The High Court held that a Recovery Officer lacks jurisdiction to issue a notice to legal heirs on the basis of a recovery certificate drawn after the defaulter's death, rendering the notice liable to be quashed under Rule 85 of the Income Tax Act.
The notice dated 04.04.2003 issued against the petitioners is quashed.
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT :
THE HONOURABLE MR. JUSTICE V.K.MOHANAN
THURSDAY, THE 2ND JULY 2009 / 11TH ASHADHA 1931
WP(C).No. 24897 of 2003(L) --------------------------------------
PETITIONERS:
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1. V.RAVINDRANATHAN NAIR, SREE BHAVANAM, WOMEN'S COLLEGE ROAD, VAZHUTHACAUD, THIRUVANANTHAPURAM.
2. V.SURENDRAN NAIR, SREE LASYAM, EDAPAZHANJI, SASTHAMANGALAM, THIRUVANANTHAPURAM.
BY MR.U.K.RAMAKRISHNAN, SENIOR ADVOCATE, ADVS. MR.E.K.MADHAVAN, MR.P.V.LOHITHAKSHAN, SMT.P.VIJAYAMMA, SMT.UMA GOPINATH, MR.V.KRISHNA MENON, SMT.AMRITA JAYARAM.
RESPONDENTS:
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1. STATE BANK OF TRAVANCORE, M.G.ROAD, THIRUVANANTHAPURAM, REPRESENTED BY ITS CHIEF MANAGER.
2. RECOVERY OFFICER, OFFICE OF THE RECOVERY OFFICER, DEBTS RECOVERY TRIBUNAL (KERALA & LAKSHADWEEP), 8TH FLOOR, KSHB BUILDING, PANAMPILLY NAGAR, KOCHI - 682 036.
R1 BY ADV. MR. R.S.KALKURA.
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 02/07/2009,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
W.P.(C). NO.24897/2003-L:
APPENDIX
PETITIONERS' EXHIBITS:
EXT.P.1: COPY OF THE NOTICE NO. DRC 976/SBT/TVM DTD. 04/04/2003 ISSUED BY THE R.2. TO THE PETITIONERS.
EXT.P.2: COPY OF THE OBJECTION DTD. 15/04/2003 SUBMITTED BY THE P.1. TO THE R.2.
EXT.P.3: COPY OF THE ORDER DTD. 15/02/2001 PASSED BY THE HONOURABLE DEBTS RECOVERY TRIBUNAL, ERNAKULAM (KERALA AND LAKSHADWEEP) IN T.A. NO. 1204 OF 1997 (O.S.NO.991 OF 1993, OF THE SUB COURT, TRIVANDRUM).
RESPONDENTS' EXHIBITS: NIL.
//TRUE COPY//
P.S. TO JUDGE.
Prv.
V.K.MOHANAN, J.
W.P.(C). No.24897 OF 2003
Dated, 2nd day of July, 2009
JUDGMENT
The petitioners, who are the Children of one
Velukutty Nair (late) - one of the Directors of Construction Engineers and Allied Technical Services (P) Ltd. which availed a loan from the Ist respondent which became due and, consequently, the respondent bank initiated proceedings to realise the amount which ultimately culminated in Ext.P1 notice against the petitioners and thus the above notice is under challenge in this writ petition.
petition is that in view of Rule 85 of the second schedule of the Income Tax Act ,1961, no proceedings against the petitioners, being the legal representatives, be initiated or proceeded as the defaulter died after the recovery certificate is drawn. In the present case, according to the petitioner, the certificate of recovery was drawn or issued
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on 27.8.2002 whereas the petitioner's father died on 21.6.2001, much earlier to the date of Recovery of certificate. Therefore, according to the petitioners, Ext.P1 notice is issued without jurisdiction and therefore the same is liable to be set aside as such.
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to the Debt Recovery Tribunal at Chennai and after the formation of the Debt Recovery Tribunal at Ernakulam, the proceedings was transferred to the DRT, Ernakulam. Thus, Ext.P3 judgment was passed by the DRT, Ernakulam and based upon Ext.P3, the Tribunal has issued recovery certificate. Thus Ext.P1 notice was issued on the basis of such recovery certificate issued by the DRT. According to the respondents, the petitioners have no locus standi to raise such objection so far as the bank has not moved against the property of the petitioners which inherited from late Velukutty Nair, the defaulter. Therefore, according to the respondents, the writ petition itself premature. It is also contended that once an order for recovery is passed by the Debt Recovery Tribunal for recovery, then the recovery of the amount due is made under the procedure for recovery tax as contemplated under sections 222 to 276 of the Income Tax Act and according to the respondents, as per Part-1 General Provisions Rule 11, Tax Recovery Officer is entitled to
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make an investigation on the claims, if any made by any of the parties. It is specifically contended that even assuming that mortgage properties have not been brought to sale, the judgment debtors have absolutely no right to impose any restriction on the discretion of the Ist respondent bank, when it proceeded as against any of the defendants or their assets. It is also stated that it is up to the decree holder bank as well as the Recovery Officer to decide as to whether the petitioners have inherited any property belonging to the said Velukutty Nair and such a plea cannot be raised in this writ petition under Article 226 of the Constitution of India.
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petitioners submitted that in the light of the facts and circumstances involved in the case, the 2nd respondent has no jurisdiction to issue Ext.P1 notice against the petitioners who are the legal heirs of the defaulter, who is no more, and who died on 21.6.2001, before issuance of the recovery certificate. It is also submitted by the counsel for the petitioner that the bank could have proceeded against the other defaulters and their assets, but in the present case, that was not done by them and the present attempt is to proceed against the petitioners in violation of the legal procedure and also overlooking the statutory bar as per the law which govern the field.
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the recovery certificate was drawn by the Tribunal only on 27.8.2002 for which the respondents are in no way responsible. It is also pointed out that the drawing of certificate of recovery is only a Clerical job, i.e within the frame work of Ext.P3 order and the drawing of certificate of recovery is equivalent to that of drawing of decree based upon the judgment of a civil court. So according to the learned counsel, by the pronouncement of Ext.P3 order, the liability of the father of petitioners has already been fixed, and therefore, it cannot be said that no proceedings can be continued against the petitioners who are the legal heirs of the defaulter whose name appeared in Ext.P3. It is also pointed out that the Ist respondent bank has already taken steps and execution proceedings are pending against the other defendants/defaulters and certain amount has already been realised from the said defaulters or defendants.
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petitioners as well as the Ist respondent. Rule 85 of the second Schedule of Income Tax Act 1961 clearly worded without any ambiguity which runs as follows:
“85. Procedure on death of defaulter.- If at any time after the certificate is drawn up by the Tax Recovery Officer the defaulter dies, the proceedings under this Schedule (except arrest and detention) may be continued against the legal representative of the defaulter, and the provisions of this Schedule shall apply as if the legal representatives were the defaulter”.
So, in the present case, Ext.P1 notice was issued by the 2nd respondent on the basis of the recovery certificate dated 27.8.2002. It is beyond dispute that the father of the petitioners died on 21.6.2001. Therefore, in view of Rule 85, stated above, the 2nd respondent has no jurisdiction to issue Ext.P1 notice so as to proceed against the petitioners to pay the amount due to the Ist respondent connected with the liability if any of their father along with other defendants.
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of Debts due to Banks and Financial Institutions Act, 1993, the Presiding Officers shall have power to withdraw the certificate or correct any clerical or arithmetical mistake in the certificate by sending an intimation to the Recovery Officer and, therefore, the Recovery Officer can proceed with the notice issued against the petitioners if the mistake is corrected by the Tribunal. The above contention is not appealable. From the very wording contained in subsection 2 of Section 26, it is crystal clear that the jurisdiction of the presiding officer is either to withdraw the certificate or correct any clerical or arithmatical mistake in the certificate. The mistake contemplated in section 26(2) is not the one which is sufficient to refix the liability of the parties. Any clerical error or arithmetical mistake can be corrected, provided, the same is brought to the notice of the presiding Officer, the Tribunal. It is also relevant to note that the Tribunal is to correct or withdraw the certificate if he is satisfied that there are sufficient grounds for the same. But that is an
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independent proceedings that would be instituted before the Presiding officer. As such at the time of filing the writ petition or at the time of issuing Ext.P1 notice, no such proceedings was initiated or no such order was issued by the Tribunal. In the absence of such order from the Tribunal and in the light of the Rule 85 which quoted above, the recovery officer cannot proceed against the petitioners on the strength of the recovery certificate dated 27.8.2002.
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WP(C) No.24897/03
the amount due to it from the other defaulters.
In the result, Ext.P1 is quashed. It is made clear that the respondents cannot proceed against the petitioners on the basis of the Recovery Certificate dated 28.7.2002 as such which was issued on the basis of Ext.P3. The writ petition is allowed to that extent. It is observed that this judgment will not stand in the way of Ist respondent to proceed against the petitioners by resorting appropriate legal procedure in case due amount was not fully satisfied from the other defaulters, if so required.
V.K.MOHANAN, JUDGE
kvm/-
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V.K.MOHANAN, J .
O.P.No.
JUDGMENT
Dated:..
2 issues framed by the court
Whether the Recovery Officer had jurisdiction to issue a notice to legal heirs on the basis of a recovery certificate drawn after the defaulter's death.
Whether procedural errors under Rule 85 of Schedule II of the Income Tax Act, 1961, vitiate the notice issued by the Recovery Officer.
3 provisions across 2 enactments
V.Ravindranathan Nair
V.Suren dran Nair
State Bank of Travancore
Recovery Officer, DRT (Kerala & Lakshadweep)
V.K. Mohanan
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
