai. 2.The Registrar, Debts Recovery Tribunal-I, Chennai. 3.Oriental Bank of Commerce, (Formerly Globe Trust Bank Ltd.,) No.63, Dr.Radhakrishnan Salai, Mylapore, Chennai-600 004. 4.Vyshya Bank Ltd., Mount Road Branch, 185, Anna Salai, Chennai - 600 002. 5.Chirala Hanumantha Reddy, Rep. by his Power of Attorney Holder, Mr.Chirala Suresh Reddy, No.33 Poes Garden, Chennai - 600 086. 6.Hanu Reddy Reality India P. Ltd., Rep. by its Director C.Suresh Reddy, 18 Bishop Wallers Avenue (East), Mylapore,. Chennai - 600 004. 7.R.Ramesh 8.Mr.A.Anil Kumar Bokdia, S/o.Mr.J.Amar Chand Bokdia https://hcservices.ecourts.gov.in/hcservices/ 9.Mrs.Anitha Devi Bokdia, W/o.Mr.A.Anil Kumar Bokdia (RR-8 and 9 impleaded as per order of this Court dated 31.03.2006 made in W.P.M.P.No.6910/2006) : Respondents Writ Petition filed under Article 226 of the Constitution of India praying for the issue of a Writ of Certiorari to call for the records relating to the order dated 28.07.2005 in Appeal No.2/2005 on the file of the Debts Recovery Tribunal-I, Chennai and the order dated 01.12.2005 in M.A.No.124/2005 on the file of the Debts Recovery Appellate Tribunal, Chennai, quash the same. For petitioner : Mr.Sathish Parasaran For 3rd Respondent : Mr.K.V. Babu For RR-5 and 6 : Mr.T.R.Rajagopalan SC for Mr.T.V. Sekar For RR-8 and 9 : Mr.Aravind Kumar COMMON ORDER K.K.SASIDHARAN, J These civil revision petitions are directed against the order dated 01.12.2005 in M.A.No.124 of 2005, whereby the Debts Recovery Appellate Tribunal modified the order dated 28.07.2005 in Appeal No.2/2005 on the file of the Debts Recovery Tribunal-I, Chennai, with respect to the property in item No.1 in the auction notice held on 18.11.2004 (C.R.P.No.1842 of 2005) and the order dated 20.02.2006 in I.N.No.315/2005 and I.A.No.91/2006, whereby the Debts Recovery Appellate Tribunal directed to take steps to auction the property in item No.3 of the auction notice (C.R.P.No.518 of 2006). 2. W.P.No.536 of 2006 has been filed by the defaulter for issue of a Writ of Certiorari calling for the orders dated 28.07.2005 in Appeal No.2/2005 as well as the order dated 01.12.2005 in M.A.No.124 of 2005 which is the subject matter of C.R.P.No.1842 of 2005 and to quash the same. 3. For the purpose of appreciating the facts in all the three matters, the factual details as found in C.R.P.No.518 of 2006 is referred to here under: The third respondent in C.R.P.No.518 of 2006, namely M/s.Global Trust Bank, Chennai filed O.A.No.1481 of 1998 before the Debts Recovery Tribunal-I, Chennai against the respondents 1 and 2 (hereinafter referred to as defaulters) for recovery of a sum of Rs.13,17,43,056.58 with future interest at the rate of 24% per annum and the said original application was allowed as per order dated https://hcservices.ecourts.gov.in/hcservices/ 27.12.2002 and a recovery certificate for the said sum was issued by the Tribunal. In pursuance of the recovery certificate No.35/2003 issued by the Tribunal, three items of property were brought to sale and for better appreciation, the details of property offered for sale are scheduled here under: "Item No.1:- Survey Nos.43/1,43/1A,43/1B Maduravoyal Village of an extent of 1.33 acres of the land and building situated at 307, Door No.165, Poonamallee High road, Aarthi Nagar, Maduravoyal, Chennai-102. (Known as Aarthi Towers) UPSET PRICE: RS.6,00,00,000/- (Rupees six crores only) Item No.2:- All that piece and parcel of land measuring 2560 sq.ft. built up area including common wall marked as Plot No.9, at premises No.19, Door No.36, (Block No.1), Vuppatur Avenue Off, Flower road, Old No.11, Kilpauk, Chennai. UPSET PRICE: RS.49,00,000/- (Rupees forty nine lakhs only) Item No.3:- Agricultural land admeasuring 21.09 acres or thereabouts in Chingleput Registration District and Walajabad Sub Registration District in No.149, Pappanguli Village in S.Nos.1,1(P), 2/1, 2/2A, 3/2A1, 3/2A2,3/28 (Part), 3/2B, 3/2C1, 3/2B(P), 3/3A, 11/2, 11/3, 12/1b1, 21, 22/2, 24/6b, 241, 256/5A, 256/5B & 256/6. UPSET PRICE: RS.67,00,000/- (Rupees sixty seven lakhs only)" 4. The recovery certificate issued by the Debts Recovery Tribunal bearing No.35/2003 and the consequential order of attachment and proposed sale of property as published in 'Daily Thanthi' dated 16.10.2004, fixing the auction on 18.11.2004 were challenged by the defaulter before the Debts Recovery Tribunal-I, Chennai in Appeal No.2 of 2005. 5. The Recovery Officer proposed to sell all the three items of property on 18.11.2004. However, item No.2 in the auction notice alone was sold on 18.11.2004. As there were no bidders in respect of item Nos.1 and 3, the sale was postponed to a subsequent date. However, no specific date was mentioned in the said proceeding. Subsequently, as per proceedings dated 01.12.2004, item Nos.1 and 3 were brought to sale on 15.12.2004 and on the said date, item No.1 in the auction notice measuring an extent of 1.33 acres situated at Maduravoyal Village in Chennai was sold. However, item No.3 was not sold on the said date and as per the proceedings of the Recovery Officer, in order to enable the petitioner to inspect the property and to verify the documents, the sale was postponed to 17.12.2004 at 04.30 p.m. The sale proceeding was taken upon on 17.12.2004 and the sale of item No.3 was made in favour of the petitioner for a sum of Rs.67,10,000/- and the purchaser has deposited 25% of the bid amount by way of demand draft. However, the balance was not paid on account of stay granted by this Court against confirmation of sale. 6. So far as C.R.P.No.1842 of 2005 is concerned, the same relates to item No.1 of the property and the upset price was fixed at https://hcservices.ecourts.gov.in/hcservices/ Rs.6 crores and the auction, which was originally scheduled on 18.11.2004, was adjourned, without specifying any date and time and subsequently on 15.12.2004 the sale was made in favour of the petitioner for a sum of Rs.6,00,10,000/-. 7. The appeal preferred by the defaulter before the Debts Recovery Tribunal-I at Chennai was disposed of as per order dated 28.07.2005, whereby the appeal was partly allowed. As per the said order, the Debts Recovery Tribunal made certain changes in the sale proceedings in respect of item No.1, but permitted the Recovery Officer to issue the sale certificates in respect of other properties as per rules. 8. The order dated 28.07.2005 in Appeal No.2 of 2005 was challenged by the defaulter before the Debts Recovery Appellate Tribunal, Chennai in M.A.No.124 of 2005 and the petitioners in the civil revision petitions filed application to implead as party and they were also heard in the matter. 9. The Debts Recovery Appellate Tribunal, as per order dated 01.12.2005, directed to bring the item No.1 of the property for sale fixing the upset price at Rs.6,00,10,000/- after giving due publication and the petitioner was also permitted to take part in the auction. The petitioner was also permitted to withdraw the amount deposited by him earlier with accrued interest, if any, and accordingly modified the order dated 28.07.2005 on the file of the Debts Recovery Tribunal-I, Chennai. The said order is challenged in C.R.P.No.1842 of 2005 by the auction purchaser, who was impleaded as a party before the Debts Recovery Appellate Tribunal. Similarly, the Debts Recovery Appellate Tribunal, as per order dated 20.02.2006, directed to bring item No.3 of the property for sale fixing the Upset price at Rs.67,10,000/- and the petitioner was also permitted to take part in the auction. The said order is challenged in C.R.P.No.518 of 2006. The appellant in Appeal No.2 of 2005 on the file of the Debts Recovery Tribunal-I, Chennai has preferred the writ petition in W.P.No.536 of 2006 challenging the order dated 28.07.2005 in Appeal No.2 of 2005 on the file of the Debts Recovery Tribunal-I, Chennai as well as the order dated 01.12.2005 in M.A.No.124 of 2005 on the file of the Debts Recovery Appellate Tribunal, Chennai. The order of the Debts Recovery Appellate Tribunal dated 01.12.2005 is challenged on the ground that the sale in respect of item Nos.2 and 3 were not set aside in the said proceeding, while setting aside the sale in respect of item No.1 of the property. The petitioner in the Civil Revision Petition is referred to hereinafter as the petitioner and the petitioner in the writ petition is referred to as the defaulter. 10. We have heard Thiru.T.R.Rajagopalan, learned Senior Counsel appearing for the petitioners in C.R.P.Nos.1842/2005 and 518/2006 and Thiru.Sathish Parasaran, learned counsel appearing for the first respondent in C.R.P.No.1842 of 2005 and respondent Nos.1 and 2 in C.R.P.No.518 of 2006 as well as the petitioner in W.P.No.536 of 2006 and Thiru.K.V.Babu, learned counsel appearing for the bank. https://hcservices.ecourts.gov.in/hcservices/ 11. The learned Senior Counsel appearing for the petitioner in both the civil revision petitions contended that the order of the Debts Recovery Appellate Tribunal is perse erroneous and is liable to be set aside for more than one reason. According to the learned Senior Counsel, once a sale by way of auction is made by the Recovery Officer, the same could be set aside only by resorting to the proceedings as contemplated under Rules 60 and 61 of the Income Tax Recovery Rules in II Schedule by filing an application to set aside the sale within 30 days after fulfilling the pre-conditions stipulated therein. It is his contention that the Tribunal has gone beyond the pleadings and prayer made by the defaulter and interfered with the auction sale conducted by the Recovery Officer and according to him, the very application before the Debts Recovery Appellate Tribunal is not maintainable and the defaulter has got other remedies available as per law and as such, prayed for setting aside the order of the Appellate Tribunal. 12. Thiru.Sathish Parasaran, learned counsel appearing for the defaulter vehemently contended that the whole procedure adopted by the Recovery Officer is wrong and in fact fraud has been committed by the Recovery Officer in confirming the auction in favour of the petitioner, he being an international real estate broker and to facilitate the confirmation of sale in favour of the petitioner, the sale was adjourned to a subsequent date without fixing a definite date and at the instance of the petitioner, the auction was adjourned by two days again and without giving any publicity, the property was sold in favour of the petitioner. As such, according to the counsel, the Appellate Tribunal is justified in interfering with the fraudulent sale and as such, prayed for rejecting the revisions. 13. We have gone through the order of the Debts Recovery Appellate Tribunal as well as the documents filed on either side to substantiate their contentions in the respective civil revision petitions and in the writ petition. 14. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is a self-contained Code enacted for the purpose of establishment of Tribunals for expeditious adjudication. Section 19 of the Act permits application to be made by the Banks and Financial Institutions to recover any debt from any person and the order passed by the Debts Recovery Tribunal is made appealable before the Appellate Tribunal under Section 20 of the Act. Chapter V of the Act deals with mode of recovery of debt on receipt of a recovery certificate by the Recovery officer from the Tribunal. As per Section 29 of the Act, the provisions of the second and third schedule to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962, as in force from time to time with the necessary modifications, if any, is made applicable to a proceeding under Act 51 of 1993. https://hcservices.ecourts.gov.in/hcservices/ 15. The present controversy relates to the manner of conduct of auction and the procedure adopted by the defaulter to set aside the sale effected by the Recovery Officer. 16. Admittedly, the auction was scheduled to be held on 18.11.2004 in respect of the three items of property shown in the auction notice. Since there were bidders only for item No.2, the said property was sold for a sum of Rs.62 lakhs and in the auction proceedings recorded by the Recovery Officer, it is stated that there are no bidders and hence, the same is postponed to a subsequent date. However, the Recovery Officer has not fixed any specific date or time to conduct the auction, which is a mandatory requirement under Rule 15(1) of the II Schedule to the Income Tax Act, 1961. The Recovery officer has power to postpone or adjourn the sale. But while doing so, duty is cast on him to adjourn the sale to a specified date and time and to give wide publicity so as to enable the prospective purchasers to take part in the auction on the adjourned date. Though there is no entry on 18.11.2004 in the proceeding with regard to the adjourned date of auction, surprisingly the Recovery Officer has recorded a proceeding on 01.12.2004 stating that the properties will be sold in public auction at 04.30 p.m. on 15.12.2004. The Appellate Tribunal, after going through the records of the auction proceedings, found that there is another proceeding on the very same date containing the very same wordings and in the said proceeding, it is ordered that the proceedings whereby the auction is adjourned to 15.12.2004 shall be put up in the notice board of the Tribunal and the bank was directed to paste a copy of the notice on the premises of the property. However, in the other proceedings dated 01.12.2004, there is no such endorsement about the requirement of publication of the notice either in the notice board or in the subject matter of the sale. Naturally, the Tribunal observed that it is not clear as to what warranted the Recovery Officer to make two proceedings on the very same date with respect to the very same matter. On 15.12.2004 item No.1 was sold in favour of the petitioner for a sum of Rs.6,00,10,000/- which was just Rs.10,000/- over and above the upset price fixed for the sale of the said item. 17. The auction with respect to item No.1 was made on 15.12.2004 and the auction with respect to item No.3 was postponed by two days so as to enable the petitioner to verify the documents. Subsequently on 17.12.2004 the auction was confirmed in the name of the petitioner for a sum of Rs.67,10,000/- which was also just Rs.10,000/- over and above the upset price. 18. It is the contention of the learned counsel for the defaulter that the whole auction was a drama stage managed by the Recovery Officer to favour the petitioner which is substantiated by the fact that by adjourning the auction sale on 18.11.2004, there was no proceeding recorded by the Recovery Officer fixing the sale to a specified date and time. According to the learned Counsel, the factum of recording suo motu proceeding twice on 01.12.2004 shows that the Recovery Officer was creating documents to appear as if the auction https://hcservices.ecourts.gov.in/hcservices/ was adjourned to a specific date to be taken up on 15.12.2004 at 04.30 p.m and due publicity was given so as to enable the prospective purchasers to take part in the auction. It is also on record that the petitioner has paid only 25% of the bid amount in respect of item No.3 and the remaining amount was kept with them, as according to the petitioner, the confirmation of sale was stayed by this Court. 19. There is no material available on record to show that the sale was adjourned on 18.11.2004 to a specific date. The Recovery Officer is dealing with the property of defaulters and guarantors and merely because the property to be auctioned belongs to the defaulter did not cloth with any right on the Recovery Officer to sell the property in the manner suitable to him and when there is a prescribed procedure which mandates that the auction sale has to be conducted in a particular manner, the Recovery Officer is bound to conduct the same in accordance with the said procedure, failing which the whole proceedings are liable to be set aside. The observation of the Tribunal with regard to the defect in the procedure adopted by the Recovery Officer cannot be termed to be a perverse finding without any material. The Appellate Tribunal found that the petitioners alone participated in the auction on 15.12.2004 which also made the Tribunal to doubt the manner in which the auction was conducted by the Recovery Officer. Therefore, we are in agreement with the conclusion arrived at by the Appellate Tribunal that the sale made on 15.12.2004 and 17.12.2004 in respect of item Nos.1 and 3 respectively are vitiated and are liable to be set aside. 20. The other contention of the learned Senior Counsel appearing for the petitioner pertains to the maintainability of the application before the Debts Recovery Appellate Tribunal to set aside the auction sale. According to the learned Senior Counsel, the procedure prescribed under the Income Tax Rules with respect to sale has to be followed and the remedy of the aggrieved party is not to file an appeal before the Debts Recovery Appellate Tribunal. 21. The Schedule-II to the Income Tax Act which is made applicable to a proceeding under Act 51 of 1993 contains provisions to file application to set aside the sale of immovable property. Section 60(1) permits an application to be made to set aside the sale of immovable property on deposit of the amount specified in the confirmation of sale along with a sum equivalent to 5% of purchase money payable to the auction purchaser. Section 61 enables an application to be filed to set aside the sale of immovable property on ground of non-service of notice or irregularity and a person aggrieved by the sale in execution of a certificate may apply to the Tax Recovery Officer to set aside the sale on the ground that notice was not served on the defaulter to pay the arrears as required or on the ground of material irregularity in publishing and conducting the sale. There is no condition for pre-deposit for making an application under Section 61 unlike an application under Section 60 which requires payment of the amount shown in the proclamation of sale along with 5% of the purchase money payable to the auction purchaser. https://hcservices.ecourts.gov.in/hcservices/ 22. The learned counsel for the defaulter contended that there is a difference in the procedure of auction as contemplated by the Income Tax Act 1961. Sale of property which is the subject matter of the proceedings of the Debts Recovery Tribunal is made by the Tribunal itself through the Recovery Officer who is an officer appointed by the Central Government for each Tribunal under Section 7 (1). The Recovery Officer is a functionary under the Debts Recovery Tribunal and he shall function as per the direction of the Presiding Officer of the Tribunal. On the other hand, the Recovery Officer under the Income Tax Act is not functioning under the Income Tax Officer, who makes the assessment and as such, the learned counsel contended that it is not possible to file an application before the Recovery Officer inasmuch as the very sale is deemed to be made by the Tribunal itself acting through its officer functioning as Recovery Officer. 23. The Apex Court in R.N.Jadi & Brothers vs. Subhashchandra reported in 2007(9) Scale 202 observed that the procedural law is always sub-serving to the akin of justice and held thus: "9. All the rules of procedure are the handmaid of justice. The language employed by the draftsman of processual law may be liberal or stringent, but the fact remains that the object of prescribing procedure is to advance the cause of justice. In an adversarial system, no party should ordinarily be denied the opportunity of participating in the process of justice dispensation. Unless compelled by express and specific language of the Statute, the provisions of the CPC or any other procedural enactment ought not to be construed in a manner which would leave the Court helpless to meet extraordinary situations in the ends of justice. 10. The mortality of justice at the hands of law troubles a Judge's conscience and points an angry interrogation at the law reformer. 11. The processual law so dominates in certain systems as to overpower substantive rights and substantial justice. The humanist rule that procedure should be the handmaid, not the mistress, of legal justice compels consideration of vesting a residuary power in judges to act ex debito justiciae where the tragic sequel otherwise would be wholly inequitable - justice is the goal of jurisprudence- processual, as much as substantive. [See Sushil Kumar Sen v. State of Bihar (1975 (1) SCC 774]. https://hcservices.ecourts.gov.in/hcservices/ 12. No person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner for the time being by or for the Court in which the case is pending, and if, by an Act of parliament the mode of procedure is altered, he has no other right than proceed according to the altered mode. [See Blyth v.Blyth (1966 (1) AII E.R 524 (HL)]. A procedural law should not ordinarily be construed as mandatory, the procedural law is always subservient to and is in aid to justice. Any interpretation which eludes or frustrates the recipient of justice is not to be followed. [See Shreenath and Anr v. Rajesh and Others (AIR 1998 SC 1827)]. 13. Processual law is not to be a tyrant but a servant, not an obstruction but an aid to justice. Procedural prescriptions are the handmaid and not the mistress, a lubricant, not a resistant in the administration of justice." 24. The provision regarding setting aside the sale as provided under the Debts Recovery Tribunal Act is akin to that of a proceeding under Order 21 Rule 89 of the Code of Civil Procedure. 25. In Challamane Huchha Gowda v. M.R.Tirumala reported in 2004(1) SCC 453, the Apex Court held thus: "9. Execution is the enforcement by the process of the court of its orders and decrees. This is in furtherance of the inherent power of the Court to carry out its orders or decrees. Order 21 CPC deals with the elaborate procedure pertaining to the execution of orders and decrees. Sale is one of the methods employed for execution. Rule 89 of Order 21 is the only means by which a judgement-debtor can