Research › Search › Judgment

Allahabad High Court · body

2011 DIGILAW 2846 (ALL)

Ballia Etawa Gramin Bank v. Ramji Singh

2011-12-14

R.K.GUPTA

body2011
JUDGMENT : R.K. GUPTA, J. (CHAIRPERSON) 1. This is an Appeal preferred by the appellant Financial Institution under Section 20 of the RDDBFI Act, 1993 challenging the order dated 18th May, 2010 passed by the Debts Recovery Tribunal in Appeal No. 2/2005 (Dr. Ramji Singh Properties and Hotels Pvt. Ltd. v. Ballia Gramin Bank) arising out of DRC No. 279 of 2002 in O.A. No. 261/01 whereby the Debts Recovery Tribunal has allowed the Appeal filed by the respondent No. 1 and held that the property sold by the Recovery Officer cannot be subjected to sale, and accordingly the Debts Recovery Tribunal quashed the auction sale dated 19th September, 2008 and confirmation of sale dated 5th January, 2009 and also the attachment of property was quashed and the Debts Recovery Tribunal further directed the Recovery Officer to refund the sale price to the purchaser within 15 days from 18th May, 2010. Appeal No. R-23/11 The present Appeal has been preferred by the Ballia Gramin Bank under Section 20 of the RDDBFI Act, 1993 challenging the order dated 18th May, 2010 passed by the Tribunal below in Appeal No. 1 of 2009 (Punjab National Bank v. Ballia Kshetriya Gramin Bank) whereby the Debts Recovery Tribunal has allowed the Appeal filed by the respondent Bank and held that the property sold by the Recovery Officer cannot be subjected to sale, and accordingly the Debts Recovery Tribunal quashed the auction sale dated 19th September, 2008 and confirmation of sale dated 5th January, 2009 and also the attachment of property was quashed and the Debts Recovery Tribunal further directed the Recovery Officer to refund the sale price to the purchaser within 15 days from 18th May, 2010. Appeal No. R-24/11 2. This Appeal has been preferred by the Ballia Gramin Bank under Section 20 of the RDDBFI Act, 1993 challenging the order dated 18th May, 2010 passed by the Debts Recovery Tribunal in Appeal No. 12 of 2009 (Dr. Appeal No. R-24/11 2. This Appeal has been preferred by the Ballia Gramin Bank under Section 20 of the RDDBFI Act, 1993 challenging the order dated 18th May, 2010 passed by the Debts Recovery Tribunal in Appeal No. 12 of 2009 (Dr. Ramji Singh Properties and Hotels Pvt. Ltd. v. Ballia Kshetriya Gramin Bank) whereby the Debts Recovery Tribunal has allowed the Appeal filed by the respondents and held that the property sold by the Recovery Officer cannot be subjected to sale, and accordingly the Debts Recovery Tribunal quashed the auction sale dated 19th September, 2008 and confirmation of sale dated 5th January, 2009 and also the attachment of property was quashed and the Debts Recovery Tribunal further directed the Recover Officer to refund the sale price to the purchaser within 15 days from 18th May, 2010. Appeal No. R-25/11 3. This appeal has been preferred by the Ballia Kshetriya Gramin Bank under Section 20 of the RDDBFI Act, 1993 challenging the order dated 18th May, 2010 passed by the Debts Recovery Tribunal in Appeal No. 39 of 2008 (Dr. Ramji Singh Properties and Hotels Pvt. Ltd. v. Recovery Officer, D.R.T., Allahabad) whereby the Debts Recovery Tribunal has allowed the Appeal filed by the respondents and held that the property sold by the Recovery Officer cannot be subjected to sale, and accordingly the Debts Recovery Tribunal quashed the auction sale dated 19th September, 2008 and confirmation of sale dated 5th January, 2009 and also the attachment of property was quashed and the Debts Recovery Tribunal further directed the Recovery Officer to refund the sale price to the purchaser within 15 days from 18th May, 2010. 4. The appellant Bank filed an application before the D.R.T., Allahabad under Section 19 of the RDDBFI Act, 1993 against the respondent No. 2 in the present Appeal for issuance of the Recovery Certificate for a sum of Rs. 51,26,964,00/- plus pendente lite and future interest @ 20.5% per annum with half yearly rests w.e.f. 1st July, 2001 till the date of realization which was registered as O.A. No. 261 of 2001 and the same was allowed ex parte on 7th August, 2002. 5. The appellant - Bank initiated the recovery proceeding and after attaching the mortgaged properties the same were put to auction on 28th May, 2004 but the auction failed as no bidder participated in the said auction. The respondent Nos. 5. The appellant - Bank initiated the recovery proceeding and after attaching the mortgaged properties the same were put to auction on 28th May, 2004 but the auction failed as no bidder participated in the said auction. The respondent Nos. 3 to 6 are partners and guarantors of respondent No. 2. The appellant - Bank filed one application before the Recovery Officer for attachment and sale of personal property i.e. Plot No. 222/3, area 0.36 decimal, Habibpur, Varanasi and the same was allowed. Consequently, the aforesaid property was attached by order dated 18th January, 2005. The respondent No. 1 filed the objection before the Recovery Officer stating therein that the property in dispute belongs to the company namely Dr. Ramji Singh, Properties and Hotels Pvt. Ltd. and it has no concern with the loan of respondent No. 2. The respondent No. 1 filed Appeal No. 2 of 2005 under Section 3 of the RDDBFI Act, 1993 and the DRT granted stay for sale on 4th August, 2005 in favour of the respondent No. 1. On 9th July, 2008 the Appeal No. 2 of 2005 was dismissed in default whereupon the appellant - Bank took steps for auction of the property in dispute and the same was held on 19th September, 2008 and the property was auctioned. On publication of the auction notice the respondent Nos. 1 and 7 i.e. the Punjab National Bank also filed objections before the Recovery Officer, Debts Recovery Tribunal, Allahabad claiming right over the property in dispute which was rejected by the Recovery Officer vide his order dated 5th January, 2009 and confirmed the sale conducted by the appellant - Bank. 6. The ground of the objection of the respondent Punjab National Bank was that the property in dispute was mortgaged with it w.e.f. 17th December, 2005, The same was rejected by the Recovery Officer on the ground that the property in dispute was attached much before its mortgage with the Punjab National Bank i.e. 18th January, 2005. The Punjab National Bank filed an Appeal which was registered as Appeal No. 1 of 2009 before the Debts Recovery Tribunal against the order passed by the Recovery Officer on 5th January, 2009 in DRC No. 279 of 2002 arising out of O.A. No. 261 of 2001. 7. The Punjab National Bank filed an Appeal which was registered as Appeal No. 1 of 2009 before the Debts Recovery Tribunal against the order passed by the Recovery Officer on 5th January, 2009 in DRC No. 279 of 2002 arising out of O.A. No. 261 of 2001. 7. The defendant No. 1 filed another appeal which was registered as Appeal No. 39 of 2008 challenging the orders dated 18th September, 2008 and 19th September, 2008 passed by the Recovery Officer. The respondent No. 1 filed another Appeal No. 12 of 2009 challenging the sale confirmation order dated 5th January, 2009. 8. By order dated 18th May, 2010 all the appeals i.e. Appeal No. 2 of 2005, Appeal No. 39 of 2008, Appeal No. 12 of 2009 and Appeal No. 1 of 2009 were allowed arising out of D.R.C. No. 279 of 2002 in O.A. No. 261/01 by holding that the property sold by the appellant - Bank cannot be subjected to sale, and accordingly the Debts Recovery Tribunal quashed the auction sale dated 19th September, 2008 and confirmation of sale dated 5th January, 2009 and also the attachment of property was quashed and the Debts Recovery Tribunal further directed the Recovery Officer to refund the sale price to the purchaser within 15 days from 18th May, 2010. 9. The Tribunal allowed all the four Appeals No. 2 of 2005, appeal No. 39 of 2008, Appeal No. 12 of 2009 and Appeal No. 1 of 2009 filed by the respondents and also accepted the objections so raised by the respondent - Bank against the appellant - Bank in Appeal No. R-23/11. The Tribunal was of the view that there is no dispute that the property was purchased by Shri Ramji Singh, son of Shri Viswanath Singh & Co. According to the Tribunal, it was a partnership firm. The partnership firm was constituted with four persons namely Ramji Singh, Laxman Singh, Shivji Singh and Markandey Singh. The Tribunal relied upon the partnership deed. The contents of the partnership deed states that the property in question was purchase by the partners by a mutual consent and, therefore, the Tribunal was of the view that it was the asset of the partnership firm and was not the individual property of Shri Ramji Singh. The Tribunal relied upon the partnership deed. The contents of the partnership deed states that the property in question was purchase by the partners by a mutual consent and, therefore, the Tribunal was of the view that it was the asset of the partnership firm and was not the individual property of Shri Ramji Singh. The Tribunal further held that the partnership firm was constituted on 27th June, 1988 but the effect of its commencement was given w.e.f. 1st April, 1983 before the purchase of the property in question. The Tribunal further held that during March, 1990 amongst all the four partners of the registered company another deed was executed whereby they inducted a new 5th partner. 10. This is to be seen that the Tribunal at no point of time has taken note of Section 69 of the Indian Partnership Act, 1932. The Tribunal has also not taken account about the matter that such partnership firm on which the reliance was placed by respondent No. 1 before the Debts Recovery Tribunal whether the said partnership firm was registered or unregistered but during the course of the arguments the learned Counsel appearing for the respondents Mr. Kushal Kant submitted that the said partnership firm was unregistered. Under these circumstances, the Tribunal should have also taken into account the effect of non-registration of the partnership firm by taking recourse of the Section 69 of the Indian Partnership Act, 1932. For the purpose of convenience, Section 69 of the Indian Partnership Act, 1932 is reproduced as under: Effect of non-registration--(1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. (2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm. (2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm. (3) The provisions of Sub-sections (1) and (2) shall apply also to a claim of set-off or other proceedings to enforce a right arising from a contract, but shall not affect-- (a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realize the property of a dissolved firm, or (b) the powers of an official assignee, receiver or Court under the Presidency Towns Insolvency Act, 1909 (3 of 1909), or the Provincial Insolvency Act, 1920 (5 of 1920), to realize the property to an insolvent partner. (4) This section shall not apply-- (a) to firms or to partners in firms which have no place of business in [the territories to which this Act extends] or whose place of business in [the said territories] are situated in areas to which, by notification under [Section 56], this Chapter does not apply, or (b) to any suit or claim of set-off not exceeding one hundred rupees in value which, in the Presidency-towns, is not of a kind specified in Section 19 of the Presidency Small Causes Courts Act, 1882 (15 of 1882), or outside the Presidency-towns, is not of a kind specified in the Second Schedule to the Provincial Small Causes Courts Act, 1887 (9 of 1887), or to any proceedings in execution or other proceeding incidental to or arising from any such suit or claim. 11. If the partnership firm is not registered then the right accrues in favour of the partners under the contract and arising out of the contract will not be available to any of the partners including the partnership firm. There is no dispute that the registration of the same is necessary. The respondent No. 1 Dr. Ramji Singh, son of Shri Vishwanath Singh & Co. There is no dispute that the registration of the same is necessary. The respondent No. 1 Dr. Ramji Singh, son of Shri Vishwanath Singh & Co. though was a company but the benefit of the same was to be taken by the partners of the firm which was constituted on 27th June, 1988, the effect of its commencement was given w.e.f. 1st April, 1983, in the said partnership firm, the property was shown to be purchased by all the four partners jointly. Thus, the right accrued under the partnership deed to the partners but the fact remains that the partnership firm was unregistered. On the basis of the aforesaid, by virtue of Sub-section (3) of Section 69 of the Indian Partnership Act, no rights under the partnership firm can be enforced arising out of terms, in other proceedings. So far as Sub-sections (1) and (2) of Section 69 are concerned, in the present case, it has no application directly but Sub-section (3) of Section 59 would be relevant which states that Sub-sections (1) and (2) shall apply also to a claim of set-off or other proceedings to enforce a right arising from a contract but shall not affect to certain cases which are mentioned therein. The word proceedings have not been defined under the said Act, therefore, the meaning of the word "proceedings" is to be understood from its dictionary meaning and according to the Black's Law Dictionary the meaning of the word proceedings reads as under: 1. The regular and orderly progression of a law suit, including all acts and events between the time of commencement and the entry of judgment. 2. Any procedural means for seeking redress from a Tribunal or agency. 3. An act or step that is part of a larger action. 4. The business conducted by a Court or other official body; a hearing. 5. Bankruptcy. A particular dispute or matter arising within a pending case --- as opposed to the case as a whole. 'Proceeding' is a word much used to express the business done in Courts. A proceeding in Court is an act done by the authority or direction of the Court, express or implied. It is more comprehensive than the word 'action', but it may include in its general sense all the steps taken or measures adopted in the prosecution or defence of an action, including the pleadings and judgment. A proceeding in Court is an act done by the authority or direction of the Court, express or implied. It is more comprehensive than the word 'action', but it may include in its general sense all the steps taken or measures adopted in the prosecution or defence of an action, including the pleadings and judgment. As applied to actions, the terms 'proceeding' may include--(1) the institution of the action; (2) the appearance of the defendant; (3) all ancillary or provisional steps, such as arrest, attachment of property, garnishment, injunction, writ of ne exeat; (4) the pleadings; (5) the taking of testimony before trail; (6) all motions made in the action; (7) the trail; (8) the judgment; (9) the execution; (10) proceedings supplementary to execution, in. code practice; (11) the taking of the Appeal or writ of error; (12) the remittitur, or sending back of the record to the lower Court from the appellate or reviewing Court; (13) the enforcement of the judgment, or a new trial, as may be directed by the Court of last resort. "Edwin E. Bryant, the Law of pleading under the Code of Civil Procedure 3-4. 12. The word proceeding in Sub-section (3) of Section 69 of the Indian Partnership Act includes all proceedings of any kind to enforce for settlement of the cases arising out of the contract and provisions contained in Sub-sections (1) and (2) also apply to those proceedings (please also see 827821 at Pages 138 to 139).'Thus, the respondent No. 1 in fact was claiming right under the contract which constituted partnership firm for the property of the partnership firm on the ground that the property belonged to the partnership firm and it does not belong to any individual. Such a right is not permissible in view of the bar created by virtue of Section 69 of the Indian Partnership Act, due to its non-registration but the Tribunal without considering the effect of Section 69(3) of the Indian Partnership Act, 1932 proceeded to hold that the right accrued under right of the partnership deed with regard to the property of the firm can be enforced by the respondent No. 1, and such a finding being contrary to the law cannot be accepted. 13. 13. Apart from the aforesaid, the respondent No. 1 along with his counter-filed in Appeal No. R-22/31 before this Tribunal has also filed the Certificate of sale of immovable property which was issued on 5th December, 1985 in the same there is no reference to the partnership firm. The partnership firm according to the averment made by the respondents came into existence on 27th June, 1988 and the same was given effect from 1st April, 1983. The sale certificate does not show that the said property was purchased by four persons in the auction but it only indicates "this is to certify that Shri Ramji Singh, S/o Shri Vishwanath Singh & Co., R/o Bhatiya Niwas, Gulab Bagh Colony, Varanasi has been declared the purchaser of the plot No. 222/3, area 0.35 decimal....." Thus, if all the four partners have jointly purchased the property in question then in the sale certificate at the first instance the name of all the four partners should have been mentioned. If the sale was confirmed in favour of all the four persons jointly then the sale certificate should have demonstrated the same. The alleged partnership firm was not registered. On the contrary, the sale certificate shows that the sale was certified in favour of Shri Ramji Singh, S/o Shri Vishwanath Singh & Co., then there was no need to have mentioned the father's name of Ramji Singh though thereafter "& Co.", is also mentioned. The name of all the four partners and their fathers name should have also been given. There was no partnership on the said date in the name and style of Ramji Singh, S/o Vishwanath Singh & Co., and thus on this basis, this is to be held that the property was individually purchased by Ramji Singh and not by the partnership firm. 14. Since on the basis of the partnership deed dated 27th June, 1988, it was attempted to enforce the right on the basis of the partnership deed that the property belongs to the partnership firm. 14. Since on the basis of the partnership deed dated 27th June, 1988, it was attempted to enforce the right on the basis of the partnership deed that the property belongs to the partnership firm. This is to be seen that the said partnership firm was unregistered and even after its reconstruction in March, 1990 when the 5th partner was inducted in the said partnership firm, it was not registered and due to bar created by virtue of Section 69 of the Indian Partnership Act, 1932 the respondent No. 1 cannot claim that the property belongs to the firm which was unregistered. The respondent No. 1 was inducted as a 5th partner in the alleged Ramji Singh S/o Vishwanath Singh & Co. subsequently in pursuance to the another partnership deed dated 30th March, 1990, the said partnership firm was dissolved and it also records the retirement of all the 4 partners and the partnership firm namely Ramji Singh S/o Vishwanath Singh & Co. company was over taken by the new company the respondent No. 1 namely Dr. Ramji Singh, Properties and Hotels Pvt. Ltd., and all the liabilities was also taken over by the respondent No. 1 and this company was claiming right over the property in terms of the deed of dissolution dated 30th March, 1990. Under these circumstances, even after retirement of all four partners, it cannot be said that the respondent No. 1 continues to be the beneficiary of the said unregistered firm because of the bar created by the virtue of Sub-section (3) of Section 69 of the Indian Partnership Act, 1932 by raising a plea before the Debts Recovery Tribunal while execution of the Recovery Certificate, to claim the ownership right over the property. 15. The right and interest on the property in question is sought to be created by the respondent No. 1 by virtue of partnership deed and admittedly, none of the partnership firm was registered and, thus, the judgment passed by the Allahabad High Court in 96995 at page Nos. 15. The right and interest on the property in question is sought to be created by the respondent No. 1 by virtue of partnership deed and admittedly, none of the partnership firm was registered and, thus, the judgment passed by the Allahabad High Court in 96995 at page Nos. 405, 406, 408, would be relevant wherein the Hon'ble High Court had an occasion of consideration of another judgment 699168 and on the basis of the same it was held that if the right and interest are sought to be claimed from the partnership deed/firm then the said partnership deed/firm must be registered and on the basis of unregistered partnership deed, any person cannot claim any right or interest. 16. The object intended by Legislature in engrafting Sub-section (3) of Section 69 of 1932 Act appears to be that in spite of the defect of non-registration and the prohibition created in the main part of non enforceability of the right arising from a contract parties having worked under the contract to the limited extent of enforcement of a right to realize assets, settlement of the accounts of dissolved firm or any right or power to realize the property of the dissolved firm are exceptions engrafted therein and gives rights to the parties to enforce the same independent of the right arising from the contract. Therefore, the parties are relieved from the prohibition created by operation of Section 69 (Please see 308999 at page Nos. 205, 206, Jaipur Bench). There is no dispute that the word "other proceedings" used in Sub-section (3) of Section 69 of the Indian Partnership Act, 1932 as aforesaid, must receive their fully meaning untrammeled by the word "a claim of set off. The latter words neither intend nor can be construed to cut down the generality of the words "other proceedings". The sub-section provides for the application of the provisions of Sub-sections (1) and (2) to claims of set-off and also to proceedings of any kind which can properly be said to be for enforcement of any right arising from contract except those expressly mentioned as exceptions in Sub-section (3) and Sub-section (4) (please see 278955. 17. The sub-section provides for the application of the provisions of Sub-sections (1) and (2) to claims of set-off and also to proceedings of any kind which can properly be said to be for enforcement of any right arising from contract except those expressly mentioned as exceptions in Sub-section (3) and Sub-section (4) (please see 278955. 17. There is no dispute in the present case that the respondent No. 1, the alleged company (not a firm) instituted the proceedings before the Recovery Officer by raising an objection that the property belongs to the alleged partnership firm and was not owned by any individual person and for this reason the law as aforesaid, in relation to the bar created by virtue of Sub-sections (3) and (4) of Section 69 of the Indian Partnership Act, 1932 shall apply against the respondent No. 1. 18. It will not be out of place to refer the judgment passed by the Apex Court in 282857, that the provisions as contained in Section 69 are mandatory one. For ready reference the same is reproduced herein-below: A bare glance at the section is enough to show that it is mandatory in character and its effect is to render a suit by a plaintiff in respect of a right vested in him or acquired by him under a contract which he entered into as a partner of an unregistered firm, whether existing or dissolved, void. In other words, a partner of an erstwhile unregistered partnership firm cannot bring a suit to enforce a right arising out of a contract falling within the ambit of Section 69 of the Partnership Act. In the instant case, Seth Suganchand had to admit in unmistakable terms that the firm 'Sethiya and Co.' was not registered under the Indian Partnership Act. It cannot also be denied that the suit out of which the Appeals have arisen was for enforcement of the agreement entered into by the plaintiff as partner of Sethiya and Co. which was an unregistered firm. That being so, the suit was undoubtedly, a suit for the benefit and in the interest of the firm and consequently, a suit on behalf of the firm. It is also to be borne in mind that it was never pleaded by the plaintiff, not even in the replication, that he was suing to recover the out-standings of a dissolved firm. It is also to be borne in mind that it was never pleaded by the plaintiff, not even in the replication, that he was suing to recover the out-standings of a dissolved firm. Thus, the suit was clearly hit by Section 69 of the Partnership Act and was not maintainable. 19. In 99465, at Pages 29,30, the view is taken that a partner in an unregistered partnership cannot enforce any right if the same arises out of a contract entered into by the partnership or by partners thereof. In the said case, since the building contract had been executed by the unregistered partnership and what the plaintiff was seeking to enforce was right arising under the contract, and it was held that the same could not be done by means of a suit as such a suit was barred under Section 69(2) and (3) of the Partnership Act. 20. Once the Tribunal has not taken care of Section 69 of the Indian Partnership Act, 1932 and proceeded by ignoring the said provisions and the finding recorded by the Tribunal that the property is not of any individual's but the same is of a partnership firm and has subsequently another two partnership firms were constituted, then the Tribunal should have born in mind that none of the partnership firms were ever registered. 21. On the basis of the law which has been discussed earlier, it is crystal clear that the partners to the unregistered firm cannot take advantage of creation of their right in enforcement of their right under partnership deed which is in form of contract. Thus, in the present case, the right to claim the property was attempted by the respondent No. 1 that the property was passed on to him by virtue of the dissolution of the earlier partnership deed and also by execution of another partnership deed to dissolve the earlier partnership deed by which the other partners have retired and the property passed to the said firm i.e. respondent No. 1. 22. The next question also arises that even assuming that the property belongs to the respondent No. 1 then at the time when the auction took place then Rules 60 and 61 of the Second Schedule of the Income-tax Act will come into play. 22. The next question also arises that even assuming that the property belongs to the respondent No. 1 then at the time when the auction took place then Rules 60 and 61 of the Second Schedule of the Income-tax Act will come into play. An objection should have been lodged by the respondent No. 1 before the Recovery Officer within a period of 30 days from the date of auction. Rules 60 and 61 of the Second Schedule of the Income-tax Act is in fact a power vested with any person other than the borrowers and guarantors of the property for redemption of the property. No objection as such, in accordance with Rules 60 and 61 of the Second Schedule of the Income-tax Act was ever raised before the Recovery Officer by the respondent No. 1. It was open for the respondent No. 1 to have resorted by invoking Rules 60 and 61 of the Second Schedule of the Income-tax Act which requires for the deposit of the amount. In this reference, the judgment passed by the Division Bench of Madhya Pradesh High Court consisting of the then Hon'ble Chief Justice A.K. Patnaik (as he then was) and Hon'ble Justice S.C. Sinha in case of Shyama Devi Chaurasia v. State Bank of India, 2007 (1) DRTC 727 (M.P.), has in Paras 9, 10, 11, 12, 13 and 14 held and the relevant paras are being quoted for ready reference: 9. Mr. Rajesh Maindiratta, learned Counsel appearing for the respondent No. 1 Bank, submitted that proviso (b) to Rule 61 of the Sch. II of the Income-tax Act, 1961 also makes it clear that an application made by a defaulter under this rule shall be disallowed unless the Applicant deposits the amount recoverable from him in execution of the certificate. He submitted that by the time, the sale of the property of late Gourishankar Chourasiya was conducted on 31st October, 2003 only the sale proceeds of the first property of Umar Kant Chourasiya, another guarantor, which was sold for Rs. 14.10 lacs had been deposited with the respondent No. 1 Bank on 31st October, 2003 and after adjustment of the said amount of Rs. 14.10 lacs, an amount of Rs. 14.10 lacs had been deposited with the respondent No. 1 Bank on 31st October, 2003 and after adjustment of the said amount of Rs. 14.10 lacs, an amount of Rs. 11,86,414.20 paise was recoverable as on 31st December, 2003 and hence, the respondent No. 1 in its reply to the objection to the sale filed before the Recovery Officer had stated that the said amount of Rs. 11,86,414/- was outstanding with further interest and yet the appellant did not deposit the said amount of Rs. 11,86,414.20. He submitted that the application of the appellant under Rule 61 of the Sch. 11 of the Income-tax Act, 1961, was, therefore, rightly disallowed by the Recovery Officer. He submitted that this is one of the grounds on which the Appeals of the appellant have been rejected by the DRT and DRAT in their respective orders dated 18th February, 2005 and 13th December, 2005. 10. Rule 61 of the Sch. II of the Income-tax Act, 1961, which provides for application for setting aside the sale of immovable on the ground of non-service of notice or irregularity, is quoted herein-below: Rule 61. Application to set aside sale of immovable property on the ground of non-service of notice or irregularity--Where immovable property has been sold in execution of a certificate (such Income-tax Officer as may be authorized by the Chief Commissioner or Commissioner in this behalf), the defaulter, or any person whose interests are affected by the sale, may at any time within thirty days from the date of sale, apply to the Tax Recovery Officer to set aside the sale of the immovable property on the ground that notice was not served on the defaulter to the arrears as required by this Schedule or on the ground of a material irregularity in publishing or conduction of the sale. Provided that-- (a) no sale shall be set aside on any such ground unless the Tax Recovery Officer is satisfied that the Applicant has sustained substantial injury by reason of the non-service or irregularity; and (b) an application made by the defaulter under this rule shall be disallowed unless the applicant deposits the amount recoverable from him in execution of the certificate. 11. A reading of the aforesaid Rule 61 of the Sch. 11. A reading of the aforesaid Rule 61 of the Sch. II of the Income-tax Act, 1961 would show that one of the grounds on which an application can be made for setting aside sale of immovable property before the Recovery Officer is that notice was not served on the defaulter to pay the arrears 'as required by the Sch. II', Rule 2 of Sch. II of the Income-tax Act, 1961, states that when a certificate has been drawn up by the Tax Recovery Officer for the recovery of arrears under the Schedule, the Tax Recovery Officer shall cause to be served upon the defaulter a notice requiring the defaulter to pay the amount specified in the certificate within fifteen days from the date of service of the notice and intimating that in default steps would be taken to realize the amount under the Schedule. It is not the case of the appellant that notice as required by Rule 2 of Schedule II of the Income-tax Act, 1961 was not served on late Gourishankar Chourasiya, who was defendant No. 4 in Original Application No. 76 of 2000. Late Gourishankar Chourasiya died on 4th September, 2003. Rule 84 of the Sch. II of the Income-tax Act, 1961, provides that no certificate shall cease to be in force by reason of the death of the defaulter and Rule 85 of the Sch. II provides that if at any time after the certificate is drawn up by the Recovery Officer, the defaulter dies, the proceedings under the Schedule may be continued against the legal representative of the defaulter, and the provisions of the Schedule shall apply as if the legal representative was the defaulter. Mr. Agrawal has not brought to our notice any provision in the Sch. II of the Income-tax Act, 1961 requiring that after the death of defaulter, a fresh notice is required to be served on the legal representatives of the defaulter to pay the amount sought to be recovered. Thus, this is not a case where notice was not served on the defaulter to pay the amount 'as required by the Sch. II' and this contention of Mr. Agrawal that the sale is liable to be set aside on the ground of non-service of notice on the defaulter to pay the amount as required by Sch. II of the Income-tax Act, 1961, has no merit. 12. II' and this contention of Mr. Agrawal that the sale is liable to be set aside on the ground of non-service of notice on the defaulter to pay the amount as required by Sch. II of the Income-tax Act, 1961, has no merit. 12. A further reading of Rule 61 of the Sch. II of the Income-tax Act, 1961 would show that the second ground on which an application can be filed before the Recovery Officer to set aside sale of immovable property is that there has been a material irregularity in publishing or conducting the sale. According to Mr. Agrawal, since the Recovery Officer did not serve a notice on the appellant and it not pass any order in the order sheet setting the terms of the proclamation of sale of the property belonging to late Gourishankar Chourasiya after adjusting the amount already deposited towards the sale of the first property and the second property, there has been a material irregularity in conduction of the sale. But we find from the records that 13th February, 2003 a proclamation of sale was, in fact, drawn up in Form No. 13 and signed by the Recovery Officer specifying that the property consisting of plot and house constructed on Plot No. 109/5, Settlement No. 660, PH No. 25, Khasra Nos. 170, 171 and 172, situated at Lokkalyan Grah Nirman Samiti, Modhotal, Jabalpur, admeasuring area 30 x 50 (1500 sq. ft.) would be sold to recover a sum of Rs. 22,97.081.45 paise including the costs and interest and the reserve sale price was indicated in the said proclamation to be Rs. 3,75,000/-. The proclamation of sale was addressed to late Gourishankar Chourasiya who was alive when the said proclamation was made on 15th February, 2003. It is not the case of the appellant that before making the said proclamation of sale, notice was not served on the late Gourishankar Chourasiya. There is no provision in the Sch. II of the Income-tax Act, 1961 for issuing fresh notice and for making fresh proclamation of sale after the death of the original defaulter. Rule 53 of the Sch. II of the Income-tax Act, 1961, only requires that a proclamation of sale shall be drawn up by the Recovery Officer and it does not state that a Recovery Officer will pass an order in the order-sheet setting the terms of proclamation as contended by Mr. Agrawal. Rule 53 of the Sch. II of the Income-tax Act, 1961, only requires that a proclamation of sale shall be drawn up by the Recovery Officer and it does not state that a Recovery Officer will pass an order in the order-sheet setting the terms of proclamation as contended by Mr. Agrawal. There is, thus, no material irregularity in conduction the sale of the property. 13. Even assuming as contended by Mr. Agrawal that there was non-service of notice on the defaulter to pay the amount as required by the Sch. II of the Income-tax Act, 1961 or there was material irregularity in conduction of the sale, Proviso (a) to Rule 61 of the Sch. II made it clear that no sale shall be set aside on any such ground unless the Recovery Officer was satisfied that the applicant had sustained substantial injury by reason of the non-service or the irregularity. Interpreting as similar provision in Order 21 Rule 90(2) of the CPC, the Supreme Court has held in 280710 and 304883, (supra) that for the Court to set aside the sale under the said provisions, it must be established that there were both material irregularity and substantial injury. In this case, the appellant has not been able to show that she has suffered any substantial injury on account of non-service of notice or material irregularity in conduction of the sale, if any. 14. Moreover, Proviso (b) to Rule 61 of the Sch. II of the Income-tax Act, 1961, mandates that an application made by a defaulter under the rule shall be disallowed unless the applicant deposits the amount recoverable from him in execution of the certificate. The appellant in her application for setting aside the sale before the, Recovery Officer has herself stated that after acceptance of the offer of the respondent No. 1 for One Time Settlement at Rs. 15,84,934.72, the borrower was required to deposit the balance amount of Rs. 1,74,934.72 within a year, but even this meager amount of Rs. 1,74,934.72 was not deposited by the appellant. Hence, the DRT and the DRAT have rightly held that the application made by the applicant for setting aside the sale had to be disallowed by the Recovery Officer. 23. In the present case, the sale has already been confirmed in favour of J.H.V. Construction Company. 1,74,934.72 was not deposited by the appellant. Hence, the DRT and the DRAT have rightly held that the application made by the applicant for setting aside the sale had to be disallowed by the Recovery Officer. 23. In the present case, the sale has already been confirmed in favour of J.H.V. Construction Company. One of the most important aspect of the present case is that the respondent No. 1 intended to get set aside the auction sale in favour of J.H.V. Construction and the sale was confirmed on 5th January, 2009 by the Recovery Officer and at the instance of the respondent No. 1 an Appeal was preferred before the Debts Recovery Tribunal which was registered as Appeal No. 12/09 which was allowed by the Debts Recovery Tribunal and against the same an Appeal is preferred by the Bank which is registered before this Tribunal as Appeal No. R-24/11. The another Appeal was also preferred against the auction as the auction was confirmed in favour of J.H.V. Construction then the respondents (appellants before the Debts Recovery Tribunal) must have impleaded the auction purchaser also as one of the respondent but before the Debts Recovery Tribunal no effort was made on behalf of the respondent No. 1 to impleaded the auction purchaser as a respondent. In this reference the judgment passed by the Hon'ble High Court of Judicature at Allahabad Lucknow Bench in case of I.C.I. Jewellery Ltd v. Debts Recovery Tribunal, 2011 (89) ALR 22, is relevant and its relevant Para No. 55 is reproduced as under: 55. As regards to the rights of the auction-purchaser, in my opinion, the Tribunal has committed no error as it is an established principle of law that auction-purchaser's interest in the auctioned property continues to be protected. Respondent Nos. 5 and 6 herein are the auction purchasers and they can be termed as 'aggrieved person' on account of interim order having been passed by the Tribunal as due to operation of the interim order, their rights were adversely affected. 24. Thus, on the basis of the law laid down by the Lucknow Bench of the Hon'ble High Court of Judicature at Allahabad, in the present case also the rights of the auction purchaser on account of confirmation of sale is adversely affected. 24. Thus, on the basis of the law laid down by the Lucknow Bench of the Hon'ble High Court of Judicature at Allahabad, in the present case also the rights of the auction purchaser on account of confirmation of sale is adversely affected. In the absence of the auction purchaser as one of the respondent before the Debts Recovery Tribunal, the auction as such could not have been set aside. It is also pertinent to mention here that in Appeal No. 12/09 which was preferred before the Debts Recovery Tribunal by the respondent No. 1 against the auction and confirmation of the property but the auction purchaser was not impleaded as one of the respondents in that case also and the judgment of DRT has to be set aside. 25. The learned Counsel appearing for the respondent No. 1 also submitted that the place of auction as notified by the Recovery Officer vide order dated 28th July, 2008 fixing auction on 19th September, 2008 of the property in question which was scheduled to be held at the premises of the Central Bank of India, Lanka Branch, Varanasi was changed vide order dated 8th September, 2008 by incorporating in the said sale proclamation Recovery Cell, Debts Recovery Tribunal, 9/3, Panna Lal Road, Allahabad in place of Central Bank of India, Lanka Branch, Varanasi was illegally changed and he further submitted that the place of auction cannot be changed by virtue of Sections 51 and 54 of the Second Schedule of Income-tax Act. The Counsel for the appellant - Bank submitted that the circumstances which compelled the Bank to change the venue of auction was the possibility of law and order situation because of publication of notices by the respondent No. 1 on 10th September, 2008 over the notice dated 9th September, 2008 issued by the Bank. Even otherwise, before the date of auction the change of venue of the auction was also published in the newspaper. The respondent No. 1 could not show that on account of change of place any prospective buyer could not participate in the said auction. Before the Debts Recovery Tribunal no other person came forward to claim that he was willing to purchase the property but on account of change of place he could not participate in the auction. The respondent No. 1 could not show that on account of change of place any prospective buyer could not participate in the said auction. Before the Debts Recovery Tribunal no other person came forward to claim that he was willing to purchase the property but on account of change of place he could not participate in the auction. More so, the Respondent No. 1 has also not been able to produce any person before the Debts Recovery Tribunal or in this Tribunal who was ready to purchase the property for the higher bid than it was sold to J.H.V. Construction, the successful bidder. The reading of Rules 51 and 54 does not mention that the place of venue of auction cannot be changed. 26. With regard to validity of the auction this is also to be noticed that the Appeal No. 02/2005 which was preferred by the respondent No. 1 company before the Debts Recovery Tribunal wherein the stay was passed by the Debts Recovery Tribunal was dismissed in default on 9th July, 2008. An application for restoration was moved and was restored vide order dated 5th December, 2009 and during the period of 9th July, 2008 to 5th December, 2009 since there was no stay, the auction was directed by order dated 28th July, 2008 by the Recovery Officer and the publication was also made for 19th September, 2008. The sale certificate was issued on 5th January, 2009 i.e. before the date when the Appeal No. 02/05 was restored and during that period there was no stay in operation in favour of the respondent No. 1. 27. In view of the aforesaid, the judgment passed by the Debts Recovery/Tribunal in favour of the respondents cannot be sustained. 28. The next appeal i.e. Appeal No. R-23/11 filed by the Punjab National Bank wherein the said Bank has claimed its first charge over the property on the ground that the property at the first instance could not have been attached on 18th January, 2005 under the order passed by the Recovery Officer which was the land in question and the Cinema Hall. It was stated that the property was under mortgage with Banaras Mercantile Bank on 16th September, 2004 and it is submitted that the property of which the charge was already created with the Banaras Mercantile Bank could not have been attached by the Recovery Officer. It was stated that the property was under mortgage with Banaras Mercantile Bank on 16th September, 2004 and it is submitted that the property of which the charge was already created with the Banaras Mercantile Bank could not have been attached by the Recovery Officer. This is also submitted that the property was also mortgaged with the Punjab National Bank and against this there was already a charge, in this reference this is to be seen that the Punjab National Bank cannot be permitted to raise objection on behalf of the Banaras Mercantile Bank but the attachment order dated 18th January, 2005 could have been objected by the said Banaras Mercantile Bank but the said Bank did not come forward to object the same and it is only the Punjab National Bank who challenged the same. No cause which existed its favour of the Banaras Mercantile Bank can be agitated by the Punjab National Bank. This is also to be seen that the property which was mortgaged with the Banaras Mercantile Bank, then no mortgage should have been created in favour of the Punjab National Bank. The loan was granted by the Punjab National Bank by mortgage of the said property only after 18th January, 2005 i.e. the date of attachment order then the charge which was created on 17th December, 2005 in favour of the Punjab National Bank was bad in law as the property was already attached by the order passed by the Recovery Officer. 29. Apart from this, after when the Banaras Mercantile Bank has released the property then the attachment order dated 18th January, 2005 stood valid and, thus, the Punjab National Bank could not have accepted the charge by mortgage and thus, the Punjab National Bank has no right to claim over the property or to establish its valid right on the said property. This is also unfortunate to mention that the Punjab National Bank submitted its valuation report dated 8th February, 2008 that the valuation of the mortgaged property was Rs. 3,45,57,000/- and since they have no valid right over the aforesaid property to enforce their valid rights as such the said valuation report is also of no consequence. The respondent No. 1 has also not filed any separate valuation report to prove that the property was of more value than for it was auctioned. 3,45,57,000/- and since they have no valid right over the aforesaid property to enforce their valid rights as such the said valuation report is also of no consequence. The respondent No. 1 has also not filed any separate valuation report to prove that the property was of more value than for it was auctioned. The respondent No. 1 cannot rely upon the valuation report submitted by the Punjab National Bank which has no locus for the reasons stated hereinabove. 30. For my aforesaid given reasons, I am inclined to allow all the four appeals preferred by the appellant Bank with costs of Rs. 50,000/- which shall be paid by respondent No. 1. So far as the Appeal preferred against the Punjab National Bank is concerned, it is also allowed with costs of Rs. 15,000/- which shall be paid by Punjab National Bank to the appellant - Bank. A copy of this judgment/order be supplied to the parties as well as the DRT concerned as per law.