AMAR CHAND AGRAWAL VS COMMISSIONER OF INCOMETAX, 2000 PTD-ALLAHABAD-HIGH-COURT-INDIA 3688 (1998)

2000 P T D 3688

[238 I T R 240]

[Allahabad High Court (India)]

Before Ravi S. Dhavan and V. P. Goel, JJ

AMAR CHAND AGRAWAL; and others

Versus

COMMISSIONER OF INCOME-TAX and others

Civil Miscellaneous Writ No. 1164 of 1983, decided on 25/04/1998.

Income-tax---

----Recovery of tax---Attachment and property---Sale by public auction not fetching reserve price---Permission to defaulter to arrange private sale of property---Provisions of R. 66 of Sched. II are similar to R. 83 of 0. 21 of I has power to authorise sale within a period less than thirty days---Sale by private negotiation authorised by TRO---Sale transaction is complete when agreed price is deposited by purchaser---Person offering more than agreed price after completion of sale transaction has been concluded, has no locus standi to object to sale---Indian Income Tax Act, 1961, S.220 & Sched. II, R.66.

Rule 66 of Schedule II to the Income Tax Act, 1961, permits change of scene from a public auction to a private negotiation by specific authorisation by the Income-tax Department. Rule 66 of Schedule II to the Act contains provisions analogous to rule 83 of Order 21 of the Civil Procedure Code. Rule 83 stipulates the principles that should a public auction be lacking in getting a reserve price or an anticipated price, a Court if not satisfied with the price fetched may permit a judgment-debtor facing a decree, to authorise him to arrange a better price by negotiating a sale. When the Tax Recovery Officer grants a certificate to the defaulter authorising him to negotiate a sale within a period to be mentioned therein the qualifying words "notwithstanding anything contained in the Schedule" is not without meaning. If the words "notwithstanding anything contained in the Schedule" were not there, then the interplay of the other qualification of the sale being concluded not earlier than 30 days would come into play. Rule 66 is an independent provision. The legislative intent is also very clear that if the Tax recovery Officer is to authorise a period within which the negotiations are to be concluded, then it is that period during which the defaulter must conclude the sale. Rule 66, thus, is not qualified by other previsions of Schedule II relating to public auction. The Tax Recovery Officer concludes the sale when the money is deposited by the person who agrees to the sale.

A property in K was attached by the income-tax authorities. It was attempted to be sold, in the first instance in 1967. The sale did not materialise because the property would not fetch the pike, which the Income- tax Department was anticipating. The bids offered at the public auction were inadequate and below the reserved price. Due permission was granted to the. defaulters, o their applying, to permit the sale of the property by private negotiation so that tree amount anticipated by the Department could be raised In May, 1982, an lifer larger than that given at the public auction had been received. This was an offer of Rs.3,50,000. During the period when authorisation had teen permitted to the defaulters to enter into negotiations, a valuation report was obtained. The report disclosed a value of Rs. 3,14,100. The Tax Recovery Officer forwarded his report to the Commissioner of Income-tax. In November, 1982, the office of the Commissioners of Income tax permitted the; Tax Recovery Officer to decide the matter on merit. The Tax Recovery Officer wrote to that his offer had been, accepted. The purchasers were then required to deposit a sum of Rs.3,50,000 in favour of the Tax Recovery Officer within seven days of the report of the letter. The purchasers placed the entire sale consideration by a banker's cheques for Rs.3,50,000 in favour of and before the Tax Recovery Officer. On December 2, 1982, the confirmation of sale was issued by the Tax Recovery Officer, in favour of the petitioners. In March 1983, the petitioners were informed by the Commissioner of Income-tax. (Tax Recovery) that two persons had filed an appeal objecting to the sale in favour of the petitioners, and that the petitioners if they desired to have an opportunity of being heard on the said appeal, they might appear, on April 4, 1983. The petitioners sent in their written objections, dated April 4, 1983, to the Commissioner of Income-tax, who passed the appellate order on September 1, 1983, setting aside the sale in favour of the petitioners. On a writ petition challenging the Order of the Appellate Authority, dated September 1, 1983, by the petitioners:

Held, that the Appellate Authority had made not only an apparent, but a manifest error in permitting and being impressed by an argument that respondents Nos.3 and 4 had a right to object within a period 3-0 days. The Tax Recovery Officer had concluded the sale as on the date when the money was deposited by the person who agreed to the sale, that is the petitioners who negotiated under the authority of the Tax Recovery Officer. Moreover, the third and fourth respondents had no locus standi in any of the negotiations permitted. to the defendants by law. Nothing was settled with and the questions of their having an interest did not arise. They were neither person interested nor did they have any interest and they had no right to file an appeal. They did not even have a right to move an application under rule 86 to seek review of any order: The order of the Appellate Authority under rule 86(1) of the Second Schedule to the Income tax Act was not valid and was liable to be quashed.

Basavarajappa (K.) v. Tax Recovery Commissioner (1997) 223 ITR 297 (SC); Boddpati Ramachandra Rao v. Special Deputy Tahsildar (1969) 71 ITR 277 (AP); Sathyanarayana (D.V.) v. Tax Recovery Officer (1992) 194 ITR 409 (Kar.); Sathyanarayana (D.V.) v. Tax Recovery Officer (1992) 197 ITR 407 (Kar.) and Tax Recovery Commissioner- v. Basavarajappa (K.) (1992) -197 ITR 398 (Kar.) ref.

V.B., Upadhyay; Senior Advocate with V.B. Singh for Petitioner.

M. Katju for Respondents Nos. 1 and 2.

JUDGMENT

RAVI S. DHAVAN, J. ---This petition has been pending in the High Court for most 15 years. The issues relate to the controversies under the income Tax, 1961, and to a real estate in Kanpur. The first premises on which those who have addressed the Court are agreed and not at issue is that the cause will be seen as when it was brought to the Court; on this aspect the law is clear in Reneshwar v. Jot Ram, AIR 1984 SC 49.

On the face there is no issue between the record as has been presented by the pathfinders and the respondents, that is respondents Nos.1 and 2, being the 1ncome-tax Department. Barring these parties no other person addressed the Coin. Respondents, Nos. 3 and 4 did not address the Court either.

For arrears of income-tax, the assessee, as at the time, R.P. Bagla, Hindu undivided family karta, B.P. Bagla and H.S. Bagla, the Hindu undivided family karta, S.N. Bagla, were defaulters with the result that their immovable property situate at Kanpur, being several houses, big bungalows and other properties, were attached by the Income-tax Department, as the law so provides, to realise the arrears of income-tax by sale of attached properties. At the relevant time, the gross income-tax arrears stood at Rs.58,27,534.

The subject-matter of this petition relates, specifically, to the property 7/76, Tilak Nagar, Kanpur. The property having been attached by the income-tax authorities, it was attempted to be sold. to the first instance in 1967. The sale did not materialise because the property would not fetch the price which the Income-tax Department was anticipating. The bids offered at the public auction were inadequate and below the reserved price. Consequentially, those who owned the properties, the defaulters, aforesaid, also raised objections, as it was within their right to do so, that the reasonable market price was snot forthcoming as a result of the public auction. Their objection was that should the properties fetch a reasonable market price and beyond the bids which were received; their income-tax liability would be reduced. It is accepted by the Income-tax Department that with the objections of the defaulters and there being no issue on the aspect that the public auction did not fetch the price which had been reserved by the Department, due permission was granted to the defaulters, on their applying to permit the sale of the property by private negotiation so that the amount anticipated by the Department could be raised. To change the scene of sale of property by public auction and permit a sale by the defaulters to raise the amount, the law provides that the defaulter must be invested with a sanction of a specific authorisation to negotiate a sale. The only difference is that the moneys which will represent considerations received on the sale (mortgage or lease not excluded) will not be paid to the defaulters, but to the Income-tax Department. Confirmation of the sale will also be certified by the Department. The law permits such a modality. This is the subject-matter of the controversy on which the arguments have been addressed after common facts were placed by learned counsel arguing for the respective parties. This provision of law which permits change of scene from a public auction to private negotiation by specific authorisation by the Income-tax Department needs to be noticed. The. procedure is provided under the Second Schedule to the Act. It is contained in rule 66 of this Schedule and reproduced:

"(66) Postponement of sale to enable defaulter to raise amount due undercertificate.--(1) Where an order for the sale of immovable propertyhas been made, if the defaulter can satisfy the Tax Recovery Officer that there is reason to believe that the amount of the certificate may De raised by the mortgage or lease or private sale of such property, or some part thereof, or of any other immovable property of the defaulter, the Tax Recovery Officer may, on his application, postpone the sale of the property comprised in the order for sale, on such terms, and for such period as he thinks proper, to enable himto raise the amount.

(2)In such case, the Tax Recovery Officer shall grant a certificate to the defaulter, authorising him, within a period to be mentioned therein, and notwithstanding anything contained in this Schedule, to make the proposed mortgage, lease or sale:

Provided that all moneys payable under such mortgage, lease or saleshall be paid, not to the defaulter, but to the Tax Recovery Officer:

Provided also that no mortgage, lease or sale under this rule shall become absolute until it has been confirmed by the Tax Recovery Officer."

The Court refers to this aspect of the matter at the very outset as the controversy itself centers around the rights of whoever may be the persons.

The Court will now revert to certain essential facts. When between the years 1967 to 1973, that is for about six years, the Income-tax Department could not arrange to sell the property which was already attached to the Department as arrears of income-tax had not been paid, the defaulters approached the Department for permission to negotiate a sale under rule 66.

The first offer which met with satisfaction and requirement of the Income-tax Department came from one Amar Chand Agrawal on May 3, 1982. The offer was addressed to the Commissioner of Income-tax, Kanpur. It was for Rs.3,50,000. This offer stood on record for almost seven months. As an abundant caution before the offer could be considered for the purposes of being accepted or approved by the Income-tax Department, it wrote to the defaulters through the Commissioner of Income-tax, Kanpur, by his letter, dated May 20, 1982. It said whereas one Sri Amar Chand Agrawal had left an offer for the purchase of the property consent of all other co-owners may be obtained and filed in the office. In response to the letter of the Commissioner of Income-tax, Kanpur, all the other co-owners joined Mr. S.N. Bagla by signifying their consent formally in writing on June 3, 1982. -

Now before the Commissioner of Income-tax, Kanpur, the record lay in a state that whereas the public auction resulted in inadequate' consideration, subsequently, by a procedure prescribed `law, reference rule 66, an offer larger than that given at the public auction had been received. This was an offer of Rs.3,50,000. Further, while the defaulters had signified their consent to this sale, they withdrew all their objections at various stages and recorded it so that their objections may be treated as withdrawn. The scene had changed from one of an invitation to make an offer as at a public auction to an offer, consideration and acceptance. This offer had the consent of all concerned, even the Income-tax Department, as the latter had permitted sale by negotiation when public auction would not fetch the reserved price. The consent of all concerned was on adequate consideration. The only matter which now remained was an approval or confirmation by the authority concerned, namely, the Tax Recovery Officer.

After having received the consent of the co-owners, the Tax Recovery Officer formally went into a dialogue with the Commissioner of Income-tax. The records show that the past history of the property was being verified. The Department went into an exercise on what the value of the property would be. The Department had the property valued. During the period when authorisation had been permitted to the defaulters to enter into negotiations, a Valuation Report No.8/AEI/RP/05/80-81/39/395, dated June 23, 1982, valued the property at Rs.3,14,100. As the amount, which was received, was beyond the price fetched at the public auction conducted by the Income-tax Department, the Tax Recovery Officer forwarded his report of July 19, 1982, to the Commissioner of Income-tax, Kanpur, with the record. Another exercise went on between the Tax Recovery Officer and the Commissioner of Income-tax, Kanpur. This was checking and rechecking on the valuation of the property, incumbrances on the property and how much of the property was possessed not by the owners (the defaulters, but by, tenants. This exercise is on record in a report, dated November 20, 1982, submitted by the Tax Recovery Officer to the Commissioner of Income-tax, Kanpur. By this time, the Department, within itself was coming to the conclusion that as their property is in the hands of tenants and it is unlikely that vacant possession would be forthcoming, the offer received is beyond and better than the value of the property assessed by the Official value. The note recorded by the Tax Recovery Officer for the Commissioner of Income tax, taking all the circumstances into account mentions "looking to the facts narrated above, if the proposal is approved, the private sale may be allowed in the interest of the Revenue." On November 23, 1982, the office of the Commissioner of Income-tax, Kanpur, recorded an endorsement for the Tax Recovery Officer: "Tax Recovery Officer should decide the matter on merit." The Tax Recovery Officer on November 24, 1982, wrote to petitioner No: 1, Amar Chand Agrawal, that the offer of May 3, 1982, upon which consent had been received from the defaulters on June 3, 1982, has been considered carefully and it is accepted. The purchasers were now required to deposit a sum of Rs.3,50,000 in favour of the Tax Recovery Officer within seven days of the receipt of the letter, copy of this letter was endorsed for information, as an abundant caution, by the Tax Recovery Officer to, (1) the Inspecting Assistant Commissioner of Income-tax, C Range, Kanpur, (2) Mr.S.N. Bagla, Karta, a defaulter, (3) Mr. B.P. Bagla, another defaulter, and (4) the Commissioner of Income-tax, Kanpur, _in compliance to his letter, dated November 23, 1982.

Having verified the valuation of the property and satisfied that the offer was more than what was valued, and having assessed that the amount will be paid to the Tax Recovery Officer, as the rule so provides, he now wrote to the defaulter, Mr. S.N. Bagla, deputing for the other co-owners and defaulters, authorising him to execute a sale within a period of seven days. The defaulters were reminded of the instructions that all the moneys payable, in the context of the sale, shall not be paid to the defaulters, but to the Tax Recovery Officer and the sale will not become absolute until it is so confirmed by, the latter. This certificate of authorisation was in keeping with the instructions of the rule of Schedule II. It is, dated November 24, 1982. As only seven days had been provided in the authorisation to the defaulters, the modalities of the sale were to be concluded within this period. Rule 66 provides for authorisation and simultaneously provides the period within which the modalities are to be completed.

On November 25, 1982, petitioner No.l, Amar Chand Agrawal, responding to the letter of the Tax Recovery Officer, placed the entire sale consideration by a banker's cheque of Rs.3,50,000 in favour of, and before the Tax Recovery Officer, Kanpur. On December 2, 1982, the confirmation of sale was issued by the Tax Recovery Officer, aforesaid in favour of the petitioners.

With the exercise of the offer, the acceptance, and the realisation of the consideration over, the contract was complete. Further, within the prescription of Schedule II, the sale having been confirmed, the defaulters saw their tax arrears reduced by the amount of the sale and the petitioners rested on confidence that they were the owners of the property. This was December, 1982,

As the next year came, the petitioners had it announced to them by a letter, dated March 23, 1983, from the Commissioner, that is to say, the Tax Recovery Commissioner, Kanpur, that one D.R. Bajpayee,, advocate, and another B.K. Agrawal, advocate, had filed an appeal, against the sale of the same property, and had raised "certain objections". The petitioners, by this letter of March 23, 1983, were intimated that should they desire to have an opportunity of being heard on this appeal, they -may appear on April 4, 1983. The petitioners replied to this notice of an "appeal" against an order of the Tax Recovery Officer, confirming the sale. Amongst many other objections which the petitioners had raised, they had also contended that the appeal needs to be rejected in limine as it is without jurisdiction, incompetent and is not maintainable. The petitioners objections to the appeal are reproduced

The Commissioner of Income-tax

Officer of the Commissioner of Income-tax, Kanpur.

Ref: Your Letter No. Appeal/86/CIT/Recy/82-83/354/6638 dated Mach 23, 1983.

Sir,

On the above Subject we have to submit as under:

The Property No.7/46, Tilak Nagar, Kanpur, with all the rights the previous owners (the vendors) had therein has vested in us (the vendees) absolutely by virtue of its release and duly authorised private sale confirmed in our name; the sale thereby becomingconclusive and absolute. The previous owners as vendors have also in the absence of any impediment or restraint validly executed the corresponding sale deed which is duly registered and the document (title deed) is in our hands. We continue to deal with and be possessed of the said property as its absolute owners since then.

We are further advised to state on legal advice that in the context of the. letter under reply specific reply can be given or it called for in the absence of any intimation worth thename about -the alleged grounds of objections, cause against us and other particulars which car be known only by inspection of records, and the relevant connected files. However, the writing/representation vaguely pointed out -in the letter aforesaid is liable to be thrown out on the following apparent grounds:

(a) that the ownership of the lot (being one of the several lots each separately valued) comprising the property in question only having hadvested in us exclusively and absolutely as its bona fide purchasers for value, the same cannot be divested;

(b) that the Income-tax Department under the recovery proceedings orotherwise has ceased to have any statutory right or any other right to deal with the property or have any concern with the vendee's title and possession;

(c) that the said Sarvasri D.R. Bajpayee and B.K. Agrawal (and for that matter any other person or persons) have no locus standi or legal competence to invoke jurisdiction of this authority under the provisions of the Income-tax Act including Schedule II to prefer anysort of objections against the said private sale;

(d) that only vendors or vendees whosoever is aggrieved can question the sale against the other by a proper action under common law in a civil Court having jurisdiction, which only is the proper forum;

(e) that the so-called appeal indicated in the letter is not and cannot be an appeal. Whatever writing/representation that might have been preferred is not worthy of being even entertained for consideration and is further liable to be thrown out being without jurisdiction and sanction of law or legal persuasion, incompetent, mala fide and notmaintainable. It is merely an abuse of law and its process.

Hence, our profound shock and surprise on. learning of some proceedings (misconceived as an appeal) initiated by S/Shri D.R. Bajpayee and another, for the first time through your letter referred to above. However, we are confident that this preliminary reply will be to your honour's entire satisfaction. Further, it is specifically stated that we, vendees, are not cannot be parties to the said so called appeal.

Your honour will, therefore, be graciously pleased to throw out the alleged appeal in limine, it being without jurisdiction, incompetent and not maintainable.

Yours faithfully,

(Sd.) Amar Chand Agrawal,

For Amar Chand Agrawal and others.

Dated: April 4, 1983 (Amar Chand Agrawal)"

The appeal was filed under rule 86 of the Second Schedule to the Act. In short the sale was set aside by the appellate order, impugned in this writ petition. The appellate order is, dated September 1, 1983. The appellate authority was of the view that D.R. Bajpayee had made an offer on November 25, 1982, for a higher amount of Rs.4 lakhs which had been rejected by the Tax Recovery Officer without' assigning any reasons. The appellate order records that this appellant had met the Tax Recovery Officer about ten days prior. The other appellant, B.K. Agrawal, contended that he made an offer on November 27, 1982, for Rs.4,10,000 which was illegally rejected by the Tax Recovery Officer on December 1, 1982. Both the appellants contended that they were under the impression that the property would be sold by a public auction only. The appellant, B.K. Agrawal, submitted that the requisite rules had not been followed and the contention was that a private negotiation can only be permitted if the highest bid is less than the reserved price; that Amar Chand Agrawal had no authority to deal with the property on behalf of his other family members; that the offer and acceptance took place on November 24, 1982; that the defaulter had left India for the U.K. where he died; that the sale of immovable property is not complete till the sale deed is registered and that the Tax Recovery Officer was obliged to take cognizance of the higher offer of the appellant, Mr. D.R. Bajpayee.

On behalf of the petitioner, Mr. Amar Chand Agrawal, the point of jurisdiction and the maintainability of this appeal was questioned. It was negative by the appellate authority on the ground that an appeal can be filed 'by any one whose interests are prejudicially affected by such an order". The other ground, which appealed to the appellate authority on setting aside the sale, was that the confirmation of the sale ought not to have been done by the Tax Recovery Officer within 30 days of the sale. The appellate authority was of the view that the sale having been made on November 24, 1982, its confirmation on December 2, 1982, by the Tax Recovery Officer was illegal. The sale was set aside. Thus, the present writ petition.

One aspect which needs to be recorded is that throughout the hearings on this writ petition no one has addressed the Court on behalf of Messrs. D.R. Bajpayee and B.K: Agrawal, respondents Nos. 3 and 4, though the names of their learned counsel have been printed throughout. On behalf of respondent No.3, D.R. Bajpayee, no one appeared at all. On behalf of respondent No.3, B.K. Agrawal, Mr. S.P. Mehrotra, who has filed his memoranda of appearance, contended that he is without instructions as his brief stood transferred to another counsel. A party, Smt. Indumati Singh, seeking. implement, has filed an application and is represented by Ms. Poonam Srivastava, but she made no submissions either. The arguments on behalf of the parties who addressed the Court were, in effect, i.e., the petitioner and the Income-tax Department.

On behalf of the petitioners, the arguments were addressed by Mr. V.B. Upadhyay, senior advocate, assisted by Mr. V.B. Singh, advocate. The contention of counsel for the petitioners was that respondents Nos. 3 and 4 had no locus standi in the matter, regard being had to the circumstances, that the property was being permitted to be sold after a public auction did not fetch the desired result and the public auction had been postponed to enable the defaulters to raise the amount due under the certificate, on authorisation by the Tax Recovery Officer as the law so provides. The contention was that these respondents have nothing to lose except to disturb and unsettle settled matters. They contended that these respondents watched the entire proceeding only to interfere at the last stage, and the contention of these respondents that they were not aware of what was on and that everything done was in a hurry is not bona fide. On facts it was placed before the Court that the amount as an offer and a commitment from the petitioners lay on record since May, 1982. Only orders for depositing the amount, were passed in November 19.82, a period of seven months had elapsed and the record was very clear that proceedings under rule 66 were in process and the defaulters had been authorised to raise the money, in effect, by private negotiations and the Income-tax Department was checking and rechecking whether the offer, received from the petitioners met with the valuation report, was more than what the Department had evaluated and beyond the last offer received in the public auction. It is contended that the facts on record show that these respondents were watching the entire proceedings and that they say so themselves that prior to the order requiring the petitioners to deposit the amount, at least ten days before, if not more, the respondents had met the Tax Recovery Officers. What is relevant, it is contended, is that the respondents had met the Tax Recovery Officer. The assertion of the respondents that they had enquired or were told by the Tax Recovery Officer that the matter will come up for public auction again is irrelevant. The fact of the matter is that the record is straight that a public auction as a modality had been abdicated or postponed and this matter also lay on record since May and June of that year. The contention that these respondents were given to understand that there would be another public auction is refuted as a submission of irresponsibility. Further, on behalf of the petitioners it is contended that there was no occasion for these respondents to file an appeal under rule 86. Taking resort to file an appeal under rule 86 as was done surreptitiously and stealthily without notice to the petitioners- was not bona fide. It only delayed matters. The delay has affected the petitioners adversely as the amount which was deposited with the Tax Recovery Officer in. November 1982, remains in deposit for the last 16 years. In so far as these respondents are concerned, except making bald objections and having filed a misplaced appeal under rule 86,

otherwise not maintainable, they neither had any risk nor anything to lose as all that they did was that in lieu of Rs.3.5 lakhs deposited by the petitioners under the directions of the Tax Recovery Officer after the matter had been negotiated as a tripartite arrangement between the Tax Recovery Officer, the defaulters and the. petitioners, one respondent offered Rs.50,000 more and then the other added Rs.10,000 over this.

It was contended on behalf of the petitioners that Schedule II itself provides remedies to any person who may be aggrieved or may feel that his interests are 'affected by a sale. In the circumstances, .any person whose interests may be affected, has remedies laid out. The Court's attention was invited to rule 61 and it was submitted that the affected persons could be (a) the Revenue, as the expressions used in this rule are "such Income-tax Officer as may be authorised by the Chief Commissioner or Commissioner in this behalf", (b) the defaulter, or (c) any person whose interests are affected by the sale, and may at any time within thirty days from the date of the sale, apply to the Tax. Recovery Officer to set aside the sale of immovable property on the ground that notice was not served on the defaulter to pay the arrears as required by this Schedule or on the ground of a material irregularity in publishing or conducting the sale. In the circumstances, it was. contended that apart from the defaulter should any other person satisfy that he has sustained substantial injury for reason of non-service or irregularity, ,then, upon the Tax Recovery Officer being satisfied that is so, he tray set aside the sale.. The contention on behalf of the petitioners was that resort to rule 61 was never taken by these respondents because it had been the petitioners who had made a deposit of Rs.3.5 lakhs, logically on a notice to Act on the Department's offer. Further it was contended that if the provision of rule 61, to which these respondents always had access, for some reason was not the recourse, then, these respondents, in so far .as their case was concerned, of an order which affected or aggrieved them, could be reviewed under rule 87 on the ground that the matter before the Tax Recovery Officer suffered from a mistake apparent on the face of record. But, these respondents never took recourse to this remedy because if sought the application would not be considered except after notice to the persons interested. The contention is that in so far as the petitioners were concerned, no one could say after they had been required to deposit. Rs.3.5 lakhs that they were not persons interested. In so far as the respondents are concerned, it was contended, their status was that of meddlers. They attempted to enter the proceedings belatedly without having madeany investment in it and for fifteen long years the petitioners had suffered with their deposit - still lying with the Tax Recovery Officer. Again, it was submitted that an appeal in any case was not maintainable, in so far as these respondents are concerned. In so far as their status lay, any order which may have been passed by the Tax Recovery Officer, "not being an order which is conclusive", the provision for appeal was resorted to not wrongly but deliberately for no other reason than that the petitioners should not have prior notice. The order of the Tax Recovery Officer under rule 66 permitting and authorising the defaulter to negotiate a sale was not an order, which was lacking in authority nor without jurisdiction.

To support the arguments on behalf of the petitioners, four cases were cited in Sathyanarayana (D. V.) v. Tax Recovery Officer (1992) 194 ITR 409 (Kar.): Tax Recovery Commissioner v. K. Basavarajappa (1992) 197 ITR 398 (Kar.); Boddpati Ramachandra Rao v. Special Deputy Tahsidar (1969) 71 ITR 277 (AP) and K. Basavarajappa v. Tax Recovery Commissioner (1997) 223 ITR 297 (SC). The last is a case decided by the Supreme Court by which the decision in Tax Recovery Officer v. K. Basavarjappa (1992) 197 ITR 398 (Kar.); has been affirmed and the matter of D.V. Satyanarayana v. Tax Recovery Officer (1992) 197 ITR 407 (Kar.), has been approved. Regard being had to the overall circumstances of the four cases, the net result on the law on who may be a person interested is best summed up by the decision of the Supreme Court in the matter of K. Basavarajappa v. Tax Recovery Commissioner (1997) 223 ITR 297. The Supreme Court observed (page 306) "It is axiomatic that mere agreement to sell creates no legal interest or right in the property which is the subject -matter of the agreement". The Supreme Court came to the conclusion that (page 307) "a person who had obtained an agreement to sell which is hit by rule 16 of . the Second Schedule to the. Income-tax - Act cannot make an application under rule 61 for setting aside the sale as a person holding interest in the property." In reference to a person who had a mere claim under an agreement to sell, the Supreme Court's observation was that (page 307) "he has to swim or sink on his own. Under these circumstances, therefore, the appellant must be held to be devoid of any locus standi for moving an application under rule 60 of the Rules for setting aside this auction sale".

The summing up of the petitioners was to the effect that with the public auction having failed to deliver the desired result the Income-tax Department having checked and rechecked that the inadequacy of consideration could only be made adequate if private negotiations were to be Permitted to the defaulters, as prescribed, and further having scrutinised that the offer received was beyond and better than the valuer's report, what the petitioners were required to deposit has surpassed the valuation of the property and, thus, the petitioners were required to conclude the sale by depositing a sum of Rs.3.5 lakhs by a banker's cheque, which they did. There has been no allegation of lack of bona fides on behalf of any one of any surreptitious deal. Thus, the allegations whether it is the Tax Recovery Officer, the defaulters or the petitioners as purchasers, the argument was wound up with the submission that these respondents were watching the proceedings all the time and when they found that the sale was concluded, they only jumped in with a better offer of rupees fifty thousand more and the next offer of rupees ten thousand more. It was contended that all that these respondents did was to make an offer without investing a paisa. They did not even have an invitation to make an offer. They are busybodies and meddlers. Under the law the sale was complete.

On behalf of the Revenue, learned senior standing counsel, Income tax Department, reiterated all the submissions, which were recorded by the appellate authority on the appeal of respondents Nos.3, and 4. He contended that the sale so concluded with the petitioners suffer from an error inasmuch as it had remained open before being concluded for a period of 30 days within which any person interested could lay an objection. It was contended that should the Tax Recovery Officer in such circumstances conclude the sale within a period of 30 days then any person who may be offering more than that, excluding the person with whom negotiations were in process, the defaulter, would be a person interested. As arguments concluded on. April 22, 1998, the next day learned senior advocate fairly acknowledged that rule 66 was a code in itself as a whole unaffected by any other provision.

The Court will take up the submissions as presented on behalf of the parties. The Court will take up the last submission as now there appears to be only an academic issue on what the nature of the proceedings under rule 66 are. Suffice it to say that the Court finds that the provisions of rule 66 do not appear different in principle and content than Order 21, rule 83 of the Civil Procedure Code. Similar provisions analogous to rule 66 as are contained under Order 21, rule 83 stipulate the principle that should a public auction be lacking in getting a reserve price or an anticipated price, a Court if not satisfied with the price fetched may permit a judgment-debtor facing a decree to authorise him to arrange a better price by negotiating a sale. Likewise, this has been done in the present case, when the Tax Recovery Officer authorised the defaulters to negotiate a private sale. In so far as the period of 30 days is concerned, it is in the context of a public auction. The appellate-authority apparently, failed and did not notice the all important expressions in rule 66, also to be found. Under Order 21, rule 83, when the Tax Recovery Officer grants a certificate to the defaulter authorising him to negotiate a sale within a period to be mentioned therein, the qualifying words, "notwithstanding anything contained in the Schedule," is not without meaning. If the words "notwithstanding anything contained in the Schedule" were not there, then the interplay of the other qualification of the sale being concluded not earlier than 30 days would come into play. It is in these circumstances, whether it is Order 21, rule 83 of the Code or rule 66 of the Income-tax Act, both these provisions, in context, are independent, composite and rest without qualification of any provision of the Code or the Act.

The legislative intent also is very clear that if the Tax Recovery Officer is to authorise a period within which the negotiations are to be concluded, then, it is that period during which the defaulter must conclude the sale. Other provisions of Schedule II relating to a public auction in so far as a sale in the context of this case is concerned, thus, do not qualify rule 66. Clearly, the appellate authority had made not only an apparent, but a manifest error in permitting and being impressed by an argument that the respondents (D.R. Bajpai) and B.K. Agrawal) had a right to object within a period of 30 days. The Tax Recovery Officer had concluded the sale as on date when the 'money was deposited by the person who agreed to the sale, that is when the petitioners, who negotiated under the authority of the Tax Recovery Officer.

There is another aspect of the matter, which has been noticed in the judgment cited. The respondents have no locus standi in any of the' negotiations permitted to the defaulters by law. On the sale of an immovable property, thus, Chapter II of the Transfer of Property Act, 1882, applies. Section 54 clearly lays out that in reference to the sale of an immovable property the fact that it is a contract and shall take place on terms settled between the parties, yet it does not, of itself, create any interest in or charge on such property. Nothing was settled with these respondents and the question of their having an interest does not arise. They were neither persons interested nor had any interest and they had no right to file an appeal. They do not even have a right to move an application under rule 86 or seek review of any order.

The appellate order of the learned Commissioner is without jurisdiction as the appeal was otherwise not maintainable. Further, it suffers from a manifest error apparent on the face of the record. Respondents Nos.3 and 4 had no interest in the immovable property. The Court is concerned that these persons did not deposit even a rupee but were permitted to thwart the negotiation, otherwise authorised by law in the defaulters with a sale concluded. The matter remained in deep freeze for 16 long years. The Order of the appellate authority dated September 1, 1983. F. No. Appeal/86/CIT(R.) of 1982-83, appended as Annexure XII to the writ petition, being an order under rule 86(1) of the Second Schedule to the Income-tax, Act, 1961, is quashed.

At the beginning of this judgment, the Court mentioned that the cause is being reckoned on the day when it was brought to the Court. The Court again reiterates this aspect that there should be no complication in reference to sale, which was negotiated between the petitioners, under the scrutiny of the Tax Recovery Officer with the defaulters. Schedule II has seen an amendment in 1992 by insertion of rule 68B. The time limit for sale of attached immovable property expires after three years. The amendment is prospective. But the Court mentions this so that in this matter there will be no further complications.

The petition is allowed with special costs against two sets of respondents at Rs.5,000 each set. Against respondents Nos.l and 2 one set and respondents Nos.3 and 4 another set.

Petition allowed with costs as above.

M.B.A./94/FCPetition allowed.