Supreme Court of India
C.N. PARAMSIVAN & ANR.versusSUNRISE PLAZA TR. PARTNER & ORS.
- Citation
- 2013 INSC 22
- Decided
- 9 January 2013
- Disposal
- Dismissed
- Bench
- T S THAKUR
Holding
Section 29 of the RDDB Act incorporates the Income‑Tax Rules only to the extent practicable, and Rule 57 (and Rule 58) are mandatory; non‑compliance renders the auction void.
Summary
The appellants purchased a mortgaged property at a public auction conducted by a Recovery Officer under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDB Act). The auction was later set aside by the Debt Recovery Appellate Tribunal on the ground that the appellants were not bona‑fide purchasers, and the High Court declared the auction void for non‑compliance with Rule 57 of the Second Schedule of the Income Tax Act, 1961, arguing that Section 29 of the RDDB Act made those rules mandatory. The appellants contended that Section 29 only applied the Income‑Tax rules "as far as possible" and with necessary modifications, thereby not imposing a strict mandatory requirement. The Supreme Court examined the statutory language, the doctrine of legislation by incorporation, and the meaning of "as far as possible", concluding that the Income‑Tax rules are applicable only to the extent practicable and that Rule 57 is mandatory, making the auction void. Consequently, the Court dismissed the appeal, upholding the High Court’s finding that the auction was illegal.
Issues considered
- The extent to which Section 29 of the RDDB Act incorporates the Income‑Tax Rules and whether it makes them mandatory in recovery proceedings.
- Whether the phrase "as far as possible" in Section 29 confers discretion on the Recovery Officer to ignore Rules 57 and 58.
- The mandatory nature of Rule 57 (and Rule 58) of the Second Schedule of the Income‑Tax Act in the context of RDDB‑Act auctions.
- The effect of non‑compliance with Rule 57 on the validity of the auction sale.
Legislation cited
- Code of Civil Procedure, 1908s. Order XXI Rules 84, s. Order XXI Rules 85, s. Order XXI Rules 86
- Income Tax Act, 1961s. Second Schedule – Rule 57, s. Second Schedule – Rule 58
- Income Tax (Certificate Proceedings) Rules, 1962
- Recovery of Debts Due to Banks and Financial Institutions Act, 1993s. s.29
Subjects
Recovery of Debts Due to Banks and Financial Institutions ActIncome Tax ActSection 29Rule 57Rule 58Statutory interpretationLegislation by incorporationMandatory provisionAuction validityBona fide purchaserDiscretion
Judgment
[2013] 4 S.C.R. 1 ·
C.N. PARAMSIVAN & ANR. A
v.
SUNRISE PLAZA TR.. PARTNER & ORS.
(Civil Appeal No.154 of 2013)
JANUARY 9, 2013
B
[T.S. THAKUR AND GYAN SUDHA MISRA, JJ.]
Recovery of Debts Due to Banks and Financial .
Institutions Act, 1993 - s.29 - Income Tax Act, 1961 -
.Second Schedule; r.57. - Auction conducted by Recovery C
Officer-under the RDDB Act held il/egaland void by High
Court on ground of non-compliance with r. 57 in th.e Second
Schedule of'the Income Tax Act - Whether s. 29 of the RDDB
Act apply the Income Tax Rules in the Second Schedule of
the Income Tax Act to recovery proceedings under RDDB Act o
with full force - Expression 'as far as possible' in s.29 - If vests
the Recovery Officer with discretion to apply the said Rules
depending upon the fact situation of each case - Held: s. 29
of the RDDB 1Act makes it clear that the rules under Income
Tax Act are applicable only "as far as possible" and with the E
modification as if the said provisions and the rules referred
to the amount of debt due under the RDDB Act instead of the
Income Tax Act - Expressions "as far as possible" and "with
necessary modifications" appearing in s. 29 have been used
to take care of situations where certain provisions under the F
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 - It cannot
be said that the use of the words "as far as possible" in s.29
is meant to give discretion to the Recovery· Officer under the G
RDDB Act to apply the said Rules or not to apply the same
in specific fact situations - 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
1
2 SUPREME COURT REPORTS [2013] 4 S.C.R.
A practicable" - Phrase "as far as possible" used in s. 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 - r. 57
is mandatory in character - Equivalent pari materia provision
B in Order XX/, rr. 84, 85 and 86 of CPC - No reason to hold
that rr. 57 and 58 are anything but mandatory in nature -
Breach of the requirements under those Rules will render the
auction non-est in the eyes of law - Code of Civil Procedure,
1908 - Order XX/, rr. 84, 85 & 86.
c Interpretation of Statutes - Legislation by incorporation
- Effect - Held: The effect of legislation by incorporation of
the provisions of an earlier Act into a subsequent Act is that
the provisions so incorporated are treated to have been
incorporated in the subsequent legislation for the first time -
D Once the incorporation is made, the provisions incorporated
become an integral part of the statute in which it is transposed
- Thereafter there is no need to refer to the statute from which
the incorporation is made and any subsequent amendment
made in it has no effect on the incorporating statute.
E
Words and Phrases - "possible" and "practicable" -
Meaning of - Held: The two words are more or less
interchangeable.
The partners of a firm had obtained bank loan based
F on equitable mortgage of their properties. The partners
defaulted in repaying the loan. The respondent-bank filed
application before the Debt Recovery Tribunal whereafter
an ex-parte decree was passed in favour of the bank. The
property mortgaged with the bank was brought to sale
G in a public auction in which the appellants emerged as
the successful bidders. The auction sale was challenged.
The debt recovery appellate tribunal held that the
appellants-auction purchasers were not bona fide
purchasers and set aside the sale and asked the partners
H . to deposit the entire loan amount.
C.N. PARAMSIVAN & ANR. v. SUNRISE PLAZA TR. 3
PARTNER & ORS.
Aggrieved, the appellants filed Writ Petition before A
the High Court. The High Court instead of going into the
question whether the appellants were bona fide auction
purchasers, examined the validity of the auction itself and
came to the conclusion that the auction conducted by
the Recovery Officer under the Recovery of Debts Due B
to Banks and Financial Institutions Act, 1993 (RDDB Act)
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 in view of Section 29 of the
RDDB Act were applicable to recovery of debt dues under c
the latter mentioned Act.
The appellant contended before this Court that the
Income Tax Rules set out in the Second Schedule of the
Income Tax Act were applicable only "as far as possible
and with necessary modification", as evident from a plain D
reading of Section 29 of the RDDB Act; that the use of
the expressions "as far as possible" and "with necessary
modifications", gave sufficient play at the joints to the
Recovery Officer to apply the said rules in the manner
considered most appropriate by him, having regard to E
the facts and circumstances of a given case; and that the
High Court had fallen in an error in ignoring the
expressions appearing in Section 29 of the RDDB Act
and proceeding with the matter as if Rule 57 of the said
rules was mandatory and applicable with full force. F
The question which therefore arose for consideration
in the instant appeal was whether Section 29 of the
Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 do not apply the Income Tax Rules G
in the Second Schedule of the Income Tax Act to the
recovery proceedings under RDDB Act with full force and
the expression 'as far as possible' appearing in Section
29 vests the Recovery Officer with discretion to apply the
said Rules depending upon the fact situation of each H
case.
4 SUPREME COURT REPORTS (2013) 4 S.C.R.
A Dismissing the appeal, the Court
HELD: 1. A plain reading of Section 29 of the
Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 leaves no manner of doubt that the
rules under Income Tax Act were applicable only "as far
8
as possible" and with the modification as if the said
provisions and the rules referred to the amount of debt
due under the RDDB Act instead of the Income Tax Act.
[Para 16] [16-A-B]
C Janak Raj v. Gurdial Singh (1967) 2 SCR 77; Janatha
Textiles and Ors. v. Tax Recovery Officer and Anr. (2008) 12
SCC 582: 2008 (8) SCR 1148, Padanathil Ruqmini Amma
Vs. P.K. Abdulla (1996) 7 SCC 668: 1996 (1) SCR 651 and
Chinnammal and Ors. v. P. Arumugham and Anr. (1990) 1
o sec 513: 1990 (1) scR 78 - cited.
2.1. Legislation by incorporation is a device to which
legislatures often take resort for the sake of convenience.
The effect of legislation by incorporation of the provisions
E of an earlier Act into a subsequent Act is that the
provisions so incorporated are treated to have been
incorporated in the subsequent legislation for the first
time. Once the incorporation is made, the provisions
incorporated become an integral part of the statute in
which it is transposed and thereafter there is no need to
F refer to the statute from which the incorporation is made
and any subsequent amendment made in it has no effect
on the incorporating statute. [Paras 17-19] [16-C; 17-B-C
&·F-G]
G 2.2. Section 29 of the RDDB Act incorporates the
pro\1isions 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
H modifications" appearing in Section 29 have been used
C.N. PARAMSIVAN & ANR. v. SUNRISE PLAZA TR. 5
PARTNER & ORS.
to take care of situations where certain provisions under A
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 B
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 C
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 D·
of the Income Tax Act and the Rules shall be construed
as a reference to the defendant under the RDDB Act. 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 E
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 reco.veries under the RDDB Act. F
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 G
that the use of the words "as far as possible" in Section
29 is meant to give discretion to the Recovery Officer to
apply tlie said Rules or not to apply the same in specific
fact situations is accordingly rejected. [Para 21] [18-E-H;
19-A-E] H
6 SUPREME COURT REPORTS [2013] 4 S.C.R.
A Ram Kirpal Bhagat and Ors. v. State of Bihar (1969) 3
SCC 471: 1970 (3) SCR 233; Mahindra and Mahindra Ltd.
v. Union of/ndia and Anr. (1979) 2 SCC 529: 1979 (2) SCR
1038 Onkarlal Nandlal v. Rajasthan and Anr. (1985) 4 SCC
404: 1985 (2) Suppl. SCR 1075; Mary Roy and Ors. v. State
B of Kera/a and Ors. (1986) 2 SCC 209: 1986 (1) SCR 371;
Nagpur Improvement Trust v. Vasantrao and Ors. and
Jaswantibai and Ors. (2002) 7 SCC 657: 2002 (2) Suppl.
SCR 636 and Mis Surana Steels Pvt. Ltd. v. The Deputy
Commissioner of Income Tax and Ors. (1999) 4 SCC 306:
c 1999 (2) SCR 589 - relied on.
Principles of Statutory Interpretation by G.P. Singh -
referred to.
3.1. While the phrase "as far as possible", may be
0 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
E application of these Rules is "not at all practicable" in the
context of RDDB Act. [Para 23] [20-D-E]
3.2. The interchangeable use of the words "possible"
and "practicable" was previously established by a three-
j udge Bench of this Court in N.K. Chauhan where this
F Court observed that in simp_le Anglo-Saxon Practicable,
feasible, possible, performable, are more or less
interchangeable. 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
G possible to apply them having regard to the scheme and
the context of the legislation. [Paras 24, 26] [20-E-F; 21-A]
Osmania University v. V. S. Muthurangam and Ors.
(1997) 10 sec 741: 1997 (1) Suppl. SCR 499; N.K.
Chauhan and Ors. v. State of Gujarat and Ors. (1977) 1 SCC
H 308: 1977 (1) SCR 1037 - relied on.
C.N. PARAMSIVAN & ANR. v. SUNRISE PLAZA TR. 7
PARTNER & ORS.
Webster and Black's Law Dictionary - referred to. A
4. 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
8
Recovery Officer under Section 29 of the RDDB Act or
Rule 57 of the Income Tax Rules. It is clear from a plain
reading of Rule 57 that the provision is mandatQry 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. The C
__ provisions of Rules 57 and 58 of the Income Tax Rules,
have their equivalent in Order XXI Rules !J4, 85 & 86 of
the C.P .C. which are pari materia in language, sweep and
effect and have been held to be mandatory by this Court
in earlier cases. In the light of the above there is no D
reason to hold that Rules 57 and 58 of the Income Tax
Rules are anything but mandatory in nature, so that a
breach of the requirements under those Rules will render
the auction non-est in the eyes of law. [Paras 27, 28 & 32)
[27-B-C & F-G; 23-G-H] E
Manila/ Mohan/al Shah and Ors. v. Sardar Sayed Ahmed
Sayed Mahmed and Anr. AIR 1954 SC 349: 1955 SCR 108;
Sardara Singh (Dead) by Lrs. and Anr. v. Sardara Singh
(Dead) and Ors. (1990) 4 sec 90; Bairam, son of Bhasa F
Ram v. flam Singh and Ors. (1996) 5 SCC 705: 1996 (5)
Suppl. SCR 104; Rao Mahmood Ahmed Khan v. Sh. Ranbir
Singh and Ors. (1995) 4 SCC 275; Gangabai Gopa/das
Mohata v. Fulchand and Ors. (1997) 10 SCC 387: 1996 (10)
Suppl. SCR 457; Himadri Coke & Petro Ltd. v. Soneko
Developers (P) Ltd. And Ors. (2005) 12 SCC 364 and Shi/pa G
Shares and Securities and Ors. v. The National Co-operative
Bank Ltd. and Ors. (2007) 12 SCC 165: 2007 (5) SCR 1128
- relied on.
H
8 SUPREME COURT REPORTS [2013] 4 S.C.R.
A Case Law Reference:
(1967) 2 SCR 77 cited Para 11
2008 (8) SCR 1148 cited Para 11
1996 (1) SCR 651 cited Para 11
B \~
1990 (1) SCR 78 cited Para 11, 12
1.970 (3) SCR 233 relied on Para 18
1979 (2) SCR 1038 relied on Para 19
c 1985 (2) Suppl. SCR 1075 relied on Para 20
1986 (1) SCR 371 relied on Para 20
2002 (2) Suppl. SCR 636 relied on Para 20
t•
D 1999 (2) SCR 589 relied on Para 20
'
1997 (1) Suppl. SCR 499 relied on Para 22
1977 (1) SCR 1037 relied on Para 24
E 1955 SCR 108 relied on Para 28
(1990) 4 sec 90 relied on Para 29
1996 (5) Suppl. SCR 104 relied on Para 30
(1995) 4 sec 215 relied on Para 31
F
1996 (10) Suppl. SCR 457 relied on Para 31
(2005) 12 sec 364 relied on Para 31
2007 (5) SCR 1128 relied on Pa~a 31
G
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 154
of 2013.
From the Judgment & Order dated 31.03.2010 o,f the High
Court of Judicature at Madras in Writ Petition No. 14594 of
H 2007.
C.N. PARAMSIVAN & ANR. v. SUNRISE PLAZA TR. 9
PARTNER & ORS.
L.N. Rao, Santash Krishanan, Krishna Dev, Senthil A
Jagadeesan, Sony Bhatt for the Appellants.
Rakesh Dwivedi, Rajiv Dutta, S. Ramesh, K.K. Mohan,
Sanskriti Pathak, Kumar Dushyant Singh, Ashish Mohan,
Arijeet Singh, Dharmendra Kumar Sinha, Himanshu Munshi, B
Manoj Kumar Karna, Rajesh Kumar for the RespQ.ndents.
The Judgment of the Court was delivered by
T.S. THAKUR, J. 1. Leave granted.
2. This appeal by special leave arises out of an order
c
passed by the High Court of Judicature at Madras whereby writ
petition No.14594 of 2007 filed by the appellants has be_en
dismissed and orders passed by the Debt Recovery Appelrate
Tribunal in M.A. No.90 of 2006 upheld, no matter on a ground
other than the one on which that found favour with the Appellate D
Tribunal.
3. Facts leading to the filing of the writ petition have been
set out at considerable length in the orders passed by the
Appellate Tribunal and that passed by the High Court. We do E
not, therefore, consider it necessary to recapitulate the entire
history over again except to the extent the same is necessary
for the disposal of the present appeal. The long drawn legal
battle that has raged over the past two decades or so has its
genesis in a loan which respondent Indian Bank advanced to F
Mis. Sunrise Plaz.a, a partnership concern comprising
respondent-S. Kalyanasundaram and his wife - Mrs. Vasantha
Kalyanasundaram. The loan was advanced on the basis of an
equitable mortgage of the properties owned by the partners of
the firm by deposit of title deeds relevant thereto. The borrower G
having defaulted in the repayment of the loan amount, the
respondent-bank filed O.A. No.238 of 1998 re-numbered as
O.A. No.1098 of 2001 before the Debt Recovery Tribunal at
Chennai. Failure of the respondents to appear and contest the
10 SUPREME COURT REPORTS [2013] 4 S.C.R. ,,:
A claim made against them culminated in the passing of an ex-
parte decree in favour of the bank on 20th September, 1999.
An application for setting asi9e of the said decree was then
made by the borrower defendants which was dismissed by the
Tribunal for default. An application for recall of the said order
B too failed and was dismissed by the Tribunal.
4. Proceedings for execution of the Recovery Certificate
issued in favour of the bank were in the meantime initiated and
the property mortgaged with the bank brought to sale in a
public auction on 7th March, 2003 in which the appellants
C emerged as the successful bidders. The respondents then filed
I.A. No.146 of 2003 for setting aside of the auction sale, while
I.A. No.150 of 2003 filed by them prayed for an order of refusal
of confirmation of the sale. The Debt Recovery Tribunal passed
a conditional order in the said application deferring the
D confirmation of sale subject to the judgment-debtor depositing
a sum of Rs.10,00,000/- with the decree holder bank on or
before 25th April, 2003. I.A. No.146 of 2003 for setting aside
the sale was, however, dismissed by the Tribunal on 15th April,
2003, as not maintainable. A prayer made by the respondents
E - judgment-debtors for extension of time to make the deposit
of the amount directed by the Tribunal having been rejected,
the recovery officer proceeded further and issued a sale
certificate in favour of the appellants on 28th May, 2003. The
judgment-debtors -respondent Nos.1 to 3 then filed an appeal
F challenging the orders passed by the Debt Recovery Tribunal
in which the Appellate Tribunal directed them to pay the
requisite court fee. •
5. Aggrieved by the order of the Appellate Tribunal, the
G judgment-debtors filed Writ Petition No.28235 of 2003 in which
the High Court by an order dated 14th October, 2003 set aside
the ex-parte decree on payment of costs. That order when
challenged by the decree holder bank in a Special Leave
Petition before this Court was affirmed and the SLP dismissed
in July 2004. Undeterred by the dismissal of the Special Leave
H
C.N. PARAMSIVAN & ANR. v. SUNRISE PLAZA TR. 11
PARTNER & ORS. [T.S. THAKUR, J.]
Petition, the bank filed a Review Application before the High A
Court for review of its order dated 14th October, 2003 setting
aside the ex-parte decree. Even the appellants herein filed a
review petition against the said order which applications were
dismissed by the High Court with liberty to the auction
purchaser-appellants herein to represent their case before the B
Debt Recovery Tribunal in the O.A. pending before it.
6. The appellants-auction purchasers at that stage filed I.A.
No.20 of 2005 before the Debt Recovery Tribunal at Chennai
seeking delivery of possession of the property purchased by
them. That application was allowed by the Tribunal with a C
direction to the Recovery Officer to put the auction purchasers
in possession. of the property in question. The defendants-
respondents herein challenged that order before the Appellate
Tribunal at Chennai on several grounds in M.A. No.90 of 2006.
The Appellate Tribunal allowed the said appeal and set aside D
the order ·passed by the Debt Recovery Tribunal with a direction
to the Debt Recovery Tribunal to take up I.A. No.20 of 2005
along with O.A. No.1098 of 2001 and dispose of the same in
accordance with law.
E
7. The appellants questioned the correctness of the above
order in Writ Petition No.29356 of 2006 which was allowed by
a Division Bench of the High Court by Order dated 29th
November, 2006, setting aside the order passed by the
Appellate Tribunal and remitting the matter back to the Debt F
Recovery Appellate Tribunal to decide the issue whether or not
the rights of a bona fide purchaser get curtailed if the ex-parte
decree on the basis whereof the auction sale was conducted
is eventually set aside. The Debt Recovery Appellate Tribunal
examined the matter afresh and held that the appellants-auction G
purchasers were not bona fide purchasers of the property as
they were aware of the pending legal proceedings between the
bank and the borrower. The Tribunal accordingly set aside the
sale with a direction to the defendants-respondents 1 to 3 to
deposit the entire amount claimed in original application.
H
12 SUPREME COURT REPORTS [2013] 4 S.C.R.
A 8. Aggrieved by the orders passed by the Appellate
Tribunal, the appellants filed Writ Petition No.14594 of 2007
before the High Court which writ petition has been dismissed
by the High Court as already mentioned above. The High Court
approached the issues from a slightly different angle; for instead
B of going into the question whether the appellants were bona fide
auction purchasers, it examined the validity of the auction itself
and 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
c 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 present appeal assails the
D correctness of the above order passed by the High Court.
9. Appearing for the appellants Mr. L. Nageshwar Rao,
learned senior counsel, made a threefold submission in support
of his case. Firstly he contended that the remand order passed
by the High Court in the earlier round was limited to the
E Appellate Tribunal finding out whether the rights of a bona fide
purchaser stood curtailed in view of the setting aside of the ex-
parte decree on which the auction had been conducted. While
the Tribunal had answered that question, the High Court had
failed to do so in the writ petition filed by the appellants. The
F High Court had digressed from the subject and added a new
dimension which had not been noticed or pressed in the earlier
round.
10. Secondly he contended that even if the High Court
G could examine a ground other than the one on which a remand
had been ordered, it failed to appreciate that the provisions of
the Income· Tax Rules set out in the Second Schedule of the
Income Tax Act were applicable only "as far as possible and
with necessary modification". This was, according to Mr. Rao,
H evident from a plain reading of Section 29 of the RDDB Act.
C.N. PARAMSIVAN .& ANR. v. SUNRISE PLAZA TR. 13
PARTNER & ORS. [T.S. THAKUR, J.]
The use of the expressions ·"as far as possible" and "with . A
necessary modifications", argued the learned counsel, gave
sufficient play at the joints to the Recovery Officer to apply the
said rules in the manner considered most appropriate by him,
having regard to the facts and circumstances of a given case.
The High Court had, argued Mr. Rao, fallen in an error in B
ignoring the expressions appearin'g .in Section 29 and
proceeding with ·the matter as if Rule 57 of the said rules was
mandatory and applicable with full force. It was also contended
by the learned counsel that if Rules 57 and 58 of the Income
Tax Rules were held applicable in the form in which they appear c
in the Second·Schedule, the requirement of Rule 61 of the said
Rules could not be ignored and had to be mandatorily followed.
Inasmuch as the Interlocutory Application filed by the judgment-
debtor for setting aside the sale had been dismissed by the
Tribunal and inasmuch as there was no challenge to the. said
0
dismissal order at any stage, the High Court ought to have held
that the condition precedent for setting aside the sale namely
.filing of a proper application was not satisfied thereby rendering
the·sale in favour of the appellants immune from any challenge
or interference.
E
11. It was thirdly argued by learned counsel for the
appellants that the appellants were bona fide purchasers., hence
protected against any interference with the sale in their favour,
no matter the decree on the basis whereof the sale had been
effected had itself been set aside by High Court. Reliance in F
support was placed by Mr. Rao upon the decisions of this Court
in Janak Raj v. Gutdial Singh (1967) 2 SCR 77; Janatha
Textiles and Ors. v. Tax Recovery Officer and Anr. (2008) 12
SCC 582; (1994) 2 SCC 364, Padanathil Ruqmini Amma Vs ..
P.K. Abdulla (1996) 7 sec 668. It was further contended that G
a contrary view was no doubt expressed by a Two-Judge Bench
of this Court in Chinnammal and Ors. v. P. Arumugham and
Anr. (1990) 1 SCC 513 but the conflict between the two lines
of the decisions referred to above deserved to be resol~ed by
a reference to a larger Bench. · H
14 SUPREME COURT REPORTS [2013] 4 S.C.R.
A 12. Mr. Rakesh Dwivedi, learned senior counsel appearing
for the respondents, per contra argued that the scope of the
proceeding before the High Court in the second round was not
in any way limited by the earlier remand ordei:_ and the High
Court could have and has indeed examined the question of
B validity of the auction sale. He urged that the provisions of the
Income Tax Rules in the Second Schedule of the Act were
applicable in the form in which the said rules were found in the
statute book as no modification or amendment of the said rules
had been made either by any legislative enactment or by way
c of Rules under the RODS Act. He contended that the words "as
far as possible" were incapable of conveying that the Recovery
Officer could at his discretion play with the rules without any
limitations on his power or discretion and without any guidelines
under the Act or the Rules. He submitted that decision of this
Court in Chinnammal and Ors. v. P. Arumugham and Anr.
0
(1990) 1 sec 513 was not in conflict with the view taken in
the decisions relied upon by Mr. Rao inasmuch as the said
decisions had not examined the issue as ·to what would
constitute a bona fide purchaser to be entitled to protection in
E law. We propose to deal with the contentions raised by Mr. Rao
ad seriatim.
13. The remand ordered by the High Court in Writ Petition
No.29356/2006 was an open remand which allowed the parties
to urge their respective contentions not only in regard to the
F rights of a bona fide purchaser, but any other contention
available to them on facts and in law. This is evident from the
operative portion of the order passed by the High Court which
was as under:
G "In the above circumstances, as agreed by learned
counsel appearing for the parties, the impugned order
dated 13. 7. 2006 passed by the Debt Recovery Appellate
Tribunal in M.A. No.90 of 2006 is set aside and the case
is remitted to the Debt Recovery Appellate Tribunal,
Chennai, to determine the aforesaid issues and any other
H
C.N. PARAMSIVAN & ANR. v. SUNRISE PLAZA TR. 15
PARTNER & ORS. [T.S. THAKUR, J.]
issue as has been raised by one or other party in M.A. A
No. 90 of 2006, preferably within two months from the date
I
of receipt or production of a copy of this order." .
14. The language employed in the remand order apart, the
High Court had not examined or determined the question
8
whether Rule 57 of the Income Tax Rules was mandatory and
if so whether there was any breach of that prqvision or the effect
thereof. There was no discussion leave alone any finality to the
determination of that aspect, so as to prevent anyone of the
parties from urging their submissions on those questions. We
have in that view no hesitation in rejecting the first limb of Mr. C
Rao's argument that the High Court could not have gone into
any other question apart the rights of a bona fide purchaser in
the proceedings arising after the remand order.
15. That brings us to the question whether Section 29 of D
the RDDB Act do not apply the Income Tax Rules in the Second
Schedule of the Income Tax Act to the recovery proceedings
under RDDB Act with full force and that the expression 'as far
as possible' appearing in Section 29 vests the Recovery
Officer with discretion to apply the said Rules depending upon E
the fact situation of each case. Section 29 of the RDDB Act
29 is as under:
29. Application of certain provisions of Income-tax
Act.- The provisions of the Second and Third Schedules F
to the Income-tax Act, 1961 and the Income-tax
(Certificate Proceedings) Rules, 1962, as in force from
time to time shall, as far as possible, apply with
necessary modifications as if the said provisions and the
rules referred to the amount of debt due under this Act
instead of to the Income-tax: G
Provided that any reference under the said provisions
and the rules to the "assessee" shall be construed as a
reference to the defendant under this Act.
H
16 SUPREME COURT REPORTS [2013] 4 S.C.R.
A 16. A bare reading of the above leaves no manner of doubt
that the rules under Income Tax Act were applicable only "as
far as possible" and with the modification as if the said
provisions and the rules referred to the amount of debt due
under the RDDB Act instead of the Income Tax Act. The
B 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.
17. Legislation by incorporation is a device to which
legislatures often take resort for the sake of convenience. The
C phenomenon is widely prevalent and has been the subject
matter of judicial pronouncements by Courts in this country as
much as Courts abroad. Justice G.P. Singh in his celebrated
work on Principles of Statutory Interpretation has explained the
concept in the following words:
D
·incorporation of an earlier Act into a later Act is a
legislative device adopted for the sake of convenience
in order to avoid verbatim reproduction of the provisions
of the earlier Act into the later. When an earlier Act or
E certain of its provisions are incorporated by reference into
a later Act, the provisions so incorporated become part
and parcel of the later Act as if they had been 'bodily
transposed into it. The effect of incorporation is admirably
stated by LORD ESHER, M.R.: 'If a subsequent Act
bn"ngs into itself by reference some of the clauses of a
F
former Act, the legal effect of that, as has often been held,
is to write those sections into the new Act as if they had
been actually written in it with the pen, or printed in it.
Even though only particular sections of an earlier Act
G are incorporated into later, in construing the incorporated
sections it may be at times necessary and permissible to
refer to other parts of the earlier statute which are not
incorporated. As was stated by LORD BLACKBURN:
"When a single section of an Act of Parliament is
H introduced into another Act, I think it must be read in the
C.N. PARAMSIVAN & ANR. v. SUNRISE PLAZA TR. 17
PARTNER & ORS. [T.S. THAKUR, J.]
sense it bore in the original Act from which it was taken, A
and that consequently it is perfectly legitimate to refer to
all the rest of that Act in order to ascertain what the section
meant, though those other sections are not incorporated
in the new Act."
B
18. In Ram Kirpal Bhagat and Ors. v. State of Bihar (1969)
3 sec 471 this Court examined the effect of bringing into an
Act the provisions of an earlier Act and held that the legislation
by incorporation of the provisions of an earlier Act into a
subsequent Act is that the provisions so incorporated are C
treated to have been incorporated in the subsequent legislation
for the first time. This Court observed:
"The effect of bringing into an Act the provisions of an
earlier Act is to introduce the incorporated Sections of the
earlier Act into the subsequent Act as if those provisions D
have been enacted in it for the first time. The nature of
such a piece of legislation was explained by Lord Esher
M. R. in Re Wood's Estate [1881] 31 Ch. D.607 that "if
some clauses of a former Act were brought into the
subsequent Act the legal effect was to write those Sections E
into the new Act just as if they had been written in it with
the pen".
19. To the same effect is the decision of this Court in
Mahindra and Mahindra Ltd. v. Union of India and Anr. (1979) F
2 SCC 529 where this Court held that once the incorporation
is made, the provisions incorporated become an integral part
of the statute in which it is transposed and thereafter there is
no need to refer to the statute from which the incorporation is
made and any subsequent amendment made in it has no effect
on the incorporating statute. The following passage is in this G
regard apposite:
''The effect of incorporation is as if the provisions were
written out in the incorporating statute and were a part of
it. Legislation by incorporation is a common legislative H
18 SUPREME COURT REPORTS [2013) 4 S.C.R
A
device employed by the legislature, where the legislature
for convenience of drafting incorporates provisions from
an existing statue by reference to that statute instead of
setting out for itself at length the provisions which it
desires to adopt. Once the incorporation is made, the
8 provision incorporated becomes an integral part of the
statute in which it is transpesed and thereafter there is no
need to refer to the statute from which the incorporation
is made and any subsequent amendment made in it has
no· effect on the incorporating statute."
c
20. We may also refer to the decisions of this Court in
Onkarlal Nandlal v. Rajasthan and Anr. {1985) 4 SCC 404,
Mary Roy and Ors. v. State of Kera/a and Ors. {1986) 2 SCC
209, Nagpur Improvement Trust v. Vasantraq and Ors. and
D Jaswantibai and Ors. {2002) 7 SCC 657, and Mis Surana
Steels Pvt. Ltd. v. The Deputy Commissioner of Income Tax
and Ors. (1999) 4 SCC 306, which have reiterated the above
proposition of law.
21. Applying the above principles to the case at hand
E 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
F 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
G 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
H of the Income Tax Rules to the recovery of debts under the
C.N. PARAMSIVAN & ANR. v. SUNRISE PLAZA TR. 19
PARTNER & ORS. [T.S. THAKUR, J.]
RDDB Act, which confusion could arise from a literal A
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 B
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 c
and 58 of the said Rules in the Second Schedule deal with the
process of recovery of the amount due and p~esent 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 .
0
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 meantto give
discretion to the Recovery Officer to apply the said Rules or E
not to apply the same in specific fact situations has not
impressed us and is accordingly rejected.
22. In Osmania University v. V. S. Muthurangam and Ors.
(1997) 10 sec 741, the question that fell for consideration was
whether the age of superannuation of the non-teaching staff at F
Osmania University should be raised to 60 years when the
same had been raised to 60 years for the University's teaching
staff. Since Section 38(1) of the Osmania University Act, 1959
stated that the conditions of service for all salaried staff of the
University shall be uniform "asfar as possible", the decision in G
the case turned on the meaning to be given to that phrase. It
was argued by the Solicitor General on behalf of the University
that the use of this phrase in Section 38(1) indicated that the
provision could be departed from in certain situations. This
·Court ruled otherwise and held as follows : H
20 SUPREME COURT REPORTS [2013) 4 S.C.R.
j
A ·a...Mr. Solicitor General is justified in his contention that
Section 38(1) of the Act. recognizes flexibility and the
expression 'as far as possible' inheres in it an inbuilt
flexibility... But if uniform conditions of service for teaching
and non teaching_ staff of the Universitv is not otherwise ·
B imQracticable, the Universit'{. is under an oblig_ation to :
maintain such uniformit'{. because of the mandate of
Section 38(1l of the Act. In the instant case, we do not
find that it is not at all Qracticable for the Universit'{. to
maintain the Qaritv in the age of suQerannuation of both
c teaching_ and non teaching staff.•
(emphasis supplied).
23. It follows that while the phrase •as far as possible", may
be indicative of a certain in!luilt flexibility, the scope of that
D 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.
E
24. The interchangeable use of the words "possible" and
"practicable" was previously established by a three-judge Bench
of this Court in N.K. Chauhan and Ors. v. State of Gujarat and
Ors., (1977) 1 SCC 308, where this Court observed that in
simple Anglo-Saxon Practicable, feasible, possible,
F ·performable, are more or less interchangeable. Webster
defines the term 'practicable' thus :
•1. That can be put into practice; feasible.
G 2.. That can be used for an intended purpose; usable.•
§
25. B.lack's Law Dictionary similarly defines 'practicable'
as follows:
·"(Of a thing) reasonably capable of being accomplished;
H feasible.•
C.N. PARAMSIVAN & ANR. v. SUNRISE PLAZA TR. 21
PARTNER & ORS. [T.S. THAKUR, J.]
26. It is, therefore, reasonable to hold that the phrase "as A
far as possible" used in Section 29 of the RDDB Act can at
best mean that the Income Tax Ruh;!s may not apply where it is
not at all possible to apply them having regard to the scheme
and the context of the legislation.
8
27. There is nothing in the provisions of Section 29 of
RDDB Act or the scheme of t~e 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
which reads as under: C
"57. (1) On every sale of immovable property, the person
declared to be the purchaser shall pay, immediately after
such declaration, a deposit of twenty-five per cent on the
amount of his pU(chase money, to the officer conducting o
the sale; and, in default of such deposit, the property shall
forthwith be resold.
(2) The full amount of purchase money payable shall be
paid by the purchaser to the Tax Recovery Officer on or
before the fifteenth. day from the date of the sale of the E
property."
28. 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 F
deposit of the amount being a mandatory requirement. The
. provisions of Rules 57 and 58 of the Income Tax Rules, have
their equivalen_t in Order XXI Ruies 84, 85 & 86 of the C.P.C.
which are pari materia in language, sweep and effect and have
been held to be mandatory by this Court in Manila! Mohanlal G
Shah and Ors. v. Sardar Sayed Ahmed Sayed Mahmed and
Anr. (Al R 1954 SC 349) in the following words:
"8. The provision .regarding the deposit of 25 per cent. by
the purchaser other than the decree-holder is mandatory H
22 SUPREME COURT REPORTS (2013] 4 S.C.R.
'
A as the language of the rule suggests. The full amount of
the purchase-money must be paid within fifteen days from
the date of the sale but the decree-holder is entitled to the
advantage of a set-off. The provision for payment is,
l
f
however, mandatory... (Rule 85). If the payment is not I
B made within the period of fifteen days, the Court has the
discretion to forfeit the deposit, and there the discretion
ends but the obligation of the Court to re-sell the property
is imperative. A further consequence of non-payment is
that the defaulting purchaser forfeits all claim to the property
(Rule 86) ... ·
c
.· 9... These provisions leave no doubt that unless the
/deposit and the payment are made as required by the
mandatory provisions of the rules, there is no sale in the
eye of law in favour of the defaulting purchaser and no
D "right to own and possess the property accrues to him.
xx xx xx xx •
11. Having examined the language-of the relevant rules
and the judicial decisions bearing upon the subject we
E
are of opinion that the provisions of the rules requiring
the deposit of 25 per cent. of the purchase-money
immediately on the person being declared as a
purchaser and the payment of the balance within 15 days
of the sale are mandatory and upon non-compliance with
F these provisions there is no sale at all. The rules do not
contemplate that there can be any sale in favour of a
· . purchaser without depositing 25 per cent. of the purchase-
money in the first instance and the balance within 15
days. When there is no sale within the contemplation of
G these rules, there can be no question of material
irregularity in the conduct of the sale. Non-payment of the
pric.e on the part of the defaulting purchaser renders the
sale proceedings as a complete nullity. The very fact that
the Court is bound to resell the property in the event of a
H default shows that the previous proceedings for sale are
C.N. PARAMSIVAN & ANR. v. SUNRISE PLAZA TR. 23
PARTNER & ORS. [T.S. THAKUR, J.]
completely wiped out as if they do not exist in the eye of A
Jaw. We hold, therefore, that in the circumstances of the
present case there was no sale and the purchasers
acquired no rights at all."
29. Relying in Manila/ Mohanlal's case (supra) Rules 84, 8
85 and 86 of Order XXI were also held to be mandatory in
Sardara Singh (Dead) by Lrs. and Anr. v. Sardara Singh
(Dead) and Ors. (1990) 4 SCC 90.
30. Similarly in Bairam, ·son of Bhasa Ram v. /lam Singh
and Ors. (1996) 5 SCC 705 this Court reiterated the legal C
position in the following words:
"7.. .it was clearly held [in Manila/ Mohan/al] that Rule 85
being mandatory, its non-compliance renders the sale
proceedings a complete nullity requiring the executing D
court to proceed under Rule 86 and property has to be
resold unless the judgment-debtor satisfies the decree
by making the payment before the resale. The argument
that the executing court has inherent power to extend time
on the ground of its own mistake was also expressly E
rejected... "
31. We may also refer to the decisions of this Court in Rao
Mahmood Ahmed Khan v. Sh. Ranbir Singh and Ors. (1995)
4 SCC 275, Gangabai Gopaldas Mohata v. Fulchand and
Ors. (1997) 10 SCC 387, Himadri Coke & Petro Ltd. v. F
Soneko Developers (P) Ltd. And Ors. (2005) 12 SCC 364 and
Shi/pa Shares and Securities and Ors. v. The National Co-
operative Bank Ltd. and Ors. (2007) 12 SCC 165, wherein the
same position has been taken.
G
32. In the light of the above we see no reason to hold that
Rules 57 and 58 of the Income Tax Rules are anything but
mandatory in nature, so that a breach of the requirements under
those Rules will render the auction non-est in the eyes of law.
33. That leaves us with the third and the only other H
24 SUPREME COURT REPORTS · ·,12013] 4 S.C.R
A submission made by Mr. Rao touching the ~rights of bonafide
purchaser and whether there is any conflict between the
decisions of this Court on the subject to call for a reference to
a larger bench. There is, in our opinion, no 'doubt that there is
an-apparent conflict between the decisions upon which reliance
B was placed by learned counsel for the parties. But having
regard to the view that we have taken on the question of the
validity of this auction itself, we do not consider it necess':lry to
make a reference to a larger bench to resolve the conflict. The
cleavage in the judicial opinion is· for the present case only of
c academic importance, hence need not be ;addressed by us or
by a larger bench for the present. ·
34. In the result, this appeal fails and is hereby dismissed
but in the circumstances without any order as to costs.
D B.B.B. ..·, Appeal dism.issed .
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