'
ITEM NO. 1B Court No.10 SECTION XII
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No..... of 2013 @ SLP(C) No. 21765 of 2010
C.N.PARAMSIVAN AND ANR. Appellant (s)
VERSUS
SUNRISE PLAZA TR. PARTNER AND ORS. Respondent (s)
Date : 09/01/2013 This Petition was called on for judgment today.
For Appellant (s) Mr. Senthil Jagadeesan, Adv.
For Respondent(s) Mr. D.K.Sinha, Adv.
Mr. Himanshu Munshi, Adv.
Mr. K.K.Mohan, Adv.
Mr. Ashish Mohan, Adv.
Mr. Chetan Rai Wahi, Adv.
Hon'ble Mr. Justice T.S.Thakur pronounced Judgment of the
Bench comprising His Lordship and Hon'ble Mrs. Justice Gyan Sudha
Misra.
Leave granted.
The appeal is dismissed without any order as to costs in
terms of the signed judgment.
(Shashi Sareen) (Veena Khera)
Court Master Court Master
Signed Reportable judgment is placed on the file.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 154 OF 2013
(Arising out of S.L.P. (C) No.21765 of 2010)
C.N. Paramsivan & Anr. ...Appellants
Versus
Sunrise Plaza TR.
Partner & Ors. ...Respondents
J U D G M E N T
T.S. THAKUR, J.
1. Leave granted.
2. This appeal by special leave arises out of an order passed by the
High Court of Judicature at Madras whereby writ petition No.14594 of 2007
filed by the appellants has been dismissed and orders passed by the Debt
Recovery Appellate Tribunal in M.A. No.90 of 2006 upheld, no matter on a
ground other than the one on which that found favour with the Appellate
Tribunal.
3. Facts leading to the filing of the writ petition have been set out
at considerable length in the orders passed by the Appellate Tribunal and
that passed by the High Court. We do not, therefore, consider it necessary
to recapitulate the entire history over again except to the extent the same
is necessary for the disposal of the present appeal.
The long drawn legal
battle that has raged over the past two decades or so has its genesis in a
loan which respondent Indian Bank advanced to M/s. Sunrise Plaza, a
partnership concern comprising respondent-S. Kalyanasundaram and his wife -
Mrs. Vasantha Kalyanasundaram.
The loan was advanced on the basis of an
equitable mortgage of the properties owned by the partners of the firm by
deposit of title deeds relevant thereto.
The borrower having defaulted in
the repayment of the loan amount, the respondent-bank filed O.A. No.238 of
1998 re-numbered as O.A. No.1098 of 2001 before the Debt Recovery Tribunal
at Chennai.
Failure of the respondents to appear and contest the claim made
against them culminated in the passing of an ex-parte decree in favour of
the bank on 20th September, 1999.
An application for setting aside of the
said decree was then made by the borrower defendants which was dismissed by
the Tribunal for default.
An application for recall of the said order too
failed and was dismissed by the Tribunal.
4. Proceedings for execution of the Recovery Certificate issued in
favour of the bank were in the meantime initiated and the property mortgaged with the bank brought to sale in a public auction on 7th March, 2003 in which the appellants emerged as the successful bidders.
The
respondents then filed I.A. No.146 of 2003 for setting aside of the auction
sale, while I.A. No.150 of 2003 filed by them prayed for an order of
refusal of confirmation of the sale.
The Debt Recovery Tribunal passed a
conditional order in the said application deferring the confirmation of
sale subject to the judgment-debtor depositing a sum of Rs.10,00,000/- with
the decree holder bank on or before 25th April, 2003.
I.A. No.146 of 2003
for setting aside the sale was, however, dismissed by the Tribunal on 15th
April, 2003, as not maintainable.
A prayer made by the respondents -
judgment-debtors for extension of time to make the deposit of the amount
directed by the Tribunal having been rejected, the recovery officer
proceeded further and issued a sale certificate in favour of the appellants
on 28th May, 2003.
The judgment-debtors -respondent Nos.1 to 3 then filed
an appeal challenging the orders passed by the Debt Recovery Tribunal in
which the Appellate Tribunal directed them to pay the requisite court fee.
5. Aggrieved by the order of the Appellate Tribunal, the judgment-
debtors filed Writ Petition No.28235 of 2003 in which the High Court by an
order dated 14th October, 2003 set aside the ex-parte decree on payment of
costs. That order when challenged by the decree holder bank in a Special
Leave Petition before this Court was affirmed and the SLP dismissed in July
2004. Undeterred by the dismissal of the Special Leave Petition, the bank
filed a Review Application before the High Court for review of its order
dated 14th October, 2003 setting aside the ex-parte decree. Even the
appellants herein filed a review petition against the said order which
applications were dismissed by the High Court with liberty to the auction
purchaser-appellants herein to represent their case before the Debt
Recovery Tribunal in the O.A. pending before it.
6. The appellants-auction purchasers at that stage filed I.A. No.20
of 2005 before the Debt Recovery Tribunal at Chennai seeking delivery of
possession of the property purchased by them. That application was allowed
by the Tribunal with a direction to the Recovery Officer to put the auction
purchasers in possession of the property in question. The defendants-
respondents herein challenged that order before the Appellate Tribunal at
Chennai on several grounds in M.A. No.90 of 2006. The Appellate Tribunal
allowed the said appeal and set aside the order passed by the Debt Recovery
Tribunal with a direction to the Debt Recovery Tribunal to take up I.A.
No.20 of 2005 along with O.A. No.1098 of 2001 and dispose of the same in
accordance with law.
7. The appellants questioned the correctness of the above order in
Writ Petition No.29356 of 2006 which was allowed by a Division Bench of the
High Court by Order dated 29th November, 2006, setting aside the order
passed by the Appellate Tribunal and remitting the matter back to the Debt
Recovery Appellate Tribunal to decide the issue
whether or not the rights
of a bona fide purchaser get curtailed if the ex-parte decree on the basis whereof the auction sale was conducted is eventually set aside.
The Debt
Recovery Appellate Tribunal examined the matter afresh and held that the
appellants-auction purchasers were not bona fide purchasers of the property
as they were aware of the pending legal proceedings between the bank and
the borrower. The Tribunal accordingly set aside the sale with a direction
to the defendants-respondents 1 to 3 to deposit the entire amount claimed
in original application.
8. Aggrieved by the orders passed by the Appellate Tribunal, the
appellants filed Writ Petition No.14594 of 2007 before the High Court which
writ petition has been dismissed by the High Court as already mentioned
above. The High Court approached the issues from a slightly different
angle; for instead of going into the question whether the appellants were
bona fide auction purchasers, it examined the validity of the auction
itself and came to the conclusion that the auction conducted by the
Recovery Officer was illegal and void because of non-compliance with the
provisions of Rule 57 in the Second Schedule of the Income Tax Act, 1961
which were in view of the provisions of Section 29 of the Recovery of Debts
Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to
a 'RDDB Act' for short) applicable to recovery of debt dues under the
latter mentioned Act. The present appeal assails the correctness of the
above order passed by the High Court.
9. Appearing for the appellants Mr. L. Nageshwar Rao, learned senior
counsel, made a threefold submission in support of his case. Firstly he
contended that the remand order passed by the High Court in the earlier
round was limited to the Appellate Tribunal finding out whether the rights
of a bona fide purchaser stood curtailed in view of the setting aside of
the ex-parte decree on which the auction had been conducted. While the
Tribunal had answered that question, the High Court had failed to do so in
the writ petition filed by the appellants. The High Court had digressed
from the subject and added a new dimension which had not been noticed or
pressed in the earlier round.
10. Secondly he contended that even if the High Court could examine a
ground other than the one on which a remand had been ordered, it failed to
appreciate that the provisions of the Income Tax Rules set out in the
Second Schedule of the Income Tax Act were applicable only "as far as
possible and with necessary modification". This was, according to Mr. Rao,
evident from a plain reading of Section 29 of the RDDB Act. The use of the
expressions "as far as possible" and "with necessary modifications", argued
the learned counsel, gave sufficient play at the joints to the Recovery
Officer to apply the said rules in the manner considered most appropriate
by him, having regard to the facts and circumstances of a given case. The
High Court had, argued Mr. Rao, fallen in an error in ignoring the
expressions appearing in Section 29 and proceeding with the matter as if
Rule 57 of the said rules was mandatory and applicable with full force. It
was also contended by the learned counsel that if Rules 57 and 58 of the
Income Tax Rules were held applicable in the form in which they appear in
the Second Schedule, the requirement of Rule 61 of the said Rules could not
be ignored and had to be mandatorily followed. Inasmuch as the
Interlocutory Application filed by the judgment-debtor for setting aside
the sale had been dismissed by the Tribunal and inasmuch as there was no
challenge to the said dismissal order at any stage, the High Court ought to
have held that the condition precedent for setting aside the sale namely
filing of a proper application was not satisfied thereby rendering the sale
in favour of the appellants immune from any challenge or interference.
11. It was thirdly argued by learned counsel for the appellants that
the appellants were bona fide purchasers, hence protected against any
interference with the sale in their favour, no matter the decree on the
basis whereof the sale had been effected had itself been set aside by High
Court. Reliance in support was placed by Mr. Rao upon the decisions of
this Court in Janak Raj v. Gurdial Singh (1967) 2 SCR 77; Janatha Textiles
and Ors. v. Tax Recovery Officer and Anr. (2008) 12 SCC 582; (1994) 2 SCC
364, Padanathil Ruqmini Amma Vs. P.K. Abdulla (1996) 7 SCC 668. It was
further contended that a contrary view was no doubt expressed by a Two-
Judge Bench of this Court in Chinnammal and Ors. v. P. Arumugham and Anr.
(1990) 1 SCC 513 but the conflict between the two lines of the decisions
referred to above deserved to be resolved by a reference to a larger Bench.
12. Mr. Rakesh Dwivedi, learned senior counsel appearing for the
respondents, per contra argued that the scope of the proceeding before the
High Court in the second round was not in any way limited by the earlier
remand order and the High Court could have and has indeed examined the
question of validity of the auction sale. He urged that the provisions of
the Income Tax Rules in the Second Schedule of the Act were applicable in
the form in which the said rules were found in the statute book as no
modification or amendment of the said rules had been made either by any
legislative enactment or by way of Rules under the RDDB Act. He contended
that the words "as far as possible" were incapable of conveying that the
Recovery Officer could at his discretion play with the rules without any
limitations on his power or discretion and without any guidelines under the
Act or the Rules. He submitted that decision of this Court in Chinnammal
and Ors. v. P. Arumugham and Anr. (1990) 1 SCC 513 was not in conflict with
the view taken in the decisions relied upon by Mr. Rao inasmuch as the said
decisions had not examined the issue as to what would constitute a bona
fide purchaser to be entitled to protection in law. We propose to deal with
the contentions raised by Mr. Rao ad seriatim.
13. The remand ordered by the High Court in Writ Petition
No.29356/2006 was an open remand which allowed the parties to urge their
respective contentions not only in regard to the rights of a bona fide
purchaser, but any other contention available to them on facts and in law.
This is evident from the operative portion of the order passed by the High
Court which was as under:
"In the above circumstances, as agreed by learned counsel appearing for the
parties, the impugned order dated 13.7.2006 passed by the Debt Recovery
Appellate Tribunal in M.A. No.90 of 2006 is set aside and the case is
remitted to the Debt Recovery Appellate Tribunal, Chennai, to determine the
aforesaid issues and any other issue as has been raised by one or other
party in M.A. No.90 of 2006, preferably within two months from the date of
receipt or production of a copy of this order."
14. The language employed in the remand order apart, the High Court
had not examined or determined the question whether Rule 57 of the Income
Tax Rules was mandatory and if so whether there was any breach of that
provision or the effect thereof. There was no discussion leave alone any
finality to the determination of that aspect, so as to prevent anyone of
the parties from urging their submissions on those questions. We have in
that view no hesitation in rejecting the first limb of Mr. Rao's argument
that the High Court could not have gone into any other question apart the
rights of a bona fide purchaser in the proceedings arising after the remand
order.
15. That brings us to the question whether Section 29 of the RDDB Act
do not apply the Income Tax Rules in the Second Schedule of the Income Tax
Act to the recovery proceedings under RDDB Act with full force and that the
expression 'as far as possible' appearing in Section 29 vests the Recovery
Officer with discretion to apply the said Rules depending upon the fact
situation of each case. Section 29 of the RDDB Act 29 is as under:
29. 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.
16. A bare reading of the above leaves no manner of doubt that the
rules under Income Tax Act were applicable only "as far as possible" and
with the modification as if the said provisions and the rules referred to
the amount of debt due under the RDDB Act instead of the Income Tax Act.
The question is whether the said two expressions render the provisions of
Rule 57 directory no matter the same is couched in a language that is
manifestly mandatory in nature.
17. Legislation by incorporation is a device to which legislatures
often take resort for the sake of convenience. The phenomenon is widely
prevalent and has been the subject matter of judicial pronouncements by
Courts in this country as much as Courts abroad. Justice G.P. Singh in his
celebrated work on Principles of Statutory Interpretation has explained the
concept in the following words:
"Incorporation of an earlier Act into a later Act is a legislative device
adopted for the sake of convenience in order to avoid verbatim reproduction
of the provisions of the earlier Act into the later. When an earlier Act or
certain of its provisions are incorporated by reference into a later Act,
the provisions so incorporated become part and parcel of the later Act as
if they had been 'bodily transposed into it. The effect of incorporation is
admirably stated by LORD ESHER, M.R.: 'If a subsequent Act brings into
itself by reference some of the clauses of a former Act, the legal effect
of that, as has often been held, is to write those sections into the new
Act as if they had been actually written in it with the pen, or printed in
it.
Even though only particular sections of an earlier Act are incorporated
into later, in construing the incorporated sections it may be at times
necessary and permissible to refer to other parts of the earlier statute
which are not incorporated. As was stated by LORD BLACKBURN: "When a single
section of an Act of Parliament is introduced into another Act, I think it
must be read in the sense it bore in the original Act from which it was
taken, and that consequently it is perfectly legitimate to refer to all the
rest of that Act in order to ascertain what the section meant, though those
other sections are not incorporated in the new Act."
18. In Ram Kirpal Bhagat and Ors. v. State of Bihar (1969) 3 SCC 471
this Court examined the effect of bringing into an Act the provisions of an
earlier Act and held that the legislation by incorporation of the
provisions of an earlier Act into a subsequent Act is that the provisions
so incorporated are treated to have been incorporated in the subsequent
legislation for the first time. This Court observed:
"The effect of bringing into an Act the provisions of an earlier Act is to
introduce the incorporated Sections of the earlier Act into the subsequent
Act as if those provisions have been enacted in it for the first time. The
nature of such a piece of legislation was explained by Lord Esher M. R. in
Re Wood's Estate [1881] 31 Ch. D.607 that "if some clauses of a former Act
were brought into the subsequent Act the legal effect was to write those
Sections into the new Act just as if they had been written in it with the
pen".
19. To the same effect is the decision of this Court in Mahindra and
Mahindra Ltd. v. Union of India and Anr. (1979) 2 SCC 529 where this Court
held that once the incorporation is made, the provisions incorporated
become an integral part of the statute in which it is transposed and
thereafter there is no need to refer to the statute from which the
incorporation is made and any subsequent amendment made in it has no effect
on the incorporating statute. The following passage is in this regard
apposite:
"The effect of incorporation is as if the provisions were written out in
the incorporating statute and were a part of it. Legislation by
incorporation is a common legislative device employed by the legislature,
where the legislature for convenience of drafting incorporates provisions
from an existing statue by reference to that statute instead of setting out
for itself at length the provisions which it desires to adopt. Once the
incorporation is made, the provision incorporated becomes an integral part
of the statute in which it is transposed and thereafter there is no need to
refer to the statute from which the incorporation is made and any
subsequent amendment made in it has no effect on the incorporating
statute."
20. We may also refer to the decisions of this Court in Onkarlal
Nandlal v. Rajasthan and Anr. (1985) 4 SCC 404, Mary Roy and Ors. v. State
of Kerala and Ors. (1986) 2 SCC 209, Nagpur Improvement Trust v. Vasantrao
and Ors. and Jaswantibai and Ors. (2002) 7 SCC 657, and M/s Surana Steels
Pvt. Ltd. v. The Deputy Commissioner of Income Tax and Ors. (1999) 4 SCC
306, which have reiterated the above proposition of law.
21. Applying the above principles to the case at hand Section 29 of
the RDDB Act incorporates the provisions of the Rules found in the Second
Schedule to the Income Tax Act for purposes of realisation of the dues by
the Recovery Officer under the RDDB Act. The expressions "as far as
possible" and "with necessary modifications" appearing in Section 29 have
been used to take care of situations where certain provisions under the
Income Tax Rules may have no application on account of the scheme under the
RDDB Act being different from that of the Income Tax Act or the Rules
framed thereunder. The provisions of the Rules, it is manifest, from a
careful reading of Section 29 are attracted only in so far as the same deal
with recovery of debts under the Act with the modification that the 'amount
of debt' referred to in the Rules is deemed to be one under the RDDB Act.
That modification was intended to make the position explicit and to avoid
any confusion in the application of the Income Tax Rules to the recovery of
debts under the RDDB Act, which confusion could arise from a literal
application of the Rules to recoveries under the said Act. Proviso to
Section 29 further makes it clear that any reference "to the assessee"
under the provisions of the Income Tax Act and the Rules shall be construed
as a reference to the defendant under the RDDB Act. It is noteworthy that
the Income Tax Rules make provisions that do not strictly deal with
recovery of debts under the Act. Such of the rules cannot possibly apply
to recovery of debts under the RDDB Act. For instance Rules 86 and 87
under the Income Tax Act do not have any application to the provisions of
the RDDB Act, while Rules 57 and 58 of the said Rules in the Second
Schedule deal with the process of recovery of the amount due and present no
difficulty in enforcing them for recoveries under the RDDB Act. Suffice it
to say that the use of the words "as far as possible" in Section 29 of RDDB
Act simply indicate that the provisions of the Income Tax Rules are
applicable except such of them as do not have any role to play in the
matter of recovery of debts recoverable under the RDDB Act. The argument
that the use of the words "as far as possible" in Section 29 is meant to
give discretion to the Recovery Officer to apply the said Rules or not to
apply the same in specific fact situations has not impressed us and is
accordingly rejected.
22. In Osmania University v. V.S. Muthurangam and Ors. (1997) 10 SCC
741, the question that fell for consideration was whether the age of
superannuation of the non-teaching staff at Osmania University should be
raised to 60 years when the same had been raised to 60 years for the
University's teaching staff. Since Section 38(1) of the Osmania University
Act, 1959 stated that the conditions of service for all salaried staff of
the University shall be uniform "as far as possible", the decision in the
case turned on the meaning to be given to that phrase. It was argued by
the Solicitor General on behalf of the University that the use of this
phrase in Section 38(1) indicated that the provision could be departed from
in certain situations. This Court ruled otherwise and held as follows :
"8...Mr. Solicitor General is justified in his contention that Section
38(1) of the Act recognizes flexibility and the expression 'as far as
possible' inheres in it an inbuilt flexibility...But if uniform conditions
of service for teaching and non teaching staff of the University is not
otherwise impracticable, the University is under an obligation to maintain
such uniformity because of the mandate of Section 38(1) of the Act. In the
instant case, we do not find that it is not at all practicable for the
University to maintain the parity in the age of superannuation of both
teaching and non teaching staff."
(emphasis supplied)
23. It follows that while the phrase "as far as possible", may be
indicative of a certain inbuilt flexibility, the scope of that flexibility
extends only to what is "not at all practicable". In order to show that
Rules 57 and 58 of the Second Schedule of the Income Tax Act may be
departed from under the RDDB Act, it would have to be proved that the
application of these Rules is "not at all practicable" in the context of
RDDB Act.
24. The interchangeable use of the words "possible" and "practicable"
was previously established by a three-judge Bench of this Court in N.K.
Chauhan and Ors. v. State of Gujarat and Ors., (1977) 1 SCC 308, where this
Court observed that in simple Anglo-Saxon Practicable, feasible, possible,
performable, are more or less interchangeable. Webster defines the term
'practicable' thus :
"1. That can be put into practice; feasible. 2. That can be used for an
intended purpose; usable."
25. Black's Law Dictionary similarly defines 'practicable' as follows
:
"(Of a thing) reasonably capable of being accomplished; feasible."
26. It is, therefore, reasonable to hold that the phrase "as far as
possible" used in Section 29 of the RDDB Act can at best mean that the
Income Tax Rules may not apply where it is not at all possible to apply
them having regard to the scheme and the context of the legislation.
27. There is nothing in the provisions of Section 29 of RDDB Act or
the scheme of the rules under the Income Tax Act to suggest that a
discretion wider than what is explained above was meant to be conferred
upon the Recovery Officer under Section 29 of the RDDB Act or Rule 57 of
the Income Tax Rules which reads as under:
"57. (1) On every sale of immovable property, the person declared to be the
purchaser shall pay, immediately after such declaration, a deposit of twenty-five per cent on the amount of his purchase money, to the officer conducting the sale; and, in default of such deposit, the property shall forthwith be resold.
(2) The full amount of purchase money payable shall be paid by the purchaser to the Tax Recovery Officer on or before the fifteenth day from the date of the sale of the property."
28. It is clear from a plain reading of the above that the provision
is mandatory in character. The use of the word "shall" is both textually
and contextually indicative of the making of the deposit of the amount
being a mandatory requirement.
The provisions of Rules 57 and 58 of the
Income Tax Rules, have their equivalent in Order XXI Rules 84, 85 & 86 of the C.P.C. which are pari materia in language, sweep and effect and have been held to be mandatory by this Court in Manilal Mohanlal Shah and Ors.
v. Sardar Sayed Ahmed Sayed Mahmed and Anr. (AIR 1954 SC 349) in the
following words:
"8. The provision regarding the deposit of 25 per cent. by the purchaser
other than the decree-holder is mandatory as the language of the rule
suggests. The full amount of the purchase-money must be paid within fifteen
days from the date of the sale but the decree-holder is entitled to the
advantage of a set-off. The provision for payment is, however, mandatory...
(Rule 85). If the payment is not made within the period of fifteen days,
the Court has the discretion to forfeit the deposit, and there the
discretion ends but the obligation of the Court to re-sell the property is
imperative. A further consequence of non-payment is that the defaulting
purchaser forfeits all claim to the property (Rule 86)...
9...These provisions leave no doubt that unless the deposit and the payment
are made as required by the mandatory provisions of the rules, there is no
sale in the eye of law in favour of the defaulting purchaser and no right
to own and possess the property accrues to him.
xx xx xx xx
11. Having examined the language of the relevant rules and the judicial
decisions bearing upon the subject
we are of opinion that the provisions of
the rules requiring the deposit of 25 per cent. of the purchase-money
immediately on the person being declared as a purchaser and the payment of
the balance within 15 days of the sale are mandatory and upon non-
compliance with these provisions there is no sale at all.
The rules do not
contemplate that there can be any sale in favour of a purchaser without
depositing 25 per cent. of the purchase-money in the first instance and the
balance within 15 days.
When there is no sale within the contemplation of
these rules, there can be no question of material irregularity in the
conduct of the sale.
Non-payment of the price on the part of the defaulting
purchaser renders the sale proceedings as a complete nullity.
The very fact
that the Court is bound to resell the property in the event of a default
shows that the previous proceedings for sale are completely wiped out as if
they do not exist in the eye of law.
We hold, therefore, that in the
circumstances of the present case there was no sale and the purchasers
acquired no rights at all."
29. Relying in Manilal Mohanlal's case (supra) Rules 84, 85 and 86 of
Order XXI were also held to be mandatory in Sardara Singh (Dead) by Lrs.
and Anr. v. Sardara Singh (Dead) and Ors. (1990) 4 SCC 90.
30. Similarly in Balram, son of Bhasa Ram v. Ilam Singh and Ors.
(1996) 5 SCC 705 this Court reiterated the legal position in the following
words:
"7...it was clearly held [in Manilal Mohanlal] that Rule 85 being
mandatory, its non-compliance renders the sale proceedings a complete nullity requiring the executing court to proceed under Rule 86 and property has to be resold unless the judgment-debtor satisfies the decree by making the payment before the resale.
The argument that the executing court has inherent power to extend time on the ground of its own mistake was also
expressly rejected..."
31. We may also refer to the decisions of this Court in Rao Mahmood
Ahmed Khan v. Sh. Ranbir Singh and Ors. (1995) 4 SCC 275, Gangabai Gopaldas
Mohata v. Fulchand and Ors. (1997) 10 SCC 387, Himadri Coke & Petro Ltd. v.
Soneko Developers (P) Ltd. And Ors. (2005) 12 SCC 364 and Shilpa Shares and
Securities and Ors. v. The National Co-operative Bank Ltd. and Ors. (2007)
12 SCC 165,
wherein the same position has been taken.
32. In the light of the above we see no reason to hold that
Rules 57 and 58 of the Income Tax Rules are anything but mandatory in nature, so that a breach of the requirements under those Rules will render the auction non-est in the eyes of law.
33. That leaves us with the third and the only other submission made
by Mr. Rao touching
the rights of bonafide purchaser and
whether there is
any conflict between the decisions of this Court on the subject to call for
a reference to a larger bench.
There is, in our opinion, no doubt that
there is an apparent conflict between the decisions upon which reliance was
placed by learned counsel for the parties.
But having regard to the view
that we have taken on the question of the validity of this auction itself,
we do not consider it necessary to make a reference to a larger bench to
resolve the conflict.
The cleavage in the judicial opinion is for the
present case only of academic importance, hence need not be addressed by us
or by a larger bench for the present.
34. In the result, this appeal fails and is hereby dismissed but in
the circumstances without any order as to costs.
.......................................J.
(T.S. Thakur)
........................................J.
(Gyan Sudha Misra)
New Delhi
January 9, 2013
ITEM NO. 1B Court No.10 SECTION XII
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No..... of 2013 @ SLP(C) No. 21765 of 2010
C.N.PARAMSIVAN AND ANR. Appellant (s)
VERSUS
SUNRISE PLAZA TR. PARTNER AND ORS. Respondent (s)
Date : 09/01/2013 This Petition was called on for judgment today.
For Appellant (s) Mr. Senthil Jagadeesan, Adv.
For Respondent(s) Mr. D.K.Sinha, Adv.
Mr. Himanshu Munshi, Adv.
Mr. K.K.Mohan, Adv.
Mr. Ashish Mohan, Adv.
Mr. Chetan Rai Wahi, Adv.
Hon'ble Mr. Justice T.S.Thakur pronounced Judgment of the
Bench comprising His Lordship and Hon'ble Mrs. Justice Gyan Sudha
Misra.
Leave granted.
The appeal is dismissed without any order as to costs in
terms of the signed judgment.
(Shashi Sareen) (Veena Khera)
Court Master Court Master
Signed Reportable judgment is placed on the file.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 154 OF 2013
(Arising out of S.L.P. (C) No.21765 of 2010)
C.N. Paramsivan & Anr. ...Appellants
Versus
Sunrise Plaza TR.
Partner & Ors. ...Respondents
J U D G M E N T
T.S. THAKUR, J.
1. Leave granted.
2. This appeal by special leave arises out of an order passed by the
High Court of Judicature at Madras whereby writ petition No.14594 of 2007
filed by the appellants has been dismissed and orders passed by the Debt
Recovery Appellate Tribunal in M.A. No.90 of 2006 upheld, no matter on a
ground other than the one on which that found favour with the Appellate
Tribunal.
3. Facts leading to the filing of the writ petition have been set out
at considerable length in the orders passed by the Appellate Tribunal and
that passed by the High Court. We do not, therefore, consider it necessary
to recapitulate the entire history over again except to the extent the same
is necessary for the disposal of the present appeal.
The long drawn legal
battle that has raged over the past two decades or so has its genesis in a
loan which respondent Indian Bank advanced to M/s. Sunrise Plaza, a
partnership concern comprising respondent-S. Kalyanasundaram and his wife -
Mrs. Vasantha Kalyanasundaram.
The loan was advanced on the basis of an
equitable mortgage of the properties owned by the partners of the firm by
deposit of title deeds relevant thereto.
The borrower having defaulted in
the repayment of the loan amount, the respondent-bank filed O.A. No.238 of
1998 re-numbered as O.A. No.1098 of 2001 before the Debt Recovery Tribunal
at Chennai.
Failure of the respondents to appear and contest the claim made
against them culminated in the passing of an ex-parte decree in favour of
the bank on 20th September, 1999.
An application for setting aside of the
said decree was then made by the borrower defendants which was dismissed by
the Tribunal for default.
An application for recall of the said order too
failed and was dismissed by the Tribunal.
4. Proceedings for execution of the Recovery Certificate issued in
favour of the bank were in the meantime initiated and the property mortgaged with the bank brought to sale in a public auction on 7th March, 2003 in which the appellants emerged as the successful bidders.
The
respondents then filed I.A. No.146 of 2003 for setting aside of the auction
sale, while I.A. No.150 of 2003 filed by them prayed for an order of
refusal of confirmation of the sale.
The Debt Recovery Tribunal passed a
conditional order in the said application deferring the confirmation of
sale subject to the judgment-debtor depositing a sum of Rs.10,00,000/- with
the decree holder bank on or before 25th April, 2003.
I.A. No.146 of 2003
for setting aside the sale was, however, dismissed by the Tribunal on 15th
April, 2003, as not maintainable.
A prayer made by the respondents -
judgment-debtors for extension of time to make the deposit of the amount
directed by the Tribunal having been rejected, the recovery officer
proceeded further and issued a sale certificate in favour of the appellants
on 28th May, 2003.
The judgment-debtors -respondent Nos.1 to 3 then filed
an appeal challenging the orders passed by the Debt Recovery Tribunal in
which the Appellate Tribunal directed them to pay the requisite court fee.
5. Aggrieved by the order of the Appellate Tribunal, the judgment-
debtors filed Writ Petition No.28235 of 2003 in which the High Court by an
order dated 14th October, 2003 set aside the ex-parte decree on payment of
costs. That order when challenged by the decree holder bank in a Special
Leave Petition before this Court was affirmed and the SLP dismissed in July
2004. Undeterred by the dismissal of the Special Leave Petition, the bank
filed a Review Application before the High Court for review of its order
dated 14th October, 2003 setting aside the ex-parte decree. Even the
appellants herein filed a review petition against the said order which
applications were dismissed by the High Court with liberty to the auction
purchaser-appellants herein to represent their case before the Debt
Recovery Tribunal in the O.A. pending before it.
6. The appellants-auction purchasers at that stage filed I.A. No.20
of 2005 before the Debt Recovery Tribunal at Chennai seeking delivery of
possession of the property purchased by them. That application was allowed
by the Tribunal with a direction to the Recovery Officer to put the auction
purchasers in possession of the property in question. The defendants-
respondents herein challenged that order before the Appellate Tribunal at
Chennai on several grounds in M.A. No.90 of 2006. The Appellate Tribunal
allowed the said appeal and set aside the order passed by the Debt Recovery
Tribunal with a direction to the Debt Recovery Tribunal to take up I.A.
No.20 of 2005 along with O.A. No.1098 of 2001 and dispose of the same in
accordance with law.
7. The appellants questioned the correctness of the above order in
Writ Petition No.29356 of 2006 which was allowed by a Division Bench of the
High Court by Order dated 29th November, 2006, setting aside the order
passed by the Appellate Tribunal and remitting the matter back to the Debt
Recovery Appellate Tribunal to decide the issue
whether or not the rights
of a bona fide purchaser get curtailed if the ex-parte decree on the basis whereof the auction sale was conducted is eventually set aside.
The Debt
Recovery Appellate Tribunal examined the matter afresh and held that the
appellants-auction purchasers were not bona fide purchasers of the property
as they were aware of the pending legal proceedings between the bank and
the borrower. The Tribunal accordingly set aside the sale with a direction
to the defendants-respondents 1 to 3 to deposit the entire amount claimed
in original application.
8. Aggrieved by the orders passed by the Appellate Tribunal, the
appellants filed Writ Petition No.14594 of 2007 before the High Court which
writ petition has been dismissed by the High Court as already mentioned
above. The High Court approached the issues from a slightly different
angle; for instead of going into the question whether the appellants were
bona fide auction purchasers, it examined the validity of the auction
itself and came to the conclusion that the auction conducted by the
Recovery Officer was illegal and void because of non-compliance with the
provisions of Rule 57 in the Second Schedule of the Income Tax Act, 1961
which were in view of the provisions of Section 29 of the Recovery of Debts
Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to
a 'RDDB Act' for short) applicable to recovery of debt dues under the
latter mentioned Act. The present appeal assails the correctness of the
above order passed by the High Court.
9. Appearing for the appellants Mr. L. Nageshwar Rao, learned senior
counsel, made a threefold submission in support of his case. Firstly he
contended that the remand order passed by the High Court in the earlier
round was limited to the Appellate Tribunal finding out whether the rights
of a bona fide purchaser stood curtailed in view of the setting aside of
the ex-parte decree on which the auction had been conducted. While the
Tribunal had answered that question, the High Court had failed to do so in
the writ petition filed by the appellants. The High Court had digressed
from the subject and added a new dimension which had not been noticed or
pressed in the earlier round.
10. Secondly he contended that even if the High Court could examine a
ground other than the one on which a remand had been ordered, it failed to
appreciate that the provisions of the Income Tax Rules set out in the
Second Schedule of the Income Tax Act were applicable only "as far as
possible and with necessary modification". This was, according to Mr. Rao,
evident from a plain reading of Section 29 of the RDDB Act. The use of the
expressions "as far as possible" and "with necessary modifications", argued
the learned counsel, gave sufficient play at the joints to the Recovery
Officer to apply the said rules in the manner considered most appropriate
by him, having regard to the facts and circumstances of a given case. The
High Court had, argued Mr. Rao, fallen in an error in ignoring the
expressions appearing in Section 29 and proceeding with the matter as if
Rule 57 of the said rules was mandatory and applicable with full force. It
was also contended by the learned counsel that if Rules 57 and 58 of the
Income Tax Rules were held applicable in the form in which they appear in
the Second Schedule, the requirement of Rule 61 of the said Rules could not
be ignored and had to be mandatorily followed. Inasmuch as the
Interlocutory Application filed by the judgment-debtor for setting aside
the sale had been dismissed by the Tribunal and inasmuch as there was no
challenge to the said dismissal order at any stage, the High Court ought to
have held that the condition precedent for setting aside the sale namely
filing of a proper application was not satisfied thereby rendering the sale
in favour of the appellants immune from any challenge or interference.
11. It was thirdly argued by learned counsel for the appellants that
the appellants were bona fide purchasers, hence protected against any
interference with the sale in their favour, no matter the decree on the
basis whereof the sale had been effected had itself been set aside by High
Court. Reliance in support was placed by Mr. Rao upon the decisions of
this Court in Janak Raj v. Gurdial Singh (1967) 2 SCR 77; Janatha Textiles
and Ors. v. Tax Recovery Officer and Anr. (2008) 12 SCC 582; (1994) 2 SCC
364, Padanathil Ruqmini Amma Vs. P.K. Abdulla (1996) 7 SCC 668. It was
further contended that a contrary view was no doubt expressed by a Two-
Judge Bench of this Court in Chinnammal and Ors. v. P. Arumugham and Anr.
(1990) 1 SCC 513 but the conflict between the two lines of the decisions
referred to above deserved to be resolved by a reference to a larger Bench.
12. Mr. Rakesh Dwivedi, learned senior counsel appearing for the
respondents, per contra argued that the scope of the proceeding before the
High Court in the second round was not in any way limited by the earlier
remand order and the High Court could have and has indeed examined the
question of validity of the auction sale. He urged that the provisions of
the Income Tax Rules in the Second Schedule of the Act were applicable in
the form in which the said rules were found in the statute book as no
modification or amendment of the said rules had been made either by any
legislative enactment or by way of Rules under the RDDB Act. He contended
that the words "as far as possible" were incapable of conveying that the
Recovery Officer could at his discretion play with the rules without any
limitations on his power or discretion and without any guidelines under the
Act or the Rules. He submitted that decision of this Court in Chinnammal
and Ors. v. P. Arumugham and Anr. (1990) 1 SCC 513 was not in conflict with
the view taken in the decisions relied upon by Mr. Rao inasmuch as the said
decisions had not examined the issue as to what would constitute a bona
fide purchaser to be entitled to protection in law. We propose to deal with
the contentions raised by Mr. Rao ad seriatim.
13. The remand ordered by the High Court in Writ Petition
No.29356/2006 was an open remand which allowed the parties to urge their
respective contentions not only in regard to the rights of a bona fide
purchaser, but any other contention available to them on facts and in law.
This is evident from the operative portion of the order passed by the High
Court which was as under:
"In the above circumstances, as agreed by learned counsel appearing for the
parties, the impugned order dated 13.7.2006 passed by the Debt Recovery
Appellate Tribunal in M.A. No.90 of 2006 is set aside and the case is
remitted to the Debt Recovery Appellate Tribunal, Chennai, to determine the
aforesaid issues and any other issue as has been raised by one or other
party in M.A. No.90 of 2006, preferably within two months from the date of
receipt or production of a copy of this order."
14. The language employed in the remand order apart, the High Court
had not examined or determined the question whether Rule 57 of the Income
Tax Rules was mandatory and if so whether there was any breach of that
provision or the effect thereof. There was no discussion leave alone any
finality to the determination of that aspect, so as to prevent anyone of
the parties from urging their submissions on those questions. We have in
that view no hesitation in rejecting the first limb of Mr. Rao's argument
that the High Court could not have gone into any other question apart the
rights of a bona fide purchaser in the proceedings arising after the remand
order.
15. That brings us to the question whether Section 29 of the RDDB Act
do not apply the Income Tax Rules in the Second Schedule of the Income Tax
Act to the recovery proceedings under RDDB Act with full force and that the
expression 'as far as possible' appearing in Section 29 vests the Recovery
Officer with discretion to apply the said Rules depending upon the fact
situation of each case. Section 29 of the RDDB Act 29 is as under:
29. 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.
16. A bare reading of the above leaves no manner of doubt that the
rules under Income Tax Act were applicable only "as far as possible" and
with the modification as if the said provisions and the rules referred to
the amount of debt due under the RDDB Act instead of the Income Tax Act.
The question is whether the said two expressions render the provisions of
Rule 57 directory no matter the same is couched in a language that is
manifestly mandatory in nature.
17. Legislation by incorporation is a device to which legislatures
often take resort for the sake of convenience. The phenomenon is widely
prevalent and has been the subject matter of judicial pronouncements by
Courts in this country as much as Courts abroad. Justice G.P. Singh in his
celebrated work on Principles of Statutory Interpretation has explained the
concept in the following words:
"Incorporation of an earlier Act into a later Act is a legislative device
adopted for the sake of convenience in order to avoid verbatim reproduction
of the provisions of the earlier Act into the later. When an earlier Act or
certain of its provisions are incorporated by reference into a later Act,
the provisions so incorporated become part and parcel of the later Act as
if they had been 'bodily transposed into it. The effect of incorporation is
admirably stated by LORD ESHER, M.R.: 'If a subsequent Act brings into
itself by reference some of the clauses of a former Act, the legal effect
of that, as has often been held, is to write those sections into the new
Act as if they had been actually written in it with the pen, or printed in
it.
Even though only particular sections of an earlier Act are incorporated
into later, in construing the incorporated sections it may be at times
necessary and permissible to refer to other parts of the earlier statute
which are not incorporated. As was stated by LORD BLACKBURN: "When a single
section of an Act of Parliament is introduced into another Act, I think it
must be read in the sense it bore in the original Act from which it was
taken, and that consequently it is perfectly legitimate to refer to all the
rest of that Act in order to ascertain what the section meant, though those
other sections are not incorporated in the new Act."
18. In Ram Kirpal Bhagat and Ors. v. State of Bihar (1969) 3 SCC 471
this Court examined the effect of bringing into an Act the provisions of an
earlier Act and held that the legislation by incorporation of the
provisions of an earlier Act into a subsequent Act is that the provisions
so incorporated are treated to have been incorporated in the subsequent
legislation for the first time. This Court observed:
"The effect of bringing into an Act the provisions of an earlier Act is to
introduce the incorporated Sections of the earlier Act into the subsequent
Act as if those provisions have been enacted in it for the first time. The
nature of such a piece of legislation was explained by Lord Esher M. R. in
Re Wood's Estate [1881] 31 Ch. D.607 that "if some clauses of a former Act
were brought into the subsequent Act the legal effect was to write those
Sections into the new Act just as if they had been written in it with the
pen".
19. To the same effect is the decision of this Court in Mahindra and
Mahindra Ltd. v. Union of India and Anr. (1979) 2 SCC 529 where this Court
held that once the incorporation is made, the provisions incorporated
become an integral part of the statute in which it is transposed and
thereafter there is no need to refer to the statute from which the
incorporation is made and any subsequent amendment made in it has no effect
on the incorporating statute. The following passage is in this regard
apposite:
"The effect of incorporation is as if the provisions were written out in
the incorporating statute and were a part of it. Legislation by
incorporation is a common legislative device employed by the legislature,
where the legislature for convenience of drafting incorporates provisions
from an existing statue by reference to that statute instead of setting out
for itself at length the provisions which it desires to adopt. Once the
incorporation is made, the provision incorporated becomes an integral part
of the statute in which it is transposed and thereafter there is no need to
refer to the statute from which the incorporation is made and any
subsequent amendment made in it has no effect on the incorporating
statute."
20. We may also refer to the decisions of this Court in Onkarlal
Nandlal v. Rajasthan and Anr. (1985) 4 SCC 404, Mary Roy and Ors. v. State
of Kerala and Ors. (1986) 2 SCC 209, Nagpur Improvement Trust v. Vasantrao
and Ors. and Jaswantibai and Ors. (2002) 7 SCC 657, and M/s Surana Steels
Pvt. Ltd. v. The Deputy Commissioner of Income Tax and Ors. (1999) 4 SCC
306, which have reiterated the above proposition of law.
21. Applying the above principles to the case at hand Section 29 of
the RDDB Act incorporates the provisions of the Rules found in the Second
Schedule to the Income Tax Act for purposes of realisation of the dues by
the Recovery Officer under the RDDB Act. The expressions "as far as
possible" and "with necessary modifications" appearing in Section 29 have
been used to take care of situations where certain provisions under the
Income Tax Rules may have no application on account of the scheme under the
RDDB Act being different from that of the Income Tax Act or the Rules
framed thereunder. The provisions of the Rules, it is manifest, from a
careful reading of Section 29 are attracted only in so far as the same deal
with recovery of debts under the Act with the modification that the 'amount
of debt' referred to in the Rules is deemed to be one under the RDDB Act.
That modification was intended to make the position explicit and to avoid
any confusion in the application of the Income Tax Rules to the recovery of
debts under the RDDB Act, which confusion could arise from a literal
application of the Rules to recoveries under the said Act. Proviso to
Section 29 further makes it clear that any reference "to the assessee"
under the provisions of the Income Tax Act and the Rules shall be construed
as a reference to the defendant under the RDDB Act. It is noteworthy that
the Income Tax Rules make provisions that do not strictly deal with
recovery of debts under the Act. Such of the rules cannot possibly apply
to recovery of debts under the RDDB Act. For instance Rules 86 and 87
under the Income Tax Act do not have any application to the provisions of
the RDDB Act, while Rules 57 and 58 of the said Rules in the Second
Schedule deal with the process of recovery of the amount due and present no
difficulty in enforcing them for recoveries under the RDDB Act. Suffice it
to say that the use of the words "as far as possible" in Section 29 of RDDB
Act simply indicate that the provisions of the Income Tax Rules are
applicable except such of them as do not have any role to play in the
matter of recovery of debts recoverable under the RDDB Act. The argument
that the use of the words "as far as possible" in Section 29 is meant to
give discretion to the Recovery Officer to apply the said Rules or not to
apply the same in specific fact situations has not impressed us and is
accordingly rejected.
22. In Osmania University v. V.S. Muthurangam and Ors. (1997) 10 SCC
741, the question that fell for consideration was whether the age of
superannuation of the non-teaching staff at Osmania University should be
raised to 60 years when the same had been raised to 60 years for the
University's teaching staff. Since Section 38(1) of the Osmania University
Act, 1959 stated that the conditions of service for all salaried staff of
the University shall be uniform "as far as possible", the decision in the
case turned on the meaning to be given to that phrase. It was argued by
the Solicitor General on behalf of the University that the use of this
phrase in Section 38(1) indicated that the provision could be departed from
in certain situations. This Court ruled otherwise and held as follows :
"8...Mr. Solicitor General is justified in his contention that Section
38(1) of the Act recognizes flexibility and the expression 'as far as
possible' inheres in it an inbuilt flexibility...But if uniform conditions
of service for teaching and non teaching staff of the University is not
otherwise impracticable, the University is under an obligation to maintain
such uniformity because of the mandate of Section 38(1) of the Act. In the
instant case, we do not find that it is not at all practicable for the
University to maintain the parity in the age of superannuation of both
teaching and non teaching staff."
(emphasis supplied)
23. It follows that while the phrase "as far as possible", may be
indicative of a certain inbuilt flexibility, the scope of that flexibility
extends only to what is "not at all practicable". In order to show that
Rules 57 and 58 of the Second Schedule of the Income Tax Act may be
departed from under the RDDB Act, it would have to be proved that the
application of these Rules is "not at all practicable" in the context of
RDDB Act.
24. The interchangeable use of the words "possible" and "practicable"
was previously established by a three-judge Bench of this Court in N.K.
Chauhan and Ors. v. State of Gujarat and Ors., (1977) 1 SCC 308, where this
Court observed that in simple Anglo-Saxon Practicable, feasible, possible,
performable, are more or less interchangeable. Webster defines the term
'practicable' thus :
"1. That can be put into practice; feasible. 2. That can be used for an
intended purpose; usable."
25. Black's Law Dictionary similarly defines 'practicable' as follows
:
"(Of a thing) reasonably capable of being accomplished; feasible."
26. It is, therefore, reasonable to hold that the phrase "as far as
possible" used in Section 29 of the RDDB Act can at best mean that the
Income Tax Rules may not apply where it is not at all possible to apply
them having regard to the scheme and the context of the legislation.
27. There is nothing in the provisions of Section 29 of RDDB Act or
the scheme of the rules under the Income Tax Act to suggest that a
discretion wider than what is explained above was meant to be conferred
upon the Recovery Officer under Section 29 of the RDDB Act or Rule 57 of
the Income Tax Rules which reads as under:
"57. (1) On every sale of immovable property, the person declared to be the
purchaser shall pay, immediately after such declaration, a deposit of twenty-five per cent on the amount of his purchase money, to the officer conducting the sale; and, in default of such deposit, the property shall forthwith be resold.
(2) The full amount of purchase money payable shall be paid by the purchaser to the Tax Recovery Officer on or before the fifteenth day from the date of the sale of the property."
28. It is clear from a plain reading of the above that the provision
is mandatory in character. The use of the word "shall" is both textually
and contextually indicative of the making of the deposit of the amount
being a mandatory requirement.
The provisions of Rules 57 and 58 of the
Income Tax Rules, have their equivalent in Order XXI Rules 84, 85 & 86 of the C.P.C. which are pari materia in language, sweep and effect and have been held to be mandatory by this Court in Manilal Mohanlal Shah and Ors.
v. Sardar Sayed Ahmed Sayed Mahmed and Anr. (AIR 1954 SC 349) in the
following words:
"8. The provision regarding the deposit of 25 per cent. by the purchaser
other than the decree-holder is mandatory as the language of the rule
suggests. The full amount of the purchase-money must be paid within fifteen
days from the date of the sale but the decree-holder is entitled to the
advantage of a set-off. The provision for payment is, however, mandatory...
(Rule 85). If the payment is not made within the period of fifteen days,
the Court has the discretion to forfeit the deposit, and there the
discretion ends but the obligation of the Court to re-sell the property is
imperative. A further consequence of non-payment is that the defaulting
purchaser forfeits all claim to the property (Rule 86)...
9...These provisions leave no doubt that unless the deposit and the payment
are made as required by the mandatory provisions of the rules, there is no
sale in the eye of law in favour of the defaulting purchaser and no right
to own and possess the property accrues to him.
xx xx xx xx
11. Having examined the language of the relevant rules and the judicial
decisions bearing upon the subject
we are of opinion that the provisions of
the rules requiring the deposit of 25 per cent. of the purchase-money
immediately on the person being declared as a purchaser and the payment of
the balance within 15 days of the sale are mandatory and upon non-
compliance with these provisions there is no sale at all.
The rules do not
contemplate that there can be any sale in favour of a purchaser without
depositing 25 per cent. of the purchase-money in the first instance and the
balance within 15 days.
When there is no sale within the contemplation of
these rules, there can be no question of material irregularity in the
conduct of the sale.
Non-payment of the price on the part of the defaulting
purchaser renders the sale proceedings as a complete nullity.
The very fact
that the Court is bound to resell the property in the event of a default
shows that the previous proceedings for sale are completely wiped out as if
they do not exist in the eye of law.
We hold, therefore, that in the
circumstances of the present case there was no sale and the purchasers
acquired no rights at all."
29. Relying in Manilal Mohanlal's case (supra) Rules 84, 85 and 86 of
Order XXI were also held to be mandatory in Sardara Singh (Dead) by Lrs.
and Anr. v. Sardara Singh (Dead) and Ors. (1990) 4 SCC 90.
30. Similarly in Balram, son of Bhasa Ram v. Ilam Singh and Ors.
(1996) 5 SCC 705 this Court reiterated the legal position in the following
words:
"7...it was clearly held [in Manilal Mohanlal] that Rule 85 being
mandatory, its non-compliance renders the sale proceedings a complete nullity requiring the executing court to proceed under Rule 86 and property has to be resold unless the judgment-debtor satisfies the decree by making the payment before the resale.
The argument that the executing court has inherent power to extend time on the ground of its own mistake was also
expressly rejected..."
31. We may also refer to the decisions of this Court in Rao Mahmood
Ahmed Khan v. Sh. Ranbir Singh and Ors. (1995) 4 SCC 275, Gangabai Gopaldas
Mohata v. Fulchand and Ors. (1997) 10 SCC 387, Himadri Coke & Petro Ltd. v.
Soneko Developers (P) Ltd. And Ors. (2005) 12 SCC 364 and Shilpa Shares and
Securities and Ors. v. The National Co-operative Bank Ltd. and Ors. (2007)
12 SCC 165,
wherein the same position has been taken.
32. In the light of the above we see no reason to hold that
Rules 57 and 58 of the Income Tax Rules are anything but mandatory in nature, so that a breach of the requirements under those Rules will render the auction non-est in the eyes of law.
33. That leaves us with the third and the only other submission made
by Mr. Rao touching
the rights of bonafide purchaser and
whether there is
any conflict between the decisions of this Court on the subject to call for
a reference to a larger bench.
There is, in our opinion, no doubt that
there is an apparent conflict between the decisions upon which reliance was
placed by learned counsel for the parties.
But having regard to the view
that we have taken on the question of the validity of this auction itself,
we do not consider it necessary to make a reference to a larger bench to
resolve the conflict.
The cleavage in the judicial opinion is for the
present case only of academic importance, hence need not be addressed by us
or by a larger bench for the present.
34. In the result, this appeal fails and is hereby dismissed but in
the circumstances without any order as to costs.
.......................................J.
(T.S. Thakur)
........................................J.
(Gyan Sudha Misra)
New Delhi
January 9, 2013
