Alex Varghese and Sojia Alex v. Recovery Officer, Debts Recovery Tribunal, Ernakulam; Union of India, through Secretary, Ministry of Finance; State Bank of India; T. M. ShaffI; Kochurani Jose

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR** ## **&** ## **THE HONOURABLE MR. JUSTICE SHAJI P.CHALY** **WEDNESDAY, THE 03RD DAY OF JUNE 2020 / 13TH JYAISHTA, 1942** ## **WA.No.1032 OF 2017** **AGAINST THE ORDER/JUDGMENT IN WPC 2861/2009 DATED 07-11-2016 OF HIGH COURT OF KERALA** ## **APPELLANT/S:** |**1**|**ALEX VARGHESE,**| |---|---| ||**AGED 47 YEARS,S/O K.C VARGHESE,**| ||**CHOORAPADIYIL HOUSE, PAMBANAR P.O., PEERMADE.**| |**2**|**SOJIA ALEX,**| ||**AGED 39 YEARS, W/O ALEX VARGHESE,**| ||**CHORAPADIYIL HOUSE, PAMBANAR P.O., PEERMADE.**| ||**BY ADV.SRI.S.SACHITHANANDA PAI**| ## **RESPONDENT/S:** |**1**|**RECOVERY OFFICER,**| |---|---| ||**DEBT RECOVERY TRIBUNAL,**| ||**ERNAKULAM 682 020.**| |**2**|**STATE BANK OF INDIA,**| ||**ELAPPARA BRANCH, ELAPPARA.**| |**3**|**T.M SHAFFI,**| ||**S/O. M.B MAJEED,CHENGATHARA HOUSE,**| ||**THAMMANAM P.O., KOCHI 32.**| |**4**|**KOCHURANI JOSE,**| ||**W/O. K.A BABY, KANJIRATHINKAL HOUSE,**| ||**KANJIRAMATTOM. 686 001.**| W.A.1032/2017 2 **5 UNION OF INDIA, REP.BY SECRETARY, MINISTRY OF FINANCE, NEW DELHI. 110 001.** **R1 BY ASSISTANT SOLICITOR GENERAL** **SRI.R.S.KALKURA SC FOR R2** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 03.06.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W.A.1032/2017 3 ## **“C.R”** ## **JUDGMENT** ## **Dated this the 3[rd] day of June, 2020** ## **S.Manikumar, CJ.** Instant writ petition is filed challenging the judgment passed by a writ court in W.P.(C).No.2861 of 2009 dated 07.11.2016, by which the writ Court declined to quash Ext.P3 order dated 17.12.2008 issued by the 1[st] respondent, Debts Recovery Tribunal. Ext.P3 dated 17.12.2008 was passed in I.A.No.1776 of 2008 in DRC No.1664 in O.A.No.394 of 2003 on the files of the Debt Recovery Tribunal (Kerala & Lakshadweep). ## 2. Short facts leading to the writ appeal are as hereunder: Appellants are the petitioners in W.P.(C) No.2861 of 2009. Respondent No.2 has filed O.A No.394/2003 before the Debt Recovery Tribunal, Ernakulam for realisation of money from the petitioners. Final order allowing the O.A was passed by the Tribunal. The 2[nd] respondent initiated proceedings for recovery of the amount awarded in O.A. No.394/2003 which was numbered as 1664. Pursuant to the proceedings in DRC No.1664, two items of mortgaged properties of the petitioners were sold. The 1[st] item having an extent of 2.50 acres comprised in Survey No.534 of Peermade Village was sold for Rs.3,30,000/- and the 2[nd] item of property having an extent of 1.69 acres was sold for Rs.2,30,000/-. The sale was on 03.11.2008. The petitioners filed W.A.1032/2017 4 Exhibit-P1 petition dated 26.11.2008 for setting aside the sale on the ground of material irregularity. The counter filed by the Bank is produced as Exhibit-P2. The recovery officer has dismissed the said petition taking note of Exhibit-P3 produced therein. The petitioners have challenged the dismissal of the petition before the learned single Judge, mainly on two grounds, viz., the sale is vitiated by material irregularity, the provision under Rule 61 of the Income Tax Act, that an application made by a defaulter under the rule shall be disallowed unless the applicant deposits the amount recoverable from him in the execution certificate. Learned single Judge without answering the contention of constitutional validity of Rule 61 of the Second Schedule of the Income Tax act raised by the petitioners as ground 'G' in the writ petition, dismissed the writ petition by the impugned judgment. Aggrieved by the same, this writ appeal is filed. 3. The appellants were the defendants in O.A No.394 of 2003. Orders were passed permitting the 2[nd] respondent bank to realise the amount determined by the sale of property belonging to the appellants. According to the appellants, item No.1 property measured an extent of 2.50 acres, situated in Sy.No.534 of Peermade Village. Item No.2 property measured an extent of 1.69 acres. Item No.1 property was sold for ₹3,30,000/- and item No.2 at ₹2,30,000/-. Respondents 3 and 4 are the auction purchasers. Contending inter alia that the sale effected by the bank suffers from material irregularity and that the properties were sold for a paltry sum, writ petition has been filed W.A.1032/2017 5 seeking to quash Ext.P3 order dated 17.12.2008 passed by the Debt Recovery Officer. Before the writ court, appellants also prayed for a direction to conduct fresh sale in DRC No.1664 in O.A No.394 of 2003 on the files of the Debt Recovery Tribunal, Ernakulam. Adverting to the pleadings and submissions, in particular, the value of the properties sold, writ court ordered thus: “The petitioners have approached this Court challenging Ext.P3 order dated 17.12.2008 issued by the 1[st] respondent, recovery officer, Debts Recovery Tribunal. The petitioners also seek for a direction to the 1[st] respondent to conduct a fresh sale in DRC No.1664 in O.A.No.394/2003 of the Debts Recovery Tribunal, Ernakulam. 2. The short facts involved in the writ petition would disclose that the petitioners were the defendants in O.A.No.394/2003. Orders were passed permitting the 2[nd] respondent Bank to realise the amount determined by sale of property belonging to the petitioners. The item No.1 property was having an extent of 2.50 acres situated in Sy.No.534 of Peermade village and item No.2 was having an extent of 1.69 acres. Item No.1 property was sold for ₹ 3,30,000/- and item No.2 at ₹2,30,000/-. Respondents 3 and 4 are the auction purchasers. 3. The petitioners submit that the sale is vitiated by material irregularity and the property had been sold for a paltry sum. Ext.P3 is the order passed by the Debts Recovery Tribunal wherein the petitioners had taken a contention that the sale has to be set aside on the ground of material irregularity. 4. Perusal of Ext.P3 would show that the Debts Recovery Tribunal had considered the matter elaborately and had arrived at a finding that there is no material irregularity in the conduct W.A.1032/2017 6 of sale. Further, since the petitioners did not deposit the amount as contemplated under Rule 61 of the Second Schedule to the Income Tax Act, 1961, the application was rejected. 5. The main contention urged by the petitioners is with reference to the value of the property. It is contended that as per the valuation originally fixed at the time of grant of loan, the Bank valued the property at ₹18 lakhs and ₹9 lakhs was advanced as loan and the property is now sold for a meagre amount. 6. Though such a contention had been raised, no material is produced to infer that the property had been sold at a grossly undervalued rate. In fact, when the property was proclaimed for sale, there were no bidders. Subsequently, the reserve price was also reduced by about 15% for both the items of property and thereafter, after making wide publication in Mathruboomi daily, the property was sold at a rate above the reserve price. 7. Having regard to the fact that all the material facts had been taken note of by the Recovery Officer and in the absence of any illegality pointed out in the matter, I don't think that this Court will be justified in interfering with such orders, especially Ext.P3 being an appealable order. Taking into consideration, the aforesaid factual situation, I don't think that the petitioners are entitled for any relief as sought for and hence this writ petition is dismissed.” ## 4. Said judgment is assailed on the following grounds: “B. The provision under R.61 of the second schedule to the Income Tax Act, that 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 W.A.1032/2017 7 is arbitrary and unconstitutional. There are two provisions to set aside the sale as contemplated under the act. The 1[st] one under R.60 in which the defaulter can deposit the amount within 30 days and seek to set aside the sale. The other provision is under R.61. When the defaulter challenges the material irregularity of the sale the stipulation to deposit the amount is unreasonable and unconstitutional. C. The similar provision under the code of civil procedure is Order 21 R 89 and 90. Under Rule 89 by depositing the entire amount with interest the judgment debtor can seek for setting aside the sale. Under Rule 90 no amount is required to deposit, when the sale is vitiated by material irregularity. D. The recovery officer sold two items of property in throw away price without giving adequate publicity of sale. The 1[st] item of property having an extent of 2.5 acres was sold for Rs.3,30,000/and 2[nd] item having 1.69 acres was sold for Rs.2,30,000/-.” 5. Though learned counsel for the appellants submitted that Rule 61 of the Second Schedule of the Income Tax Act, 1961 was also challenged before the writ court, going through the materials and the prayer made in the writ petition, we find that Rule 61 of the Second Schedule has not been challenged. Mr. S. Sachithananda Pai, learned counsel for the appellants, submitted that auction was conducted in the year 2009. More than a decade is lapsed. 6. Impugned order dated 17.12.2008 in I.A.No.1776 of 2008 in DRC No.1664 in O.A.No.394 of 2003 is passed by the Recovery Officer, Debt Recovery Tribunal (Kerala & Lakshadweep). Section 30 of The Recovery of Debts and Bankruptcy Act, 1993 provides for an appeal against an order passed by a recovery officer. W.A.1032/2017 8 ## 7. Section 30 of The Recovery of Debts and Bankruptcy Act, 1993 reads thus: “30. **Appeal against the order of Recovery Officer** .- (1) Notwithstanding anything contained in Section 29, any person aggrieved by an order of the Recovery Officer made under this Act may, within thirty days from the date on which a copy of the order is issued to him, prefer an appeal to the Tribunal. (2) On receipt of an appeal under sub-section (1), the Tribunal may, after giving an opportunity to the appellant to be heard, and after making such enquiry as it deems fit, confirm, modify or set aside the order made by the Recovery Officer in exercise of his powers under Sections 25 to 28 (both inclusive).” 8. Section 30-A, which speaks about deposit of amount of debt due for filing appeal against orders of the Recovery Officer is extracted hereunder: “[30-A. Deposit of amount of debt due for filing appeal against orders of the Recovery Officer.- Where an appeal is preferred against any order of the Recovery Officer, under Section 30, by any person from whom the amount of debt is due to a bank or financial institution or consortium of banks or financial institutions, such appeal shall not be entertained by the Tribunal unless such person has deposited with the Tribunal fifty per cent of the amount of debt due as determined by the Tribunal.]” 9. As observed by the writ court, order impugned is appealable. Instead of preferring an appeal, writ petition has been filed by the appellants alleging irregularity in the valuation of the properties auctioned. Irregularity, if any W.A.1032/2017 9 averred, is a matter of fact, which requires evidence. In **Union of India and Another v. Delhi High Court Bar Association And Others** [(2002) 4 SCC 275], after referring to the statutory provisions, at paragraphs 28 to 30, the Hon'ble Supreme Court held thus: “28. At the time when the Guwahati High Court had rendered its decision there was only one Appellate Tribunal. It is for that reason that the Guwahati High Court had observed that the judicial review was illusory. Now, more Appellate Tribunals have been established and the inconvenience of the litigant in travelling a long distance to approach a Appellate Tribunal cannot be regarded as making the judicial review of the Tribunal's decision illusory. Furthermore, with the pecuniary jurisdiction of the Tribunal being of Rs. 10 lacs and above for a fairly large number of borrowers of small amounts, the civil courts are not divested of their jurisdiction. 29. The Guwahati High Court had held that Sections 25 and 28 are arbitrary and unreasonable, being without any guidelines or control. These observations were made prior to the amendment of Sections 25 and 28. After amendment the said provisions read as under:- " **25. Modes of recovery of debts** .- The Recovery Officer shall, on receipt of the copy of the certificate under sub-section (22) of section 19, proceed to recover the amount of debt specified in the certificate by one or more of the following modes, namely:(a) attachment and sale of the movable or immovable property of the defendant; (b) arrest of the defendant and his detention in prison; (c) appointing a receiver for the management of the movable or immovable properties of the defendant. W.A.1032/2017 10 **28. Other modes of recovery** .- (1) Where a certificate has been issued to the Recovery Officer under sub-section (7) of section 19, the Recovery Officer may, 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 this section. (2) 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: Provided that nothing in this sub-section shall apply to any part of the amount exempt from attachment in execution of a decree of a civil court under section 60 of the Code of Civil Procedure, 1908 (5 of 1908). (3)(i) The Recovery Officer may at any time or from time to time, by notice in writing, require any person from whom money is due or may become due to the defendant or to any person who holds or may subsequently hold money for or on account of the defendant, to pay to the Recovery Officer either forthwith upon the money becoming due or being held or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount of debt due from the defendant or the whole of the money when it is equal to or less than that amount. (ii) A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of the defendant jointly with any other person and for the purposes of this sub-section, the shares of the joint holders in such amount shall be presumed, until the contrary is proved, to be equal. (iii) A copy of the notice shall be forwarded to the defendant at his last address known to the Recovery Officer and in the case of a joint account to all the joint holders at their last addresses known to the Recovery Officer. (iv) Save as otherwise provided in this sub-section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, bank, financial institution, or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like to be made before the payment is made notwithstanding any rule, practice or W.A.1032/2017 11 ## requirement to the contrary. (v) Any claim respecting any property in relation to which a notice under this sub-section has been issued arising after the date of the notice shall be void as against any demand contained in the notice. (vi) Where a person to whom a notice under this subsection is sent objects to it by a statement on oath that the sum demanded or the part thereof is not due to the defendant or that he does not hold any money for or on account of the defendant, then, nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the Recovery Officer to the extent of his own liability to the defendant on the date of the notice, or to the extent of the defendant's liability for any sum due under this Act, whichever is less. (vii) The Recovery Officer may, at any time or from time to time, amend or revoke any notice under this sub-section or extend the time for making any payment in pursuance of such notice. (viii) The Recovery Officer shall grant a receipt for any amount paid in compliance with a notice issued under this subsection, and the person so paying shall be fully discharged from his liability to the defendant to the extent of the amount so paid. (ix) Any person discharging any liability to the defendant after the receipt of a notice under this sub-section shall be personally liable to the Recovery Officer to the extent of his own liability to the defendant so discharged or to the extent of the defendant's liability for any debt due under this Act, whichever is less. (x) If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Recovery Officer, he shall be deemed to be a defendant in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realisation of the amount as if it were a debt due from him, in the manner provided in sections 25 26 and 27 and the notice shall have the same effect as an attachment of a debt by the Recovery Officer in exercise of his powers under section 25. (4) The Recovery Officer may apply to the court in whose custody there is money belonging to the defendant for payment to him of the entire amount of such money, or if it is more than the amount of debt due, an amount sufficient to discharge the amount of debt so due. W.A.1032/2017 12 (4A) The Recovery Officer may, by order, at any stage of the execution of the certificate of recovery, require any person, and in case of a company, any of its officers against whom or which the certificate of recovery is issued, to declare on affidavit the particulars of his or its assets. (5) The Recovery Officer may recover any amount of debt due from the defendant by distraint and sale of his movable property in the manner laid down in the Third Schedule to the Income-tax Act, 1961 (43 of 1961)." While Section 25 provides for modes of recovery of debts either by attachment and sale or arrest or appointment of a receiver, Section 28 provides for modes of recovery in addition to the ones specified in Section 25. A perusal of the aforesaid provisions cannot lead one to the conclusion that the same are arbitrary, unreasonable or without any guidelines. It is quite clear that in order to recover the debts, the recovery officer has to attach and sell the immovable property and that for protection and preservation of the same, he has the power to appoint a Receiver for the management thereof. 30. By virtue of Section 29 of the Act, the provisions of the Second and Third Schedules to the Income-tax Act, 1961 and the Income-Tax (Certificate Proceedings) Rules, 1962, have become applicable for the realisation of the dues by the Recovery Officer. Detailed procedure for recovery is contained in these schedules to the Income-Tax Act, including provisions relating to arrest and detention of the defaulter. It cannot, therefore, be said that the recovery officer would act in an arbitrary manner. Furthermore, Section 30, after amendment by the Amendment Act, 2000, gives a right to any person aggrieved by an order of the Recovery Officer, to prefer an appeal to the Tribunal. Thus now an appellate forum has been provided against any orders of the Recovery Officer which may not be in accordance with law. There is, therefore, sufficient safeguard which has been provided in the event of the Recovery Officer acting in an arbitrary or an unreasonable manner. The provisions of Sections 25 and 28 are, therefore, not bad in law.” W.A.1032/2017 13 10. That apart, the Hon'ble Supreme Court in various decisions held that writ petition cannot be entertained against proceedings under The Recovery of Debts and Bankruptcy Act, 1993. In the light of the above discussion and decision, we are not inclined to entertain instant writ appeal. Writ appeal is dismissed. ## **Sd/-** **S.MANIKUMAR CHIEF JUSTICE** DG **Sd/SHAJI P.CHALY JUDGE**