P KUMARAN Vs. DEBTS RECOVERY APPELLATE TRIBUNAL

JUDGEMENT

(1.) The writ petition raises an important question as to whether sub-rules (1) and (2) of Rule 57 of the Second Schedule to the Income Tax Act, 1961 empower the Debt Recovery Officer to extend the time prescribed therein for the auction purchaser to pay the purchase money?

(2.) The Petitioner is the auction purchaser and the third Respondent is the borrower. The third Respondent failed to settle the loan amount, which made the fourth Respondent-Indian Bank, Kolathur Branch to initiate recovery proceedings in O.A. No. 28 of 2001 before the Debts Recovery Tribunal-II, Chennai and the same was decreed for a sum of Rs. 4,46,77,168.31 and a recovery certificate was also issued in D.R.C. No. 169 of 2003 on 15.9.2003. After the recovery certificate was issued, the secured asset was put to public auction on 23.11.2006 and the Petitioner being the successful bidder for Rs. 60,00,000/-, his bid was confirmed and he was directed to make the payment of 25 percent of the purchase money, i.e., Rs. 15,00,000/-, which was complied with on the same day. Subsequently, as the Petitioner was bedridden, he made a request to the Recovery Officer to give him time. Accordingly, he was given time to make the further payment of 75percent. He also paid the balance purchase money of 75 percent only on15.2.2007 along with the poundage fee and the amount was appropriated by the fourth Respondent bank. In the meantime, the case stood transferred to the file of the Debts Recovery Tribunal-III and renumbered as O.A. No. 206 of 2007. Pending issuance of the sale certificate, the third Respondent approached the Recovery Officer by filing I.A. No. 4 of 2007 under Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act read with Rules 11, 57 & 58 of the Second Schedule to the Income Tax Act to set aside the sale on the ground that the auction purchaser failed to pay the balance of purchase money within 15days from the date of confirmation. However, the said application was dismissed on 5.4.2007 on the ground that the auction purchaser had paid the entire balance amount in the extended period and the sale certificate was issued to the Petitioner. Aggrieved by that order, the third Respondent preferred appeal in M.A. No. 14 of 2007 in R.P. No. 3 of 2007 in O.A. No. 206 of 2007 and the same was allowed by the Debt Recovery Tribunal-III, the second Respondent on 27.7.2007 on the ground that the Petitioner had not deposited the balance amount within 15days and ordered for resale after forfeiting 15% of the amount deposited by the Petitioner. As against the said order, the Petitioner filed M.A. No. 124 of 2008and the fourth Respondent bank filed M.A. No. 225 of 2008 before the Debts Recovery Appellate Tribunal and both the appeals were dismissed on 18.9.2008. Thereafter, the order of the Appellate Tribunal was questioned by the fourth Respondent bank in W.P. No. 30781 of 2008 and the same was dismissed on 24.4.2008confirming the order of the Appellate Tribunal. Subsequently, the third Respondent filed M.A. No. 20 of 2008 in O.A. No. 206 of 2007 before the second Respondent seeking to cancel the sale certificate issued in favour of the Petitioner and to order fresh auction sale. The said application was allowed by the Tribunal on 8.9.2009 and the sale certificate issued in favour of the Petitioner was cancelled and the fourth Respondent bank was directed to return the sale proceeds. The above orders are questioned by the Petitioner in this writ petition.

(3.) Mr. Vijay Narayan, learned senior counsel appearing for the Petitioner would submit that Rule 57(1) of the Second Schedule to the Income Tax Act, 1961obligates the purchaser to deposit 25 percent of the purchase money immediately on the date of sale. The Petitioner has complied with the said condition. However, the Petitioner has not paid the balance of 75 percent of the bid amount within 15 days as required under Rule 57(2). Nevertheless, on his request, the Petitioner was allowed to deposit the amount even after the prescribed period of15 days. Hence, the question of forfeiting the 25 percent of the amount deposited under Rule 57(1) on the ground that the Petitioner failed to deposit75 percent as per Rule 57(2) does not arise. Though as per Rule 57(2), the successful bidder should deposit the balance of 75 percent within 15 days from the date of confirmation, in the wake of Section 29 of the Recovery of Debts Dueto Banks and Financial Institutions Act, a discretion is conferred on the Recovery Officer to grant extension. The extension, if any, granted by the Recovery Officer for the auction purchaser to deposit 75 percent of the amount beyond the period of 15 days immediately on confirmation of bid would not vitiate the auction proceedings. In support of the said submission, he would rely upon the judgment of the Andhra Pradesh High Court in P. Mohan eddy and Ors. v. Debts Recovery Appellate Tribunal, Mumbai and Ors, 2004 AIR(AP) 94.