Shakuntalam Landcraft Private Limited vs ARCIL and Ors on 17 May 2024

J U D G M E N T

The Appellant once again knocked on this Tribunal's door to make such orders and give such directions as may be necessary to provide a meaningful effect to (i) this Tribunal's order dated 24th April 2024, (ii) the Hon'ble DRAT's order dated 30th April 2024 and 1st May 2024 and (iii) Rule 65 of the Second Schedule of the Income Tax Act and prevent the abuse or misuse of the wrongful refusal to handover the possession by the Recovery Officer after he issued the sale certificate dated 1st May 2024 and to secure the ends of justice.

On 28th August 2023, the Recovery Officer conducted an e-auction of the land bearing Plot No.A-1, admeasuring acres, Surajpur Industrial Area, Noida Dadri Road, Greater Noida, District Gautam Budha Nagar, U.P.-203207 (the subject property) and declared the Appellant a successful purchaser. As directed by the Recovery Officer, the Appellant deposited the entire sale consideration of Rs.359.05 crore and paid the poundage fees. Despite this Tribunal's order dated 24th November 2023 and the Hon'ble DRAT's order dated 6th December 2023, besides earlier orders of the higher forum, the Recovery Officers neither confirmed the sale nor issued the sale certificate. The Recovery Officer purposely and intentionally disobeyed the higher forums' order. The Recovery Officer set aside the completed sale on 28th August 2023 on the cartelisation ground, which was neither pleaded nor established by (i) Authum Investment & Infrastructure Ltd. (Authum) and (ii) Uttar Pradesh State Industrial Development Authority (UPSIDA). The Appellant preferred Appeal No.1 of 2024, challenging the Recovery

Officer's impugned order dated 17th January 2024. On 24th April 2024, the Tribunal allowed Appeal No.1 of 2024 and directed the Recovery Officer to issue a sale certificate to the Appellant within one week of receiving the order.

Aggrieved by this Tribunal's order dated 24th April 2024, (i) UPSIDA filed Appeal No.27 of 2024, and

(ii) Authum filed Appeal (D) No.922 of 2024. On 30th April 2024, the Hon'ble DRAT passed the following order in Authum's Appeal (D) No.922 of 2024:

4. After hearing both sides extensively, I find that several contentions which have been raised by both sides will have to be gone into at length while deciding the appeal. Hence, for the meantime, the Ld. Recovery Officer is directed to issue the sale certificate in favour of the auction purchaser subject to the ultimate decision of this Tribunal in the appeal. The auction purchaser will not create any third-party interest till a decision is taken in this appeal. Replies if any, shall be filed and pleadings completed.

On 1st May 2024, the Hon'ble DRAT passed the following order in UPSIDA's Appeal No.27 of 2024:

2. The 4t h Respondent had filed an appeal over the very same order of the R.O. which is being challenged in appeal before this Tribunal, and an order was passed by this Tribunal that the sale certificate shall be issued in favour of the auction purchaser subject to the ultimate decision of that appeal. In this appeal, the stand taken by the Appellant is different. This Tribunal is also made to understand that the Appellant herein had got a favourable from the Recovery Officer in the proceedings at an earlier point of time against ARCIL

which has preferred an appeal before the D.R.T. and the same is pending consideration of the D.R.T. and is yet to be disposed of.

3. The prayer of the Appellant to stall the issuance of the sale certificate at this point cannot be considered and therefore, the interim prayer is dismissed, keeping open the contentions of the Appellant including the claim which has been raised against the subject property open for the consideration in this appeal. It is also ordered that the D.R.T. shall earnestly attempt to dispose of Appeal No.01/2023 filed by ARCIL against the order of the R.O., as expeditiously as possible so that the contention raised by the Appellant in that appeal can be determined as the early stage. The Ld. R.O. shall proceed to comply with the order of the Ld. P.O. in issuing the Sale Certificate to the 6t h Respondent completing all formalities attended thereto, which shall be of course be subject to the ultimate decision of this Tribunal in the pending appeals.

On 1st May 2024, the Recovery Officer

(i) confirmed the sale vide Exhibit 878, (ii) issued a sale certificate relating to the subject property favouring the Appellant, and (iii) issued a letter to the Superintendent of Stamps confirming the sale favouring the Appellant and requested to adjudicate and determine the stamp duty payable.

However, the Recovery Officer failed to hand over the possession and title deeds of the subject property to the Appellant. The Appellant, therefore, moved the interlocutory application Exhibit 885 and prayed to immediately hand over the subject property's possession and original title documents.

On 9th May 2024, the Recovery Officer passed the following order: Application of the successful auction purchaser for handing over the possession, taken on record. Counsel for ARCIL submitted that they have filed a Misc. Appn. for allowing appropriation of sale proceeds in favour of CH ARC and SASF towards part satisfaction of the RC. Counsel for SASF submitted that SASF has filed affidavit in support of the Misc. Appn. filed by ARCIL. Counsel for M/s. Shakuntalam (Auction Purchaser) consented to release of sale proceeds in favour of ARCIL, subject to the orders of Appellate Courts. Counsel for Ld. O.L. submitted that they have filed affidavit (Exh-

884) submitting therein that 17 ex workers/officers CD-1 Company (In Liqn.) have filed applications before the Hon’ble High Court of Delhi for recalculation of their claims and that reply to these pending applications has been filed before the Hon’ble High Court of Delhi and the same is pending for consideration of the Hon’ble High Court of Delhi. Counsel for Auction Purchaser submitted that they have filed an application (Exh-885) submitting therein that as per the Order dated 01.05.2024 passed by the Hon’ble Chair Person, DRAT, Mumbai and Appeal No.27/2024, all the sale formalities are also required to be completed. He requested that the prayers contained in Para 05 of the aforesaid application for possession or original title documents available with the applicants in respect of the auctioned property be handed over to the Auction Purchaser immediately. Counsel for ARCIL consented to the application filed by M/s. Shakuntalam Landcraft Pvt. Ltd. subject to the orders of Appellate Courts. Counsel for SASF adopted the submissions of the ARCIL.

Counsel for UPSIDA submitted that UPSIDA has filed a Writ Petition before the Hon’ble High Court of Bombay. Counsels for ARCIL and M/s. Shakuntalam submitted that the Writ Petition filed by UPSIDA has not been moved. It is on record that issues involved in the present recovery proceedings are highly contested and appeals are pending before the Hon’ble DRAT, Mumbai. As per submissions of the Counsel for UPSIDA, UPSIDA has filed a Writ Petition before the Hon’ble High Court of Bombay. As a Recovery Officer, it is my pious duty to follow the procedure in accordance with law and also as per the practice being followed in this DRT-II Mumbai. Therefore, the Misc. Application (Exh-882) filed by ARCIL and the Application (Exh-885) filed by M/s. Shakuntalam Landcraft Pvt. Ltd. (Auction Purchaser) shall be taken up for decision on the next date of hearing. It is seen that vide Exh-876, M/s. Authum has filed affidavit in compliance of the direction given on 29.09.2024. Therefore, ARCIL, SASF, M/s. Shakuntalam, Ld. O.L. and UPSIDA are again directed to file their compliance to the directions given on 29.04.2024 by next date of hearing. Counsel for Ld. O.L. is also directed to file compliance of direction given on 25.04.2024 by next date of hearing. Adj. for compliance.

The Appellant challenged the impugned order, calling it arbitrary and cryptic and requested this Tribunal to set it aside on the following, amongst other grounds that the Recovery Officer:

(i) wilfully disobeyed the Hon'ble DRAT's order dated 30th January 2024 and 1st May 2024 and this Tribunal's order dated 24th April 2024,

(ii) arbitrarily refused to give possession and original title documents relating to the subject property to the Appellant as he felt the contest by (a) UPSIDA and (b) Authum, (iii) failed to maintain the judicial propriety, (iv) repeatedly flouted the higher forums orders by following self-regulated procedure, (v) none of the higher forums passed any order prohibiting the Recovery Officer from parting with the possession of the subject property to the Appellant, (vi) despite unambiguous order passed by the Hon'ble DRAT, he sat in Appeal wilfully disobeying the orders dated 30th April 2024 and 1st May 2024 and refused to handover the possession and original documents to the Appellant,

(vii) imposed liability upon the Appellant without handing over possession and original title deeds, (viii) by refusing to deliver the original title documents and possession of the subject property, he passed an ad-interim relief in gross defiance and contempt of the Hon'ble DRAT's orders dated 30th April 2024 and 1st May 2024, (ix) failed to act fairly and transparently, (x) the Hon'ble DRAT by its order dated 30th April 2024 and 1st May 2024 protected the rights of (a) UPSIDA and (b) Authum and therefore, he ought not to have disobeyed the unambiguous orders dated 30th April 2024 and 1st May 2024 by expanding the scope.

Mr Nagori narrated the above facts and argued to

allow the Appeal directing the Recovery Officer to immediately hand over the control of (i) the subject property and (ii) the original title deeds to the Appellant.

Mr Aniket Dighe, representing Respondents 1 and 2, supported the Appeal and requested the Tribunal to direct the Recovery Officer to hand over the possession of the subject property and the original title deeds to the Appellant.

Ms Barsha Parulekar, representing the Official Liquidator, the 3rd Respondent, also supported the Appellant in handing over the possession of the subject property and the title deeds to the Appellant.

Analysis and Findings:

In the present case, the Tribunal noted the tendency of the Recovery Officers to act suo motto without any application by the parties. The suo motto acts to (i) issue a corrigendum and to postpone the e-auction in defiance of the order dated 9th August 2023 passed by the Hon'ble DRAT and the order dated 11th August 2023 passed by the Hon'ble Bombay High Court in Asteroid's Writ Petition, and (ii) to suo motto review or to sit in Appeal against the predecessor's order dated 28th August 2023 in gross defiance of the ruling in Standard Chartered Bank versus

Dharminder Bhohi (2013) 15 SCC 341.

The Tribunal also noted that Recovery Officers' discourteous approach and attitude to disobey the orders of the higher forums wilfully. The Recovery Officer's intentional refusal to disobey various orders of the higher forums is contemptuous. The Recovery Officer failed to maintain the hierarchy of the judicial system, a fundamental feature. The Recovery Officer's conduct is unsatisfactory. Such indiscipline is unacceptable, destroying the sanctity of the auction and the stake holder's confidence in the judicial system. The Recovery Officer's judicial misconduct is a direct attack by interfering and obstructing the smooth administration of justice.

On 24th November 2023, this Tribunal passed an order in Appeal (D) No.2208 of 2023 directing the Recovery Officer (i) to conclude the sale and (ii) issue a sale certificate by vesting title favouring the Appellant. The Recovery Officer wilfully disobeyed this Tribunal's order dated 24th November 2023 and the Hon'ble DRAT's order dated 6th December 2023 by setting aside the completed sale held on 28th August 2023 by his order dated 17th January 2024.

On 24th April 2024, this Tribunal set aside the impugned order dated 17th January 2024 passed by the Recovery Officer and directed him to issue a sale certificate within one week of receiving the order.

On 30th April 2024, the Hon'ble DRAT passed an order in Authum's Appeal directing the Recovery Officer to issue a sale certificate subject to the ultimate decision in Appeal (D) No.922 of 2024 and injuncted the Appellant from creating third- party rights.

On 1st May 2024, the Hon'ble DRAT rejected UPSIDA's request in its Appeal No.27 of 2024 to prevent the Recovery Officer from issuing a sale certificate. The Hon'ble DRAT kept the issue of UPSIDA's claim open and directed this Tribunal to determine and dispose of the 1st Respondent's Appeal No.1 of 2023 as early as possible. Most importantly, the Hon'ble DRAT directed the Recovery Officer to comply with this Tribunal's order dated 24th April 2024 by issuing a sale certificate favouring the Appellant completing all attending formalities subject to the ultimate decision of Appeal No.27 of 2024.

The order dated 30th April 2024 and 1st May 2024 passed by the Hon'ble DRAT is unambiguous. The Recovery Officer partly complied with the order and directions contained in the orders dated (i) 24th April 2024, (ii) 30th April 2024 and (iii) 1st

May 2024. The Recovery Officer's partial compliance would mean (i) passing order dated 1st May 2024 confirming the sale [under Rule 63(1)] of the subject property favouring the Appellant, (ii) addressing letter dated 1st May 2024 to the Superintendent of Stamps, Gautam Budha Nagar, U.P. and (iii) issuing a sale certificate (under Rule

65) on 1st May 2024 favouring the Appellant. However, the Recovery Officer refused to hand over the physical possession and the original title deeds of the subject property to the Appellant.

On 4th May 2024, the Appellant moved I.A. Exhibit 885, requesting the Recovery Officer to hand over the subject property's possession and original title deeds. On 9th May 2024, the Recovery Officer heard (i) the Appellant, (ii) Respondents 1 to 3,

(iii) Authum and (iv) UPSIDA.

The Recovery Officer recorded the 1st and 2nd Respondents' consent to deliver the possession and documents subject to the orders of the Appellate Courts (means the Hon'ble DRAT and the Hon'ble Bombay High Court). The counsel representing Respondents 1 and 2 supported the Appellant, requesting the Tribunal to allow its Appeal subject to the outcome of the UPSIDA and Authum's Appeal before Hon'ble DRAT. They anxiously await the distribution process after handing over possession of the subject property and documents. The certificate holders consistently stood before the Recovery Officer and this Tribunal.

The Recovery Officer did not record the 3rd Respondent's statement or submission relating to the possession and title documents. However, Ms Puralekar supported the Appellant and submitted that the Recovery Officer must hand over the possession and documents. After that, the Official Liquidator shall take steps to distribute the sale proceeds lying with the 1st Respondent.

Notably, except for the submission of filing a writ petition before the Hon'ble Bombay High Court, UPSIDA's counsel said nothing. The impugned order does not record UPSIDA's submissions on facts and law. Even after recording the submissions of the Appellant and the 1st Respondent, UPSIDA did not move the Writ Petition; the Recovery Officer ignored it. The Recovery Officer attempted to justify the contemptuous act for an unrelated purpose or patently illegal, unreasonable or irrelevant grounds, refusing to hand over possession and documents. According to the Recovery Officer, UPSIDA and Authum are contesting the proceedings before him. Factually incorrect. The present case does not disclose any pending application of UPSIDA or Authum before the Recovery Officer. Neither UPSIDA nor Authum's counsels (i) sought an adjournment to file a reply affidavit to the Appellant's interlocutory application Exhibit 885, (ii) opposed the handing over of the possession of the subject property and title documents. Authum's counsel did not advance any argument except for filing the affidavit. The Recovery Officer erred in not distinguishing or analysing the facts and circumstances of the case during the pendency of judicial review of his order before the higher judiciary. The Recovery Officer overlooked that the mere pendency of the writ petition before the Hon'ble Bombay High Court is generally considered insufficient. UPSIDA did not answer the Appellant, and 1st Respondent's submission that it did not move the writ petition means for any urgent ad-interim relief. In short, the Appellant and 1st Respondent's submission would imply that the mere pendency of the writ petition is not an answer to the Tribunal's order dated 24th April 2024 and the Hon'ble DRAT's order dated 30th April and 1st May 2024. Understandably, UPSIDA and Authum have challenged the sale certificate issued to the

Appellant. Both have different propositions to make and ask for different reliefs. However, the current position is that as per the Hon'ble DRAT's order dated 30th April 2024 and 1st May 2024, the Recovery Officer issued the Sale Certificate on 1st May 2024 subject to the ultimate decision in Appeals before it.

In this context, the Tribunal shall now deal with Rule 65 of the Second Schedule of the Income Tax Act read as under:

65. (1) Where a sale of immovable property has become absolute, the Tax Recovery Officer shall grant a certificate specifying the property sold, and the name of the person who at the time of sale is declared to be the purchaser.

(2) Such certificate shall state the date on which the sale became absolute.

The Recovery Officer erred in giving a meaningful interpretation of Rule 65 of the Second Schedule of the Income Tax Act. The sale confirmation and certificate do not disclose that the Recovery Officer adopted a different practice and procedure for handing over the possession and documents of the subject property sold under e-auction to the Appellant. Unhesitatingly, the Recovery Officer accepted and acknowledged Rule 65(1) and (2) and, on 1st May 2024, declared the absolute sale favouring the Appellant. Once the sale is declared absolute subject to the outcome of UPSIDA and

Authum's Appeal before the Hon'ble DRAT, the Recovery Officer erred in depriving the Appellant of possession of the subject property. Such interpretation by the Recovery Officer contradicts Rule 65 of the Second Schedule of the Income Tax Act and the settled law. Once the auction purchaser tendered the entire sale consideration and the Recovery Officer issued a sale certificate, the Recovery Officer must hand over the possession without any refusal. The settled law requires the protection of the right of the bonafide auction purchaser. The Recovery Officer grossly erred in not protecting a bonafide auction purchaser. There is nothing to suggest any allegation against the applicant or its fault. The Tribunal feels no hesitation in concluding that the applicant, a bonafide auction purchaser's right, requires protection by directing the Recovery Officer to immediately hand over the possession of the subject property to the applicant. Withholding the subject property and original title deeds would amount to a travesty of justice.

Lastly, the Recovery Officer listed the matter for decision on 6th June 2024. The Tribunal directs the Recovery Officer to dispose of the Appellant's I.A. Exhibit 885 on or before 22nd May 2024 and handover the possession of the subject property and the original title deeds to the Appellant within one week from 22nd May 2024.

At this stage, the Tribunal is informed that UPSIDA moved Writ Petition No.7368 of 2024 challenging this Tribunal’s order dated 24th April 2024 and the Hon’ble DRAT’s order dated 1st May 2024 seeking to stay the effect, operation, and implementation of the sale certificate dated 1st May 2024. Today, that is, 17th May 2024, the Hon’ble Bombay High Court heard the parties and rejected to grant any protective or injunctive reliefs to UPSIDA.

Hence, the following order:

ORDER

(A) The Tribunal disposed of the uncontested Appeal with the direction above without costs. (B) Parties to appear before the Recovery Officer on 22nd May 2024.

Sd/-

(Deepak M. Thakkar) Presiding Officer, DRT-2, Mumbai Nidhi