ORDER
Motilal B. Naik, J. (Chairman)
1. The present appeal is filed by the auction purchaser aggrieved by the order passed by the Debts Recovery Tribunal, Chandigarh (for short ‘the DRT’) in Appeal No. 6/2005 on 30.3.2005. Before I set out to decide the controversy, few facts which are necessary to be recorded are as under:
2. The 2nd respondent herein instituted O.A. seeking to recover certain amounts, which was decreed. As the judgment debtors failed to pay the amount, recovery proceedings were initiated by the Recovery Officer on the basis of the Recovery Certificate issued under the scheme of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short ‘the RDB Act’). The Recovery Officer appointed one Mr. U.K. Khosla, an Advocate, to auction the property and accordingly sale proclamation was issued on 23.9.2004 fixing the Reserve Price at Rs. 1 crore and the auction was fixed for 30.10.2004. Neither the decree-holder nor the judgment debtors objected to the fixing of the Reserved Price at Rs. 1 crore. When the auction was held on 30.10.2004, the appellant and one Mr. B.K. Julka participated in the auction. The appellant herein offered Rs. 1,00,10,000/-, which was the highest bid amount. Accordingly, the appellant’s bid was accepted. After the auction process was completed, the Advocate who was authorised to conduct the auction, submitted his report to the Recovery Officer for taking appropriate action thereafter. However, Mr. Julka, who participated in the auction, filed objections on 25.11.2004, i.e. after 25 days of auction, but, later, withdrew his objections on 12.1.2005 by filing an appropriate affidavit. Thereafter, the 1 st respondent herein filed objections after 73 days from the date of sale, before the Recovery Officer. On behalf of the appellant herein it was contended before the Recovery Officer that the objection filed by the 1st respondent herein after 44 days of auction is beyond the statutory period provided for filing objections and on that ground it was contended that the objections are liable to be dismissed. It was also contended that the objector is not a person who is to be treated as a person affected and urged the Recovery Officer to reject the objections. The Recovery Officer, after considering the facts and in view of the provisions appearing under Rules 60 to 65 of the Second Schedule to the Income Tax Act, rejected the objection by order dated 12.1.2005. Thereafter, the 1st respondent preferred an appeal before the Presiding Officer, DRT, Chandigarh, under Section 30 of the Act. In the meantime, after dismissal of the objections filed by the 1st respondent herein, the Recovery Officer issued sale certificate on 17.1.2005.
3. The 1st respondent, as indicated, filed Appeal 6/2005 on 27.1.2005. Various grounds were urged by the 1st respondent herein against the auction and the Tribunal by order dated 30.3.2005, set aside the auction sale against which the present appeal is filed.
4. Heard Counsel for the appellant, Counsel for the 1 st respondent and Counsel for the 2nd respondent.
5. On behalf of the appellant, who is the auction purchaser, the first and foremost ground urged before this Tribunal is that the Presiding Officer, DRT, Chandigarh has travelled beyond its jurisdiction in interfering with the auction sale though was properly conducted in terms of the relevant provisions of the Second and Third Schedules to the Income Tax Act. Secondly, it is urged that the very filing of the objections by the 1st respondent hereinbefore the Recovery Officer was beyond the period prescribed for filing such objections and that this factor had also been ignored by the Tribunal. However, solely relying on a judgment of the Hon’ble Supreme Court in Divya Manufacturing Co. (P) Ltd. and Anr. v. Union Bank of India and Ors. (2000-3) PLR CXXVI (SC), the DRT allowed the appeal filed by the 1st respondent, without even looking to the facts whether the objection filed before the Recovery Officer was within time and the objector is a proper person to file or has made deposits as provided under Rule 60 of the Second Schedule to the Income Tax Act. The learned Counsel contended that there was no allegations about any variation of Rules 52 to 57, either by the financial institution or by the judgment debtors, nor was there any objection on the ground of violation of the said rules. Counsel also contended that even assuming for a moment that the 1st respondent was entitled to raise objection to such a sale, the procedure contemplated under Rules 60 and 61 of the Second Schedule to the Income Tax Act have to be followed. It is urged that when these factors were brought to the notice of the Recovery Officer at the first instance, the Recovery Officer rightly rejected the objections holding that the objections were filed beyond the time stipulated. However, the Tribunal ignored all these facts and observed that in a given case the Tribunal is competent to invoke suo motu powers and while holding so, interfered with the auction resulting in irreparable injury to this appellant, who has already parted with the sale price nearly a year ago. It is also alleged that when rights of parties crystallized, the Tribunal cannot unsettle such rights without there being any material irregularities which has resulted irreparable injury to the 1 st respondent herein. Counsel also pleaded that where immovable property has been sold in execution of a decree, any objection for setting aside the decree has to be made within the stipulated time along with such deposit and that Section 5 of the Limitation Act does not aid a person who files such an objection beyond the period. It is also urged that inadequacy of price is not a sufficient ground for setting aside the sale, but, what is required to be seen is whether the alleged material irregularities have caused irreparable injury to the other side. Counsel also stated that when auction is to be conducted in a particular manner as provided under the Act, there cannot be deviation. In support of his varied contentions, the learned Counsel invited my attention to the following decisions:
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AIR 1936 Privy Council 253.
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6. On behalf of the 1st respondent, who is the objector, Mr. S.S. Garg, on the contrary, submitted that the Tribunal was justified in setting aside the auction sale, as the Tribunal found defects in the auction. Counsel also stated that as held by the Hon’ble Supreme Court in Divya Manufacturing Co. (P) Ltd. and Anr. v. Union Bank of India and Ors. time factor may not come in the way of the Courts when it is noticed that proper price has not been realised by way of sale. It is also urged that though one Mr. Julka participated in the bid and subsequently filed objections on 12.1.2005, later, for reasons unknown withdraw his objections. Thus, according to the learned Counsel, there appears to be some nexus between the appellant-auction purchaser and the said Mr. Julka and both of them have colluded and as such the Tribunal has rightly set aside the auction sale. It is also urged that the Bank though valued the property for Rs. 1,39,50,000/-, failed to object fixing of the Reserve Price at Rs. 1 crore earlier and that this factor has also been noted by the Tribunal. Counsel stated that the Tribunal took into consideration the totality of the circumstances and rightly interfered with the auction. He pleaded dismissal of the appeal.
7. On the basis of submissions made by the Counsel, the point for consideration is whether the Tribunal was justified in upsetting the auction sale made in favour of the appellant herein.
8. The Recovery Officer initially rejected the objections filed by the 1 st respondent on the ground that the objections were filed beyond the limitation period. Though this factor was brought to the notice of the Tribunal during the hearing of the appeal filed by the appellant, the Tribunal ignored this factor. It is pertinent to mention hereunder the observations made by the Tribunal, on which basis the auction sale was set aside by the Tribunal, Whether these observations made are on sound legal principles and are sufficient to interfere when an immovable property is sold in execution of decree?
9. Some of the findings recorded by the Tribunal in the impugned order, on which basis the Tribunal interfered with the auction sale are abstracted hereunder:
At page 3 of the order the Tribunal observed “On perusal of entire record of RO, I find that no reasoned order has been passed by him as to why and how the reserve price was fixed at Rs. 100.00 lacs as against the valuation of Rs. 139.50 lacs given by the approved valuer of respondent No. 2 (CH Institution)…”. In the same para the Tribunal further observed “….It is pertinent to mention that this Tribunal cannot loose sight (if the fact that Recovery Officer has fixed a reserve price less than about 40% if the valuation (of property in question given by approved valuer respondent No. 2 (CH Institution) which has also objected to by respondent No. 2 (CH Institution), in my opinion, it is not unusual that cartels are made and in this case sudden withdrawal of objections by Mr. Balkishan Julka after levelling very serious allegations and after getting the recovery proceedings transferred from the office of RO-I to RO-II speaks volumes of mala fide in which the auction sale was held. Non-action on the part of respondent No. 2 (CH Institution) knowing fully well that the property in question had been sold for much less than the valuation report, also speaks volumes about its conduct in fiddling with the public money more so when it had to realise more than Rs. 10.00 crores…”. The Tribunal also made a further observation in the same para. “…As per settled law of land, in case of Court auctions, the Court, instead of going for technical objections should try to obtain the best price of property put to auction by it. Reliance for this view is placed on the view of Hon’ble Apex Court held in Divya Manufacturing Co. Pvt. Ltd. and Anr. v. Union Bank of India and Ors. Published at (2000-3) PLR Vol. CXXVI Hon’ble Supreme Court. Even if, the objections of appellant against auction are to be ignored, still in view of the above judgment of Hon’ble Apex Court, it is the bounden duty of this Tribunal to exercise its suo motu jurisdiction in the matter and ensure that the property put to auction gets the best available price in the market….”By recording its findings the Tribunal set aside the order of the Recovery Officer in the following manner: “For the foregoing reasons and taking stock of all the facts and circumstances of the case discussed hereinabove, 1 have no hesitation in holding that the impugned order passed by the RO on 12.1.2005 cannot be sustained in law and, therefore, is set aside. Consequently, it is directed that the auction money be returned to respondent No. 1 (auction purchaser) forthwith. Recovery Officer may proceed further to re-auction the property in question after fixing the reserve price de novo as per law.
10. In the light of the serious contentions raised by the learned Counsel for the appellant about these observations which formed part of the impugned order, on which basis the Tribunal has set aside the sale, it is necessary for this Tribunal to examine whether such conclusions arrived at by the Tribunal are based on facts of the case and are properly formed. The decision in Divya Manufacturing relied upon by the DRT to hold that the Court is entitled to exercise suo motu powers and can do and undo things, could be treated as if the Hon’ble Supreme Court vested suo motu powers in the Tribunals?
11. Firstly, I must say that these Debts Recovery Tribunals are constituted under the provisions of the RDB Act, 1993. The powers to be exercised by the Tribunals arc distinct from the powers to be exercised by the Hon’ble Supreme Court and the Hon’ble High Courts which are constitutional Courts and are vested with plenary powers also. I must record hereunder that the Tribunals functioning under the RDB Act are not vested with such plenary powers, but derive their powers only under the RDB Act, 1993.I have not come across a provision under the RDB Act, 1993 which confers suo motu powers or nor semblance of conferment of such powers could be gathered from the entire text of the Act. Though Section 22 of the RDB Act provide that the Tribunal and the Appellate Tribunal shall not be bound by procedure laid down in CPC but shall be guided by the principles of natural justice and subject to other provisions of the Act and Rules and shall have the power to regulate their own procedure including places at which they shall have their sittings, I do not think this provision could be interpreted to say that the Tribunals have suo motu powers. I am, therefore, inclined to say that the view taken by the Tribunal that it can exercise suo motu powers to interfere in a given case, may not be a correct position.
12. Coming to the decision in Divya Manufacturing’s case, it was a company matter where Official Liquidator was appointed by the Court for auctioning the property. The Hon’ble Company Court noticed various deformities in the sale and basing on which the sale was set aside. It is to be further noted hereunder that under the Companies Act the auction held by the Official Liquidator is to be confirmed by the Company Court. Till such time the sale does not reach finality. Under the scheme of the RDB Act, once a judgment is rendered, DRT issue Recovery Certificate indicating the amount due, etc. and is sent to the Recovery Officer for taking steps as per the provisions under Sections 25 and 28 of the RDB Act. Sections 25 and 28 of the RDB Act provide modes of recovery of debts. Sections 26 and 27 deal with the validity of Recovery Certificate and powers to grant stay by the Presiding Officer. Section 29 of the Act refers to application of certain provisions of the I.T. Act which says:
The provisions of the Second and Third Schedules to the Income Tax Act, 1961 (43 of 1961) and the Income Tax (Certificate Proceedings) Rules, 1962 as in force from time-to-time shall, as far as possible, apply with necessary modifications as if the said provisions and the rules referred to the amount of debt due under this Act instead of to the Income Tax Act:
Provided that any reference under the said provisions and the rules to the “assessee” shall be construed as a reference to the defendant under this Act.
Part III of the Second Schedule to the Income Tax Act provide for sale and proclamation of sale. Relevant Rules are from 52 to 59. When sale of immovable property is completed, Rule 60 provides for filing an application to set aside the sale on deposit. Rule 61 also provides for filing an application to set aside the sale of immovable property on the ground of non-service of notice or irregularity, which are noted hereunder:
Rule 60
1. Where immovable property has been sold in execution of a certificate, the defaulter or any person whose interests are affected by the sale, may, at any time within thirty days from the date of the sale, apply to the Tax Recovery Officer to set aside the sale, on his depositing-
(a) the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered, with interest thereon at the rate of (fifteen) per cent per annum, calculated from the date of the proclamation of sale to the date when the deposit is made; and
(b) for payment to the purchaser, as penalty, a sum equal to five per cent of the purchase money, but not less than one rupee.
2. Where a person makes an application under Rule 61 for setting aside the sale of his immovable property, he shall not, unless he withdraws that application, be entitled to make or prosecute an application under this rule.
Rule 61
Where the immovable property has been sold in execution of a certificate, such Income Tax Officer as may be authorised by the Chief Commissioner or Commission in this behalf, the defaulter or any person whose interests are affected by the sale, may, at any time within thirty days from the date of the sale, apply to the Tax Recovery Officer to set aside the sale of the immovable property on the ground that notice was not served on the defaulter to pay the arrears as required by this Schedule or on the ground of a material irregularity in publishing or conducting the sale:
Provided that-
(a) no sale shall be set aside on any such ground unless the Tax Recovery Officer is satisfied that the applicant has sustained substantial injury by reason of the non-service or irregularity; and
(b) an application made by a defaulter under this rule shall be disallowed unless the applicant deposits the amount recoverable from him in the execution of the certificate.
Section 63 provides (1) when no application is made for setting aside the sale under Rules 60 and 61 or where such an application is though made but disallowed by the Recovery Officer, the Recovery Officer shall make an order confirming that sale if the full amount of purchase has been paid, (2) when such application is made and allowed, the Recovery Officer shall set aside the sale by giving notice to the affected party.
13. Rules 60 and 61 speak about filing of application to set aside the sale within 30 days from the date of sale on fulfilling certain requirements. Admittedly, in this case, auction was concluded on 30.10.2004. The 1st respondent herein filed its objections only on 12.1.2005, i.e. after 73 days of conclusion of the auction, without making any deposit as provided under Rule 60 of the Rules. Rule 60 provides objections to be filed within 30 days from the date of the auction sale on depositing certain amounts. Time provide for filing application to set aside is 30 days from 30.10.2004, which would expire by 29.11.2004. However, the objections, admittedly, are filed on 12.1.2004, i.e. 44 days after the statutory limitation period provided under the rules. The Recovery Officer has recorded a finding that the so-called objection to the sale has been filed beyond the permissible period and on that ground rejected the application even without examining whether the requirement of deposit by the 1 st respondent is also necessary or not.
14. The learned Counsel for the 1st respondent, i.e. the objector, though has placed reliance on a decision of the Hon’ble Supreme Court in Nani Gopal Paul v. T. Prasad Singh and Ors. AIR 1993 SC 1971 and contended that the Hon’ble Supreme Court or the Trial Court would not remain as mute spectators and allow miscarriage of justice, I am afraid, this decision will not assist the 1st respondent. A reading of the said judgment would reflect that the Division Bench of the Hon’ble High Court had recorded “when there was other offers at the time of auction, the Court would have been vigilant enough to scrutinise such offers whatever they are worth”. In such circumstances, it was held that the auction is vitiated.
15. Facts in hand are that the 1st respondent/objector did not participate in the auction and nor there was anyone who came forward to offer more than what is offered by the appellant. Neither judgment debtors nor the decree-holder objected to the fixing the Reserve Price at Rs. 1 crore. It is only after 73 days of auction the 1st respondent filed objections before the Recovery Officer on the ground that as per the valuation report filed by the financial institution the value of the property is shown more than the Reserve Price and that the Reserve Price could not have been fixed lesser than the price shown in the valuation report. It is to be noted, even for discussion purpose if it is to be held that the 1st respondent is entitled to file objection on the ground alleged, sale conducted by virtue of Court decree cannot be nullified on the basis of an allegation made by a person who never participated in the process nor is JD or a person whose interests are affected. If it is a person whose interests are affected, or is a defaulter, he can file objection on deposit of certain amount provided under Rules 60 and 61 of the Second Schedule to the Income Tax Act and such objections are to be filed within the stipulated period. Neither of these condition are complied with by the 1st respondent. The Court auction proceedings cannot be allowed to be converted into a public interest litigation and stall the recovery proceedings on one ground or the other.
16. The controversy in this case is whether objection to set aside the sale could be permitted beyond the period prescribed under the scheme. The Hon’ble Supreme Court in Mohan Lal v. Hari Prasad Yadav and Ors. 1995(1) CCC 398 (SC), dealing with a similar situation of setting aside the sale has categorically held that “when dealing with the situation of setting aside the auction, the limitation is governed by Article 127 of the Limitation and Section 5 of the Limitation Act has no application and time cannot be extended beyond the stipulated period to set aside the auction proceedings. Same is the ratio laid down by the Hon’ble Supreme Court in Basavantappa v. Gangadhar Narayan Dharwadkar and Anr. .
17. In view of the discussion, it has to be held that the Recovery Officer was right in rejecting the application filed by the 1 st respondent for setting aside the sale held on 30.10.2004, 44 days after expiry of limitation period under Rules 60 and 61 of the Second Schedule to the Income Tax Act. Since the issue raised before this Tribunal is limited on this aspect, I am not inclined to go into the area whether the objections filed by the 1st respondent before the Recovery Officer seeking to set aside the sale without making any deposit could have been entertained at all and whether the 1st respondent would fall within the category of the persons whose interests are affected. As discussed, the DRT on certain assumptions and presumptions, failed to take note of the ground reality, without recording that the 1st respondent has suffered irreparable injury as a result of Court auction and its Interests are affected by such an auction, could not have interfered with the order passed by the Recovery Officer. I am convinced to hold, taking into consideration the object of the Act, the Recovery Officer was right in rejecting the objection. The order under appeal is set aside. The Recovery Officer shall take all consequential steps without further loss of time.
18. In the result, the appeal is allowed with costs throughout.
19. LR copy be marked.