Rule 68B of the Income Tax Act does not apply to recovery proceedings under the RDDB Act; enforcement is governed by the Limitation Act's provisions.

Headnote:(A) Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Applicability of Rule 68B of the Second Schedule to the Income Tax Act, 1961 - The court held that Rule 68B is not applicable in recovery proceedings under the RDDB Act; instead, the limitation period for recovery shall follow Article 136 of the Limitation Act, 1963 - Dismissal of borrower applications and allowance of Bank's claims were justified, confirming the separation of provisions under both Acts. (Paras 24.2, 24.1)

(B) The concept of 'as far as possible' in S. 29 of the RDDB Act indicates flexibility in application of Income Tax provisions, but does not allow avoidance of mandatory compliance - Recovery Officers must adhere to the law without arbitrary discretion. (Paras 18.1)

(C) The enforceability of recovery certificates is maintained, provided actions are taken within prescribed limitations, reinforcing the principle that recovery within these limits is both lawful and necessary. (Paras 10.2)

(D) The court determined that further enforcement actions on the basis of expired recovery certificates are invalid, thereby protecting the rights of borrowers against unjust recovery actions. (Paras 14-15)

JUDGMENT

[OP (DRT) Nos.446/2023, 394/2022, 517/2023 W.P.(C) Nos.3943/2023, 9592/2021, 6793/2018]

Heard Mr George Thomas Mevada (Sr) assisted by Mr Amal Geroge, Mr E K Nanda Kumar (Sr) assisted by Ms Ramola N, Mr George Poonthottam (Sr) assisted by Mr R Sunilkumar, Mr Manu Ramachandran, Mr Peer Mohamed Khan, learned Counsel for the petitioners, and Mr Jawahar Jose, Mr Varghese Cherian, Mr Sunil Sankar, Mr P Chandrasekhar, Sri Madhu Radhakrishnan learned Counsel for the respondents.

2. The common question that arises for consideration in these petitions is whether the provisions of Rule 68B of the Second Schedule to the Income Tax Act 1961 have been made applicable to proceedings for recovery of amounts determined as payable to a Bank/Financial Institution under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, ‘RDDB Act’) prohibits the proceedings from continuing beyond the period prescribed in that Rule.

2.1 Almost common questions of law and facts are involved in these petitions. Therefore, these petitions are being decided by this common judgment. The brief facts of each case are stated hereunder:

Facts

W.P.(C) No.6793/2018

3. The petitioner is a public-sector Bank constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970. The 2^nd and 3^rd respondents were the guarantors for loans obtained by one M/s Excellent Trading Company from the petitioner. Certain properties of these respondents were provided as security by way of mortgage. M/s Excellent Trading Company defaulted in the repayment of these loans which led to the initiation of proceedings against it as well as the 2^nd and 3^rd respondents by the petitioner under the RDDB Act. The petitioner filed O.A. No.47/2013 before the Debts Recovery Tribunal, Ernakulam, which was ordered in favour of the petitioner on 23.07.2013 and consequently, the recovery certificate, DRC No.3947, was issued in favour of the petitioner.

3.1 In pursuance of DRC No.3947, the Recovery Officer began enforcement proceedings under DRC No.3947 in O.A. No.47/2013. However, the 2^nd and 3^rd respondents filed I.A. No.229/2018 on 12.01.2018 in DRC No.3947 praying to close DRC No.3947 under Rule 68B of the Second Schedule to the Income Tax Act 1961. The Recovery Officer passed an order dated 05.02.2018 holding that the recovery certificate expired on 31.03.2017 in terms of Rule 68B of the Second Schedule to the Income Tax Act 1961. The order dated 05.02.2018 passed by the Recovery Officer is under challenge in the present writ petition.

W.P.(C) No.3943/2023 with W.P.(C) No. 9592/2021

4. The petitioners are the judgment debtors in TDRC 01 of 2018 in O.A. No.11/2002 of Debts Recovery Tribunal Bangalore. After having suffered judgment in O.A. No.11/2002 passed by the Debts Recovery Tribunal Bangalore, the petitioner in W.P.(C) No.9592/2021 challenged the order passed in O.A. No.11/2002 in W.P.(C) No.8641/2020 before the High Court of Karnataka. However, the Karnataka High Court dismissed the writ petition vide judgment in W.P.(C) No.9592/2021 and left it open for the judgment debtor in O.A. No.11/2002 to challenge the same before the Debts Recovery Appellate Tribunal, Chennai.

4.1 Thereafter, the petitioner filed an Appeal, AIR 715/2018, before the Debts Recovery Appellate Tribunal, Chennai, which was dismissed. In the meanwhile, a recovery certificate issued in O.A. No.11/2002 was transferred to the Debts Recovery Tribunal Ernakulam on 23.03.2007 before the Recovery Officer for execution. The recovery proceedings were initiated by the Recovery Officer against the mortgaged property situated in Alleppey. Subsequently, after the establishment of DRT-II, the recovery certificate was reposted before the Recovery Officer of DRT-II and renumbered as TDRC 1/2018. The petitioners objected to the recovery proceedings on the grounds that the same were barred by limitation as prescribed under Rule 68B of the Second Schedule to the Income Tax Act

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2024 Supreme(Online)(KER) 55259

Rule 68B of the Income Tax Act does not apply to recovery proceedings under the RDDB Act; enforcement is governed by the Limitation Act's provisions.

Cases Referred (5)

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