TMI Blog2013 (9) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... t 'EPFO'), the Commercial Taxes Department of the State Government, the Tamil Nadu Industrial Investment Corporation (for short 'TIIC') and various banks including Punjab Nation Bank (for short 'PNB'), Indian Bank, ICICI Bank Limited, etc., The Company owed huge amount towards salary, statutory and other benefits to the workmen and also the employees of the Co- operative Society. 3. The company owns vast extent of lands and other properties at Madurai as well as Kodaikanal. The textile mill with its surrounding area is situated in about 15 acres of land worth about several crores of rupees. The company owns a guest house in Madurai town that would also fetch several crores. The company also owns an extent of 3.95 acres in old survey No.25/6/4 and 25/6/5 and new Town Survey No.21 in Kodaikanal. The said land consists of two lots. The laid with the bungalow is situated in an extent of 1 acre and 25.46 cents. The remaining vacant land measures 2 acres, 69.54 cents. We are concerned in this case about the land and bungalow in 1 acre 25.46 cents in Kodaikanal. 4. The Managing Director of Mahalakshmi Textiles Mills Limited (for short MTML ) filed W.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Labour to arrive at a consensus for selling the properties of MTML. It is also directed that once the properties are sold, they should apportion the realized amount to satisfy the various claims with due proportion to each of the claimants. A further direction was issued that the said exercise shall be completed within a period of twelve weeks. Various properties of the MTML were the subject matter in the said writ petitions. 9. EPFO challenged the common order dated 08.09.2008 in respect of W.P.(MD)No.1476 of 2005 and 9809 of 2007 in writ appeal W.A.(MD)Nos.556 and 557 of 2009. Their grievance was that they have their own machinery for recovery of the Provident Fund dues and therefore, they do not want to abide by any direction of the Secretary to the Tamil Nadu Government, Commercial Taxes and Registration Department. 10. The Division Bench excluded the EPFO from the directions issued by the learned Single Judge in the common order dated 08.09.2008 in W.P.(MD)No.1476 of 2005 and 9809 of 2007 etc., batch while disposing of those appeals in W.A.(MD) Nos.556 and 557 of 2009 on 22.04.2010. 11. In those circumstances, Sale Proclamation dated 04.06.2010 was issued by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. One Sheik Dawood of Madurai offered to pay a sum of ₹ 2.48 crores. He was declared as the highest bidder. He also deposited a sum of ₹ 87 lakhs out of the total purchase amount of ₹ 2.48 crores. But he failed to deposit the balance amount on the plea that there were encumbrances in the properties, since two sale deeds in Document No.2441 of 2009 to an extent of 30 cents and in Document No.2442 of 2009 to an extent of 11.070 cents were executed with regard to the property concerned in the proclamation of sale. 16. In these circumstances, EPFO filed W.P.(MD)No.11726 of 2010 seeking a direction to the Sub Registrar, Kodaikanal, to cancel the registration of documents in Document Nos.2441 and 2442 of 2009 executed by one Vaigai Durai, being the power agent of MTML, in favour of his wife Panchasheelagandhi. 17. At the time of filing of the writ petition, the Inspector General of Registration, the Sub Registrar of Kodaikanal, Vaigai Durai and Panchasheelagandhi, were alone made as respondents 1 to 4 respectively. Thereafter, Sheik Dawood, the highest bidder, got impleaded as fifth respondent and MTML got impleaded as sixth respondent. 18. A Counter aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owns a guest house in Madurai Town that alone is worth about ₹ 10 cores. He also undertook to clear the entire dues payable to the EPFO within three weeks. 19.4. He relied on a Full Bench judgment of this Court reported in (2011) 2 MLJ 569 (Latif Estate Line India Ltd. V. Hadeeja Ammal) for the proposition that there is no provision either in the Registration Act or in the Transfer of Property Act for cancelling a sale deed. He averred that no writ can be issued to the second respondent - Sub Registrar to cancel the sale deeds. 20. The fourth respondent, the wife of the third respondent, filed a counter-affidavit and an additional counter-affidavit. The fourth respondent, the purchaser of the property by way of sale deeds executed by her husband, the third respondent, averred that MTML, having appointed her husband as power agent, cannot now question the sale deeds executed by the third respondent being its power agent. It is admitted that the power agent is her husband and her husband was appointed as a power agent after receipt of ₹ 25,00,000/- (Rupees twenty five lakhs only) by MTML on an understanding that the power agent would be at liberty to sell the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the EPFO, which is the subject matter of this writ petition. 21.4. It is stated that the Director of MTML AL.Lakshmanan executed a general power of attorney dated 03.07.2009 in favour of Thiru.Vaigai Durai-the third respondent in the writ petition insofar as the property in 1 acre and 25.46 cents at Kodaikanal. It was executed only for discharging the liabilities of the company. In the said power of attorney, the attachment of the property made by the EPFO had been clearly mentioned. Thus, the MTML had no dishonest intention to fraudulently sell the properties of the company. 21.5. The power agent-the third respondent very well knew about the dues of the MTML to be paid to EPFO and the Commercial Taxes Department, as the same were specifically mentioned in the power deed. But the third respondent executed two sale deeds dated 18.11.2009, in his capacity as the power agent of the company, in favour of HIS WIFE, the fourth respondent. The third respondent did not discharge any of the liabilities of the company. It is stated that the present guideline value of the disputed property itself is ₹ 4,12,00,000/- (Rupees four crore and twelve lakhs only) and the mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by various unions seeking to implead them as respondents in W.P.(MD)No.8972 of 2012. Heard the learned counsels appearing for the petitioners in M.P.(MD)Nos.2 to 6 of 2012 in W.P.(MD)No.8972 of 2012. In order to decide the issues involved in these writ petitions, they are not necessary parties. Moreover, the company has filed an affidavit stating that after settling the amount payable to EPF Organization from the amount realized in the fresh auction sale, in the event of ordering fresh auction sale, the balance amount shall be paid to the workmen. Hence, these miscellaneous petitions in M.P.(MD)Nos.2 to 6 of 2012 in W.P.(MD)No.8972 of 2012 are DISMISSED. 24. Since the issues involved in both the writ petitions are common, the writ petitions have been taken up for hearing together and disposed of by this common order. 25. The ranks of the parties, for the sake of convenience, are referred to as per W.P.(MD)No.11726 of 2010. 26. Heard both sides. 27. The learned counsel for the petitioner submitted that the third respondent, being the power agent of MTML, executed sale deeds in Document No.2441 of 2009 to an extent of 30 cents and in Document No.2442 of 2009 to an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to discharge the liabilities by sale of the properties covered by the power deed. When the facts are not in dispute, this Court can very well issue direction under Article 226 of the Constitution, particularly, when the third respondent's action is nothing, but fraud. 27.5. The learned counsel for the petitioner further submitted that the alienation of the property that has been under attachment is void. The attachment of the property in issue was statutorily made by EPFO pursuant to Section 8-B read with Section 8-C of the EPF Act. The attachment was not made pursuant to any order of civil court. On the other hand, the attachment was made by the Recovery Officer of EPFO pursuant to the statutory power given to him under Section 8-B read with Section 8-C of the EPF Act. The Recovery Officer has the power to effect the sale of the immovable property as per Sections 8-B and 8-C read with Section 8-G of the EPF Act. As per Section 8-G of the EPF Act, the Second and Third Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962, shall apply in effecting attachment and sale. When the Recovery Officer of the EPFO effected attachment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not entitled to get back the amount deposited towards 25% of the bid amount, since he did not pay the balance amount within a period of 15 days from the date of sale of the property, the petitioner is willing to refund the entire amount after defraying the sale expenses out of the sale proceeds of the fresh auction sale to be held. 27.10. Likewise, the learned counsel has fairly submitted that though the prayer was to cancel both the sale deeds in document Nos.2441 and 2442 of 2009, the EPFO was not pressing its claim against document No.2442 of 2009, since the same is not part of the lands measuring 1 acre and 25.46 cents mentioned in the sale proclamation dated 04.06.2010, as the said land comes within 2 acre and 69.54 cents which is also under attachment, i.e., he confined to cancellation of document No.2441 of 2009 alone measuring 30 cents and in that even the entire 125 cents that were brought to sale would be available for EPFO authorities to bring fresh auction sale. 28. The learned Special Government Pleader for the respondents 1 and 2, namely, the Inspector General of Registration, Chennai, and the Sub-Registrar, Kodaikanal, submitted that the Sub Registrar had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etro Ltd., V. Soneko Developers (P) Ltd. And others; (2)2010 (3) CTC 372 - C.N.Paramasivam and another v. Sunrise Plaza, rep. By its partner, Kalyanasundaram and others; (3)2011 (6) CTC 858 - Sri anbalayam Textiles Private Ltd., rep. By its Chairman P.Veerasamy V. The Chairman-cum-Managing Director, T.N. Industrial Investment Corporation Ltd. And others; and (4)2011 (6) CTC 349 - P.Kumaran V. The Debts Recovery Appellate Tribunal and Others; 33. I have considered the submissions made by either side. 34. It is not in dispute that the sixth respondent-MTML has to pay statutory dues to various statutory bodies and Commercial Taxes Department and banks. The company owns properties to repay its statutory dues. 35. The sixth respondent-MTML filed a counter-affidavit admitting that 3.95 acres in Kodaikanal of MTML was attached by the EPFO and the Commercial Taxes Department. Paragraph 6 of the counter-affidavit in this regard is relevant and the same is extracted hereunder: 6. The Mahalakshmi Textile Mills Limited owned an extent of 3.95 Acres in Old Survey Number 25/6/4 and 25/6/5, New Town Survey Number 21 in Kodaikanal. The said land consists of 2 lots. The land with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operties of the establishment and where such attachment and sale is insufficient for recovery the whole of the amount of arrears specified in the certificate, the Recovery Officer may take such proceedings against the property of the employer for recovery of the whole or any part of such arrears. (2) The authorised officer may issue a certificate under sub-section (1), notwithstanding that proceedings for recovery of the arrears by any other mode have been taken. 8-C. Recovery officer to whom certificate is to be forwarded. (1) The authorised officer may forward the certificate referred to in section 8B to the Recovery Officer within whose jurisdiction the employer - (a) carries on his business or profession or within whose jurisdiction the principal place of his establishment is situated; or (b) resides or any movable or immovable property of the establishment or the employer is situated. (2) Where an establishment or the employer has property within the jurisdiction of more than one Recovery Officers and the Recovery Officer to whom a certificate is sent by the authorised officer - (a) is not able to recover the entire amount by the sale of the property mova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n arises : Provided that a suit may be brought in a civil court in respect of any such question upon the ground of fraud. 12. Removal of attachment on satisfaction or cancellation of certificate. Where- (a) the amount due, with costs and all charges and expenses resulting from the attachment of any property or incurred in order to hold a sale, are paid to the Tax Recovery Officer, or (b) the certificate is cancelled, the attachment shall be deemed to be withdrawn and, in the case of immovable property, the withdrawal shall, if the defaulter so desires, be proclaimed at his expense, and a copy of the proclamation shall be affixed in the manner provided by this Schedule for a proclamation of sale of immovable property. 16. Private alienation to be void in certain cases. (1) Where a notice has been served on a defaulter under rule 2, the defaulter or his representative in interest shall not be competent to mortgage, charge, lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer, nor shall any civil court issue any process against such property in execution of a decree for the payment of money. (2) Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ...... (vii) In the case of immovable property, the person declared to be the purchaser shall pay immediately after such declaration a deposit of twenty five percent on the amount of his purchase money to be officer conducting the sale and in default of such deposit, the property shall forthwith be put up again and resold. The full amount of the purchase money payable shall be paid by the purchaser to the undersigned on or before 15 days from the date of the sale of the property, exclusive of such day, or if 15th day, be a Sunday or other holiday, then or the first office day after the 15th day. In default of payment within the period mentioned above, the property shall be resold, after the issue of fresh proclamation of sale. The deposit, after defraying the expenses of the sale, may, if the undersigned thinks fit, be forfeited to the Employees' Provident Fund and the defaulting purchaser shall forfeit all claims to the property or to any part of the sum for which it may subsequent be sold. 44. As per Clauses (iv) and (vii) of the proclamation of sale, the highest bidder shall pay 25% of the bid amount immediately. He shall pay the balance amount on or before 15 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mills. And whereas this spinning Mill has been closed and the company has become defunct. And whereas since the Schedule property is located at Kodaikanal which is under attachment made by Employees Provident Fund Department, and also Tamilnadu State Sales Tax Department. And whereas there were heavy loans payable to the Tamil Nadu Industrial Investment Corporation Ltd., and as such the said corporation took over possession of the entire properties of the mill inclusive of the Schedule mentioned properties. And whereas all the Directors have left the management leaving the same to be dealt with by me and to clear the debts. And whereas I have cleared the entire dues payable to Tamil Nadu Industrial Investment Corporation Ltd., and in consideration of the same, the said Corporation has handed over all the properties to me as per their communication dated 20.12.2004. And whereas negotiations have to be initiated with Employees provident fund Department, Sales Tax Department, and other Departments of Central and State Government to arrive at the actual amount payable to them to them to get the schedule mentioned properties released. And whereas the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove in this regard. We are not concerned with various sales that took place in respect of 2 acres 69.54 cents. We are concerned with 1 acre and 25.46 cents that were brought to sale by EPFO by issuing proclamation of sale on 04.06.2010. Therefore, the submission of the learned counsel for the third respondent has no merit. 51. The main crux of the submission of the learned counsel for the third respondent is that the writ petition is not maintainable and the only remedy available for the EPFO authorities seeking to cancel the sale deeds executed by the third respondent in favour of his wife is before the Civil Court. The submission of the learned counsel deserves to be rejected for more than one reason. The lands covered under the sale deeds executed by the third respondent in favour of his wife are already under attachment. This is not in dispute as the same is found even in the power deed. This attachment is not pursuant to an order by any civil court based on a decree of a civil court. On the other hand, the attachment was statutorily made under Sections 8-B, 8-C and 8-G of the EPF Act read with Second and Third Schedule to the Income Tax, 1961. 52. At this junctur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad, reported in 1967 64 ITR 1 [AP] held in categorical terms that the alienation to the property under attachment shall be void as per Rule 16(2) of the Second Schedule to the Income Tax Act. In fact, it is held that even before the attachment, after the issuance of certificate by the Authorised Officer to the Recovery Officer, any dealing in relation to the property by the defaulter is prohibited by Rule 16(1) of the Second Schedule to the Income Tax Act. The objection of the defaulter raised therein that such a restriction would amount to infringement of the fundamental rights guaranteed under Article 19(1)(g) of the Constitution of India was rejected. The following passages in the said judgment is extracted in this regard: We, are, therefore, of the view that once a notice has been served and, as a matter of fact, even before any attachment is made, the defaulter cannot deal with his properties in any manner. If there is any dealing with the property, whether movable or immovable, after the receipt of the notice, the defaulter would be contravening the provisions of rule. 16. Any such private alienation made would be void in certain cases as is clear from the marginal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, no question of the fundamental rights guaranteed under article 19(1)(g) being affected. Further, it may be noted that the right to carry on trade or to hold property or to do business is subject to the liability to pay the debts incurred by the persons, whether in the course of the business or otherwise. To hold that property cannot be attached or transfers cannot be interdicted by operation of law or by order of a court under any law intended for the protection of the rights of the creditors, would amount to conferring a new fundamental right, viz., freedom from discharging debts and obligations, which certainly could not have been envisaged by the framers of the Constitution. Take the case of an insolvent. Under section 28 of the Provincial Insolvency Act all the property of the insolvent vests in the official receiver who holds it for the benefit of the creditors. Can the insolvent challenge it on the ground that he, by the process of the property vesting in the official receiver, is not able to do his business or hold the property, and thus his fundamental rights are affected ? Our answer is that he cannot challenge. Take another instance. On the allegation of a party to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from attachment. That application was rejected by the execution court on 11.08.1980. The matter was taken to the Calcutta High Court by way of appeal. The appeal was allowed on 16.03.1982. The appellant before the Apex Court is the Decree-holder, who filed the execution application. (ii) The plea was that in view of Section 64 of the Code of Civil Procedure, the sale by the judgment-debtor during the period of attachment is void. Accepting the same, the Apex Court reversed the order of the High Court and restored the order of the execution court. (iii) Rule 16(2) of the Second Schedule to the Income Tax Act and Section 64 of the Code of Civil Procedure are in pari materia. (iv) Therefore, the sale executed by the third respondent in this case shall be void as per the pronouncement of the Apex Court. (III) The judgment of this Court in Palani Gounder (Decd.) and Others V. Income Tax Revenue Department and others, reported in 1998 (229) ITR 59 (Mad.). (i) In this judgment, this Court has clearly held that the sale deed executed in contravention of Rule 16(2) of the Second Schedule to the Income Tax Act is void. (ii) The appellants in that case before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r his representative-in-interest shall not be competent to mortgage, charge or lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer, nor shall any civil court issue any process against such property in execution of a decree for the payment of money. ..... A reading of the above said rule shows that the Tax Recovery Officer has to serve a notice on the defaulter, requiring the defaulter to pay the amount specified in the certificate within 15 days from the date of the service of the notice and also intimating the defaulter that the steps will be taken to realise the amount under the Schedule. In other words, the rule mentioned above makes it clear that me nonce must contain one details of the arrears towards the income- tax and the time within which the amount to be paid. In order to given opportunity to the defaulter, all necessary things have to be mentioned in the notice under rule 2. In this respect, it is the contention of learned counsel for the respondents that though the notice under rule 2 has not been served prior to exhibit A-1, other notices mentioning the tax arrears and the time within which the defau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly, the properties were attached on 10.01.1972. Thereafter, the Recovery Officer issued an order on 01.06.1974 declaring that the sale is void. (iii) In those circumstances, the purchaser filed a suit before the Sub Court, Dindigul, for declaration that the purchase is not void and the purchaser sought for an injunction restraining the Recovery Officer from proceeding against the property. The purchaser also sought for declaration that the order of the Recovery Officer dated 01.06.1974 holding the said is void as illegal. (iv) The said suit was dismissed. The first appellate court confirmed the same. This Court also rejected the Second Appeal after extracting the above paragraph in the judgment in Palani Gounder (Decd.) and Others V. Income Tax Revenue Department and others, reported in 1998 (229) ITR 59 (Mad.) in paragraph 17. (v) In the said judgment in 1998 (1) CTC 547, it is held in paragraph 18 as hereunder: 18 In view of the well laid principles, I do not think it is necessary to deal with the contention elaborately, since I am entirely in agreement with the above said principles. In view of this, the contention of the counsel for the appellants cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2442 of 2009, are recorded. 60. In view of the above discussions, both the writ petitions are disposed of with the following directions : (i) The sale deed executed by the third respondent in document No.2441 of 2009 in the office of the Sub Registrar, Kodaikanal, in favour of his wife, the fourth respondent in W.P.(MD)No.11726 of 2010 is void in view of Rule 16(2) of the Second Schedule to the Income Tax Act and the four judgments referred to above. (ii) The Recovery Officer, EPFO, Madurai, is directed to conduct fresh auction sale in respect of the property measuring 125.46 cents in old Survey Nos.25/6/4 and 25/6/5 and present Taluk Survey No.21, Block 15, Ward C of Kodaikanal Taluk belonging to MTML after fresh sale proclamation. (iii) The Recovery Officer, EPFO, Madurai, is directed to deposit the balance amount, after adjusting the dues payable to EPFO by the MTML from and out of sale consideration, before the Joint Commissioner of Labour, Madurai. (iv) The Joint Commissioner of Labour, Madurai, is directed to disburse the amount deposited by the Recovery Officer, EPFO, Madurai, proportionately to the workmen, by ascertaining the dues payable to the workmen by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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