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MADRAS HIGH COURT
R. Banumathi and K.K. Sasidharan, JJ.
N. R. Sadasivam —Petitioner
versus
Indian Bank and Ors. —Respondents
W. P. Nos. 20208 and 20209 of 2012
Decided on 19.12.2012
IMPORTANT POINT
The proclamation by its very nature is a mandatory requirement in view of the language used by the law makers.
Headnote:Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Income-tax (Certificate Proceedings) Rules, 1962-Rules 52 to54-Auction sale-Writ petitions challenging Sale Notice and related Auction proceedings on the ground that before auctioning property, proclamation of sale was not issued by Recovery Officer-Second Schedule to the Income Tax Act contains a mandatory provision regarding issuance of proclamation of sale and details to be incorporated in such proclamation- Hence, it cannot be said that proclamation is only a ritual- The factual matrix clearly showed that Recovery Officer failed to follow the mandatory provisions of the Second Schedule to Income-tax Rules- When it is made out that Recovery officer being the officer of the Tribunal had committed material irregularity in the matter of sale, there was no question of relegating the petitioner to an alternative forum- These are not matters which should be decided on the basis of technicalities- The Bank should always welcome better offers- In case the proclamation is made with notice to the petitioner, Recovery Officer would be in a better position to know the actual value of the property and to indicate the correct upset price- Hence, held that impugned sale and consequential Auction proceedings were liable to be set aside- Recovery Officer directed to value the property once again and issue a Proclamation of Sale as provided under Second Schedule to the Income Tax Act and proceed afresh on merits and as per law-Writ petitions Allowed. (Paras 21 to 25)
K.K. Sasidharan, J.—These two writ petitions raises a short point of some importance relating to the relevance of proclamation in Auction Sale proceedings.
2. The writ petitions are at the instance of a borrower, and the challenge is to the sale notice dated 16th May 2012 in DRCD No. 36/2012 in O.A. No. 222/2010 on the file of Debt Recovery Tribunal II, Chennai, and the related auction proceedings dated 26th June 2012 on the file of the Recovery Officer, Debt Recovery Tribunal, Chennai.
The facts:
3. The Adyar Branch of India Bank granted financial assistance to M/s. Anbu Pazhamudir Nilayam, stated to be a Partnership Firm. The writ petitioner and respondents 3 & 4 were the partners of the said firm. The petitioner also executed a Guarantee Deed undertaking to pay the amount due from the Second Respondent besides mortgaging the subject property.
4. The second respondent filed to pay the loan amount and this resulted in initiating recovery proceedings by the Bank. The Bank filed O. A. No. 222 of 2010 before the Debt Recovery Tribunal II, Chennai [hereinafter referred to as the “Tribunal”). Though the petitioner was also a party to the proceedings, he has not chosen to appear before the Tribunal. The Tribunal was pleased to issue a Recovery Certificate for a sum of Rs. 7,99,09,385 authorizing the Bank to recover the said sum with interest. The petitioner challenged the order dated 28th December 2011 in O. A. No. 222 of 2010 before the Tribunal.
5. While so, the Recovery Officer initiated steps to auction the property mortgaged by the petitioner. The Recovery Officer initially attached the property and therefore issued an auction Notice dated 16th May 2012 indicating that the property would be auctioned on 26th June 2012. Accordingly, auction was conducted on 26th June 2012. The bid submitted by Mr. M. C. Kandasami and V. Saravanan for a sum of Rs. 65 lakhs was found to be the highest bid. The joint bidders have deposited a sum of Rs.16.25 lakhs being 25% of the bid amount. However, confirmation has not been issued.
6. The Sale Notice dated 16th May 2012 and the related Auction proceedings are challenged in this writ petition primarily on the ground that before auctioning the property, proclamation of sale was not issued by the Recovery Officer.
7. According to the petitioner, his statutory appeal challenging the order passed by the Tribunal was pending before the Debt Recovery Appellate Tribunal [hereinafter referred to as “the Appellate Tribunal”]. The Appeal was not numbered on account of the delay in re-presentation. While so, the Recovery Officer issued the impugned Sale Notice and thereafter conducted the Sale proceedings on 26th June 2012. It is the case of the petitioner that the mandatory provisions of the II Schedule to the Income Tax Act made applicable to the proceedings for recovery under the Recovery of Debts due to banks and Financial Institutions Act has not been complied with by the Recovery Officer. According to the petitioner, Rule 52 (2) of the II Schedule mandates that the Tax Recovery Officer shall cause a proclamation of the intended sale to be made in the language of the District before ordering sale of the immovable property. It was his further contention that the property would easily fetch Rs One crore and as such, the Recovery Officer was not justified in accepting the bid for Rs.65 lakhs without making earnest efforts to, obtain the correct value of the property.
8. The Chief Manager, A. R. M. branch, Indian Bank, filed a detailed Counter Affidavit disputing the claim made by the petitioner. According to the Bank, all the procedures laid down under II Schedule to the Income Tax Act were followed by the Recovery Officer in its letter and spirit and as such, no interference is called for in the proceedings in question. The Bank further contended that the sale Notification was published in Daily Thanthi and on account of wide publicity; several bidders participated in the auction proceedings. Acc
