Mr.R.chidambaram and ors V/S IOB

M.A(S.A):81/2012

Proof of service not filed in this transfer petition.

Ld. Counsel Shri Aravind Ghosh appearing on behalf of the respondent bank stated that this Tribunal by its discretion transfer this case to any other DRT of competent jurisdiction and also issue directions for the disposal of the SA itself within two months.

Ld. Counsel Shri Desingu appears on behalf of the transfer petitioners and stated that a Presiding Officer cannot step into the shoes of the Authorised officer and also cannot conduct auctions and such being the case the SA should be transferred.

Heard both sides.

In view of the submissions made by the Ld. Counsel for the respondent bank the following order is passed.

‘A Presiding Officer of the DRT cannot conduct a sale under the provisions of the SARFAESI Act. Therefore the Registry, DRT-II, Chennai who has already collected the tenders is hereby directed to return the same to the Authorized Officer of the respondent bank. ‘SA No.67/2012’ is hereby transferred from the file of DRT-II, Chennai to the file of DRT-I, Chennai. The Ld. Presiding Officer, DRT-I, Chennai is hereby directed to take up the SA and dispose of the same as enshrined in Sec.17(5) of the RDDBFI Act.  However it will be open to the respondent bank to urge the Ld. Presiding Officer to dispose of the SA at the earliest.’

This MA(SA) is disposed of accordingly.

IA 749/2012 (stay); Orders passed in MA(SA).  Hence this IA is closed.

This order was issued by THE HON'BLE CHAIRPERSON  of DRAT ,Chennai ON 23/07/2012

Delay of 51 days in filing the appeal - Dismissed

M/s.Alengar constructions (HUF) V/S Indian bank 
A.IR:223/2010

IA 468/10 (delay) :This is an IA filed for the condonation of the delay of 51 days in filing the appeal against the order passed in IA 891/2002 in OA No.341/2007 (old No.944/1999).

      

Ld.  Counsel appearing on behalf of the petitioner stated that reasons for the delay have been set out in paragraph 4 and 5 of the affidavit filed in support of the petition and prayed that the delay of 51 days in filing the appeal  be condoned for the  reasons stated therein and this IA be allowed.

Ld.  Counsel Shri Balasubramaniam appearing on behalf of the respondent bank stated that the bank has filed a counter and that the dues to the bank is more than Rs.50.00 crores and that a perusal of the said paragraphs 4 and 5 would reveal that the petitioner has not made out a case for the condonation of delay as the petitioner has not sufficiently explained the cause for the delay and prayed that the petition may be dismissed.

Heard the Ld. Counsel.

A perusal of paragraphs 4 and 5 of the affidavit filed in support of the petitioner reveals that the petitioner is a Hindu Undivided Family i.e. HUF and that its Kartha is now residing in Chidambaram and Thirunelveli and that there is no office for the petitioner at Chennai.  

 It is stated in paragraph 4 of the affidavit that the copy of the order dt 23.11.2009 passed in IA No.891/02 on the file of DRT-II, Chennai was not served on the petitioner and that the petitioner came to know about the order only on 12.1.2010 and the certified copy of the order was obtained by the petitioner on 13.1.2010. 

 It is also stated in paragraph 5 of the affidavit that due to the Pongal holidays the Kartha and his family had gone to their native place Thirunelveli and returned to Chidambaram and  that they were able contact their advocate only in the first week of February, 2010 and that the delay of 51 days had occurred in this case. 

 It is stated that due to the aforesaid reasons the delay of 51 days be had been occasioned and it is prayed that this IA be allowed and the delay of 51 days in filing the appeal be condoned. 

It is seen that the Kartha of the petitioner had gone to Thirunelveli along with family members and that they contacted their advocate in Chennai only in the first week of February, 2010.  No reason has been stated for their inability to contact their counsel at Chennai and in the absence of any reason being set out for their inability to contact their counsel at Chennai it can been seen that the reasons set out by the petitioner in the affidavit do not in any way show that the petitioner was prevented by sufficient cause from filing the appeal within the time prescribed and also do not explain the delay of 51 days.  

It is also seen that a sum of more than Rs.50.00 crores of public money is to be recovered from the petitioner and the OA is pending for the last 11 years.

In view of the fact that the petitioner has not explained the delay properly and that a sum of more than Rs.50.00 crores is due and recoverable from the petitioner and in view of the fact that the OA itself is pending for more than 11 years this Tribunal is compelled to dismiss this IA.  

Accordingly this IA is dismissed.

Chennai 7th oct 2011

Sapthagiri Pee Gee Fruits Processing (P) Ltd., Vs UCO Bank

IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

DATED THE 14^TH SEPTEMBER, 2004

PRESENT:  HON’BLE JUSTICE DR. PRATIBHA UPASANI

CHAIRPERSON

MA-35/2004

(IA-750/2002 in TA-68/1996-DRT-I, Chennai)

BETWEEN:

M/s. Sapthagiri Pee Gee Fruits Processing (P) Ltd.,

Rep. by its Managing Director Mr. M.G. Sekar,

607, 7^th Street, Gopalapuram,

Chennai-600 086.

…  Appellant

            (Counsel:  Mr. M.G.C. Prabhakar)

AND

UCO Bank,

730, Mount Road (Anna Salai),

Chennai-600 002.

…  Respondent

            (Counsel:  Mr. Srinath Sridevan)

:  O R D E R  :

1.         This Miscellaneous Appeal is filed by the Appellant/Third party purchaser/Auction purchaser M/s. Sapthagiri Pee Gee Fruits Processing (P) Ltd., being aggrieved by the Common Order dated 24.12.2003 passed by the Learned PO of DRT-I, Chennai, on the Interim Application IA No.750/2002.  By the impugned Order the Ld. PO rejected the application made by the auction purchaser in which a prayer was sought that the DRT should pass order directing the Recovery Officer/Bank that the amount of Rs.2,91,255/- out of Rs.75 lakhs deposited by the auction purchaser towards the sale proceeds, be paid directly to the Tamil Nadu Electricity Board (for the sake of brevity hereinafter referred to as TNEB), Dharmapuri Circle, Dharmapuri.  Apprehension was expressed that if these arrears of electricity were not paid, then the auction purchaser might face disconnection of electricity supply.

2.         Few facts which are required to be stated are as follows.

3.         Property belonging to the Certificate debtor M/s. Dharmapuri Steel Castings Ltd., Dharmapuri, which was mortgaged to the applicant Bank namely, UCO Bank, was purchased by the present appellant at auction held by the Recovery Officer during the course of recovery proceedings initiated against the Certificate debtor.  The property consisted of land along with building and old machinery equipment etc.  While tenders were invited by the Recovery Officer for sale of the Steel castings factory of the Certificate debtor, they were invited on ‘as is where is basis’.  The bid of the present appellant was accepted.  The amount paid by the auction purchaser/present appellant was Rs.75 lakhs.  The appellant later on came to realise that there were electricity dues by TNEB to the tune of Rs.2,91,255/-.  As per rules of the TNEB, if this amount was not paid the auction purchaser would have faced disconnection of electricity supply.  Therefore, application came to be made by the appellants/auction purchaser that this amount of Rs.2,91,255/- out of the deposit of Rs.75 lakhs made by the auction purchaser towards sale proceeds in the Tribunal/Bank be paid directly to the TNEB.  It was this application which came to be rejected by the Ld. PO of DRT-I, Chennai. 

4.         I have heard Mr. Mr. M.G.C. Prabhakar, Advocate for the appellant and Mr. Srinath Sridevan, Advocate for the respondent Bank.  I have also gone through the proceedings including the impugned Order, the offer inviting tenders by the Recovery Officer for sale of the mortgaged property and the terms and conditions under which sealed tenders were invited.  In the said text, description of the property is given and it is specifically and categorically mentioned that tenders are invited for sale on ‘as is where is basis’ for realising the dues of M/s. Dharmapuri Steel Castings (Certificate debtor).  Thus the said invitation leaves no room for doubt that the premises were to be purchased in the auction by the auction purchaser on ‘as is where is basis’.  The appellants, therefore, ought to have been on their guard, ought to have been vigilant and alert and should have made enquiries whether there were any encumbrance on the property. Since the appellants, in spite of being businessmen did not make any such enquiry which reasonably any prudent businessmen would have made, it was revealed later on that TNEB had dues of Rs.2,91,255/- by way of outstandings.

5.         Clause-6.10 of the terms and conditions of supply of electricity of TNEB specifically says that in such a contingency the intending purchaser has to pay the arrears.  Clause-6.10 can be reproduced below for the sake of  convenience :-

                        “The Board will refuse to supply electricity to an intending consumer who has defaulted in payment of dues to the Board in respect of any other service connection held in his name.

                        In case of services which have been disconnected / dismantled for non-payment of arrears and if the services are to be availed by other parties in the same premises either by purchase or transfer or in auction or on lease basis then in such cases the services will be effected only on clearance of the dues outstanding against such disconnected / dismantled service by the intending consumers.”

6.         The above Rule makes it clear that the sole responsibility to clear the outstandings of TNEB is of the auction purchaser/appellant only.  Now, the appellant wants to adjust this amount of Rs.2,91,255/- from Rs.75 lakhs which he has paid to the Bank towards the purchase of the mortgaged property.  This, of course, is unreasonable and not acceptable.

The appellants are trying to avoid the additional burden of paying the outstanding and want that amount to be adjusted from the amount which they have already paid towards the purchase of the mortgaged property.  But the Bank towards whose dues the property is auctioned should not be deprived of the amount which rightfully is due to the Bank.  The lapse has to be totally attributed to the negligent appellants who did not verify before making offer to purchase the property with respect to the encumbrance upon the said property which they wanted to purchase.  The property and plant and machinery was not promised by the Tribunal to be sold as free from any encumbrance.  The property was to be sold on the ‘as is where is basis’.  Nothing was suppressed or was kept in the dark from the intending purchaser about the status of the factory, condition of plant and machinery and the same were offered for sale on ‘as is where is basis’.  It was then the responsibility of the intending purchaser as a prudent businessman and buyer to make relevant enquiries with respect to the property.  Once the auction purchaser has purchased the property with his eyes open, now he cannot deprive the Bank of its dues by submitting that the electricity dues should be paid from the sale proceeds.  That will not be fair.  The auction purchaser has to pay the outstanding of TNEB by making payment to TNEB if he wants to enjoy the premises with electricity supply.  Another peculiar thing is that the TNEB has not made any application that their dues should be paid by the Bank, and rightly so, because the Bank is not responsible to pay any arrears of electricity dues of the property sold to the third party.  The property was mortgaged with the Bank and it was the borrower who had committed default and not the Bank.  For realising the debt the property was sold.  The application about adjustment of the outstanding dues of TNEB is made by the auction purchaser to reduce his burden.  But he has to thank himself for this situation.  Had he made proper enquiries he would have come to know about the dues payable to TNEB and accordingly he would have changed the offer made by him or would have sought some adjustment towards the electricity dues of TNEB.

7.         Section-55(1)(a) of the Transfer of Property Act says that at the time of sale the seller has to disclose to the buyer any material defect in the property of which the seller is and the buyer is not aware and which the buyer could not with ordinary care discover.  In the present case at hand, the notice inviting sealed tenders reveals that all the relevant information to the intending purchaser was revealed and nothing was suppressed.  It was categorically mentioned that the property as well as the plant and machinery were being sold only on ‘as is where is basis’ which clearly means that the Tribunal/Bank was selling the machinery at its face value at present condition, situation and subject to prior dues, charges or encumbrances, if any, that may be found to be paid by the purchaser, as the Tribunal was not aware of the dues/charges.  Interested buyers were at liberty to make any enquiries and have inspection of the property in question.

….5/

8.         In view of the above discussion, I find no infirmity in the impugned Order passed by the Ld. PO of DRT-I, Chennai.  The appeal, therefore, will have to be rejected.  The said Order, therefore, will have to be upheld and the appeal will have to be dismissed.  Accordingly, following Order is passed.

9.         Miscellaneous Appeal MA No.35/2004 is dismissed.

(Dictated to PS & the transcript signed by me today the 14^th September, 2004)

                                                                                                                                                                                                                                                                        Sd/-

[ JUSTICE  DR. PRATIBHA UPASANI ]

CHAIRPERSON

SBI Vs Bi Metalic Steel & Alloys Ltd & Allahabad Bank

IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

DATED THE 22^ND APRIL, 2004

PRESENT:  HON’BLE MRS. JUSTICE A. SUBBULAKSHMY

CHAIRPERSON

MA-37/2003

(MA-95/02 in RA-1/02 in MP-3&4/01 in RP-375/01 in OA-1144/1995-DRT, Hyderabad)

BETWEEN:

State Bank of India,

Main Branch, Bank Street,

Koti, Hyderabad.

….  Appellant

            (Counsel:  Mr. K.S. Sundar)

AND

1.  Mr. V. Chakrapani,             (Party in person)

     325, Kabra Complex,

     M.G. Road, Secunderabad,.

2.  M/s. Bi Metalic Steel & Alloys Ltd.,

     Rep. by its Official Liquidator,

     Hyderabad.

3.  Allahabad Bank,

     Parklane Branch,

     Secunderabad.

…  Respondents

:  O R D E R  :

1.         The Original Application (OA) was allowed by the Tribunal by Order dated 13.1.1997.  Recovery proceedings commenced.  The 1^st respondent filed MP-3/2001 before the Recovery Officer praying to close the recovery proceedings against immovable properties of the defaulter as barred by limitation and another petition MP-4/2001 was also filed before the Recovery Officer by M/s. V.M. Finance & Leasing Company against the property and the Recovery Officer rejected both the applications by Order dated 28.8.2002.  Then the petitioner in MP-3/01 preferred an appeal RA-1/2002 before the Presiding Officer and that was dismissed by the Tribunal by Order dated 4.10.2002.  Again the 1^st respondent filed Review Petition MA-95/2002 before the Tribunal for reviewing its Order dated 4.10.2002 and the Review Petition was allowed by the Tribunal by Order dated 6.1.2003 and consequently RA-1/02 was also allowed.  That Order dated 6.1.2003 is being now challenged by the Bank in this appeal.

2.         The Recovery Officer in his Order dated 28.8.2002 has found that the Demand Notice under Rule-2 of the Second Schedule of Income Tax Act, 1961 were issued under Part-1 of the Rules whereas attachment of the property is provided under Rule 48 of the said rules and service of attachment is provided under Rule 49 and Proclamation of Attachment is provided under Rule 50 and Rule 51 clearly states that the attachment of property under Rule 48 shall relate back to the date on which the notice to pay arrears was served and the time limit of four years stipulated in Rule 68(B) shall be taken into consideration only with reference to the service of the proceedings commenced from the stage of Rule 48 i.e. attachment and not earlier in view of the language used under Rule 68(B) of the Second Schedule to the Income Tax Act, 1961 to the effect that no sale of immovable property shall be made under this part after expiry of 4 years and in the present case attachment of immovable property was issued under Rule 48 on 31.7.2001 and still the period of 4 years is available for proceeding further and it is not barred by limitation. 

3.         Even though the PO, DRT, initially dismissed the appeal RA-1/02 preferred as against the Recovery Officer’s Order, on the Review Petition (MA-95/02) filed by the 1^st respondent herein, the PO, DRT allowed that Review Petition by Order dated 6.1.2003 holding that after recovery proceedings are taken he is empowered to act only under the provisions of the Income Tax Act, which is made applicable under Section 29 read with Section 34 of the RDDB&FI Act and he has ultimately found that it is barred by limitation.  The PO’s finding is that the Recovery Officer has to take action with regard to the recovery only under the provisions of the Income Tax Act, which is made applicable under Section-29 read with Section-34 of the RDDB&FI Act. 

4.         Section-29 of the RDDB&FI Act, 1993 reads as follows :-

“Application of certain provisions of Income-tax Act:  The provisions of the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time shall, as far as possible, apply with necessary modifications as if the said provisions and the rules referred to the amount of debt due under this Act instead of to the income-tax :

Provided that any reference under the said provisions and the rules to the “assessee” shall be construed as a reference to the defendant under this Act.”

5.         Section-34 of the RDDB&FI Act, 1993 reads as follows -

“Act to have overriding effect – (1) Save as provided under sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.

(2)        The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948, the State Financial Corporations Act, 1951, the Unit Trust of India Act, 1963, the Industrial Reconstruction Bank of India Act, 1984 [the Sick Industrial Companies (Special Provisions) Act, 1985 and the Small Industries Development Bank of India Act, 1989]”

6.         Section-29 of the RDDB&FI Act clearly states that only the provisions of the Second and Third Schedule to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962 as in force from time to time shall as far as possible apply with necessary modification.  It clearly states that the provisions of Second and Third Schedules to the Income tax Act, 1961 alone will apply and not the entire Income Tax Act.  So, the finding of the PO, DRT that after execution proceedings started the provisions of the Income Tax Act is made applicable under Section 29 read with Section 34 of the RDDB&FI Act, is erroneous and it is liable to be set aside in as much as Section 29 reads that the provisions of Second and Third Schedules to the Income Tax Act and Income Tax (Certificate Proceedings) Rules, 1962 alone will apply as far as possible. 

7.         Rule-68B of the Second Schedule of Income Tax Act, 1961 reads as follows :-

“Time limit for sale of attached immovable property -  (1) No sale of immovable property shall be made under this Part after the expiry of four years from the end of the financial year in which the order giving rise to a demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has become conclusive under the provisions of section 245-I or, as the case may be, final in terms of the provisions of Chapter XX.”

8.         Rule-68B of the Income tax Act states that amount for recovery of which immovable property has been attached, that has become conclusive under the provisions of Section 245-I or, as the case may be, final in terms of the provisions of Chapter XX.  This Rule is not applicable under the RDDB&FI Act and these provisions cannot be applied to for sale of the property under the RDDB&FI Act. Rule-68B will apply only for the recovery of amount which has become conclusive under the provisions of Section 245-I or in terms of provisions of Chapter XX.  Since the provisions of Section 245-I and Chapter XX are not applicable under the RDDB&FI Act, this cannot be invoked at all.

9.         The 1^st Respondent pointed out that by applying this provision under Rule-68B, the period of four years has to be reckoned from the end of the financial year in which the Order giving rise to a demand of any tax, interest, fine, penalty or any other sum of recovery to which the immovable property has been attached.  The 1^st respondent pointed out that the OA Order was passed on 13.1.1997 and from the end of the financial year if the period of four years is reckoned this case is clearly barred by limitation.  He pointed out that the Order giving rise to a demand means Order passed in the main OA and from that date from the end of that financial year, no sale can take place after the expiry of four years.  That argument is not an acceptable one.  The provisions of Section 245-I or provisions of Chapter XX are not applicable under the RDDB&FI Act.  The end of financial year will come only in the case of Income tax arrears and interest etc. and not under the RDDB&FI Act.  The question of financial year will not arise under the Act under the provisions and Section 245-I or Chapter XX are also not applicable under the RDDB&FI Act.  Section-29 of the RDDB&FI Act clearly states that only the provisions of Second and Third Schedule to the Income Tax Act, 1961 will apply with necessary modification.  The Heading in Section-29 itself indicates that only certain provisions of the Income tax Act shall be applicable i.e. provisions of Second and Third Schedule to the Income Tax Act.  So the whole of Income tax Act is not applicable under the RDDB&FI Act and also the provisions of Section 245-I or Chapter XX.  The amount which has become conclusive under the provisions of Section 245-I or Chapter XX alone cannot be recovered after the expiry of four years from the end of the financial year and not the amount determined under the RDDB&FI Act.  So, by invoking Section-68B of the Income-tax Act the 1^st respondent cannot contend that the time limit fixed for sale of attached immovable property under the RDDB&FI Act is only four years from the end of the financial year in which the Order for demand arises.  So the period of limitation set out in Rule-68B is not applicable for recovery of the amount under the RDDB&FI Act.

10.       Further, Section-24 of the RDDB&FI Act states with regard to the limitation.  It reads that the provisions of Limitation Act, 1963 shall, as far as may be, apply to an application made to a Tribunal.  With regard to the limitation, it has been clearly set out under the Act that only the provisions of Limitation Act, 1963 shall apply to an application made under the RDDB&FI Act to the Tribunal.  When there is specific provision with regard to the limitation under the RDDB&FI Act, the provisions contained in Section-68B of the Income-tax Act cannot be applied.  Under the Limitation Act, the period of limitation for execution proceedings is 12 years.

11.       Law empowers the Recovery Officer a period of 12 years to start the execution proceedings.  When there is specific provision which is made applicable for recovery of the amount under the RDDB&FI Act, only that law is applicable and not the period of limitation provided under Rule-68B of the Income tax Act.  All the cases which have been transferred to the DRT under the RDDB&FI Act were pending before the Civil Court before the enactment of the RDDB&FI Act.  After the RDDB&FI Act came into force, under the provisions of this Act the cases pending before the Civil Court were transferred and only those provisions relating to recovery of proceedings for mortgage suits are applicable under the RDDB&FI Act as there is specific provision under the Act with regard to the period of limitation under Section-24 of the Act.  So, the period of limitation is only 12 years and not the period mentioned in Rule-68B of the Income Tax Act.  So, I do not find any force in the argument advanced by the 1st respondent.  Order dated 6.1.2003 passed by the PO, DRT, Hyderabad, allowing the Review Petition (MA-95/02) and consequently allowing RA-1/2002 holding that the recovery proceedings against immovable properties is barred by limitation, is erroneous and it is liable to be set aside and it is set aside.

12.       Appeal allowed.  Order dated 6.1.2003 passed by the PO, DRT, Hyderabad, in the Review Petition (MA-95/2002) is set aside.  Recovery Officer is directed to continue the recovery proceedings.

(Dictated to PS & the transcript corrected, pronounced & signed by me in the open court today the 22^nd April, 2004).

[ MRS. JUSTICE A. SUBBULAKSHMY ]

CHAIRPERSON