ORDER
K. Gnanaprakasam, J. (Chairperson)
Aggrieved by the Order dated 18.1.2005 passed by the DRT, Bangalore, in AOR-12/2004, the 1st respondent there in namely, State Bank of India, has preferred this appeal.
The facts which are leading to the filing of this appeal are as follows.
1. The appellant Bank had filed OA-725/1995 against the 2nd respondent viz., C.C. George, for recovery of a sum of Rs. 15,84,495.98p. and the said OA was allowed by order dated 24.4.1999. The Bank during the pendency of the OA came to know that the 2nd respondent herein had disposed of the property to the 1st respondent for a sale consideration of Rs. 1,44,00,000/- (Rupees one crore and forty-four lakhs only). It is stated that the 1st respondent had issued a cheque dated 16.6.1998 in favour of the 2nd respondent for a sum of Rs. 17,00,000/- that being the part of the sale consideration had chosen to withhold the said sum as that being the amount due to the appellant Bank by the 2nd respondent with a specific understanding that the said cheque will not be encashed by the 2nd respondent till the dues to the Bank are settled. The 1st respondent is well aware that the 2nd respondent owes money to the Bank and in fact that there was a correspondence between the 1st respondent and one H. Thippa Reddy during 1997 in this regard. As soon as the Bank came to know about the said transaction between the respondents 1 and 2 and also the amount withheld by the 1st respondent, the Recovery Officer issued a demand notice dated 12.6.2000, restraining the 1st respondent from paying the said money to any person and also directed him to deposit the said amount with him.
2. But on the other hand, the 2nd respondent had withdrawn the said amount on 5.7.2000 with the help of the 1st respondent, through a fresh cheque dated 24.3.2000. This conduct of the 1st respondent amounts to deliberate fraud and the transaction between the respondents 1 and 2 was a sham and nominal one which is not binding on the appellant Bank.
3. The appellant Bank filed a petition under Section 28(2) of the Recovery of Debts Due to Banks and Financial Institutions (RDDB&FI) Act, 1993, seeking direction to the 1st respondent to deposit a sum of Rs. 17,00,000/- and in pursuance of the same, Recovery Officer issued a notice calling upon the 1st respondent to pay the said amount. Both the appellant and the 1st respondent were heard by the Recovery Officer and he had allowed the application of the appellant Bank by order dated 17.12.2003 and directed the 1st respondent to deposit the said amount together with interest.
4. As against the said Order dated 17.12.2003 passed by the Recovery Officer, the 1st respondent herein preferred an appeal before the DRT, Bangalore, and the learned Presiding Officer after hearing both the parties, by order dated 18.1.2005 set aside the Order of the Recovery Officer dated 17.12.2003, and allowed the appeal on the ground that there was no demand notice in DCP-1120 to the 1st respondent and demand notice issued was in respect of DCP-1121, which is relatable to a different case. The said order is under challenge in this appeal.
Heard the learned Advocate for the appellant and the respondents.
5. The points that arise for consideration in this appeal are :
(1) Whether the payment made by cheque by the 1st respondent to the 2nd respondent after the receipt of demand notice dated 12.6.2000 from the Recovery Officer, is collusive?
(2) Whether the order passed by the DRT is liable to be set aside?
6. Points Nos. 1 and 2 : Let us consider the notice dated 12.6.2000, issued by the Recovery Officer, under Rule 31 of the Second Schedule to the Income Tax Act, 1961, read with Section 28 of the RDDB&FI Act, 1993. Rule 31 of the Second Schedule to the Income Tax Act, deals with attachment of the property in custody of Court or public officer and, therefore, the rule relied upon by the Recovery Officer is not relevant. But the said rule has got to be read with Section 28 of the RDDB&FI Act, 1993, which deals with the other modes of recovery apart from the modes available under Section 25 of the said Act. Section 28(2) states: “If any amount is due from any person to the defendant, the Recovery Officer may require such person to deduct from the said amount, the amount of debt due from the defendant under this Act and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Recovery Officer.”
That on the date of issuance of the notice, the cheque dated 24.3.2000 issued by the 1st respondent in favour of the 2nd respondent was not encashed. But whereas, it was encashed only on 5.7.2000. In this connection, it would be useful to consider certain undisputed facts. The 2nd respondent sold his property to the 1st respondent under the sale deed dated 19.6.1998, for sale consideration of Rs. 1,44,00,000/- and the payments were made as follows :
(1) Rs. 80,00,000/- paid already.
(2) Rs. 25,00,000/- by Cheque No. 037139, dated 16.6.1998
(3) Rs. 22,00,000/- by Cheque No. 037141, dated 16.6.1998
(4) Rs. 17,00,000/- by Cheque No. 037135, dated 16.6.1998
7. Out of the three cheques, the cheque dated 16.6.1998 was for Rs. 17,00,000/-which would approximately cover the debt due to the appellant Bank by the 2nd respondent. The 1st respondent namely, M/s. Fletcher Pioneer (India) Pvt. Ltd., did not part with the said cheque and withheld the same as they were aware of the debt due by the 2nd respondent to the appellant Bank anticipating action by the Bank. The 2nd respondent was called upon through demand notice to pay the certificate debt which was served upon him on 12.3.2000. The demand notice was served upon the 1st respondent on 12.6.2000. After the receipt of the notice, the 1st respondent issued a fresh cheque No. 274024 dated 24.3.2000, in lieu of the earlier cheque bearing No. 037135 dated 16.6.1998 for Rs. 17 lakh and thereby facilitated the 2rnd respondent to encash the same. No reason has been given by the 1st respondent for having issued a fresh cheque in the place of the old cheque dated 16.6.1998, after a lapse of two years. But the fact remains that the cheque dated 24.3.2000 was issued by ante-dated, after the receipt of the demand notice dated 12.6.2000. This shows, the clear collusion between the respondents 1 and 2. In fact, the 1st respondent was aware of the debt due by the 2nd respondent to the appellant Bank from the letter dated 11.2.1997 written by the 1st respondent to one Shri H. Tippa Reddy, though the issuance of the said letter is disputed by the 1st respondent. Even otherwise, in the absence of any explanation not having been given by the 1st respondent for issuing a cheque dated 24.3.2000 in the place of the earlier cheque dated 16.6.1998 for Rs. 17 lakh would abundantly prove that the transaction between the respondents 1 and 2, are nothing short of collusiveness. Though the cheque is valid for the period of six months from the date of issue, it may be recalled why the 2nd respondent had not encashed the cheque upto 5.7.2000. It may be post-dated cheque by which either the drawer of the cheque namely, the 1st respondent should have requested the drawee the 2nd respondent, not to present the cheque for payment upto certain dates. That shows that the amount payable by the 1st respondent to the 2nd respondent was in the hands of the 1st respondent. Admittedly, the receipt of the notice dated 12.6.2000 issued by the Recovery Officer to the 1st respondent, is not in dispute. That in the said notice, it is made clear that the 2nd respondent has not paid the amount due to the appellant Bank and the Recovery Officer is desired to attach the same payable by him to the 2nd respondent. That in Para 1 of the said notice the 2nd respondent was also prohibited and restrained until further orders of the Recovery Officer from receiving the amount from the 1st respondent. The 1st respondent was further prohibited and restrained until further orders from delivering the money to any person and also directed to release the money to the Recovery Officer. That only after the receipt of this notice, a fresh cheque dated 24.3.2000 was prepared and the 2nd respondent had presented the cheque and encashed the same for which the 1st respondent is also a party. As it remains undisputed that the 2nd. respondent encashed the cheque only after the receipt of the notice dated 12.6.2000, it. would definitely project that the respondents 1 and 2 colluded together and defeated the interest of the appellant Bank.
8. The learned Advocate for the 1st respondent would contend that the DCP Number stated in the notice dated 12.6.2000, does not relate to OA-725/1995 as it relates to OA-306/1995 and, therefore, the very notice itself is defective and it does not call for the 1st respondent to remit the amount and, therefore, the order passed by the Presiding Officer, DRT, is in order.
9. The mere wrong quoting of DCP Number would not absolve the 1st respondent from its liability. It is also significant to note that the 2nd respondent who is the principal borrower, has not chosen to question the correctness of the DCP Number and in the absence of the same, it is not known how the 1st respondent is able to say that the DCP Number is wrong. This one instance is sufficient to come to the conclusion that both the respondents’ are acting in collusion. Before this Tribunal also, the 2nd respondent remained ex parte. As such, even if there is any discrepancy in noting down the DCP, that will not militate the case of the appellants to any extent, as contended by the learned Advocate for the appellant. The amount due to the Bank is public money and the same cannot be allowed to be frittered away by raising certain technical flaws or defects. As the 2nd respondent having sold the property for more than Rs. 1,44,00,000/- had no mind and intention to pay the amount due to the appellant Bank, which has got to be discouraged and deprecated. If really the 1st respondent has not colluded with the 2nd respondent, he could have got clarification from the Recovery Officer without paying the amount to the 2nd respondent and the haste in which the 2nd respondent encashed the cheque after receipt of the demand notice would clearly go to show the collusion between the respondents, which cannot at all be ruled out.
10. A reading of Section 28(1) and (2) of the RDDB&FI Act, 1993, would make it clear that the Recovery Officer, without prejudice to the modes of recovery specified in Section 25, recover the amount of debt by any one or more of the modes provided under the section. Sub-clause (2) of Section 28 enables the Recovery Officer to require such person to deduct from the said amount, the amount of debt due from the defendant under this Act and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Recovery Officer. Now, if we see the notice dated 12.6.2000, issued by the Recovery Officer, in Para 3 he made it clear that, “Your are hereby directed to release the money or property or rent or deposit etc. and any interest or dividend becoming payable thereon to the undersigned by demand draft favouring Recovery Officer, DRT, Bangalore”. This is sufficient compliance of Sub-clause (2) of Section 28, and, therefore, the 1st respondent cannot be heard to say that the notice issued by the Recovery Officer is wanting. This aspect was not considered by the learned Presiding Officer of DRT, and he went wrong in holding that there is no Attachment Notice not to speak of Demand Notice in this DCP and the said observation of the DRT is wrong on the face of the notice dated 12.6.2000. I am also at a loss to know how the DRT had observed that the very petition of the applicant Bank under Section 28(2), is misconceived when Section 28(2) enables the Recovery Officer to issue such a notice. As such, the said finding of the learned Presiding Officer of DRT, Bangalore, is liable to be set aside.
11. The learned Advocate for the appellant would contend that the appellant filed two OAs against the 2nd respondent i.e. OA No. 725/1995 and OA No. 306/1995. During the pendency of OA-725/1995, the appellant Bank came to know that the respondents entered into an agreement by which the 2nd respondent was arranging to sell his properties to the 1st respondent and to discreet the same. Sooner the Bank came to know about the transaction, the Recovery Officer issued a demand notice dated 12.6.2000 under Rule 30 of the Second Schedule to the Income Tax Act, 1961 read with Section 28 of the RDDB&FI Act, 1993 in DCP No. 1121. Despite the said notice, the 1st respondent effected payment to the 2nd respondent, which according to the appellant is illegal. Though the DCP Number is wrongly shown as 1 121 instead of 1120, that may not be a valid ground for the 1st respondent to effect payment to the 2nd respondent as the 1st respondent had enough knowledge that the 2nd respondent owes money to the Bank and as a matter of fact, the cheque ante-dated as 24.3.2000 for Rs. 17 lakhs, was encashed on 5.7.2000, after the receipt of notice of demand from the Recovery Officer dated 12.6.2000 and both the respondents in collusion had completed the transaction to defeat the appellant. When the 1st respondent had received the notice on 12.6.2000 itself, he should have deposited the amount before the Recovery Officer or could have clarified if there were any doubts and instead of doing so, the 1st respondent effected payment to the 2nd respondent on 5.7.2000, which is in gross violation of the notice dated 12.6.2000 and, therefore, both the respondents are liable to pay the amount.
12. In the result, the appeal is allowed and the order dated 18.1.2005, passed by the DRT, Bangalore, in AOR-12/2004, is set aside.