Summary
Mortgaged lands of borrowers were auctioned by the DRT Recovery Officer on 08.01.2007 for Rs 1.35 crore on a proclamation stating the dues as Rs 1,27,30,527 'including interest as on 30.06.2006'. Within 17 days the borrowers applied under Rule 60 of the Second Schedule to the Income Tax Act, depositing that sum, 5% of the purchase money as penalty and 15% interest from the proclamation. The bank alleged a shortfall but supplied no calculation; the borrowers deposited Rs 2.80 lakh in anticipation and the balance of Rs 77,647 the day after the sheet was filed. The Recovery Officer set aside the sale, the bank returned the title deeds and took the money, and the borrowers sold to the appellant. The DRT reversed, the DRAT restored the setting aside, and the Gujarat High Court confirmed the auction for non-compliance with Rule 60.
Issues
- Whether a judgment debtor who deposits the amount specified in the sale proclamation with the penalty and interest required by Rule 60 of the Second Schedule to the Income Tax Act, 1961, and promptly makes good a shortfall attributable to the Recovery Officer's failure to state interest accrued after the proclamation date, has complied with Rule 60 so as to have the auction sale set aside.
- Whether an inaccuracy in the proclamation of sale as to the amount recoverable can be held against the judgment debtor exercising the right under Rule 60.
Provisions considered
- Rules 53 and 60, Income Tax Act, 1961, Second Schedule (applied to recovery under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 by Sections 25 to 29)Rule 53 requires the proclamation to specify as fairly and accurately as possible the amount for recovery of which the sale is ordered, a duty on the Recovery Officer; Rule 60 lets the defaulter, within thirty days and without assigning cause, have the sale set aside by depositing that amount with 5% of the purchase money for the purchaser and interest at 15%. The debtor deposited all that the proclamation specified and the Rule required, and the shortfall in interest for 30.06.2006 to 08.01.2007 flowed from the Officer's omission. (¶¶ 3.9, 6.1, 6.2, 6.3, 6.4)
- Sections 25 to 29, Recovery of Debts Due to Banks and Financial Institutions Act, 1993The recovery certificate was executed by the Recovery Officer under these provisions, importing the procedure of the Second Schedule to the Income Tax Act including Rule 60. (¶¶ 2.1, 2.4)
Held
- It was the Recovery Officer's duty to state the exact amount in the proclamation; by mentioning Rs 1,27,30,527 including interest as on 30.06.2006 without specifying interest to the date of proclamation, the Officer's inaccuracy caused the shortfall of Rs 3,57,647, a very small sum against the amounts deposited. The bank's reply alleging a shortfall on the 29th day carried no calculation sheet; had it, the debtor would have paid within thirty days, and he in fact deposited Rs 2.80 lakh in anticipation and the balance the day after the sheet was filed. There was substantial compliance with Rule 60, and the debtor should not suffer for the Officer's mistake. (¶¶ 6.1, 6.2, 7)
- The right under Rule 60 is a valuable right and the last opportunity for a judgment debtor to save his property after a court auction, to be exercised without assigning any cause on deposit of the specified sums; it should not be affected on technical grounds or for a bona fide mistake for which he is not responsible (Hotel Paras Garden approved). (¶¶ 6.3, 6.4)
- The bank, after the deposits, complied with the Recovery Officer's order by returning the title deeds and sought and obtained release of the money without claiming any further amount, so the plea that Rs 4.63 lakh remained due had no substance. The High Court's view was too technical and ignored the facts in their true perspective. (¶¶ 6.5, 7)
- To do substantial justice to the auction purchasers, whose deposit of Rs 1.35 crore is to be refunded with accrued interest, the subsequent purchaser was directed to pay them a further Rs 10 lakh within four weeks. (¶ 8)
Result
Appeal allowed; the Gujarat High Court's judgment of 22.12.2015 set aside and the DRAT order of 07.09.2015 setting aside the auction sale of 08.01.2007 restored; the auction purchasers' deposit to be refunded with accrued interest, and the appellant to pay them Rs 10,00,000 by demand draft within four weeks. No order as to costs.