TMI Blog2008 (8) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2. The case of the appellant is as follows: (a) Since 1999, the appellant has been a lessee of the plaint scheduled mentioned premises which belonged to Sujatha Films Limited (SFL) and running two preview theatres. They have installed costly equipments in the premises for running the theatre. To recover the tax arrears from the said SFL, the Income Tax Department auctioned the schedule premises on 17.3.2005 pursuant to a proclamation of sale dated 7.2.2005. After the auction, the department attempted to transfer physical possession to the bidder even before the issuance of sale certificate. Immediately, the appellant filed a writ petition in WP No. 10094 of 2005, and an order was passed by this Court on 28.3.2005 restraining the department from interfering with the plaintiff's possession of the property for a minimum period of 30 days from the date of service of order dated 17.3.2005. The said order was subsequently modified on 8.4.2005 to the effect that the department should not interfere with the plaintiff's possession for a minimum period of 30 days from the confirmation of the sale. The confirmation of sale has been made by a certificate of sale dated 4.5.2005 issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer; that as per the proclamation, the sale was fixed to be held on 17.3.2005; that the sale proclamation would clearly indicate that the property to be sold was clearly mentioned; that it was also mentioned that the said theatre was under the occupation of the appellant as tenant; that even prior to the date of the proclamation of sale, the appellant had corresponded with the respondent department on the subject and the department has addressed a letter to the appellant on 4.1.2005; that the department made a publication without mentioning that the property was under the occupation of the appellant as tenant; that on 11.3.2005, the appellant objected to the proposed sale emphasising that their possession and right of occupancy through their letter and pointed out the defect in the proclamation and demanded rectification; that a reply was sent by the department on 14.3.2005 that the lease in favour of the appellant for 9 years from 1990 was after a Tax Recovery Officer notice dated 31.1.1990, and therefore the lease was invalid; that the said notice was not mentioned in the proclamation of sale; that despite the objections raised by the appellant and even without rectifying the def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the sale. 7. The learned Counsel would further add that the said auction sale was confirmed by the department in favour of the defendants by an order in Form No.18 on 4.5.2005; that the sale certificate has also been issued in favour of the defendants in Form No.20 of the Income Tax (Certificate Proceedings) Rules, 1962; that while issuing the confirmation order and the sale certificate, the respondent deliberately added a mention about a purported Recovery Certificate No.256/91-92 dated 31.1.1990 with a mala fide view to fill up the lacuna in the proceedings of the department though such certificate was not mentioned in the proclamation of sale giving rise to a real apprehension that the said certificate was made up and produced with ulterior motive; that a copy of the sale certificate was affixed on the wall of the theatre premises by the staff of the Income Tax Department and by beat of "Tom Tom"; that they declared that the interest of the landlord defaulter was transferred to the purchaser as provided in Rule 40; that a letter was addressed by the advocates of the defendants to the respondent department seeking to set aside the auction sale and demanding the refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt served a letter dated 13.7.2005 on the appellant at 10.50 a.m. and demanded that the appellant should vacate the premises within one hour; that the defendants with the connivance of the Income Tax Department forcibly took possession of the theatre with the police aid; and have caused considerable damage to the premises and also the installations; that the appellant filed Application Nos.2883 and 2884 of 2005 and O.A.No.692 of 2005 for restoration of the possession of the theatre; that an application was also filed in WPMP No.25189 of 2005 for restoration of possession; that on 22.8.2005 this Court passed a common order in both the applications in the suit and in the writ petition ordering restoration of possession to the appellant and reviving the interim injunction originally granted in O.A.No.543 of 2005 and WPMP No.19093 of 2005 until further orders; that it is pertinent to point out that the Court was convinced that the appellant was in possession of the property as a tenant of the lessor and hence their possession was to be protected; that though it was forcibly taken by the defendants with the aid of the Income Tax Department and police, the Court has passed an order for r ..... 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Officer without jurisdiction; that the Officer was directed by the Court to find out the claim made by the appellant and also the nature of the possession; that he was never directed to find out the validity of the tenancy; that while doing so, the Officer has clothed himself with a jurisdiction which was not vested with him, and has recorded that the tenancy was void and invalid; that the materials including the proclamation, would clearly indicate that symbolic delivery was done following Rule 40 of the Income Tax (Certificate Proceedings) Rules,; that after doing so, the department cannot be allowed to say that for the instant case, Rule 40 is not applicable and Rule 39 alone has to be applied; that in order to suit the convenience of the department, the same was done after the auction purchasers came with a request to cancel the auction sale and also with a further request that the actual possession has got to be handed over by proceeding under Rule 39; and that all would go to show that the department had hand in glove with the auction purchaser. 11. Added further the learned Counsel that the appellant has sought for a permanent injunction to restrain the defendants auctio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him to find out whether the said Rule was applicable to the present case or not; but, contrary to the direction and also the propositions of law, the Tax Recovery Officer has declared the tenancy as void; that the trial Judge has confirmed the said finding of the Tax Recovery Officer without issues, evidence and trial and without giving opportunity to the appellant to let in evidence both oral and documentary to prove the contrary and thus, the order of the learned Single Judge in dismissing the writ petition was in violation of the principles of natural justice; and that the observations made by the learned Single Judge assailing the validity of the lease deeds were unsustainable on facts and have been made contrary to the available records. 13. The learned counsel appearing for the appellant, in support of his contentions, has relied on the following decisions: (a) Dev Raj Dogra v. Gyan Chand Jain, AIR 1981 SC 981; (b) Sancheti Leasing Co. Ltd. v. ITO [1998] Ind Law 570; [2002] 246 ITR 814 (Mad); (c) TRO v. Gangadhar Vishwanath Ranade [1998] 234 ITR 188; [1998] 6 SCC 658 (d) A. Stephen Samuel v. Union of India [2003] 2 MLJ 220; [2004] 118 comp Cas 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot maintainable without arriving at a conclusion on trial was correct. 19. Before adverting the attention to answer those questions, it would be more fit and proper to look into the factual events and circumstances under which such an order came to be passed by the Tax Recovery Officer of the respondent department. 20. The owner of the said property namely the Sujatha Films Limited who fell in income tax arrears to the tune of Rs.11.04 crores along with interest, was liable to pay Rs.19 crores. Pursuant to the certificate issued by the TRO on different dates, Rule 2 notice under Schedule II was issued on 27.2.1987, and the said property was attached on 30.9.1992. Following the same, the property was brought for auction sale by issuing a proclamation on 7.2.2005. The defendants in the suit who were the auction purchasers, when attempted to take possession, it was resisted by the appellant. The objections put forth by the defaulter were negatived and the property was actually auctioned on 7.3.2005. Following the said incident on 19.2.2005, the appellant filed W.P.No.10094 of 2005 on 21.3.2005 seeking for a writ of mandamus to restrain the respondent department from interferi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 005 at 11.00 a.m. Before the Tax Recovery Officer neither of the party should seek for any adjournment on that day. The Tax Recovery Officer shall permit the respective counsel to represent the applicant as well as the respondents/defendants. They should present all their applications and documents before the Tax Recovery Officer without fail and proceed with and be ready with their submissions. After hearing the applicant as well as the respondents/defendants, the Tax Recovery Officer shall pass his orders as to the applicability of Rule 39 of the Income Tax (Certificate Proceedings) Rules, 1962 to the case of the applicant and such order shall be passed on or before 29.9.2005. Copy of the order may be furnished to the applicant as well as the respondents/defendants. The implementation of the said order shall await further order in these proceedings." 22. The very reading of the above part of the order would clearly indicate that the parties agreed that their respective contentions with regard to the possession and also the applicability of Rule 39 could be decided by the Tax Recovery Officer, and the said order after it was made, could be subjected to test in the writ petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the purchaser, order delivery to be made by putting such purchaser or any person whom the purchaser may appoint to receive delivery on his behalf in possession of the property, and if need be, by removing any person who refuses to vacate the same. (2) For the purposes of sub-rule (1), if the person in possession does not afford free access, the Tax Recovery Officer may, after giving reasonable warning and facility to any woman not appearing in public according to the customs of the country to withdraw, remove or open any lock or bolt or break open any door or do any other act necessary for putting the purchaser, or any person whom the purchaser may appoint to receive delivery on his behalf, in possession." 40. Delivery of immovable property in occupancy of tenant:- Where the immovable property sold is in the occupancy of a tenant or other person entitled to occupy the same and a certificate in respect thereof has been granted under Rule 65 of the principal rules, the Tax Recovery Officer shall, on the application of the purchaser, order delivery to be made by affixing a copy of the certificate of sale in some conspicuous place on he property, and proclaiming to the occupa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aiming a title over the property in question. Having consented to such an order for referring the matter to the Tax Recovery Officer and after producing all the documentary evidence in order to prove the alleged lease, the appellant cannot now be permitted to say that the Tax Recovery Officer could not pass such an order. The learned Single Judge was thoroughly mindful of the situation, and hence it was also pointed out in the judgment that the order of the Tax Recovery Officer could be tested by the Court in the proceedings, and also the implementation of the order would depend upon the result of the proceedings. In the instant case, the appellant cannot come forward with the plea to state that the Tax Recovery Officer has neither power nor jurisdiction to go into the question as to the nature of possession of the appellant and give a report. If that contention was accepted, the very purpose for which the matter was referred to the Tax Recovery Officer by consent of parties would be defeated. Hence the correctness of the order has got to be tested in the proceedings. 25. It is not in controversy that after the confirmation of the sale on 4.5.2005 and issuance of the sale certi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e plaintiff relied on three unregistered lease deeds dated 28.11.1989, 1.12.1990 and 20.8.1999 respectively. The first lease deed was for a period of 12 months, and the monthly rental was shown as Rs.5,000/-. The same was entered into between G. Venkateswaran and his wife, and both the lessor and lessee were shown to be in the same address. The document was witnesses by none. A deposit of Rs.15 lakhs was shown to have been paid. The second lease agreement was for a period of 9 years, and the monthly rental was written as Rs.5,000/-. A sum of Rs.75 lakhs was shown as the security deposit. The said amount of deposit would carry interest at 10% per annum. The said lease deed was also signed by the husband and wife as lessor and lessee respectively. While the matter stood thus, the third lease deed a perpetual one, was entered into by the wife of Venkateswaran as lessee and one of the directors of the GVFL which was to the effect of rental free. All these lease deeds on their face, would clearly indicate that they were prepared and kept ready for some ulterior purpose probably as put forth by the department to defraud the claim of the department. (ii) Pursuant to the SFL's huge arrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available materials, after scrutiny of the available materials, the Tax Recovery Officer has found that the lease deeds relied on by the plaintiff, were only created, and since the plaintiff was in occupation only on behalf of the defaulter, Rule 39 of the Income Tax (Certificate Proceedings) Rules has got to be applied in the present facts of the case. 30. It is true that ordinarily the validity of the lease agreement has got to be determined only in Civil Court and the Tax Recovery Officer is not competent to adjudicate upon this issue. But, in the instant case, a necessity arose to refer the matter to Tax Recovery Officer pending the proceedings before this Court, to find out whether delivery of possession was to be effected under Rule 39 of Income Tax (Certificate Proceedings) Rules, and thus, he was called upon to exercise his jurisdiction as envisaged in the Rules to find out whether any resistance was made by the plaintiff in good faith. On such exercise, he has found that the resistance was not bona fide since the lease deeds relied on by the plaintiff to call itself as a lessee were against the order of attachment and made in violation of the undertaking and hence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, have placed the documentary evidence. The plaintiff had rested its case on the three lease deeds in order to contend that it was a lessee under the defaulter. As per the directions of the Court and in exercise of the jurisdiction, vested under the Rules, the Tax Recovery Officer was to go into the question as to the applicability of Rule 39 and in order to find out the same, the Tax Recovery Officer has to decide the question whether the resistance made by the appellant was bona fide. In order to resolve the question, a duty was cast upon the Tax Recovery Officer to look into the documents and take a decision and place before the Court which he has accordingly done. The learned Single Judge while issuing direction to the Tax Recovery Officer to find out the applicability of Rule 39, has also further pointed out that the order so made by the Tax Recovery Officer was to be tested by this Court and also the implementation of the said order should await the further orders in the proceedings. Accordingly, the learned Single Judge has elaborately discussed in the judgment both factual and legal positions in the writ petition and has found that there was no ground to set aside the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Court is that the learned Single Judge has appointed an Advocate Commissioner in order to effect the immediate delivery of possession on 6.12.2005 at 3.00 P.M. despite the request of the appellant to challenge the judgment. It is pertinent to point out that the appellant has given an undertaking before the Court that if the Court held that Rule 39 of the Income Tax (Certificate Proceedings) Rules is found applicable, then they would surrender possession forthwith. When the Court came to the conclusion that Rule 39 of the Income Tax (Certificate Proceedings) Rules alone would apply, as per the undertaking, the appellant/plaintiff should come forward to hand over possession. But, they sought for time to prefer an appeal which, in the opinion of the learned Single Judge, should not be allowed. It is pertinent to point out that the learned Single Judge while ordering immediate delivery of possession, has also pointed out that if the plaintiff came out successful in the appeal, the plaintiff can very well invoke Section 144 of Civil Code Procedure for restoration of possession. Under the stated circumstances, this Court is unable to see any merit in the contention put forth by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f those documents could be considered as that of a tenant or they were in possession on behalf of the defaulter. Thus the Tax Recovery Officer has acted as per the directions of the Court and on evaluation of the available materials, found that the appellant was in possession on behalf of the defaulter. Under the circumstances, the learned Single Judge was perfectly correct in sustaining the order. 39. It remains to be stated that the appellant has filed the suit only for permanent injunction to restrain the auction purchasers from interfering with the possession on the strength of the alleged lease. Even after the same was denied both by the department and by the auction purchasers, the appellant has not filed a suit for declaration that it was a tenant or made an attempt to amend the plaint for such a declaration since the appellant was conscious of the fact that if such a declaration of lessee was sought for on the strength of those lease deeds, he could not make out a case to obtain the relief. Once the appellant was unable to make out a case in the writ petition where they challenged the delivery of possession under Rule 39, the delivery of possession under Rule 39 has to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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