C.N. Paramsivan & Anr. vs. Sunrise Plaza TR. Partner & Ors., Civil Appeal No. 154 of 2013, (Arising
out of S.L.P. (C) No.21765 of 2010), decided on 9th January, 2013
The High Court came to the
conclusion that the auction conducted by the Recovery Officer was illegal and
void because of non-compliance with the provisions of Rule 57 in the Second
Schedule of the Income Tax Act, 1961 which were in view of the provisions of
Section 29 of the Recovery of Debts Due to Banks and Financial Institutions
Act, 1993 (hereinafter referred to a ‘RDDB Act’ for short) applicable to
recovery of debt dues under the latter mentioned Act.
The appellant challenged the correctness
of the above order passed by the High Court.
The question is whether the said
two expressions render the provisions of Rule 57 directory no matter the same
is couched in a language that is manifestly mandatory in nature.
The Hon’ble Supreme Court held:
“Section 29 of the RDDB Act incorporates the
provisions of the Rules found in the Second Schedule to the Income Tax Act for
purposes of realisation of the dues by the Recovery Officer under the RDDB Act.
The expressions “as far as possible” and “with necessary modifications”
appearing in Section 29 have been used to take care of situations where certain
provisions under the Income Tax Rules may have no application on account of the
scheme under the RDDB Act being different from that of the Income Tax Act or
the Rules framed thereunder. The provisions of the Rules, it is manifest, from
a careful reading of Section 29 are attracted only in so far as the same deal
with recovery of debts under the Act with the modification that the ‘amount of debt’
referred to in the Rules is deemed to be one under the RDDB Act. That
modification was intended to make the position explicit and to avoid any
confusion in the application of the Income Tax Rules to the recovery of debts
under the RDDB Act, which confusion could arise from a literal application of
the Rules to recoveries under the said Act. Proviso to Section 29 further makes
it clear that any reference “to the assessee” under the provisions of the
Income Tax Act and the Rules shall be construed as a reference to the defendant
under the RDDB Act. It is noteworthy that the Income Tax Rules make provisions that
do not strictly deal with recovery of debts under the Act. Such of the rules
cannot possibly apply to recovery of debts under the RDDB Act. For instance
Rules 86 and 87 under the Income Tax Act do not have any application to the
provisions of the RDDB Act, while Rules 57 and 58 of the said Rules in the
Second Schedule deal with the process of recovery of the amount due and present
no difficulty in enforcing them for recoveries under the RDDB Act. Suffice it
to say that the use of the words “as far as possible” in Section 29 of RDDB Act
simply indicate that the provisions of the Income Tax Rules are applicable
except such of them as do not have any role to play in the matter of recovery
of debts recoverable under the RDDB Act. The argument that the use of the
words “as far as possible” in Section 29 is meant to give discretion to the
Recovery Officer to apply the said Rules or not to apply the same in specific
fact situations has not impressed us and is accordingly rejected.”
[Para 21]
“It follows that while the phrase “as far as
possible”, may be indicative of a certain inbuilt flexibility, the scope of
that flexibility extends only to what is “not at all practicable”. In order to
show that Rules 57 and 58 of the Second Schedule of the Income Tax Act may be
departed from under the RDDB Act, it would have to be proved that the
application of these Rules is “not at all practicable” in the context of RDDB Act.”
[Para 23]
“It is, therefore, reasonable to hold that
the phrase “as far as possible” used in Section 29 of the RDDB Act can at best
mean that the Income Tax Rules may not apply where it is not at all possible to
apply them having regard to the scheme and the context of the legislation.”
[Para 26
“There is nothing in the provisions of
Section 29 of RDDB Act or the scheme of the rules under the Income Tax Act to suggest
that a discretion wider than what is explained above was meant to be conferred
upon the Recovery Officer under Section 29 of the RDDB Act or Rule 57 of the
Income Tax Rules..” [Para 27]
“It is clear from a plain reading of the
above that the provision is mandatory in character. The use of the word shall”
is both textually and contextually indicative of the making of the deposit of
the amount being a mandatory requirement..” [Para 28
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