Wp/4219/2004 Of M/S.kushal Polymers Private Limited v. The Commissioner Of Income Tax-2

THE HON’BLE MR JUSTICE DILIP B. BHOSALEAND THE HON’BLE MR JUSTICE A. RAMALINGESWARA RAO Writ Petition No. 4219 of 2004 ORDER: (Per the Hon’ble Mr.Justice A. Ramalingeswara Rao) The petitioner, M/s Kushal Polymers Private Limited, is theauction-purchaser of the property in question. The property originallybelongs to one Sri S.V. Raghu, who committed default in payment oftax arrears to the extent of Rs.16,13,769/-. During the course ofrecovery proceedings, the process of sale of immovable property,belonging to the said defaulter, situated at Plot Nos.18, 19 and 20,Malani Cooperative Housing Society Limited, Bowenpally, wasinitiated by putting the same into auction on 28-03-2002, in accordance with the Rules of the Second Schedule, appended tothe Income Tax Act, 1961 (for short ‘the Act’). The petitioner becamethe highest bidder. At the time of participating in the auctionproceedings, it paid an amount of Rs.10,000/-, and thereafter, paid anamount of Rs.6,92,500/-, on 01-04-2002, totalling to Rs,7,02,500/-. The balance amount of Rs.21,07,500/- together with1% poundage of Rs.28,100/- was payable on or before 12-04-2002, but the petitioner committed default in payment of thesaid amount. Heard the learned counsel for the petitioner and learnedStanding Counsel for the respondents. In Sl.No.1 of the auction notice, containing further terms andconditions of sale by public auction, it was notified as follows: “If the balance 75% amount is not paid by due date i.e.on 12-4-2002, then out of the 25% of the amount paid, thecosts of the auction will be deducted and the balance may beforfeited to the Govt. according to the discretion of the T.R.O”. The 2[nd] respondent issued notice to the petitioner on 26-04-2002 to show cause as to why the sale proceedings shouldnot be cancelled, and the deposit of Rs.7,02,500/-, made by it, shouldnot be forfeited. In response to the same, the petitioner addressed a letter to the 2[nd] respondent on 10-05-2002, stating that they are making the balance payment asper the details given in the said letter and requested for confirmation ofthe sale and delivery of the physical possession of the property. Thesaid payment was made through demand drafts, after the due date. However, it came on record that the demand drafts dated 26-04-2002were cancelled on the next date. The petitioner addressed another letter to the 2[nd] respondent on 19-08-2002, stating that they have advertised in the newspaper on29[th], 30[th] and 31[st] of March, 2002, with a view to sell the property intime, by keeping some marginal profit, and that they came to know thatthe property was already leased out to APSFC for a period of eightyears for an industry named A.P Packaging (P) Limited, and it wasunder lock and key by APSFC since 06-02-2002, as the said industrycommitted default in payment of loan arrears. Ultimately, they soughtfor refund of the advance amount of Rs.7,02,500/- with interest, in viewof the pending litigation on the property. The 2[nd] respondent passed orders on 11-09-2002, rejecting the request put forward by the petitioner, stating that, had the petitionerbeen paid the entire amount, it would have become the owner of theproperty, and vacating of the premises by M/s A.P Packaging (P) Ltdwas not a problem. The 2[nd] respondent accordingly passed an order,forfeiting the amount (being 25% of the bid amount deposited), to theGovernment. As against the said order, the petitioner filed a revisionbefore the 1[st] respondent. The 1[st] respondent passed an order on 14-01-2004, upholdingthe order passed by the 2[nd] respondent dated 11-09-2002. It wasobserved that there was no charge created on the property in question and that the lessee is entitled to mortgage his lease-holdinterest only in favour of Andhra Pradesh State Financial Corporation,who, in turn, has granted a loan to the lessor. request put forward by the petitioner, stating that, had the petitionerbeen paid the entire amount, it would have become the owner of theproperty, and vacating of the premises by M/s A.P Packaging (P) Ltdwas not a problem. The 2[nd] respondent accordingly passed an order,forfeiting the amount (being 25% of the bid amount deposited), to theGovernment. As against the said order, the petitioner filed a revisionbefore the 1[st] respondent. The 1[st] respondent passed an order on 14-01-2004, upholdingthe order passed by the 2[nd] respondent dated 11-09-2002. It wasobserved that there was no charge created on the property in question and that the lessee is entitled to mortgage his lease-holdinterest only in favour of Andhra Pradesh State Financial Corporation,who, in turn, has granted a loan to the lessor. The lease agreement entered into was initially for a period of eightyears from 01-10-1992. Thus, on the date of proclamation of sale by the 2[nd] respondent, the lease agreement stood null and void, as the lease expired, and that there was no renewal of the same. Further, as per the terms and conditions of sale by public auction of the property indicated that the property was sold based on theinformation available with the department, and it was not answerablefor any error, mis-statement or omission in proclamation of the sale.The petitioner was not bana fide in purchasing the said property, andon the other hand, wanted to sell the said property to a third party, togain some income. The balance amount was sought to be paidthrough demand drafts, obtained by M/s Padmini Pipes Limited, Cherlapally on 26-04-2002, and they werecancelled on the next date itself. We have carefully perused the orders passed by the 2[nd] respondent as well as the 1[st] respondent. Under Rule 58 of theSecond Schedule, appended to the Act, the 2[nd] respondent iscompetent to exercise his discretion in forfeiting the amount of initialdeposit made by the petitioner, in case it fails to deposit the balance ofthe bid amount, within the stipulated period. The 2[nd] respondent passed a cogent order, and the same wasconfirmed by the 1[st] respondent. We see no error or improper exercise of power by therespondents 1 and 2, in passing the orders. The writ petition is liable to be dismissed, and it is accordinglydismissed. There shall be no order as to costs. _____________________________ DILIP B. BHOSALE, J. _____________________________ A. RAMALINGESWARA RAO, J. Dt. 05-02-2015. KO