M/S West India Steel Company Limited v. State of Kerala and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** ## **THE HONOURABLE MR.JUSTICE ANTONY DOMINIC** ## **MONDAY, THE 8TH DAY OF APRIL 2013/18TH CHAITHRA 1935** ## **WP(C).No. 33784 of 2011 (W)** **----------------------------** ## **PETITIONER :** **--------------------** **M/S.WEST INDIA STEEL COMPANY LIMITED A COMPANY INCORPORATED UNDER INDIAN COMPANIES ACT 18/849, C.KURIYAL LANE, P.V.SWAMI ROAD CHALAPPURAM, KOZHIKODE - 673 002 REPRESENTED BY ITS PRESENT DIRECTOR MR.P.V. ALI MUBARAK, S/O.LATE ALAVIKUTTY** **BY ADVS.SRI.N.M.MADHU SMT.C.DEVIKA RANI KAIMAL SMT.C.S.RAJANI** **RESPONDENT(S) : ----------------------------** ## **1. THE STATE OF KERALA,** **REPRESENTED BY ITS SECRETARY TO THE DEPARTMENT OF REVENUE, GOVERNMENT SECRETARIAT THIRUVANANTHAPURAM - 695 001** **2. THE DISTRICT COLLECTOR, CIVIL STATION, KOZHIKODE DISTRICT,** **KOZHIKODE - 673 020** **3. THE DEPUTY TAHSILDAR, REVENUE RECOVERY, KOZHIKODE TALUK, KOZHIKODE - 673 001** **4. THE ASSISTANT COMMISSIONER (ASSESSMENT) II, SALES TAX OFFICE, SPECIAL CIRCLE-I KOZHIKODE - 673 001** **R1 TO R4 BY SR. GOVT. PLEADER SRI. JOSEPH GEORGE** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 08-04-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **Mn** **...2/-** ## **WP(C).No. 33784 of 2011 (W)** ## **APPENDIX** ## **PETITIONERS' EXHIBITS :** **EXT.P1 TRUE COPY OF THE ASSESSMENT ORDER DATED 15.11.1997 PASSED BY THE FOURTH RESPONDENT.** - **EXT.P2 TRUE COPY OF THE ORDER IN APPEAL DATED 15.10.2008 PASSED BY THE DEPUTY COMMISSIONER(APPEALS)** - **EXT.P3 TRUE COPY OF THE MODIFIED ASSESSMENT ORDER DATED 23.12.2008 PASSED BY THE FOURTH RESPONDENT.** - **EXT.P4 TRUE COPY OF THE SALE NOTICE IN FORM 16.** - **EXT.P5 TRUE COPY OF THE RECEIPT DATED 25.08.2008 EVIDENCING PAYMENT BY THE PETITIONER.** - **EXT.P6 TRUE COPY OF THE REFUND ORDER DATED 22.04.2009** **EXT.P7 TRUE COPY OF THE REFUND PAYMENT ORDER DATED 24.04.2009 ISSUED BY THE FOURTH RESPONDENT.** - **EXT.P8 TRUE COPY OF THE REPRESENTATION DATED 28.12.2009 SUBMITTED BY THE PETITIONER TO THE SECOND RESPONDENT.** - **EXT.P9 TRUE COPY ORDER OF CONFIRMATION OF SALE DATED 18.12.1999. EXT.P10 COPY OF THE DEMAND DRAFT DATED 6.2.2012. EXT.P11 COPY OF THE LETTER DATED 6.2.2012. EXT.P12 COPY OF THE RELEVANT PAGE OF THE LETTER DELIVERY BOOK. RESPONDENTS' EXHIBITS : NIL** **//TRUE COPY//** **P.A. TO JUDGE** ## **Mn** ## **ANTONY DOMINIC,J -------------------------------W.P.(C) No.33784 of 2011** **------------------------------------Dated this the 8[th] day of April, 2013** ## **JUDGMENT** Heard the learned counsel for the petitioner and the learned Government Pleader appearing for the respondents. 2. Petitioner Company was a dealer under the KGST Act. Ext.P1 is an assessment order passed against the petitioner on 15.11.1997. This assessment order is in relation to the year 1993-1994 and the tax liability of the petitioner was assessed at Rs.3,75,752.80/-. Although the petitioner was pursuing the statutory remedies, taking advantage of the absence of stay order, the respondents continued the recovery action and 27 cents of land belonging to the petitioner was proceeded against in pursuance to Ext.P4 notice issued on 16.06.1999. Finally, the property was auctioned on 20.07.1999 and was taken over by the Government as bought-in-land. W.P.(c) No.33784 of 2011 : 2 : Ext.P9 proceedings show that the Revenue Divisional Officer confirmed the sale on 18.12.1999. 3. Subsequently, after various rounds of litigation, the appellate authority passed Ext.P2 order dated 15.10.2008, remanding the matter to the assessing authority for passing fresh orders as directed therein. According to the petitioner, while the matter stood thus, the respondents initiated revenue recovery action for recovery of the balance amount due and accordingly by Ext.P5 dated 25.08.2008, the petitioner remitted Rs.9,28,899/- in settlement of the tax liability for the assessment year 1993-1994. After this remittance was made by the petitioner, the assessing authority passed Ext.P3 order dated 23.12.2008, holding that the tax due from the petitioner for the assessment year in question was Rs.1,45,662/- and that after appropriating the said amount from the payments made by the petitioner, the petitioner was entitled to be refunded Rs.9,31,745/-. W.P.(c) No.33784 of 2011 : 3 : Accordingly, Ext.P6 refund order was issued and Ext.P7 refund repayment order was also issued on 24.04.2009. Subsequently, the petitioner submitted Ext.P8 application dated 28.12.2009 to the second respondent requesting for reconveyance of the property to them. Orders were not passed and therefore, the petitioner has filed this writ petition. 4. Heard the learned Government Pleader. According to the learned Government Pleader, if the petitioner was aggrieved by Ext.P9 order of the RDO confirming the sale in favour of the State, their remedy was to file a revision under Section 83 of the Revenue Recovery Act. This was not done by the petitioner and that therefore, the writ petition is not maintainable. The second contention raised by the learned Government Pleader is that the Government have already issued orders regulating the manner in which claims for reconveyance of bought-in-lands should be made and W.P.(c) No.33784 of 2011 : 4 : dealt with. According to him, bought-in-land can be reconveyed to the defaulter if he makes an application in that behalf within two years and pays the amount due together with interest. It is also stated that subsequently, the Government have issued order dated 01.03.2013, directing that such defaulters can seek reconveyance of a maximum of one acre of land if application is made within five years of confirmation and on payment of market value. It is stated that Ext.P9 was issued on 18.12.1999 and Ext.P8 application for reconveyance was made by the petitioner only on 28.12.2009. This according to the learned Government Pleader is belated and therefore, cannot be allowed. The learned Government Pleader also placed reliance on the judgment of this Court in **Ashok Kumar v. State of Kerala(2012(2) KLT 164)** , where it was held that settlement of liability in an amnesty scheme does not result in upsetting of sale of the property of the defaulter and will not entitle the defaulter to claim W.P.(c) No.33784 of 2011 : 5 : reconveyance of the property. 5. I have considered the submissions made. 6. Admittedly, the property of the petitioner was proceeded against and was taken over as bought-in-land. This was on the basis of Ext.P1 assessment order dated 15.11.1997 and as per this order, the petitioner's liability was quantified at Rs.3,75,752.80/-. This liability of the petitioner got reduced to Rs.1,45,662/- in Ext.P3 revised assessment order. In that order, after appropriating the amount due and interest thereon and Rs.9,31,745/already realized from the petitioner was ordered to be refunded to them. This therefore, shows that he liability for the recovery of which, auction was conducted on 20.07.1999 was an assumed liability of the petitioner and that liability got revised and reduced with Exts.P2 and P3 orders passed by the appellate authority and the assessing officer himself. W.P.(c) No.33784 of 2011 : 6 : 7. The question in such a case is whether the assessee can be deprived of his land even after he has settled the liability by paying the amount due. In my view, the answer should be in the negative, because the assessee did not have the liability for the recovery of which the sale was conducted and the balance liability has also been settled by the assessee. This view I have taken is supported by the principles laid down by the Apex Court in its judgment in **Mohan Wahi v. Commissioner, Income Tax, Varanasi and others (2001(4) SCC 362)** where in paragraphs 7 to 11, it was held thus: _“7. Taking up first question the first, according to S.222 where an assessee is in default or is deemed to be in default in making a payment of tax, the Tax Recovery Officer may issue a certificate specifying the amount of arrears due from assessee and shall proceed to recover from such assessee the amount so specified by one or more of the modes which include attachment and sale of the assessee's immovable properties. The Second Schedule sets_ W.P.(c) No.33784 of 2011 : 7 : _out the procedure for recovery of tax. We will refer to some of the rules contained in the Second Schedule and relevant for our purpose. Rules regarding attachment and sale of immovable property are contained in Part III of Second Schedule. Rule 56 provides that the sale shall be by public auction to the highest bidder and shall be subject to confirmation by the Tax Recovery Officer. Several provisions contained in the rules which follow Rule 56 are in pari materia with the provisions dealing with attachment and sale of immovable property contained in Order 21 of the C.P.C. dealing with execution of decrees passed by civil Courts. However, in Order 21 of the C.P.C., a provision similar to Rule 56 of Second Schedule is not to be found. Rule 60 provides for an application to set aside sale of immovable property being made by defaulter or an interested person on his depositing the specified amount within 30 days from the date of sale. Rule 61 deals with application to set aside sale of immovable property on the ground of nonservice of notice on the defaulter under the Schedule or on the ground of material irregularity in publishing or conducting the sale. Under Rule 62 a sale may be set aside on an application by the purchaser on the ground that the defaulter_ W.P.(c) No.33784 of 2011 : 8 : _had no saleable interest in the property sold. The prescribed time limit within which the application can be made under Rule 60,61 or 62 is 30 days from the date of sale. Where no application is made for setting aside the sale or such an application having been made is disallowed, the Tax Recovery Officer shall make an order confirming the sale and thereupon the sale shall become absolute. On a sale or immovable property becoming absolute, a sale certificate shall be issued under Rule 65._ _8. Under S.224, an assessee cannot dispute the correctness of any certificate drawn up by the Tax Recovery Officer but it is lawful for the Tax Recovery Officer to cancel the certificate for any reason if he thinks it necessary to do so or to correct any clerical or any arithmetical error therein. Sub-sec.(3) of S.225 provides as under :-_ _225. Stay of proceedings in pursuance of certificate and amendment or cancellation thereof._ _xxx xxx xxx_ _(3) Where a certificate has been drawn up and subsequently the amount of the outstanding demand is reduced as a result of an appeal or other proceeding under this Act, the Tax_ W.P.(c) No.33784 of 2011 : 9 : _Recovery Officer shall, when the order which was the subject-matter of such appeal or other proceeding has become final and conclusive, amend the certificate, or cancel it, as the case may be._ _9. The term 'reduced' in sub-sec.(3) of S.225 would include a case where the demand consequent upon an appeal or any proceedings under the Income-tax Act has been reduced to (nil) also. The Tax Recovery Officer is obliged to give effect to such reduction in demand and accordingly amend or cancel the certificate. The scheme of Part III of Second Schedule indicates that the sale proceedings terminate on their becoming absolute whereafter all that remains to be done is the issuance of sale certificate. However, an order confirming the sale by the Tax Recovery Officer is a must. The efficacy of the sale by public auction in favour of the highest bidder has been made to depend on the order of confirmation by the Tax Recovery Officer by incorporating Rule 56 in the Schedule. It is true that ordinarily if there is no application filed for setting aside sale under Rules 60,61 or 62 and 30 days from the date of the sale have expired, the Tax Recovery Officer has to make an order confirming a sale. Nevertheless, an order shall_ W.P.(c) No.33784 of 2011 : 10 : _have to be actually made. The combined effect of sub-sec.(3) of S. 225 of the Act and Rule 56 and Rule 63 of Second Schedule is that if before an order confirming the sale is actually passed by the Tax Recovery officer, the demand of tax consequent upon an order made in appeal or other proceedings under the Act has been reduced to nil, the Tax Recovery Officer is obliged to cancel the certificate and as soon as the certificate is cancelled, he shall have no power to make an order confirming the sale. The sale itself being subject to confirmation by the Tax Recovery Officer, would fall to the ground for want of confirmation._ _10. In the case at hand the sale was held on 111-1980. No application was filed for setting aside the sale either by the assessee or by the auction purchaser or by anyone interested in the property. On expiry of 30 days from the date of the sale the Tax Recovery Officer could have passed an order confirming the sale. However, the Tax Recovery Officer was injuncted by the writ of civil Court from confirming the sale. The interim order issued by the civil Court ceased to operate on 12-1-1998 whereafter an order of confirmation was passed on 25-3-1998 by the Tax Recovery Officer ignoring, or unmindful of,_ W.P.(c) No.33784 of 2011 : 11 : _the important event which had taken place in between. Before 25-3-1998, the demand against the assessee admittedly stood reduced to nil. This fact was in the notice of Income-tax Officer as well as the Commissioner of Income Tax. Attention of the Income-tax Officer as also the Tax Recovery Officer was also invited by the firm M/s. UPCC through its communication dated 2211-1996 (Annexure P-6). On 16-1-1997, the counsel for the assessee had specifically called upon the Income Tax Officer who had raised the demand against the assessee to confirm if all the recovery certificates issued against the assessee firm had stood withdrawn or cancelled. In view of the facts within the knowledge of the department and the communications so made, the Tax Recovery Officer could not have confirmed the sale on 25-3-1998. Rule 56 in Second Schedule of the Income-tax Act, 1961 is neither a redundant nor a formal provision. It casts an obligation on the Tax Recovery Officer to pass an order confirming the sale consciously and with due application of mind to the relevant fact relating to sale by public auction which is to be confirmed. Under Rule 63, confirmation of sale is not automatic. An order confirming the sale is contemplated to make the sale absolute._ W.P.(c) No.33784 of 2011 : 12 : _Ordinarily,in the abence of an application under Rule 60,61 or 62 having been made or having been rejected if made, on expiry of 30 days from the date of sale the Tax Recovery Officer shall pass an order confirming the sale. However, between the date of sale and the actual passing of the order confirming the sale if an event happens or a fact comes to the notice of the Tax Recovery Officer which goes to the root of the matter, the Tax Recovery Officer may refuse to pass an order confirming the sale. The fact that sale was being held for an assumed demand which is found to be fictitious or held to have not existed at all, in fact or in the eye of law, is one such event which would oblige the Tax Recovery Officer not to pass an order confirming the sale and rather annul the same. The High Court in our opinion, clearly fell in error in not allowing relief to the petitioner-appellant by setting aside the sale._ _11.Shri S.K. Jain, learned counsel for the auctionpurchaser,respondent No.3, referred to Janak Raj v. Gurdial Singh (1967)2 SCR 77 and Sardar Govindrao Mahadik v. Devi Sahai, AIR 1982 SC 989 wherein it has been held that once a sale has taken place in execution of a decree, the sale has to be confirmed notwithstanding the fact that_ W.P.(c) No.33784 of 2011 : 13 : _after the holding of the sale, the decree was set aside. In Janak Raj's case, sale was held in execution of an ex-parte decree. The ex-parte decree was set aside subsequent to the date of the sale but before an order confirming the sale was passed. This Court held that in the absence of an application for setting aside the sale having been moved on the grounds available under Rules 89 to 91 of Order 21 of C.P.C., the Court could not have refused to confirm the sale. However, in this case itself, this Court has observed (at page 80) that there may be cases in which apart (from the provisions of Rules 89 to 91 the Court may refuse to confirm a sale, as for instance, where a sale is held without giving notice to the judgment debtor, or where the Court is misled in fixing a reserved price or where there was no decree in existence at the time when the sale was held. In Sardar Govindrao Mahadik's case, Janak Raj's case was referred. The Court has drawn a distinction between a Court auction held in favour of a decree holder and where the auction purchaser is an outsider or a stranger. In former case on the decree ceasing to exist before the sale is confirmed, the sale may be refused to be confirmed but in the latter case, equity in favour of the stranger should be_ W.P.(c) No.33784 of 2011 : 14 : _protected and the judgment debtor should be left to suffer for the default on his part for not obtaining stay of the execution of the decree from where it was under challenge. Though the learned counsel for the auction purchaser has relied heavily on these decisions, suffice it to observe that these are the cases of auction sale held under Order 21 of the C.P.C. and, therefore, may not apply to the case of an auction sale held under Second Schedule of the Income-tax Act in view of Rule 56 contained therein. Moreover, in these decisions also, the Supreme Court has contemplated situations where in spite of the auction sale having been held and no application for setting aside the sale having been moved, yet in exceptional situation the sale may be refused to be confirmed and may be set aside. Shri S.K. Jain also relied on Padanthil Ruqmini Amma v. P.K. Abdulla (1996)1 JT (SC) 381, wherein this Court has observed that unless the auction purchasers were protected, the properties which are sold in Court auction would not fetch a proper price. It is true that sanctity of sale of property by public auction has to be protected but at the same time a citizen faced with proceedings for recovery of assumed arrears should not be deprived of his property in spite of judicial or_ W.P.(c) No.33784 of 2011 : 15 : _quasi judicial pronouncement holding, before the sale was confirmed, that there were no arrears. This observation applies a fortiori under the scheme of Income-tax Act, the relevant provisions whereof have already been referred to by us.”_ 8. This judgment was followed by this Court in the judgment in W.P.(c) No.20889 of 2011. 9. Insofar as the contention of the learned Government Pleader that the petitioner should have pursued the remedy of revision against Ext.P9 and having not done so, the writ petition is not maintainable, is concerned, it is the settled position of law that despite the availability of alternate remedy if a writ petition is admitted and kept pending, this Court should not later dismiss the writ petition on the ground of alternate remedy, which would have done, by then, become time barred. Therefore, I am not impressed by this contention of the learned Government Pleader. W.P.(c) No.33784 of 2011 : 16 : 10. Insofar as the Government orders relied on by the learned Government Pleader are concerned, those orders can have relevance only in cases where the property has been taken over by the Government as bought-in-land in a legal and valid manner. This Government order cannot apply to a case like the present one where the petitioner is sought to be deprived of their property without the authority of law. Therefore, this contention of the learned Government Pleader, cannot be accepted. In the result, the petitioner is entitled to succeed. The writ petition is allowed and Ext.P9 is set aside. The respondents shall reconvey to the petitioner 27 cents of land mentioned in Exts.P4 and P9, at any rate, within eight weeks of receipt of a copy of this judgment. Sd/- **ANTONY DOMINIC, JUDGE** ln