IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI
DATED THE 14th OCTOBER, 2005
PRESENT: HON’BLE MR. JUSTICE K. GNANAPRAKASAM
(IA-131/2003 in TA-144/2001: DRT-II, Chennai)
Smt. T. Padmavathy,
Wife of R. Tamilmani,
No.23, Josier Street,,
1. Western Exports India Pvt. Ltd.,
Rep. by its Managing Director
Mr. Jayakar A. Henry,
No.42, 3rd Street,
East Abhiramapuram, Chennai-4.
2. Indian Overseas Bank,
Esplanade Branch, Chennai.
Counsel for Appellant: Mr. V. Shanmugham
Counsel for 1st Respondent: Senior Advocate Mr. K.V. Venkatapathi representing Mr. K.S. Natarajan
Counsel for 2nd Respondent: Mr. F.B. Benjamin George
: O R D E R :
This is an Appeal filed by the Auction Purchaser.
1. That in respect of the amount due by the 1st Respondent to the 2nd Respondent, the 2nd respondent Bank namely, Indian Overseas Bank, instituted a Suit in the High Court of Madras, and the Suit was subsequently transferred to the DRT, Chennai, and the same was taken on file as TA-51/1997, and the said Application was decreed in favour of the Bank on 10.11.1997. As the 1st Respondent did not pay the decretal amount, Recovery Certificate was issued and the property of the guarantor was brought to sale in 2000. At that time, the 1st Respondent filed Writ Petition before the Madras High Court to set aside the Order of the Respondent Bank rejecting their request for settlement based upon the guidelines issued by the Reserve Bank of India (RBI) and for a direction to the Bank to implement the guidelines issued by the RBI. During the pendency of the Writ Petition, the High Court granted stay on condition that the 1st Respondent should deposit 25% of the decree amount and the same was not complied with. That thereafter, the property was brought to sale in the Public auction held on 22.1.2002, and the Appellant became the successful bidder and she had deposited a sum of Rs.20 lakhs as per the auction conditions. The 1st respondent filed Writ Petition before the High Court for stay of the confirmation of sale and the High Court by its Order dated 30.1.2002, granted stay on condition that the Writ Petitioner should deposit a sum of Rs.27 lakhs within a period of one week and the same was complied. The Auction purchaser impleaded herself in the Writ proceedings and filed an Application to vacate the interim stay and the High Court dismissed the vacate stay Petition on the ground no case made out and that the 1st Respondent have also complied with interim Order. The Auction Purchaser was given liberty to take back the amount deposited by her. However, during the pendency of the Writ proceedings, the 1st respondent settled the matter with the 2nd respondent Bank and wanted to withdraw the Writ Petition and the same was opposed by the Auction purchaser. Ultimately, the High Court by its Order dated 14.2.2003 had disposed of the Writ Petitions and Writ Miscellaneous Petitions by observing that, “It is for the Forum constituted under The Recovery of Debts Due to Banks & Financial Institutions Act, 1993, to decide all other controversies or other disputes in respect of the proceedings before it as well as subsequent auction sale and purchase and it is open to the parties to work out whatever remedies available to them in law in respect of the auction sale.” Based upon the said Order, the 1st respondent filed IA-130/2003 to stay all further proceedings in DRC No.123/2001 with the Recovery Officer-I, and IA-131/2003 to withdraw the Recovery Certificate issued in DRC-123/2001 and to dismiss the TA-144/2001 as settled. The Bank also filed a Memo dated 9.5.2003 for recording full satisfaction of the amount received, namely Rs.38 lakhs. The Ld. PO had taken that Memo on record and also recorded full satisfaction. DRC-123/2001 was also directed to be terminated. The Recovery Officer was also directed to terminate all further proceedings in DRC-123/2001. Aggrieved by the same, the Auction purchaser has preferred this Appeal.
Heard the Learned Advocate for the Appellant and Respondents.
2. The points for consideration that arises in this Appeal are :-
1) Whether the Presiding Officer of the DRT has power to recall the Recovery Certificate after having issued, on the ground that the matter was settled between the Creditor Bank and the Borrower.
2) Are not the Bank and the borrower/guarantor entitled to settle the matter after the issuance of the Recovery Certificate.
Points 1 & 2 :
3. The Ld. Advocate for the Appellant had straight away taken me to Section-26 of the RDDB&FI Act, 1993, which deals with validity of Certificate and amendment thereof, which runs as under :-
(1) It shall not be open to the defendant to dispute before the Recovery Officer the correctness of the amount specified in the certificate, and no objection to the certificate on any other ground shall also be entertained by the Recovery Officer.
(2) Notwithstanding the issue of a certificate to a Recovery Officer, the Presiding Officer shall have power to withdraw the certificate or correct any clerical or arithmetical mistake in the certificate by sending an intimation to the Recovery Officer.
(3) The Presiding Officer shall intimate to the Recovery Officer any order withdrawing or cancelling a Certificate or any correction made by him under sub-section (2).
Sub-clause (2) of Section-26 of the ‘Act’ empowers the Presiding Officer to withdraw the Certificate or correct any clerical or arithmetical mistake in a Certificate by sending an intimation to the Recovery Officer, and this could be done even after the issuance of the Certificate. As such, the power and authority of the Presiding Officer to withdraw the Recovery Certificate cannot at all be disputed. But the contention of the Appellant, that it could be withdrawn only to carry out the correction of any clerical or arithmetical mistakes in the Certificate and not for any other purpose. That in order to support his submission, the Appellant relied upon the case of Dwaraka Das, Appellant Vs. State of M.P. & Another, Respondents – (1999) 3 SCC 500. That Judgement deals with the powers of the Civil Court under Section-152 & 151 C.P.C. :-
“6. Section 152 CPC provides for correction of clerical or arithmetical mistakes in judgments, decrees or orders of errors arising therein from any accidental slip or omission. The exercise of this power contemplates the correction of mistakes by the court of its ministerial actions and does not contemplate of passing effective judicial orders after the judgment, decree or order. The settled position of law is that after the passing of the judgment, decree or order, the court or the tribunal becomes functus officio and thus being not entitled to vary the terms of the judgments, decrees and orders earlier passed.”
4. It is the contention of the Appellant that the Ld. PO after having passed an Order by issuing a Recovery Certificate to the Recovery Officer, has no right to recall or withdraw the said Certificate as he has become functus officio. The Appellant also relied upon the case of Premier Automobiles Ltd., Bombay, Appellant Vs. Kabirunissa & Others, Respondents – 1991 Supp (2) SCC 282. That case deals with the powers of the Civil Court under Order 47 Rule 27 only. In that case, “During the pendency of the appeal before the appellate court, an application for admitting additional evidence under Order 41, Rule 27, of the Code of Civil Procedure was filed by the appellants, which remained undisposed of. Even while pronouncing its judgement disposing of the appeal finally, the appellate court did not advert to it. It was only after the case was disposed of that the application for additional evidence was rejected by a short order, observing that the appellants had sufficient opportunity to produce the documents in the trial court, and it had failed to do so.” In those circumstances, it was held that after the Appeal had been finally disposed of, the Appellate Court had become functus officio. Appellant also relied upon the case of Hari Singh Mann, Appellant Vs. Harbhajan Singh Bajwa & Others, Respondents – (2001) 1 SCC 169. That case arose under Criminal proceedings and the same has no relevance to the facts of our case. Appellant also relied upon the case of State of Punjab, Appellant Vs. Darshan Singh, Respondent – (2004) 1 SCC 328, which deals with the power of the Court under Section 152 of the C.P.C. The Appellant also relied upon the case of Subhadra Ranipal Choudhary, Appellant Vs. Sheirly Weigal Nain & Others, Respondents – (2005) 5 SCC 230, which is of no help to decide the issue involved in this matter. Appellant also relied on the case of Babu Khan & Others, Appellants Vs. Nazim Khan (Dead) By LRs & Others, Respondents – (2001) 5 SCC 375. The facts in the said case deal with regard to the dispossession of a tenant and it has no application to the case on hand. The Appellant also relied upon the case of Union of India & Another, Appellants Vs. Paras Laminates (P) Ltd., Respondent – (1990) 4 SCC 453, which deals with the powers of the Administrative Tribunals Act, 1985, and also the precedents. It was observed, “There is no doubt that the Tribunal functions as a court within the limits of its jurisdiction. It has all the powers conferred expressly by the statute. Furthermore, being a judicial body, it has all those incidental and ancillary powers which are necessary to make fully effective the express grant of statutory powers. Certain powers are recognised as incidental and ancillary, not because they are inherent in the Tribunal, nor because its jurisdiction is plenary, but because it is the legislative intent that the power which is expressly granted in the assigned field of jurisdiction is efficaciously and meaningfully exercised. The powers of the Tribunal are no doubt limited. Its area of jurisdiction is clearly defined, but within the bounds of its jurisdiction, it has all the powers expressly and impliedly granted. The implied grant is, of course, limited by the express grant and, therefore, it can only be such powers as are truly incidental and ancillary for doing all such acts or employing all such means as are reasonably necessary to make the grant effective.” This decision supports the case of the 1st Respondent.
5. Mr. V. Shanmugham, the Learned Advocate for the Appellant has further vehemently contended that the 1st Respondent is not an aggrieved person and, therefore, he is not entitled to set aside the sale and he relied upon Rule-60 of the Second Schedule to the Income-tax Act, 1961, which states -
“(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.”
6. To sustain his submission, he relied upon the case of Thammanna, Appellant Vs. K. Veera Reddy & Others, Respondents - 1980 (4) SCC 62. That case arises out of an election petition wherein the Hon’ble Supreme Court discussed about the definition of the person aggrieved who is entitled to challenge the validity of an election. But in our case, the rule is clear that the defaulter or any person whose interest is affected can file an application to set aside the sale. The Borrower the 1st Respondent is not only the defaulter but also the person, whose interest is affected and hence the Petition is maintainable. Appellant also relied upon the case of Bar Council of Maharashtra, Appellant Vs. M.V. Dabholkar & Others, Respondents – (1975) 2 SCC 702. That case arose in respect of disciplinary proceedings taken by the Bar Council of the State, and the same is of no help to the Appellant.
7. The Appellant further submitted that usually the Court’s sale should not be set aside and if it is to be set aside, fresh sale should be for more price than the original price and if ultimately the auction sale is set aside, the auction purchaser is entitled to claim interest @ 18% p.a. on the amount deposited by him towards purchase of the land and relied upon the case of Motors & Investments Ltd., Appellant Vs. New Bank of India & Others, Respondents – (1997) 11 SCC 271, wherein the Apex Court accepted the argument submitted on behalf of the Appellant in that case that the auction purchaser should be suitably compensated and had observed, “In the event of any subsisting liability against the estate of Respondents 2 and 3, to discharge any debts, it may be open to the official assignee to bring such part of the properties which may be sufficient to discharge the liability, to sale by public auction either by inviting tenders or through appropriate procedure under Order 21 of the CPC and then to conduct the sale in accordance therewith. In case the official assignee has kept Rs.77,500/- in any interest-earning security, the principal amount together with interest is directed to be refunded to the appellant. In case the amount was not kept in any deposit and was used to discharge outstanding debt due by Respondents 2 and 3, the appellant is entitled to get interest at 18% per annum on the amount deposited by the appellant and the sale should be so conducted keeping in view the interest liability. From the amount secured by sale, apart from discharging the liabilities fastened on the lands, the interest also should be repaid to the appellant from the date of the deposit till date of repayment to the appellant.” The Appellant has advanced this argument on the ground that if for any reason this Tribunal is not accepting the argument advanced on behalf of the Appellant on all aspects or other aspects, the Appellant is entitled to have the return of the deposit amount together with interest @ 18% p.a. from the date of deposit.
8. Per contra, Mr. K.V. Venkatapathi, the Learned Senior Advocate representing the 1st Respondent submitted that the auction in this case was held on 22.1.2002 and the said auction was stayed by the High Court of Madras by its Order dated 30.1.2002 made in WMP No.2474/2002 in WP No.21744/2000, on condition that the 1st respondent borrower should deposit a sum of Rs.27 lakhs and the said condition was complied with by the borrower and the Application filed by the Appellant to vacate the stay was dismissed as the 1st Respondent had complied with the Interim Order of the High Court by its Order dated 28.2.2002. The High Court gave liberty to the Appellant herein to take back the amount deposited by her (Emphasis supplied). Then the matter was posted before the very same Learned Judge (Justice K. Sampath) for being mentioned on 5.3.2002, and the Ld. Judge had observed, “Interim Order already granted is to continue. It is open to the parties to move the learned Judge (Justice P.K. Misra) for any relief they want.” That thereafter, the final hearing of the matter was taken up and disposed of by the High Court (Justice E. Padmanabhan) by its Order dated 14.2.2003, directed the parties to work out the remedy before the appropriate forum and also declined to examine the validity or invalidity of the auction sale or as to whether the certificate of recovery still survives or what is the effect of auction sale and what right has accrued to the auction purchaser or whether the Writ Petitioner (1st Respondent) could avoid the auction sale already been conducted by leaving open all these things to be agitated by either of the parties under the RDDB&FI Act, 1993. Based upon the said observation only, the 1st respondent filed IAs 130 & 131 of 2003, to stay all further proceedings in DRC-123/2001 and also to withdraw the Recovery Certificate issued in DRC-123/2001. It is the contention of the Ld. Advocate for the 1st Respondent that though the Appellant who is the Auction purchaser, had deposited a sum of Rs.20 lakhs on the date of auction, he has not chosen to comply with Rule-57 & 58 in Part-III of the Second Schedule to the Income-tax Act, 1961, which is applicable to the sale under the RDDB&FI Act. Rule-57 Sub-rule (1) states, “On every sale of immovable property, the person declared to be the purchaser shall pay, immediately after such declaration, a deposit of twenty-five per cent, on the amount of his purchase money, to the officer conducting the sale; and, in default of such deposit, the property shall forthwith be re-sold.” Sub-rule (2) states, “The full amount of purchase money payable shall be paid by the purchaser to the Tax Recovery Officer on or before the fifteenth day from the date of the sale of the property.”
9. It is further pointed out that though the Appellant had complied with Sub-clause (1) of Rule-57, but has not complied with Sub-clause (2) of Rule-57. When the Auction purchaser has not complied with Sub-clause (2) of Rule-57, then Rule-58 has got to be invoked which states, “In default of payment within the period mentioned in the preceding rule, the deposit may, if the Tax Recovery Officer thinks fit, after defraying the expenses of the sale, be forfeited to the Government, and the property shall be re-sold, and the defaulting purchaser shall forfeit all claims to the property or to any part of the sum for which it may subsequently be sold.” Pointing out these relevant Rules, it is argued that the Appellant has not chosen to comply with these Rules and, therefore, the Appellant has no locus standi to ask for the confirmation of the sale. The Appellant during the course of his argument has submitted that he was prevented from paying the balance of the sale consideration as required under Sub-clause (2) of Rule-57, as there was a stay granted by the High Court and the said argument was shattered by the Ld. Advocate for the 1st Respondent that there was no specific Order of the Court preventing the Auction purchaser from depositing the balance of the sale consideration as required under Sub-clause (2) of Rule-57. As the Appellant failed to deposit the balance of the sale consideration, the sale itself is wiped out and the Appellant has no locus standi to complain of anything. The 1st Respondent is inspired to state so by relying upon the case of Manilal Mohanlal Shah & Others, Appellants Vs. Sardar Sayed Ahmed Sayed Mahmad & Another, Respondents – AIR 1954 S.C. 349, wherein it was held :–
“(11). Having examined the language of the relevant rules and the judicial decisions bearing upon the subject, we are of the opinion that the provisions of the rules requiring the deposit of 25 per cent of the purchase money immediately, on the person being declared as a purchaser and the payment of the balance within 15 days of the sale are mandatory and upon non-compliance with these provisions, there is no sale at all. The rules do not contemplate that there can be any sale in favour of a purchaser without deposing 25 per cent of the purchase money in the first instance and the balance within 15 days. When there is no sale within the contemplation of these rules, there can be no question of material irregularity in the conduct of the sale. Non-payment of the price on the part of the defaulting purchaser renders the sale proceedings as a complete nullity.”
Hence it is made clear that the non-payment of the balance of the sale consideration within 15 days from the date of Auction makes the sale invalid and the same is wiped out.
It is, therefore, submitted that there is no sale at all in favour of the Appellant as contended by her and, therefore, all submissions made on behalf of the Appellant has to be rejected.
10. It is further argued that the Appellant is not at all entitled to claim interest @ 18% p.a. on the amount deposited by her. But on the other hand, as the Appellant defaulted in paying the balance of the sale consideration within the stipulated time as required under Sub-clause (2) of Rule-57, the expenses incurred in bringing the sale have got to be defrayed in and out of the amount deposited by her and the same may be forfeited to the Government. The defaulting purchaser shall forfeit all claims to the property or to any part of the sum for which it may be subsequently sold. When the Rule is so clear, the Appellant cannot at all claim interest. The 1st Respondent has further pointed out that when the High Court confirmed the Interim Order granted by it on 28.2.2002, by dismissing the vacate stay Petition filed by the Appellant it observed, “It is open to the petitioner in the vacate stay petition to take back the amount stated to have been deposited by him.” This Order was passed on 28.2.2002. The Appellant could have withdrawn the amount or could have requested the DRT to deposit the said amount in an interest earning account. When this Tribunal put a question to the Appellant whether the said amount was invested in interest earning deposit, he pleads ignorance and so with the Respondent also. When especially the High Court gave the liberty to the Appellant to withdraw the amount, no purpose could be achieved at this distance of time stating that there was an interim stay by the High Court and, therefore, the Appellant was prevented from depositing the balance amount and she did not incline to withdraw the amount in spite of the Order of the High Court. After all, the property brought to sale is the property of the Borrower the 1st respondent, and it has got every right to settle the matter with the creditor Bank and retain the property by discharging the debt due to the Bank. It does not lie in the mouth of the Appellant to say that the Borrower and the Bank are not entitled to settle the matter after the issuance of the Recovery Certificate. In fact, settlement is possible at any stage of the proceedings, if the creditor and debtor agrees within permissible limits and the Auction purchaser, who is a third party cannot put any hurdle to the same.
11. At this juncture, the Ld. Advocate for the 2nd Respondent Indian Overseas Bank has submitted that the Appellant has misconceived everything and the settlement was done as per the then existing Rules and the settlement by the borrower is always a welcomable feature and the Banks cannot close their doors for settlement and, therefore, unnecessary mud-sling is being thrown on the Bank stating that the Bank and the Borrower have colluded in settling the matter, which is unwarranted and the Appellant’s contentions are baseless.
12. I have carefully considered the arguments and rival arguments of the Appellant and the Respondents. It is not in dispute that the Appellant is the successful bidder in the Auction held on 22.1.2002 and had deposited a sum of Rs.20 lakhs on the date of auction itself. It is also not in dispute that the Appellant had not deposited the balance of the sale consideration within 15 days from the date of sale of the property as required under Sub-rule (2) of Rule-57, Part-III of the Second Schedule to the Income-tax Act, 1961. No doubt, the 1st respondent had obtained an Order of stay of the auction from the High Court on 30.1.2002 and the said interim Order was granted on condition and the said condition was also complied with by the 1st respondent and the Petition filed by the Appellant to vacate that interim Order was also dismissed. The High Court granted liberty to the Appellant to withdraw the amount deposited and she could have done it or at least she could have requested the DRT to deposit the said amount in interest earning account and she has not chosen to do so. When the Writ Petition filed by the 1st respondent was finally disposed of, the Appellant had raised several issues before the High Court with regard to the validity or invalidity of the auction sale, about the validity of the Recovery Certificate issued and also the rights of the auction purchaser and all those issues have been addressed by the DRT and on perusing the Order passed by the DRT, I am of the considered view that the Order passed by the DRT, that as the amount has been settled by the borrower with the Bank by a compromise, nothing survives in the TA to be executed and the Recovery Certificate issued in pursuance of the said decree was terminated by holding that Recovery Certificate issued is unexecutable and all the proceedings under the Recovery Certificate stands terminated. I am of the view that the DRT has power to recall Recovery Certificate even after its issuance on the ground that the matter was settled between the creditor Bank and the Borrower/guarantor. As such, the Order passed by the DRT-II, Chennai, does not suffer from any infirmity which requires interference by this Tribunal.
13. In the result, the Appeal is dismissed. But however, the Appellant is permitted to withdraw the amount deposited by her. Though the Appellant claimed interest @ 18% p.a., she is not entitled to the said claim, as the High Court gave liberty to withdraw the amount, way back in 2002 itself. But however, taking note of the prevailing rate of interest on the loan advanced by the Banks, I order that the Appellant shall be entitled to claim interest @ 6% p.a. from the date of deposit till the date of realisation and recover from the 1st Respondent. If the amount had been deposited in interest earning Account and any interest is payable on the deposit of the Appellant, the said amount shall be deducted in and out of the amount payable by the 1st Respondent as ordered above. No cost.
(Dictated to PS, transcript corrected, order pronounced & signed by me in the open court today 14 .10.2005)
[ JUSTICE K. GNANAPRAKASAM ]