Summary
The Court set aside a DRT recovery auction of a DDA leasehold plot because the proclamation of sale did not disclose DDA's claim to unearned increase or the lease terms, contrary to Rule 53 of the Second Schedule to the Income Tax Act and Rule 16 of the 1962 Rules and to the bank's undertaking to the High Court. DDA's second writ petition was not barred by res judicata, since the first was withdrawn and not decided on merits. The bona fide auction purchaser was to get its deposit back with 9% interest.
Issues
- Whether DDA's second writ petition was barred by principles analogous to Section 11 CPC because an earlier writ petition had been dismissed as withdrawn.
- Whether an e-auction under the Recovery of Debts and Bankruptcy Act, 1993 was valid when the proclamation of sale did not disclose the lessor's claim to unearned increase or the terms of the lease.
- What relief should go to a bona fide auction purchaser when the sale is set aside.
Provisions considered
- Section 29, Recovery of Debts and Bankruptcy Act, 1993Applies the Second and Third Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962, with necessary modifications, to recovery of debts under the 1993 Act; the auction was tested against those provisions. (¶ 23)
- Second Schedule, Rule 53, Income Tax Act, 1961Requires the proclamation of sale to state, as fairly and accurately as possible, anything the Recovery Officer considers material for a purchaser to judge the nature and value of the property. The omission of DDA's unearned increase claim and of the lease terms from the e-auction notice violated this rule. (¶¶ 23, 24, 27)
- Rule 16, Income Tax (Certificate Proceedings) Rules, 1962Empowers the Recovery Officer to summon and examine persons on matters relevant to the proclamation. The Recovery Officer directed issue of the proclamation without requiring DDA to quantify its claim, in violation of this rule. (¶¶ 25, 26, 27)
- Section 11, Code of Civil Procedure, 1908Res judicata bars re-trial of a matter heard and finally decided. Because the first writ petition was withdrawn on the bank's undertaking and not decided on merits, and the auction in breach of that undertaking gave a fresh cause of action, principles analogous to Section 11 did not bar the second writ petition. (¶¶ 28, 29)
Held
- A proclamation of sale in recovery proceedings under the 1993 Act must disclose all matters material to a purchaser's judgment of the nature and value of the property. An e-auction notice that omitted the lessor DDA's claim to unearned increase and the lease terms, issued without the Recovery Officer requiring DDA to quantify its claim, violated Rule 53 of the Second Schedule to the Income Tax Act, 1961 and Rule 16 of the 1962 Rules; the proclamation, confirmation of sale and sale certificate carried no sanctity. (¶¶ 24, 25, 26, 27)
- The bank had undertaken before the High Court that the auction would be subject to the terms of the lease, and failed to place the lease terms before the Recovery Officer; the auction was held in breach of that undertaking and of the lease. (¶¶ 27, 29)
- Res judicata rests on a matter having been heard and finally decided. Following Daryao and Gulabchand Chhotalal Parikh, a writ petition withdrawn on the strength of an undertaking, without a decision on merits, does not bar a later petition, particularly where breach of the undertaking gives a fresh cause of action. The High Court erred in dismissing DDA's writ petition on principles analogous to Section 11 CPC without examining the validity of the auction. (¶¶ 28, 29)
- Courts have inherent jurisdiction to order restitution to prevent unjust enrichment. The auction purchaser, which bid in good faith and was at no fault, was entitled to restitution, and the bank, which lent on an unauthorised mortgage and auctioned what it did not lawfully hold, must bear the consequences. (¶¶ 30, 31)
Result
Appeal allowed; the High Court's order, the e-auction notice of 27.09.2012, the auction of 09.11.2012, and the confirmation of sale and sale certificate set aside; the bank directed to return the balance amount deposited by the auction purchaser, with interest at 9% per annum from the date of deposit till repayment, within one month.