Prayer in W.P No. 11524 of 2005:
Writ Petition filed under Article 226 of the Constitution of India, to issue a writ of Certiorarified Mandamus calling for the records of the respondents' order made in M.A No. 32 of 2004 in I.A No. 143 of 2004 in O.A No. 994 of 2001 dated 17.5.2004 on the file of the second respondent and confirmed in M.A No. 94 and 95 of 2004 dated 3.1.2005 on the file of the third respondent and quash the order dated 3.1.2005
Prayer in W.P No. 11718 of 2005:
Writ Petition filed under Article 226 of the Constitution of India, to issue a writ of Certiorarified Mandamus calling for the records of the respondents' order made in M.A No. 33 of 2004 in I.A No. 172 of 2004 in O.A No. 995 of 2001 on the file of the second respondent and confirmed in M.A Nos. 94 and 95 of 2004 on the file of the third respondent and quash the same.
ORDER
(Order of the Court was made by K. RAVICHANDRABAABU, J)
These writ petitions are filed challenging the order passed in M.A Nos. 32 & 33 of 2004 in I.A Nos. 143 & 172 of 2004 in O.A Nos. 994 & 995 of 2001 respectively on the file of the second respondent and confirmed in M.A Nos. 92, 93, 94 and 95 of 2004 respectively on the file of the third respondent.
2. The case of the petitioners is as follows:
W.P No. 11524 of 2005:
(a) The first petitioner is a Partnership Firm dealing in various electrical and electronic home appliances. The petitioners approached the first respondent-Bank for sanction of credit facilities and accordingly the first respondent sanctioned a sum of Rs. 15 lakhs during April, 1991 and subsequently, Rs. 35 lakhs of open cash credit in the year 1994. Though the petitioners have been making payments regularly to the first respondent - Bank, due to general global recession, the petitioners were not able to keep up their schedule of payments. The petitioners have in fact, paid more than Rs. 1.50 crores approximately towards interest alone.
(b) The first respondent filed O.A No. 994 of 2001 on the file of the second respondent Tribunal for recovery of a sum of Rs. 57,22,710.50. The petitioners filed their written statement and made their objections. They also wanted to have an amicable settlement of the dues. The petitioners sent a proposal for one time settlement pending Original Application. The said proposal was accepted by the first respondent with the condition that the same should be paid within a period of three months. The petitioners paid a sum of Rs. 5 lakhs immediately to show their bona fides. At the request of the petitioners, the first respondent extended the time for payment. The petitioners were not able to mobilize the funds during the extended period. Therefore, the only course open to the petitioners was to settle the property under mortgage with the first respondent - Bank by a private sale and remit the sale proceeds with the Bank towards its liability. Therefore, they filed I.A No. 407 of 2003 before the second respondent to permit the petitioners to sell the property by private sale. The fourth respondent recovery officer was pleased to fix the upset price for both the properties at Rs. 43 lakhs and Rs. 33 lakhs respectively and called for sealed tenders. As the market value of the said properties were much higher than the upset price, the petitioners raised their objections and requested the first respondent to fix the fair price. Their objections were not considered by the Recovery Officer and he proceeded with the sale without following any of the guidelines. As there were no bidders on 3.3.2004, the private sale could not be completed. The Recovery Officer instead of postponing the sale to a future date, suo motu converted the sale into public auction on the same day. As there were no bidders, the first respondent - Bank itself ventured to purchase the property by making a bid of Rs. 10,000/- more than the upset price for both the properties. The Code of Civil Procedure has no application to the Recovery Tribunals and the permission of the Tribunal is necessary for the Bank to purchase the property by itself. Aggrieved against the sale, the petitioners filed M.A No. 32 of 2004 to set aside the sale. The said application was rejected and the sale was confirmed, against which, the petitioners preferred M.A Nos. 92 and 93 of 2004 before the third respondent, which was also rejected and the sale was confirmed.
W.P No. 11718 of 2005:
(c) The first petitioner is a partnership firm dealing in radios and watches. The petitioners approached the first respondent - Bank for sanction of credit facilities. The first respondent sanctioned a sum of Rs. 15 lakhs during September, 1991. Though the petitioners have been making payments regularly to the fist respondent-Bank, they were not able to keep up their schedule of payments, due to general global recession in the open market. The petitioners have paid approximately more than Rs. 1.50 crores towards interest alone.
(d) The first respondent filed O.A No. 995 of 2001 on the file of the second respondent - Tribunal for recovery of a sum of Rs. 29,31,235.77 The petitioners filed their written statement and made their objections. They also wanted to settle the matter amicably. Pending Original Application, the petitioners sent a proposal for one time settlement and the same was accepted by the first respondent with the condition that the said amount should be paid within a period of three months. The petitioners paid a sum of Rs. 5 lakhs immediately to show their bona fides. Subsequently, time was extended by the first respondent - Bank, at the request of the petitioners. The petitioners were not able to mobilize the funds during the extended period. Therefore the only course open to the petitioners was to settle the property under mortgage with the first respondent Bank by a private sale and remit the sale proceeds with the Bank towards its liability. Therefore, they filed I.A No. 408 of 2003 before the second respondent to permit the petitioners to sell the property by private sale. The fourth respondent Recovery Officer was pleased to fix the upset price for both the properties at Rs. 43 lakhs and Rs. 33 lakhs respectively and called for sealed tenders. As the market value of the said properties were much higher than the upset price, the petitioners raised their objections and requested the first respondent to fix the fair price. Their objections were not considered by the Recovery Officer and he proceeded with the sale without following any of the guidelines. As there were no bidders on 3.3.2004, the private sale could not be completed. The Recovery Officer instead of postponing the sale to a future date, suo motu converted the sale into public auction on the same day. As there were no bidders, the first respondent Bank itself ventured to purchase the property by making a bid of Rs. 10,000/- more than the upset price for both the properties. The Code of Civil Procedure has no application to the Recovery Tribunals and the permission of the Tribunal is necessary for the Bank to purchase the property by itself. Aggrieved against the sale, the petitioners filed M.A No. 33 of 2004 to set aside the sale. The said application was rejected and the sale was confirmed, against which, the petitioners preferred M.A No. 94 and 95 of 2004 before the third respondent, which was also rejected and the sale was confirmed.
3. Challenging those proceedings, the present writ petitions are filed before this Court.
4. The learned counsel appearing for the petitioners in these writ petitions contended that apart from fixing very low upset price, which was objected to by the petitioners, sale has not been conducted by following the procedures contemplated under the Second Schedule to the Income Tax Rules made therein. According to the learned counsel, the Bank without getting permission from the Tribunal, ought not to have brought the properties under public auction and therefore there is a procedural violation in selling the property in favour of the Bank which according to him, is for a very low price.
5. On the other hand, learned counsel appearing for the first respondent Bank submitted that all the procedures have been followed before conducting the sale and there is no procedural violation as claimed by the petitioners. He also invited the attention of this Court to the order passed by the Debts Recovery Tribunal dated 4.2.2004, wherein the petitioners were given option to bring the buyers of the properties within three weeks, which they failed to utilize. Therefore the learned counsel submitted that the petitioners are only trying to drag on the proceedings.
6. We have heard the learned counsel appearing on either side and perused the materials placed before this Court and also gone through the affidavit filed in support of the application for setting aside the sale as well as the affidavit filed in support of these writ petitioners and the appeal grounds.
7. It is seen that the respondent-bank has filed the above said Original Applications for recovery of a sum of Rs. 57,22,710.50 (W.P No. 11524 of 2005) and Rs. 29,31,235.77 (W.P No. 11718 of 2005) respectively, against the petitioners herein. It is also seen that the petitioners during the pendency of the Original Applications filed applications seeking permission to bring the property for sale. Based on the said applications, the Tribunal has granted permission and based on such permission, the sale proceedings have been conducted. As there was no party available for getting the property under private sale, the Recovery Officer proceeded to convert the sale as a public sale and in such course of action, the Respondent-Bank had participated and purchased the property by quoting Rs. 10,000/- more than the upset price.
8. The grievance of the petitioners is that conversion of such sale proceedings as public sale was not in accordance with the procedures contemplated under the Second Schedule to the Income Tax Rules and more particularly, Rule 17 of the Income Tax Rules.
9. We perused the orders passed by the Tribunal as well as Appellate Tribunal and we find that no discussion has been made to that effect as to whether the required mandatory statutory procedures have been followed or not. It is also seen that the petitioners have filed a memo even on 1.3.2004 itself before conducting the auction, objecting to the fixation of upset price by the Recovery Officer. Therefore, considering all these objections raised by the petitioners and also the relevant provisions under the Income Tax Rules, the matter needs to be considered afresh by the Debts Recovery Tribunal and for which purpose, we are of the view that the matter needs to be remitted back by giving an opportunity to the petitioners to raise all their objections before the Debts Recovery Tribunal No. II.
10. Accordingly, the matter is remitted back to Debts Recovery Tribunal No. II, Chennai for fresh consideration. The petitioners are granted two weeks time to file additional grounds before the Debts Recovery Tribunal No. II, Chennai from the date of receipt of a copy of this order. The first respondent Bank shall file their objections if any, based on the additional grounds filed by the petitioners, within two weeks thereafter. On receipt of the additional grounds from the petitioners and the objections, if any filed by the first respondent-Bank, the Debts Recovery Tribunal shall consider the same and pass fresh orders on the M.As on merits and in accordance with law, within a period of eight weeks from the date of completion of such pleadings. We also make it clear that we are not expressing any view on the merits of the contentions raised by the petitioners in respect of their respective claim. Time mentioned above should be strictly adhered to by both the parties.
11. The writ petitions are disposed of accordingly. Consequently, the connected miscellaneous petitions are closed. No costs.