Allowed

Titto Thomas v. Bank of India

Kerala HC22 Mar 2016OP (DRT)/13/2015

Case brief

AI extract

What is this about?

The High Court set aside the DRT's order confirming a sale of mortgaged property conducted by a Recovery Inspector without a validly appointed Recovery Officer. The Court held the sale irregular under the Income Tax Act, 1961, and allowed the guarantor-petitioner's claim, ordering the return of the purchaser's deposit.

What did the court decide?

Set aside the order of the DRT and the sale conducted on 27.02.2013; direct the return of the purchaser's deposit with interest.

Titto Thomas Vs Bank of India — Cheque Dishonour | Kerala HC (2016)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

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TUESDAY, THE 22ND DAY OF MARCH 2016/2ND CHAITHRA, 1938

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OP (DRT).No. 13 of 2015 (O)

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AGAINST THE ORDER IN OA 301/2008 of DEBT RECOVERY TRIBUNAL, ERNAKULAM DATED 07.01.2015

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PETITIONER(S):

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TITTO THOMAS S/O.LATE K.P.THOMAS, KANNETH HOUSE MAYILALLAMPARA P.O., PUTHUPPADI, KOZHIKODE DISTRICT.

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BY ADVS.SRI.S.EASWARAN SRI.M.A.AUGUSTINE

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RESPONDENT(S):

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1. BANK OF INDIA ZONAL OFFICE, KALOOR, KOCHI-682017.

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2. JOE K.THOMAS

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S/O.LATE K.P.THOMAS, KANNETH HOUSE MAYILALLAMPARA P.O., PUTHUPPADI KOZHIKODE DISTRICT-673001.

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3. THE DEBTS RECOVERY TRIBUNAL ERNAKULAM, REPRESENTED BY ITS REGISTRAR -682011.

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4. DAVOOD P.T.S. S/O.ABDURAHIMANKUTTY, RESIDING AT V5, CRESENT COURT PANIKKAR ROAD, NADAKKAVU-674011.

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R3 BY ADV. SRI.N.NAGARESH, ASSISTANT SOLICITOR GENERAL R4 BY ADV. SMT.K.P.SANTHI R4 BY ADV. SMT.V.SHARMILA R1 BY ADV. SRI.DEVAN RAMACHANDRAN (SR.) R1 BY ADV. SRI.K.M.ANEESH R1 BY ADV. SRI.K.SANTHOSH KUMAR (KALIYANAM) R1 BY ADV. SRI.ADARSH KUMAR R1 BY ADV. SRI.BIJU VARGHESE ABRAHAM R1 BY ADV. SRI.DILEEP CHANDRAN

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THIS OP (DEBT RECOVERY TRIBUNAL) HAVING COME UP FOR ADMISSION ON 22-03-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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OP (DRT).No. 13 of 2015 (O)

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APPENDIX

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PETITIONER(S)' EXHIBITS

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EXT. P1 : TRUE COPY OF THE NOTICE DT.12-11-12.

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EXT. P2 : TRUE COPY OF THE PROCLAMATION OF SALE NOTICE DT.26-11-12. EXT. P3 : TRUE COPY OF THE APPEAL MEMORANDUM IN APPEAL NO.2 OF 2013 WITH ANNEXURE.

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EXT. P4 : TRUE COPY OF THE OBJECTION FILED BY THE R1 IN APPEAL 2/13.

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EXT. P5 : TRUE COPY OF THE ORDER DT.7-1-15 IN APPEAL 2/13 OF R3.

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RESPONDENT(S)' EXHIBITS:

NIL

// TRUE COPY //

P.A TO JUDGE

K. VINOD CHANDRAN, J.

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=====================

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O.P(DRT)No.13 of 2015 - O

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======================

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Dated this the 22^nd day of March, 2016

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J U D G M E N T

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The original petition is more or less on the same lines as the ones decided by judgment dated 19.12.2015, in O.P(DRT) Nos.11 and 12 of 2015. The learned Standing Counsel, appearing for the respondent Bank, would attempt to draw a distinction, which makes it imperative that the facts are briefly touched upon, since the distinction drawn is on a question of law raised on the facts.

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The petitioner, who was a guarantor in a loan

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availed by the original borrower, his brother, had challenged Ext.P2 proclamation of sale by Ext.P3 appeal before the Debt Recovery Tribunal (DRT), Ernakulam. The proclamation of sale made on 26.11.2012 was by the incumbent Recovery Officer

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and the sale as per the proclamation was posted to 04.02.2013. The petitioner did not have any objection, with respect to the date or with respect to the upset price fixed. The appeal was filed on two counts. The Recovery Officer demitted office on 30.11.2012 after the proclamation of sale was made. There was no Recovery Officer appointed for more than two months and hence on 29.01.2013, Ext.P3 appeal was moved, primarily contending that there is no possibility of a Recovery Officer being appointed before the date of sale, which prejudices the petitioner in so far as disabling him from moving an application to otherwise settle the debt; without resorting to the sale of the property mortgaged.

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The essential contention taken up before the DRT was that there was an amount of Rs.52,55,468/- lying in deposit at the Sub Court, Sulthan Bathery as evidenced from Ext.P3 (Annexure A3); which was in the name of the three brothers, the petitioner, the original borrower and one

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another. There was a provision under Rule 31 of the Second Schedule to the Income Tax Act, 1961, providing for an application to the Recovery Officer to call for any amounts, lying in deposit, which the original borrower or the guarantor was entitled to. Such an application could have been made as per the Schedule only before the Recovery Officer and there being no Recovery Officer appointed; the prayer in Ext.P3 appeal was for transfer of amounts deposited in the Civil Court, equal to the dues in the loan account, as indicated in the proclamation of sale.

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Admittedly, there was a stay of confirmation

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granted by the DRT. The sale on 04.02.2013, did not take place and the Recovery Inspector assuming the powers of the Recovery Officer on the basis of an authorisation, adjourned the sale to 27.02.2013. On that date also, there was no Recovery Officer appointed. The Recovery Inspector again based on the authorisation, conducted the sale. This Court in

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the aforecited decision found that the authorisation made long prior, by another Recovery Officer would not clothe the Recovery Inspector, with the power to carry on the sale, especially when there was none occupying the Office of the Recovery Officer.

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The distinction from the cited decision, on facts, pointed out by the learned Standing Counsel is that, here the sale was not challenged by the petitioner, within a reasonable time. In the cited decision, the facts indicate that an appeal was filed after the sale was confirmed, within 30 days and under Rule 61 of Second Schedule. In such circumstance, there was a properly instituted appeal, which is absent in the present case, is the contention. The learned Standing Counsel would also point out that the appeal filed by the petitioner was against the proclamation of sale and that could have been maintained only as against the objections on the upset price or any like matter, affecting prejudicially the interest of the owner

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of the property, as discernible from the proclamation itself. The appeal was filed only on an apprehension that the Recovery Officer would not be in office on the date of sale and the sale itself having been conducted by the Recovery Inspector on valid authorisation; definitely there should be an appeal filed under Rule 61 of the Second Schedule. The amendment made to the earlier appeal against the proclamation as such, cannot be entertained and in any event the application was grossly delayed being filed on 25.08.2014, far beyond the 30 days as prescribed under Rule 61, is the contention.

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Herein, it is to be noticed that the proclamation of sale itself was challenged on the basis of Ext.P3 appeal. The essential ground raised was not the apprehension of there being no Recovery Officer on the date notified for sale, but the prejudice caused insofar as the petitioner being not able to file an application under Rule 31 of Second Schedule. The confirmation also was stayed by the DRT, when the appeal

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was moved. The DRT also in its order finds that the appeal is properly instituted but however rejects the claim on the ground that the petitioner could always redeem the property by making deposit of the amounts.

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The DRT has failed to look into whether there is any irregularity caused in the sale itself, for reason of there being no Recovery Officer, after the proclamation of sale and for considerable period thereafter. The DRT also has proceeded on the basis that the authorisation granted was proper. If at all no deposit is made, as directed by the DRT, then there would be a confirmation effected, which could validly be challenged by the petitioner, within 30 days. To relegate the petitioner to such remedy essentially in the context of this Court having found that no sale could have been conducted by the Recovery Inspector on the basis of the authorisation issued by yet another incumbent in office, in the year 2009, would only lead to multiplicity of litigation. In such

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circumstance, the distinction pointed out by the learned Standing Counsel, if accepted can only result in the necessary consequence of confirmation, to which the petitioner could take a valid challenge, in which event the issue would be covered by the findings of this Court in an identical situation.

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The facts having been noticed, the issue is squarely covered by the decision aforecited. The authorisation upon which the Recovery Inspector conducted the sale was also one, which was found to be not a proper authorisation in the aforecited decision.

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The learned Counsel for the purchaser would point out that the property was purchased for Rs.42,10,000/-. The amounts said to be in deposit before the Sub Court, Sulthan Bathery being Rs.52,55,468/-, admittedly belongs to three persons and the disbursal of the same was challenged before this Court, which writ petition was subsequently dismissed. The contention is that the amounts now in deposit

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in fact belong to three persons and there could be disputes raised on the disbursal of the same, which would go against the interest of the Bank also. However, that is a matter, which has to be agitated by the Bank in appropriate proceedings. Significant also would be the fact that, the amounts in deposit is the entitlement of three persons, the petitioner, the guarantor, his brother, the original borrower and another sibling. The borrower and guarantor would thus be entitled to 2/3^rd of the amounts in deposit, which could very well settle the debt due to the Bank. It is made clear that this is merely a passing observation and need not be taken as a finding, which this Court would not venture to attempt; when one of the three, who are entitled, is not before this Court.

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In such circumstance, the original petition would stand allowed, setting aside Ext.P5 order and declaring that the sale conducted by the Recovery Inspector on 27.02.2013, is irregular and not in accordance with the provisions of the

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Second Schedule of the Income Tax Act, 1961, following the findings in judgment dated 19.12.2015, in Bio Research Pharmaceuticals v. State Bank of Travancoere [O.P(DRT) Nos.11 and 12 of 2015] . The amounts deposited by the purchaser, the 4^th respondent is said to be in fixed deposit. The entire amounts with interest accrued on the same will be returned to the 4^th respondent, within a period of one month from today. The parties shall suffer their respective costs.

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Sd/-

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K. VINOD CHANDRAN, JUDGE

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SB/22/03/2016

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// true copy //

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P.A to Judge.

Titto Thomas v. Bank of India

Case brief

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What did the court decide?

Titto Thomas v. Bank of India

Case brief

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