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2009 Supreme(MP) 1236
MADHYA PRADESH HIGH COURT AT JABALBUR BENCH
Arun Mishra, S.Shrivastava, JJ.
Mohini Hardayal Singh - Appellant
Versus
Punjab and Sind Bank and Others - Respondent
W. P. No. 2199 of 2008
Decided On : 15-05-2009
For petitioner:Ravishankar Prasad, Senior Advocate with Rahul Shrivastava and Satish Agrawal, For respondent No.1:Wajid Haider, For respondent Nos.4 to 8:Rajesh Maindiratta, For respondent No.11: P.K.Agrawal
The sale of property without notice to the legal representatives is void and not merely voidable.
Headnote:
RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 - SECTION 31-A - APPLICABILITY - CERTIFICATE OF RECOVERY - ISSUANCE - NECESSITY - SECTION 60(1)(CCC) OF CIVIL PROCEDURE CODE - EXEMPTION OF RESIDENTIAL HOUSE FROM ATTACHMENT AND SALE - APPLICABILITY - NOTICE UNDER RULE 2 OF SCHEDULE II OF INCOME TAX ACT, 1961 - SERVICE - NECESSITY - SUBSTANTIAL INJURY - DETERMINATION.
Fact of the Case:
The petitioner, Smt. Mohini Hardayal Singh, challenged the judgment of the DRAT, Allahabad, which allowed the appeal filed by the auction purchaser and the bank against the order of the DRT, Jabalpur, setting aside the sale of her residential property situated at Panchsheel Park, New Delhi, in execution of a decree passed against her husband and others.
Finding of the Court:
The Court held that: 1. Notice under Order 21, Rule 22, Civil Procedure Code, was necessary for two reasons: (a) the execution was presented beyond four years, and (b) the judgment debtor, Hardayal Singh, had died on 17-11-1994, and the bank had filed execution on 13-9-1995, against the petitioner, her son, and daughter. 2. It was mandatory to follow the rules prescribed under the Second Schedule of the Income Tax Act, and non-compliance thereof made the order void. 3. The sale of the property without notice to the legal representatives was void and not merely voidable. 4. The petitioner was entitled to claim exemption under section 60(1)(ccc) of the Civil Procedure Code, as the property was her main residential house and was not mortgaged with the bank. 5. The DRAT was influenced by the observations made in the interim orders, which were not to be considered as adjudication on merits. 6. The sale could not be set aside without considering whether any substantial injury was caused to the petitioner, particularly in view of her claim for exemption under section 60(1)(ccc) of the Civil Procedure Code.
Issues: 1. Whether notice under Order 21, Rule 22, Civil Procedure Code, was necessary before the sale of the property? 2. Whether it was mandatory to follow the rules prescribed under the Second Schedule of the Income Tax Act? 3. Whether the sale of the property without notice to the legal representatives was void or merely voidable? 4. Whether the petitioner was entitled to claim exemption under section 60(1)(ccc) of the Civil Procedure Code? 5. Whether the DRAT was influenced by the observations made in the interim orders? 6. Whether the sale could be set aside without considering whether any substantial injury was caused to the petitioner?
Ratio Decidendi: The Court relied on the following principles: 1. Notice under Order 21, Rule 22, Civil Procedure Code, is mandatory when an application for execution is made more than two years after the date of the decree, or against the legal representative of a party to the decree, or where an application is made for execution of a decree filed under the provisions of section 44-A. 2. The provisions of the Second Schedule of the Income Tax Act are mandatory and non-compliance thereof makes the order void. 3. The sale of property without notice to the legal representatives is void and not merely voidable. 4. The main residential house is exempted from attachment and sale under section 60(1)(ccc) of the Civil Procedure Code, provided that the property is not specifically charged with the debt sought to be recovered. 5. Observations made in interim orders are not to be considered as adjudication on merits. 6. A sale cannot be set aside without considering whether any substantial injury was caused to the petitioner.
Final Decision: The Court allowed the writ petition, set aside the judgment of the DRAT, Allahabad, and the decision of the Presiding Officer, DRT, and remitted the case to the Presiding Officer, DRT, for further proceedings. The Presiding Officer was directed to inquire into the claim of exemption under section 60(1)(ccc) of the Civil Procedure Code and render a decision in accordance with law within six weeks from the date of completion of the inquiry.
JUDGMENT
Arun Mishra, J.:-
The instant writ petition has been preferred by Smt. Mohini Hardayal Singh aggrieved by the judgment delivered by DRAT, Allahabad on 1-2-2008 thereby setting aside the decision of Debts Recovery Tribunal, in the matter of sale of residential house situated at S-246, Panchsheel Park, New Delhi in execution of the decree passed against the husband of the petitioner and others.
2. Petitioner's case, in short, is that M/s Sterling Malt and Foods Pvt. Ltd. (hereinafter referred to as "the Company") manufactured malt from its factory located at 34, Industrial Area, Banmore, District-Morena (MP). Late Shri Hardayal Singh, husband of the petitioner and Shri N. S. Satyanarayan Rao were the Directors of the Company. Late Shri Hardayal Singh and his family resides at S-246, Panchsheel Park, New Delhi. Company availed financial facilities from Punjab and Sind Bank from its branches at Cannought Place, New Delhi and Jayendrganj, Gwalior. On land, factory buildings, plant and machinery situated at the factory premises charge of the bank was created and personal guarantees were submitted by the aforesaid guarantors. The property in question at Panchsheel Park, New Delhi was not mortgaged for the factory loan.
3. With respect to factory situated at Banmore, the malt manufacturing unit stopped functioning in 1983 and its accounts with Bank also became irregular. Bank had filed two civil suits, one in the Court of District Judge, Morena against the Company and its Directors Civil Suit No. 1-B/1987 for recovery of Rs. 3,84,29,670 with interest at the rate of 13.5% per annum (P.I) and a suit for approximately Rs. 21,00,000 with regard to the other loan availed of from the Bank's branch at Gwalior.
4. Hardayal Singh invited an outside investor to take over the Company along with its assets and liability by buying majority share holding therein so as to wipe off undischarged debts. Accordingly, L. K. Trust of Banglore acquired substantial control and management of the Company. L. K. Trust did not pay any consideration to existing Company, Promoter was to wipe off debt of bank, proposal for revival was submitted. Bank accepted the above proposal with few modifications. Various security documents were got executed by the trust and its trustees in favour of the bank including personal guarantees of two trustees. The bank amended the suit registered as Civil Suit No. 26-A/1999 in the District Court, Morena. The trust and trustees were impleaded as party/defendant. Compromise application (P.6) was filed in the aforesaid civil suit at Morena. The Company together with the trust and the trustees became liable to pay a sum of Rs. 1.80 crores in half yearly instalments during the period of seven years commencing from December, 1991. It was stated in the decree that property situated at Panchsheel Park has been released from the charge though it was infact not mortgaged with the Bank. Civil Suit No. 60-B/1988 pending at District Court, Gwalior was also compromised. The property at Delhi was charged against personal loan obtained at Delhi which has been paid. Bank has issued no dues certificate.
5. Trust paid to the bank an aggregate sum of Rs. 82,00,000 from 17-9-1992 to 19-9-1998, still the possession was not handed over as per compromise. Consequently, the trust stopped the instalments and bank filed execution proceedings in District Court, Morena, M. P. in the year 1995.
6. Late Shri Hardayal Singh passed away on 17-11-1994 after prolonged illness. He executed a Will in favour of Mohini Hardayal Singh.
7. In execution case at Morena at the first instance the bank had impleaded the petitioner and her son and daughter as judgment debtors along with trust and trustees being judgment debtors 5 to 10. The execution was filed after four years of passing of decree. In the execution case at Morena petitioner and her son and daughter were not served. Prayer was made before the District Court, Morena to attach the property situated at Panchsheel
