TMI Blog2017 (2) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... d G. R. Udhwani, JJ. For the Petitioner : B. S. Soparkar and S. N. Soparkar For the Respondent : Nitin K. Mehta, Sunit S. Shah JUDGMENT K. S. Jhaveri, J. 1. By way of this petition, the petitioner has challenged the letter/order dated December 14/18, 2000 together with notice of the same date, which is at annexure A to the petition, and has prayed to prohibit the respondent or any other persons with whom the petitioner's monies might be lying either under fixed deposit receipts or call money or otherwise, to make payment to the Income-tax Department in respect of the dues of Shri Om Prakash Agrawal and the members of his group. 2. The petitioner is a co-operative bank registered under the Co-operative Societies Act, 1961. One Adarsh Co-operative Bank Ltd. was incorporated under the provisions of the Gujarat Co-operative Societies Act, 1961, on August 5, 1974. The name of said bank was changed to Vikram Co-operative Bank Ltd. Management of the said bank was in the hands of one Shri Om Prakash Agrawal in the year 1980-81. The Income-tax Department conducted series of search operations on the said bank during the period from November 8, 10, 1981 in conne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al and the members of his group amounted to more than ₹ 2.31 crores. On June 27, 1989, a reminder was issued to the Settlement Commission requesting it to return the fixed deposit receipts of Shri Agarwal amounting to ₹ 72.95 lakhs so as to enable Vikram Co-operative Bank to adjust the same against the dues of the group of Shri Agarwal. On September 19, 1989 Vikram Co-operative Bank received a letter from the Settlement Commission informing Vikram Co-operative Bank that assessments in question have not yet been finalized and that the matter is under consideration. On August 12, 1991 the Assisting Commissioner of Income- tax (Investigation Circle 501). Ahmedabad (hereinafter referred to as the Assessing Officer ) addressed a letter to Vikram Co-operative Bank informing it that a sum of ₹ 36,31,815 is outstanding against Shri Agarwal as regards the tax dues and that Shri Agarwal is entitled to receive ₹ 2 lakhs being the amount of fixed deposit receipts pledged on July 12, 1980 and that Vikram Co-operative Bank should pay the said amount of fixed deposit receipts under section 226(3) of the Income-tax Act, 1961 ('the Act' for short). Together with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he meantime, the petitioner thought it appropriate to take legal advice on the question as to whether there is any prohibition in law restraining the petitioner from exercising its statutory rights of set off of the amount of the fixed deposit receipts against the dues recoverable by it from the said Shri Agarwal and the members of his group. The petitioner. Therefore, obtained opinion of its counsel on August 12, 1993, whereby the counsel opined that the petitioner was and is entitled to appropriate the amount of fixed deposit receipts against the outstanding dues of Shri Agar wal and the member of his group. Based on that opinion the board of directors of the petitioner bank passed a resolution to adjust a sum of ₹ 93,14,649.18 then payable to said Shri Agarwal and the members of his group under the fixed deposit receipts pledged by them against the amount recoverable by the petitioner in respect of the finance and facilities given to said Shri Agarwal and the members of his group. 2.5 On October 26, 1993 the Assessing Officer sent his Inspector to look into the records of the petitioner bank to determine the amount pay able to said Shri Agrawal by the petitioner. On Oct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the petitioner has placed huge amount as deposits, fixed deposits, current account, etc. attaching the said balances and also calling upon them to make the payment of the entire balance or to the extent of the dues to the Tax Recovery Officer. The said letter further indicated that if the said amount is not remitted to the Tax Recovery Officer action will be taken against them in accordance with the provisions of the 2nd Schedule to the Act, Civil Procedure Code and Criminal Procedure Code. There upon, the petitioner filed a writ petition being SCA 2642 of 1992 before this hon'ble court challenging inter alia the letter/order dated February 28, 1992 and further for prohibiting the respondents from calling upon the petitioner and/or any other persons with whom the petitioner/s moneys might be lying to make payment to the Income-tax Department in respect of the dues of Shri Om Prakash Agarwal and the members of his group. The said petition was placed for admission before this hon'ble court (Coram : M. B. Shah and H. L. Gokhale. JJ.) and the hon'ble court was pleased to issue notice to respondent No. 2 and granted ad interim relief in terms of para 7(B) of the petition w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on before this hon'ble court being SCA No. 7490 of 1994. The petition was admitted and interim order was granted. Ultimately, the petition came up for hearing before this hon'ble court (Coram : B. C. Patel and M. C. Patel JJ.) who vide its order dated July 13, 1999 quashed the said order with a direction to decide the matter afresh. 2.9 On September 11, 2000, respondent No. 2 issued notice. The same was replied to by the petitioner vide letter dated September 21, 2000 wherein complete details were filed. In particular, it was pointed out that the respondent has no right to call upon the petitioner to make any payment of tax liability of Om Prakash Agarwal. It was also pointed out that there was no valid attachment order from the Income-tax Department and the respondent was called upon to furnish a copy of the order, if any, in this behalf. This letter was replied to by respondent No. 2 vide his letter dated October 31, 2000 reiterating the earlier contention. According to him, the Department was holding fixed deposit receipts and, therefore, there was no need for a separate attachment order. This letter was replied to by the petitioner on November 3, 2000 pointing out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he action of the respondents in declaring the petitioner bank as defaulter and calling upon it and thereafter the petitioner's debtor to pay the amount of ₹ 1,22,86,006 with interest is bad, illegal and contrary to law. Said demand is raised against the petitioner on the ground that the Income-tax Department has to recover the said sum from Shri Om Prakash Agarwal and the members of his group, however, the petitioner has no concern with the said dispute. Under the provisions of the Gujarat Co-operative Societies Act and the Contract Act, the petitioner is entitled to set off of the said amount payable by it against the amount recoverable by it. Therefore, the action of the respondent seems to be proposing that it has an overriding right to recover the amount from any person notwithstanding the statutory rights that may be available to it/him. 3.1 He further submitted that action of the respondents in declaring the petitioner bank as a defaulter is patently bad and illegal. When initially demand was raised, at that time the amount recoverable by the fixed deposit receipts under attachment also was in the sum of ₹ 36,35,285. Thereafter, six deposit receipts were gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of this the proceedings should have been terminated. Instead, the respondents have proceeded further in the matter. Mr. Soparkar, therefore, prays to allow present petition. 4. On the other hand, Mr. Mehta, learned advocate appearing for the respondent submitted that by virtue of provisions of section 226(3)(x) of the Income-tax Act, the petitioner has been treated to be deemed assessee in default for the amount due from Shri Om Prakash Agrawal. He further submitted that none of the fixed deposit receipts seized from the premises of the assessee were found to be pledged or hypothecated. He further submitted that immediately after the search action on November 9, 1982, an order under section 132(3) was issued and served upon the Vikram Co- operative Bank restraining to remove or deal with the fixed deposit receipts and other term deposits of the bank and this order has never been rescinded. He further submitted that action of the petitioner appropriating the amount of the fixed deposit receipts against the so-called outstanding dues of the assessee is illegal and in violation of the provisions of section 132(3) of the Act. He further submitted that notice under section 226 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requisition any arrears of tax due from such assessee, and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Central Government or as the Board directs : Provided that any part of the salary exempt from attachment in execution of a decree of a civil court under section 60 of the Code of Civil Procedure, 1908 (5 of 1908), shall be exempt from any requisition made under this sub-section. (3) (i) The Assessing Officer or Tax Recovery Officer may, at any time or from time to time, by notice in writing require any person from whom money is due or may become due to the assessee or any person who holds or may subsequently hold money for or on account of the assessee to pay to the Assessing Officer or Tax Recovery Officer either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due by the assessee in respect of arrears or the whole of the money when it is equal to or less than that amount. (ii) A notice under this sub-section may be issued to any person who holds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson so paying shall be fully discharged from his liability to the assessee to the extent of the amount so paid. (ix) Any person discharging any liability to the assessee after receipt of a notice under this sub-section shall be personally liable to the Assessing Officer or Tax Recovery Officer to the extent of his own liability to the assessee so discharged or to the extent of the assessee's liability for any sum due under this Act, whichever is less. (x) If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Assessing Officer or Tax Recovery Officer, he shall be deemed to be an assessee in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realization of the amount as if it were an arrears of tax due from him, in the manner provided in sections 222 to 225 and the notice shall have the same effect as an attachment of a debt by the Tax Recovery Officer in exercise of his powers under section 222. (4) The Assessing Officer or Tax Recovery Officer may apply to the court in whose custody there is money belonging to the assessee for payment to him o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n amount of ₹ 35,000. As rightly contended by the learned counsel for the appellant-bank, the bank in the instant case has the liberty to adjust from the proceeds of the two fixed deposit receipts towards the dues to the bank and if there is any balance left that will only be the amount which would belong to the depositor namely the judgment-debtor in this case and only such amount, if any, can be attached in discharge of a decree. It is also submitted that the liability of the judgment-debtor to the appellant-bank was far in excess of the amounts covered by the two fixed deposit receipts and therefore nothing is due from the bank to the judgment-debtor. This is a matter for verification. However, in the view taken by us above namely that the bank has a general lien over the two fixed deposit receipts we set aside the order of the High Court directing the appellant-Bank to deposit an amount of ₹ 35,000. The High Court shall, however, consider the objections raised by the bank, namely that no amounts are due to the judgment-debtor, in the light of the above principles laid down by us and then decide whether there is any amount left for being attached by the decree holder ..... X X X X Extracts X X X X X X X X Extracts X X X X
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