Case: Connectwell Industries Private Limited Vs. Union of India &amp; Others

2. The case of the petitioners as disclosed from the petition is that the Union Bank of India had filed Recovery Proceeding No.90 of 2002 for execution of Recovery Certificate in Original Application No.1836 of 2000, drawn up by the Presiding Officer, Debts Recovery Tribunal No.III (DRT) Mumbai for a sum offrom the certificate debtors, M/s. Brown Pharma India Ltd. ("BPIL" for short) as per the Recovery Certificate.3. Pursuant to the direction of the Recovery Officer, the movable and immovable properties situated at plotMIDC Dombivili belonging to the Certificate Debtor BPIL was put up for public auction on 28/9/04. By their letter dated 8/12/04 the petitioners submitted their offer for the purchase of the said property at Rs.22,00,000/for immovable property and Rs.1,00,000/for movable property. The said offer was accepted by the Recovery Officer, respondent 2 herein. On 9/12/04 the said property was sold to the petitioners by a private treaty.4. A sale certificate dated 14/1/05 was issued by the DRT in favour of the petitioners. It is noted in the said certificate that no application under Rule 60, 61 or 62 of the Second Schedule of the Income Tax Act, 1961 ("the said Schedule" for convenience) had been received for setting aside the sale as on the date of issuance of the certificate by DRT. The said sale certificate has been registered with theOffice, Kalyan. By their letter dated 14/1/05, the petitioners requested the 2nd respondent, the Recovery Officer, DRT to handover possession of the said plot to them.5. It appears that on 17/6/03 the 4th respondent i.e. the Tax Recovery Officer, Range 1 Kalyan had attached the said plot under Rule 48 of the said Schedule in recovery proceedings initiated by Income Tax Department, Kalyan, against BPIL, who had created mortgage in respect of the said plot in 1998.6. The 3rd respondent i.e. MIDC by its letter dated 23/3/06 addressed to the 2nd respondent, the Recovery Officer of the DRT stated that the 4th respondent had by his letter dated 6/3/06 informed the 3rd respondent that the Income Tax Department had attached the said plot on 17/6/03.7. The petitioners addressed letter to the MIDC, respondent 3 to transfer the said plot purchased by them in the auction conducted by the Recovery Officer, DRT respondent 2, in their favour. The petitioners also addressed a letter to the 2nd respondent. The MIDC by its letter dated 19/6/2006 has called upon the petitioners to obtain no objection certificate from DRT.8. According to the petitioners, they have paid the entire sale proceeds. They are in possession of the said plot. But they have not received any positive response as regards their request for transfer of the said plot in their favour from the respondents. It is in these circumstances that the petitioners have approached this court.9. We have heard Mr. Tulzapurkar, learned counsel appearing for the petitioners, Mr. Mishra, learned counsel for respondent 1, Mrs. Deepa Chavan, learned counsel for respondent 3 and Mr. Chauhan, learned counsel for respondent 4. We have perused the affidavits filed by the 3rd4th respondents and the rejoinder filed on behalf of the petitioners.

Court's reasoning:
17. It is clear, therefore, that after notice under Rule 2 is served on the defaulter the defaulter or his representative in interest cannot deal with the property belonging to him except with the permission of the Tax Recovery Officer and under(2) of Rule 16, if any attachment has been made under this schedule any private transfer or delivery of the property or of any interest therein contrary to such attachment is void against all claims enforceable under the attachment.18. In this case notice under Rule 2 was issued to BPIL on 11/2/2003. The said immovable property was attached under Rule 48 of the said schedule on 17/6/03 videForm No.ITCP 16 annexed to the affidavit of the Tax Recovery Officer states that the defaulter BPIL had failed to pay a sum of Rs.20,46,813/payable under certificate dated 11/2/2003 and hence the said property is attached. The sale in favour of the petitioners has taken place on 9/12/2004 and the sale certificate is issued on 14/1/05. Therefore, as per Rule 2 read with Rule 16 of the said Schedule the said sale is void.19. We are not impressed by Mr. Tulzapurkars contention that because the sale was at the instance of the 2nd respondent under the orders of the DRT, it will not be covered by Rule 16. The defaulter could not have sold the property after receipt of notice under Rule 2 and after attachment of the property by the Income Tax Department. Therefore, in the circumstances of the case even respondent 2 could not have ordered the sale of the said property. It is not possible for us to set aside the attachment in this manner. Attachment levied by theDepartment cannot cease to operate because of subsequent sale. Dues of the Department must be paid. Attachment will continue to operate so long as the dues are not paid and the fact that property has changed hands will, in our opinion, make no difference.20. In our opinion, the reliance placed by Mr. Tulzapurkar on the judgment of this court in P. Kumars case (supra) is misplaced. In that case the petitioners therein had entered into an agreement of sale dated 18/8/1984 with one company. Possession was handed over to the petitioners. The petitioners and the company jointly filed Form No.37EE before the Competent Authority under Section 269 AB(2) of the Income Tax Act. In March 1987, the Income Tax Department attempted to attach the said property. Petitioners wrote a letter to the Income Tax Department stating that they had purchased the premises without notice of any proceedings against the said company in respect of assessment yearThe company had filed return for the assessment yearon 27/2/84, though the date of completion of the assessment was not indicated.21. On facts before it a learned Single Judge of this court held that the petitioner and the said company had jointly filed Form No.37EE in the office of the Competent Authority. The assessment of the said company was not completed until March, 1986 and hence no demand could, thus be pending against the said company at the relevant time. This court observed that the petitioners therein had filed the requisite forms and, therefore, it was for the department to raise objection against the purchase of the premises from the said company. This court observed that affidavit in reply was also not filed by the department. In the circumstances, this court quashed the notice of attachment.22. In this case, the Income Tax Department has filed affidavit. The petitioner has not chosen to make BPIL party. It is not even averred in the petition that no demand was pending against BPIL. Mrs. Majas, the Tax Recovery Officer of the Income Tax Department has stated in her affidavit that the Income Tax Department had initiated recovery proceeding against BPIL for realization of dues of more than Rs.20 lacs. She has annexed to her affidavit a table giving all particulars about the assessment years, demand to be recovered, date of service of notice and dates of payment. We are not in a position to record a finding that in the facts of this case, there was no pending demand, particularly when there is no specific challenge raised in the petition. In our opinion, the judgment of this court in P. Kumars case will have to be confined to its own facts.23. In the circumstances, we are of the opinion that there is no merit in this writ petition.