IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI
DATED THE 18TH NOVEMBER, 2004
PRESENT: HON’BLE JUSTICE DR.
CHAIRPERSON
MA-69/2004
(RA-4/04 in CP-65/03 in RP-62/02 in OA-16/1996-DRT, Hyderabad)
BETWEEN:
State Bank of India
R.A.R. Branch,
1-1-78, First Floor,
Secunderabad-500 003
Andhra Pradesh.
… Appellant
(Counsel: Mr. K.S. Sundar)
AND
1. D. Venkataramana Reddy,
S/o. D. Narasimha Reddy,
10-3-178, 21/9 St. John’s Road
Secunderabad, Andhra Pradesh.
2. K. Subbamma alias K. Vimalamma,
W/o. K. Sundararami Reddy,
1616, Plot No.11, Ward No.16,
Bit No.1, Ramamurthy Nagar,
(R.S. No.1576/4/0).
… Respondents
(Counsel: Mr. Devanand for Mr. G.R. Swaminathan)
: O R D E R :
1. Mr. K.S. Sundar, Advocate for the appellant Bank is present.
Mr. Devanand, Advocate holding for Mr. G.R. Swaminathan
for the respondents is present.
…2/
2. This Miscellaneous Appeal is filed by the appellant /Original applicant State Bank of India being aggrieved by the Order dated 23.3.2004 passed by the Learned PO of DRT, Hyderabad PO of DRT, which was allowed. Being aggrieved, it is now the Bank who has approached this Appellate Tribunal by filing this Miscellaneous Appeal.
3. Few facts which are required to be stated are as follows.
4. OA No.16/1996 was filed by the appellant/original applicant namely, State Bank of India
During the course of recovery proceedings, one claimant D. Venkataramana Reddy arrived on the scene who was the son-in-law of defendant No.4 Smt. K. Vimalamma. He alleged that he was the owner of the property which was attached by the Recovery Officer. He submitted Xerox copy of the Agreement of Sale
The writing was on the reverse of the Xerox copy of the Agreement of Sale
5. Armed with the decree of the Nellore Civil Court
Xerox copy of the Agreement of Sale, the claimant prayed for
raising of the attachment of the said property in question.
6. Mr. K.S. Sundar, Advocate for the appellant Bank, however,
pointed out that the Bank was holding the title deeds of the said
property which was equitably mortgaged with the Bank on 13.5.1987.
It was pointed out that the mortgage was of the date 13.5.1987
and the OA was filed in February, 1996. It was pointed out that it was
only after filing of the OA that the son-in-law (claimant) of respondent
No.2 K. Vimalamma in collusion with her, entered into collusive
litigation in the Civil Court
It was also pointed out that there was neither any conveyance
nor any original Agreememt of sale and what was produced
before the Recovery Officer was only Xerox copy of Agreement
of Sale which was not even registered and was not even
adequately stamped and that alleged amount of consideration
was noted only on the reverse side of the Xerox copy
of the Agreement of Sale. It was vehemently argued by
the Bank’s Advocate that the alleged sale of the said
property in question by Judgement debtor K. Vimalamma
to the claimant was sham and bogus and that it was only an
attempt by the Judgement debtor to defeat the rightful
claim of the Bank, in collusion with the third party/claimant
who was none else but her own son-in-law.
7. The Ld. Recovery Officer after hearing both sides
and after going through the material placed before him by
the claimant to establish his right on the said property,
rejected the claimant’s contention that he was the owner
of the said property and concluded that the attachment
was correctly levied. Holding this, he rejected the application
for raising attachment.
8. The Ld. PO , in appeal filed before him under
Section-30 of the RDDB&FI Act, 1993, reversed the
said Order holding that the Recovery Officer had no authority
to examine the rights of the parties when there was a decree
of the Civil Court Civil
Second Schedule to the Income Tax Act, 1961, the Ld. PO
also held that order of the Recovery Officer will be subject
to the result of the order of a Civil Court
Holding this, appeal filed by the claimant came
to be allowed. Hence, this appeal before the Appellate forum.
9. I have heard Mr. K.S. Sundar, Advocate
appearing for the appellant Bank and Mr.
Devanand, Advocate holding for Mr. G.R. Swaminathan,
for the respondent.
10. I have also gone through the proceedings
including the relevant Rule i.e. Rule-11(6) of the
Second Schedule to the Income Tax Act, 1961, the
Order passed by the Recovery Officer and the
Order passed by the Ld. PO of DRT, which is
impugned in the present appeal and, in my view, the
Ld. PO was not correct in setting aside the Order of the
Recovery Officer and allowing the claim of the claimant/3rd party.
11. Rule-11(6) of the Second Schedule to the Income
Tax Act, 1961, which is applicable to the recovery
proceedings/execution proceedings under the RDDB&FI Act, states as follows :-
Rule-11. Investigation by Tax Recovery Officer –
(1) Where any claim is preferred to, or any objection
is made to the attachment or sale of, any property
in execution of a certificate, on the ground that
such property is not liable to such attachment or
sale, the Tax Recovery Officer (to be read as
Recovery Officer as far as the DRT proceedings
are concerned) shall proceed to investigate
(emphasis applied) the claim or objection.
Provided that no such investigation shall be made
where the Tax Recovery Officer considers that the
claim or objection was designedly or unnecessarily delayed.
12. Thus, Rule-11 clothes the Recovery Officer with the
authority to investigate the claim or objection put by the
third party during the course of recovery proceedings.
The objector/3rd party has to establish that the property
in question for certain reasons is not liable for attachment
or sale and the onus of proving that is entirely upon
the third party who puts forth his claim before the
Recovery Officer. After he puts forth his claim
alongwith sufficient proof, then the Recovery Officer
has authority to ‘investigate’ that claim.
13. In the present case at hand, son-in-law of judgement
debtor No.4 Smt. K. Vimalamma, was the objector.
He put forward his claim that the property attached belonged
to him, that this property was sold to him by his mother-in-law/
Judgement debtor No.4 Smt. K. Vimalamma by Agreement
of Sale dated 30.3.1985. It was also submitted by the
objector that he had filed a Suit for specific performance in
the Civil Court Nellore
during vacation and the Suit was decreed in his favour
on 25.1.1999. According to him, there was a decree of
the competent Civil Court
of Sale was ordered to be specifically performed.
According to him, therefore, the property in question belonged to
him and was not liable for attachment.
14. To substantiate his claim that he was the owner of the
property, he tendered following documents before the Recovery Officer :-
…6/
a) Xerox copy of the Agreement of Sale alleged to
have been executed by Judgement debtor No.4 on
12.3.85/30.3.85 which was un-registered document
and was not properly stamped, also showed writing
on the reverse side of the Xerox copy allegedly
showing that certain payments were made to
the Judgement debtor No.4 Smt. K. Vimalamma,
by him towards consideration.
15. It was contended by the claimant that there
was a decree for specific performance passed by
the Nellore Court
16. Thus, on this ground and on the basis of this
proof, attachment was sought to be raised by the objector.
When this was the material placed before the Recovery Officer,
as per Rule-11, it was incumbent upon the Recovery Officer to
investigate the claim of the objector and he did so
by proceeding to examine the documents tendered by
the objector in support of his contention that his
property in question was not liable for attachment.
17. The Recovery Officer observed that first of all,
what was produced was only a Xerox copy of (un-registered
and not properly stamped) Agreement of Sale
observed that proof with respect to consideration was not
by way of any separate receipts but certain writing was
made on the Xerox copy of the Agreement of Sale
that certain amount was paid by the claimant to the Judgement
debtor No.4 Smt. K. Vimalamma, towards consideration.
He also observed that in a Suit filed by the son-in-law /objector
against his mother-in-law, the applicant Bank was not a party
and that the Agreement of sale between mother-in-law and
son-in-law was sham and bogus and collusive and was allegedly
executed only to defeat the rightful claim of the Bank.
He observed that un-registered and insufficiently stamped
Agreement of Sale
in view of the provisions of the Transfer of Property Act, 1882.
He observed that there was no conveyance and, therefore,
no transfer of ownership from seller to the buyer. He reiterated
that the alleged transfer was for immovable property of the value
of more than Rs.100/-, but it was not effected by way of registration.
The Recovery Officer was constrained to observe all the above
mentioned facts as these were the facts which were very obvious
on the face of the instrument before the Recovery Officer on the
basis of which the claimant was resting his case of the ownership
of the property in question. Once the Recovery Officer is authorised
by statute to investigate the claim of the claimant with respect to
a particular property, the Recovery Officer could not have shunned
this responsibility by overlooking all these facts which were sufficient
even prima facie to come to a conclusion that the alleged Xerox
copy of the Agreement of Sale which was not registered and which
was not even sufficiently stamped conveyed any title to the claimant.
17. As far as the alleged decree of specific performance
passed by the Nellore Court
Officer took into consideration the fact that the Bank was
not a party to the decree. Therefore, the decree is obviously
binding only against the parties to the Suit. It cannot bind a third party,
namely, the State Bank of India
entitled to go beyond the decree of the Civil Court of competent
jurisdiction, he may not be authorised or empowered to examine
the nitty-grittys with respect to a title, but it can never be said
that Recovery Officer cannot examine the documents and can
overlook the patent defects or flaws in the documents which are
tendered before him on which the claimant’s claim is based.
If such a thing is allowed to happen curtailing the power of
Recovery Officer to examine the documents tendered before
him for the purpose of scrutiny then, unscrupulous and dishonest
judgement debtors can always enter into collusive suits with the
third party and can put the third party as an objector during
the course of the recovery proceedings. The Recovery Officer
may not be able to give any declaration with respect to the title of
a person but, it cannot be said that he is not entitled or empowered
to examine the documents placed before him and to arrive at a
finding after examining them. He can certainly give his finding with
respect to those things which are prima facie required for a person for
proving his claim and if the documents are not convincing, the Recovery
Officer is entitled to reject the claim. This is the only way in which he
can investigate the claim of the claimant as envisaged by Rule-11
of the Second Schedule to the Income-tax Act, 1961.
18. Sub-clause (6) of Rule-11 of the Second Schedule to
the Income-tax Act, 1961, states that the party against whom an
order is made can always file a suit in the Civil Court to establish
the right which he claims to the property in dispute; but, subject to the
result of such suit (if any), the order of the Tax Recovery Officer
shall be conclusive. In the present case at hand, the Recovery Officer,
after investigating the claim of the objector had rejected his claim.
The objector was, therefore, aggrieved and it was for him to
approach the Civil Court
He cannot rely upon the decree of the Nellore Civil Court
was binding only upon the parties to the suit. He cannot say by
any stretch of imagination that the decree between the
mother-in-law and son-in-law was binding on the Bank, because
the Bank was not a party to the Suit. There is every room to
say prima facie that it was a collusive decree.
The Ld. Recovery Officer was, therefore, very right
in rejecting the claim of the objector and the Ld. PO
committed error in curtailing the power of the Recovery
Officer conferred upon him by Rule-11 of the Second Schedule
to the Income-tax Act, 1961. The impugned Order of the Ld. PO of
DRT, Hyderabad
appeal will have to be allowed.
Accordingly, following order is passed.
: O R D E R :
Miscellaneous Appeal MA No.69/2004 is allowed,
impugned Order dated 23.3.2004 passed by the Ld. PO of DRT,
Hyderabad, in RA-4/2004 in CP-65/2003 in RP-62/2002 in OA-16/1996,
is hereby set aside.
(Dictated to PS & the transcript corrected, pronounced & signed by me today 18.11.2004).
Sd/-
[ JUSTICE DR. PRATIBHA UPASANI ]
CHAIRPERSON
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