| SooperKanoon Citation | sooperkanoon.com/1168019 |
| Court | Chennai High Court |
| Decided On | Sep-30-2013 |
| Judge | D.HARIPARANTHAMAN |
| Appellant | Employees' Provident Fund Organization |
| Respondent | 1. the Inspector General of Registration, |
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED:
30. 09/2013 CORAM THE HONOURABLE MR. JUSTICE D.HARIPARANTHAMAN W.P.(MD)No.11726 of 2010 and W.P.(MD)No.8972 of 2012 and M.P.(MD)No.2 of 2010 in W.P.(MD)No.11726 of 2010 and M.P.(MD)Nos.1 to 6 of 2012 in W.P.(MD)No.8972 of 2012 Employees' Provident Fund Organization represented by Recovery Officer, Employees' Provident Fund Organization, LDC Road, Madurai. .. Petitioner in W.P.(MD)No.11726 of 2010 M/s.Mahalakshmi Textile Mills Ltd., represented by its Director AL.Lakshmanan, S/o.Alagu Sundaram Chettiar, Door No.6A, Vallabai Road, Chokkikulam, Madurai - 625 002. .. Petitioner in W.P.(MD)No.8972 of 2012 vs.
1. The Inspector General of Registration, 100, Santhome High Road, Chennai - 600 028.
2. The Sub-Registrar, Sub-Registrar Office, Kodaikanal.
3. S.Vaigai Durai 4. P.Panchasheelagandhi 5. M.Sheik Dawood * 6. M/s.Mahalakshmi Textile Mills Ltd. represented by its Director AL.Lakshmanan, S/o.Alagu Sundaram Chettiar, Door No.6a, Vallabai Road, Chokkikulam, Madurai - 625 002. ** .. Respondents in W.P.(MD)No.11726 of 2010 1. Employees' Provident Fund Organization represented by Recovery Officer, Regional Office, Door No.1, Lady Doak College Road, Chokkikulam, Madurai 625 002.
2. M.Sheik Dawood .. Respondents in W.P.(MD)No.8972 of 2012 * R5 impleaded as party respondent vide court order dated 25.06.2012 in M.P.No.1 of 2010 ** R6 impleaded as party respondent vide court order dated 29.06.2012 in M.P.No.1 of 2012 * * * Prayer in W.P.(MD)No.11726 of 2010 Writ Petition filed under Article 226 of the Constitution of India for the issuance of writ of Mandamus directing the second respondent to cancel the registration of documents No.2441 of 2009 and 2442 of 2009 executed by the third respondent in favour of the fourth respondent. Prayer in W.P.(MD)No.8972 of 2012 Writ Petition filed under Article 226 of the Constitution of India for the issuance of writ of Mandamus directing the first respondent to conduct fresh auction sale of the property measuring 125.46 cents in old survey number 25/6/4 and 25/6/5 and present town survey number 21, Block 15, Ward C of Kodaikanal Taluk belonging to the petitioner company after fresh sale proclamation and consequently forbearing the first respondent from confirming the sale held on 07.07.2010 in favour of the second respondent as per the terms of proclamation of sale dated 04.06.2010. * * * !For Petitioner in W.P.(MD) ... Mr.G.R.Swaminathan No.11726 of 2010 For Petitioner in W.P. ... Mr.J.Barathan for (MD)No.8972 of 2012 ^For Respondents in W.P. ... Mr.D.Muruganandam, (MD)No.11726 of 2010 Addl. Government Pleader for RR1 and 2 Mr.A.R.Sethupathy for R3 Mr.C.Ramachandran for R4 Mr.T.Lajapathi Roy for R5 Mr.J.Barathan for R6 For Respondents in W.P. ... Mr.G.R.Swaminathan for R1 (MD)No.8972 of 2012 Mr.T.Lajapathi Roy for R2 :COMMON
ORDERMahalakshmi Textile Mills Limited, Pasumalai, Madurai, is a company registered under the Companies Act, 1956. It is a textile mill. It employed about 900 workmen.
2. The company went into bad weathers from the year 1985. It faced severe financial crisis and there were dues to the statutory bodies, like Employees' State Insurance Corporation (for short 'ESI'), Employees' Provident Fund Organization (for short 'EPFO'), the Commercial Taxes Department of the State Government, the Tamil Nadu Industrial Investment Corporation (for short 'TIIC') and various banks including Punjab Nation Bank (for short 'PNB'), Indian Bank, ICICI Bank Limited, etc., The Company owed huge amount towards salary, statutory and other benefits to the workmen and also the employees of the Co- operative Society.
3. The company owns vast extent of lands and other properties at Madurai as well as Kodaikanal. The textile mill with its surrounding area is situated in about 15 acres of land worth about several crores of rupees. The company owns a guest house in Madurai town that would also fetch several crores. The company also owns an extent of 3.95 acres in old survey No.25/6/4 and 25/6/5 and new Town Survey No.21 in Kodaikanal. The said land consists of two lots. The laid with the bungalow is situated in an extent of 1 acre and 25.46 cents. The remaining vacant land measures 2 acres, 69.54 cents. We are concerned in this case about the land and bungalow in 1 acre 25.46 cents in Kodaikanal.
4. The Managing Director of Mahalakshmi Textiles Mills Limited (for short ".MTML".) filed W.P.(MD)Nos.1476 of 2005, 9089 and 6660 of 2007. The EPF organization, ESI, PNB, Bank of Madura of Madurai, Official Liquidator, TIIC, and the workers unions were made as parties and a direction was sought to sell the properties of the company, over which, the aforesaid organizations have created charges so as to recover their dues and to settle the statutory dues payable to workmen.
5. The PNB filed W.P.(MD)Nos.584 and 585 of 2006 making the Commercial Taxes Department and MTML as respondents. The bank sought to quash the attachment order and sale notice of the Commercial Taxes Department.
6. One Subbulakshmi and one K.S.Sriram, in his individual capacity, filed W.P.(MD)Nos.4511 and 4512 of 2007 respectively and K.S.Sriram representing M/s.Madras Gauge Room Equipment Private Limited filed W.P.(MD)No.4513 of 2007 seeking to quash the attachment order issued by the Deputy Commercial Tax Officer of the Commercial Taxes Department and for a direction to the Commercial Taxes Department to permit registration of sale in favour of the petitioner in respect of the plot Nos.20, 21 and 22 Kodaikanal Town.
7. One S.Subramanian, as if claiming to be the custodian of MTML, filed W.P.(MD)No.2603 of 2008 seeking to quash the auction notice dated 18.01.2008 issued by the Deputy Commercial Tax Officer, Kodaikanal.
8. All the writ petitions, except W.P.(MD)Nos.584 and 585 of 2006, were dismissed by the common order dated 08.09.2008 by the Madurai Bench of this Court. While dismissing those writ petitions, this Court found that one Statutory Corporation / Department is fighting against another Statutory Corporation / Government Department for the dues payable by MTML. The Court felt that the PNB should not have filed the writ petition before this Court against the Commercial Taxes Department and the controversy should have been resolved by mutual negotiations between the two statutory authorities. No order was passed in those two writ petitions in W.P.(MD)Nos.584 and 585 of 2006 in view of the directions issued in that order dated 08.09.2008. Ultimately, this Court issued a direction to the Secretary to the Government, Commercial Taxes and Registration Department, Government of Tamil Nadu, Fort St. George, Chennai, to convene a meeting of the representatives of the ESI Corporation, EPFO, Commissioner for Commercial Taxes, PNB, and ICICI Bank as well as Commissioner of Labour to arrive at a consensus for selling the properties of MTML. It is also directed that once the properties are sold, they should apportion the realized amount to satisfy the various claims with due proportion to each of the claimants. A further direction was issued that the said exercise shall be completed within a period of twelve weeks. Various properties of the MTML were the subject matter in the said writ petitions.
9. EPFO challenged the common order dated 08.09.2008 in respect of W.P.(MD)No.1476 of 2005 and 9809 of 2007 in writ appeal W.A.(MD)Nos.556 and 557 of 2009. Their grievance was that they have their own machinery for recovery of the Provident Fund dues and therefore, they do not want to abide by any direction of the Secretary to the Tamil Nadu Government, Commercial Taxes and Registration Department.
10. The Division Bench excluded the EPFO from the directions issued by the learned Single Judge in the common order dated 08.09.2008 in W.P.(MD)No.1476 of 2005 and 9809 of 2007 etc., batch while disposing of those appeals in W.A.(MD) Nos.556 and 557 of 2009 on 22.04.2010.
11. In those circumstances, Sale Proclamation dated 04.06.2010 was issued by the Recovery Officer of EPFO, Madurai, bringing to sale the land measuring 1 acre and 25.46 cents at Kodaikanal. It is not in dispute that the lands to an extent of 3.95 acres in old survey No.25/6/4 and 25/6/5 and new Town Survey No.21 in Kodaikanal consists of two lots were already under attachment by the Recovery Officer of EPFO, Madurai, as the order of attachment was passed as early as on 30.04.2003. As stated above, the subject land consists of two lots and we are concerned with the land with the Bungalow in an extent of one acre and 25.46 cents that was brought to sale.
12. The Proclamation of Sale dated 04.06.2010 was issued by the Recovery Officer, EPFO, Regional Office, Madurai, fixing the date of sale as 07.07.2010. The Recovery Officer referred to various certificates issued by the Authorized Officer under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for short ".EPF Act".) between 1995 and 2009 that a sum of Rs.1,79,07,678/- (Rupees one crore seventy nine lakhs seven thousand six hundred and seventy eight only) was due from the MTML being defaulter. It is stated that the said sum is recoverable with interest in accordance with Section 7Q of the EPF Act. It is also stated that as on 07.07.2010, the date fixed for the sale, the due was arrived at Rs.1,88,03,061/- (Rupees one crore eighty eight lakhs three and sixty one only) including cost and charges.
13. The reserve price of the entire property measuring 1 acre 25.46 cents was fixed at 2,43,29,000/- (Rupees two crore fourty three lakhs and twenty nine thousand only). The proclamation contains a clause that the highest bidder shall be declared to be the purchaser. The person declared to be the purchaser shall, immediately after such declaration, deposit 25% of the amount of his purchase money to the Officer conducting the sale and in default of such deposit, the property would forthwith be put up again for resale.
14. A further condition in the proclamation is that the balance amount of 75% shall be paid by the purchaser on or before 15 days from the date of sale of the property and default of this also would result in the resale after the issue of fresh proclamation of sale. The deposit, after defraying the expenses of the sale, be forfeited to the Employees' Provident Fund and the defaulting purchaser shall forfeit all rights to the property.
15. One Sheik Dawood of Madurai offered to pay a sum of Rs.2.48 crores. He was declared as the highest bidder. He also deposited a sum of Rs.87 lakhs out of the total purchase amount of Rs.2.48 crores. But he failed to deposit the balance amount on the plea that there were encumbrances in the properties, since two sale deeds in Document No.2441 of 2009 to an extent of 30 cents and in Document No.2442 of 2009 to an extent of 11.070 cents were executed with regard to the property concerned in the proclamation of sale.
16. In these circumstances, EPFO filed W.P.(MD)No.11726 of 2010 seeking a direction to the Sub Registrar, Kodaikanal, to cancel the registration of documents in Document Nos.2441 and 2442 of 2009 executed by one Vaigai Durai, being the power agent of MTML, in favour of his wife Panchasheelagandhi.
17. At the time of filing of the writ petition, the Inspector General of Registration, the Sub Registrar of Kodaikanal, Vaigai Durai and Panchasheelagandhi, were alone made as respondents 1 to 4 respectively. Thereafter, Sheik Dawood, the highest bidder, got impleaded as fifth respondent and MTML got impleaded as sixth respondent.
18. A Counter affidavit is filed by the Sub Registrar, Kodaikanal, the second respondent in W.P.(MD)No.11726 of 2010 on behalf of respondents 1 and 2. It is averred that the petitioner shall workout its remedy by filing a civil suit before the civil court and they cannot seek for cancellation of sale deed in the writ proceedings. It is also averred that the attachment order issued by the EPFO is an encumbrance but the same cannot operate as prohibition to the Sub Registrar to register the sale deeds in respect of the property. The second respondent, Sub Registrar, relied on some departmental instructions in this regard.
19. A counter-affidavit dated 04.06.2.012, additional counter-affidavit dated 02.07.2012 and an affidavit dated 30.07.2012 were filed by Thiru.Vaigai Durai-the third respondent. 19.1. When the counter-affidavit dated 04.06.2012 was filed, MTML was not impleaded as a party respondent. It is averred that he is the power agent of the principal (MTML) of the lands that are in issue in this case. Without making the principal as a party, the writ petition is not sustainable. It is also alleged that the Principal made several alienation of the property in 1987 itself by making out several plots and without making those purchasers as parties, the writ petition is not maintainable. It is stated that the auction sale was the collusive action of EPFO and the alleged auction purchaser and the authorities do not have power to cancel the registered document under the provisions of the Registration Act and the parties, if aggrieved over the sale, shall approach the competent civil court questioning the sale. The issue relating to cancellation of sale deeds cannot be made the subject matter of the writ jurisdiction. He undertakes to discharge his dues payable to the EPFO within three months. 19.2. In the additional counter-affidavit dated 02.07.2012, after the 5th and 6th respondents got impleaded, he stated that the principal, who got impleaded as sixth respondent, has now colluded with the EPFO and the highest bidder, the fifth respondent. It is stated that he was always willing to pay the entire amount legally due to the EPF Organization from the MTML. 19.3. In the affidavit dated 30.07.2012, he stated that the company owns the mill and the surrounding areas measuring 15 acres worth about Rs.25 Crores and more. It is also averred that the company owns a guest house in Madurai Town that alone is worth about Rs.10 cores. He also undertook to clear the entire dues payable to the EPFO within three weeks. 19.4. He relied on a Full Bench judgment of this Court reported in (2011) 2 MLJ569(Latif Estate Line India Ltd. V. Hadeeja Ammal) for the proposition that there is no provision either in the Registration Act or in the Transfer of Property Act for cancelling a sale deed. He averred that no writ can be issued to the second respondent - Sub Registrar to cancel the sale deeds.
20. The fourth respondent, the wife of the third respondent, filed a counter-affidavit and an additional counter-affidavit. The fourth respondent, the purchaser of the property by way of sale deeds executed by her husband, the third respondent, averred that MTML, having appointed her husband as power agent, cannot now question the sale deeds executed by the third respondent being its power agent. It is admitted that the power agent is her husband and her husband was appointed as a power agent after receipt of Rs.25,00,000/- (Rupees twenty five lakhs only) by MTML on an understanding that the power agent would be at liberty to sell the entire area covered in the power deed and clear the amount payable to the EPFO. It is averred that the third respondent is ready to pay the entire amount due to the EPFO. It is also averred that various sale deeds were executed in the property of MTML that were under attachment and these sale deeds alone cannot be sought to be cancelled.
21. MTML filed a counter-affidavit and two additional counter-affidavits. It is stated that the company employed about 900 workmen. It got into financial crises from the year 1985 onwards. The dues payable to various statutory bodies, Commercial Taxes Department and various banks got mounted. The properties of the company had been attached under relevant statutes by the concerned statutory bodies, Commercial Taxes Department and various banks. The arrears of the salary to the workmen alone would come to Rs.4,25,43,131/- (Rupees four crores twenty five lakhs forty three thousand one hundred and thirty one only) including bonus, gratuity, compensation etc.. 21.1. There were also proceedings before the Official Liquidator under the Companies Act against MTML. Ultimately, an amount of Rs.3,58,80,890/- (Rupees three crores fifty eight lakhs eighty thousand eight hundred and ninety only) was paid to the Commercial Taxes Department under the Samadhan Scheme announced by the Government. A sum of Rs.23,00,000/- (Rupees twenty three laksh only) was paid to the Indian Bank under OTS Scheme and a sum of Rs.56,90,000/- (Rupees fifty six lakhs ninety thousand only) was paid to ESI Corporation. It is stated that the company still owes statutory dues to the ESI, EPFO, PNB, ICICI Bank and the workmen. 21.2. It is averred that the Company owns lands to an extent of 3.95 acres in old survey No.25/6/4 and 25/6/5, New Town Survey No.21, in Kodaikanal. The said land consists of two lots. The land with the bungalow is situated in an extent of one acre and 25.46 cents. The remaining vacant land measuring 2 acres and 69.54 cents had been laid into a layout of 27 housing plots in 1986. The company sold most of the housing plots before the property was attached by the EPFO and the Commercial Taxes Department. 21.3. However, the property measuring 1 acre and 25.46 cents consisting of the bungalow is intact and no sale was made by the company and the said land measuring 1 acre and 25.46 cents was brought for sale by the EPFO, which is the subject matter of this writ petition. 21.4. It is stated that the Director of MTML AL.Lakshmanan executed a general power of attorney dated 03.07.2009 in favour of Thiru.Vaigai Durai-the third respondent in the writ petition insofar as the property in 1 acre and 25.46 cents at Kodaikanal. It was executed only for discharging the liabilities of the company. In the said power of attorney, the attachment of the property made by the EPFO had been clearly mentioned. Thus, the MTML had no dishonest intention to fraudulently sell the properties of the company. 21.5. The power agent-the third respondent very well knew about the dues of the MTML to be paid to EPFO and the Commercial Taxes Department, as the same were specifically mentioned in the power deed. But the third respondent executed two sale deeds dated 18.11.2009, in his capacity as the power agent of the company, in favour of HIS WIFE, the fourth respondent. The third respondent did not discharge any of the liabilities of the company. It is stated that the present guideline value of the disputed property itself is Rs.4,12,00,000/- (Rupees four crore and twelve lakhs only) and the market value is Rs.7 crores. 21.6. The details of the sales made on various dates by the company in the land measuring 2 acres and 69.54 cents were given in a tabular column. The tabular column also gives the details of sales made by some parties in the aforesaid land of 2 acres and 69.54 cents and according to MTML, those sales were unauthorized. 21.7. It is averred that the EPFO brought to sale one acre and 25.46 cents by a proclamation of sale dated 04.06.2010 and since the highest bidder failed to comply with the terms of the proclamation of the sale by not paying the balance amount of purchase money within 15 days from the date of sale, though the auction purchaser made initial deposit, the property shall be resold by way of fresh proclamation of sale. 21.8. Hence, MTML supported the cause of EPFO seeking to cancel the registration of documents as prayed for in the writ petition and also sought for a further direction to the EPFO to conduct fresh auction sale of 125.46 cents in old survey No.25/6/4 and 25/6/5 and present Taluk Survey No.21, Block 15, Ward C of Kodaikanal Taluk, belonging to the company. 21.9. In the additional counter-affidavit dated 30.07.2012 of the Director AL.Lakshmanan of MTML, it is stated that out of 25 lakhs received by him from the third respondent, power agent, MTML returned back a sum of Rs.10,00,000/- on various dates and the power agent Thiru.Vaigai Durai issued receipts for the same. The receipts are enclosed in the additional typed-set of papers. 21.10. It is further averred that if the property measuring one acre and 25.46 cents is brought for fresh auction, it would fetch a very greater price and after adjusting the dues of the EPFO, the remaining surplus amount can be utilized to pay the arrears of salary and other dues payable to the workmen.
22. W.P.(MD)No.8972 of 2012 is filed by the MTML represented by its Director Mr.AL.Lakshmanan arraying EPF Organization and Sheik Dawood as respondents 1 and 2 respectively praying for a direction to the first respondent - EPF Organization to conduct fresh auction sale of the property measuring 125.46 cents in Kodaikanal referred to above and to forbear the first respondent EPF organization from confirming the sale held on 07.07.2010 in favour of the second respondent, the highest bidder.
23. M.P.(MD)Nos.2 to 6 of 2012 in W.P.(MD)No.8972 of 2012 are filed by various unions seeking to implead them as respondents in W.P.(MD)No.8972 of 2012. Heard the learned counsels appearing for the petitioners in M.P.(MD)Nos.2 to 6 of 2012 in W.P.(MD)No.8972 of 2012. In order to decide the issues involved in these writ petitions, they are not necessary parties. Moreover, the company has filed an affidavit stating that after settling the amount payable to EPF Organization from the amount realized in the fresh auction sale, in the event of ordering fresh auction sale, the balance amount shall be paid to the workmen. Hence, these miscellaneous petitions in M.P.(MD)Nos.2 to 6 of 2012 in W.P.(MD)No.8972 of 2012 are DISMISSED.
24. Since the issues involved in both the writ petitions are common, the writ petitions have been taken up for hearing together and disposed of by this common order.
25. The ranks of the parties, for the sake of convenience, are referred to as per W.P.(MD)No.11726 of 2010.
26. Heard both sides.
27. The learned counsel for the petitioner submitted that the third respondent, being the power agent of MTML, executed sale deeds in Document No.2441 of 2009 to an extent of 30 cents and in Document No.2442 of 2009 to an extent of 11.070 cents in favour of his wife, the fourth respondent, in respect of the property of MTML- the sixth respondent, and those lands were attached by the petitioner-EPFO much before the execution of sale deeds, since the MTML was to pay a huge sum of money towards EPF dues to the petitioner. The third respondent was well-aware of the attachment. The document appointing third respondent as power agent itself speaks about the existence of the attachment. The third respondent was appointed as power agent to discharge the liability by selling 1.25 acres of the properties mentioned in the power deed. Out of 1.25 acres, the third respondent sold 41.070 cents to himself by executing two sale deeds in favour of his wife-the fourth respondent for the alleged consideration mentioned therein and even those amounts were not paid either to the EPFO or to the Sales Tax Department. 27.1. The learned counsel for the petitioner emphasised the relationship between the third and fourth respondents to come to the conclusion that the action of the third respondent in executing the impugned sale deeds is a fraudulent one. 27.2. It is submitted that if this Court comes to the conclusion that the third respondent acted fraudulently in executing the impugned sale deeds, since the ".fraud". would vitiate every action, this Court could very well issue the direction as sought for directing the registering authorities to cancel the sale deeds, without driving the petitioner to approach the civil court. 27.3. Secondly, the learned counsel for the petitioner submitted that EPFO is a public authority. When the statutory dues under the EPF Act payable by MTML were not paid, the properties of MTML were attached under EPF Act. After attachment, the properties have acquired public nature. When a public element is involved, the writ petition is maintainable. He relied on the judgment of the Apex Court in Air India Statutory Corporation V. United Labour Union, (1997) 9 SCC377in this regard. 27.4. The learned counsel for the petitioner more importantly asserted that the facts are not in dispute, i.e., the third respondent executed sale deeds pursuant to the power deed executed by MTML in his favour. The power deed itself makes it clear that the properties that are sold now are attached by EPFO. The other undisputed fact is that the power was given to the third respondent to discharge the liabilities by sale of the properties covered by the power deed. When the facts are not in dispute, this Court can very well issue direction under Article 226 of the Constitution, particularly, when the third respondent's action is nothing, but fraud. 27.5. The learned counsel for the petitioner further submitted that the alienation of the property that has been under attachment is void. The attachment of the property in issue was statutorily made by EPFO pursuant to Section 8-B read with Section 8-C of the EPF Act. The attachment was not made pursuant to any order of civil court. On the other hand, the attachment was made by the Recovery Officer of EPFO pursuant to the statutory power given to him under Section 8-B read with Section 8-C of the EPF Act. The Recovery Officer has the power to effect the sale of the immovable property as per Sections 8-B and 8-C read with Section 8-G of the EPF Act. As per Section 8-G of the EPF Act, the Second and Third Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962, shall apply in effecting attachment and sale. When the Recovery Officer of the EPFO effected attachment of the properties and thereafter, any sale of the attached property made by any party shall be void, in view of Rule 16(2) of the Second Schedule to the Income Tax Act read with Section 8-G of the EPF Act. In these circumstances, according to the learned counsel, the Recovery Officer has sought for cancellation of such void sale deeds before this court invoking Article 226 of the Constitution of India. 27.6. At this juncture, he also referred to Rule 9 of the Second Schedule of the Income Tax Act, 1961 read with Section 8-G of the EPF Act to contend that there is a general bar to the jurisdiction of the civil court and all questions shall be decided only by the Recovery Officer. 27.7. The learned counsel for the petitioner submitted that in this case, before effecting the sale, the third respondent should have removed the attachment as contemplated in Rule 12 of the Second Schedule to the Income Tax Act, 1961 by paying the amount due with costs and all charges and expenses to the Recovery Officer or by cancellation of certificate issued by the Authorised Officer of EPFO that led to the Recovery Officer to take action in accordance with Sections 8-B and 8-C of the EPF Act. 27.8. He submitted that pursuant to the certificates issued by the Authorized Officer under Sections 8-B read with 8-C of the EPF Act to the Recovery Officer stating that the MTML was to pay 1,79,07,678/- (Rupees one crore seventy nine lakhs seven thousand six hundred and seventy eight only) to EPFO, the Recovery Officer, who effected attachment of properties of MTML measuring 3.95 acres at Kodaikanal long back, issued proclamation of sale in respect of a portion of the attached property measuring 1 acre and 25.46 cents on 04.06.2010 fixing the date of sale as 07.07.2010 and the reserve price was fixed at Rs.2,43,29,000/- (Rupees two crores forty three lakhs and twenty nine thousand only). The fifth respondent was the highest bidder, who offered to buy the property at 2.48 crores and also deposited Rs.87 lakhs immediately. But he failed to deposit the balance purchase amount within 15 days from the date of sale, as per the proclamation of sale. Since the fifth respondent did not comply with the conditions stipulated in the proclamation of sale, a fresh sale shall be conducted by the Recovery Officer. 27.9. The learned counsel fairly stated that though the fifth respondent is not entitled to get back the amount deposited towards 25% of the bid amount, since he did not pay the balance amount within a period of 15 days from the date of sale of the property, the petitioner is willing to refund the entire amount after defraying the sale expenses out of the sale proceeds of the fresh auction sale to be held. 27.10. Likewise, the learned counsel has fairly submitted that though the prayer was to cancel both the sale deeds in document Nos.2441 and 2442 of 2009, the EPFO was not pressing its claim against document No.2442 of 2009, since the same is not part of the lands measuring 1 acre and 25.46 cents mentioned in the sale proclamation dated 04.06.2010, as the said land comes within 2 acre and 69.54 cents which is also under attachment, i.e., he confined to cancellation of document No.2441 of 2009 alone measuring 30 cents and in that even the entire 125 cents that were brought to sale would be available for EPFO authorities to bring fresh auction sale.
28. The learned Special Government Pleader for the respondents 1 and 2, namely, the Inspector General of Registration, Chennai, and the Sub-Registrar, Kodaikanal, submitted that the Sub Registrar had to simply register the documents that are produced before him for registration, particularly, following the departmental instructions referred to in the counter-affidavit. Therefore, he cannot be faulted for registering the documents. However, he submitted that the power of this Court is not fettered to issue a suitable direction to cancel the sale deeds in the interest of justice.
29. The learned counsel for the third respondent relied on a Full Bench decision of this Court in Latif Estate Line India Ltd. V. Hadeeja Ammal reported in (2011) 2 MLJ569and contended that there is no provision either in the Registration Act or in the Transfer of Property Act for cancelling a sale deed and that the only remedy available to the aggrieved party is to file civil suit to cancel the sale deed. It is submitted that no writ petition is maintainable with a prayer of this nature. He also submitted that he would clear the dues to the EPFO. He further submitted that MTML owns a large number of properties and therefore, those properties can be proceeded against.
30. The learned counsel for the fourth respondent made his submissions on the lines of the learned counsel for the third respondent.
31. The learned counsel for the fifth respondent submitted that since he parted with a large sum of money of Rs.87 lakhs, this respondent might be permitted to remit the balance amount on certain conditions so that he would get a sale certificate, based on the sale that took place on 07.07.2010.
32. The learned counsel for the MTML, the sixth respondent, submitted that the third respondent acted in a fraudulent manner and therefore, the sale deeds are liable to be set aside, as submitted by the EPFO. He supported the claim of the EPFO. The learned counsel also submitted that besides setting aside the sale, a fresh auction shall be conducted by bringing 125.46 cents to sale and the sale proceeds could be utilized to pay the dues payable to EPFO and the balance shall be paid to the workmen by issuing necessary direction by this Court to the Commissioner of Labour, to disburse the amount, after ascertaining with the MTML and various trade unions. In this regard, he has brought to the notice of this Court, the prayer in W.P.(MD)No.8972 of 2012. 32.1. The learned counsel for the sixth respondent relied on the following judgments: (1)(2005) 12 SCC364- Himadri Coke & Petro Ltd., V. Soneko Developers (P) Ltd. And others; (2)2010 (3) CTC372- C.N.Paramasivam and another v. Sunrise Plaza, rep. By its partner, Kalyanasundaram and others; (3)2011 (6) CTC858- Sri anbalayam Textiles Private Ltd., rep. By its Chairman P.Veerasamy V. The Chairman-cum-Managing Director, T.N. Industrial Investment Corporation Ltd. And others; and (4)2011 (6) CTC349- P.Kumaran V. The Debts Recovery Appellate Tribunal and Others; 33. I have considered the submissions made by either side.
34. It is not in dispute that the sixth respondent-MTML has to pay statutory dues to various statutory bodies and Commercial Taxes Department and banks. The company owns properties to repay its statutory dues.
35. The sixth respondent-MTML filed a counter-affidavit admitting that 3.95 acres in Kodaikanal of MTML was attached by the EPFO and the Commercial Taxes Department. Paragraph 6 of the counter-affidavit in this regard is relevant and the same is extracted hereunder: ".6. The Mahalakshmi Textile Mills Limited owned an extent of 3.95 Acres in Old Survey Number 25/6/4 and 25/6/5, New Town Survey Number 21 in Kodaikanal. The said land consists of 2 lots. The land with the bungalow is situated in an extent of 1 Acre 25.46 cents. The remaining vacant land measures 2 Acres 69.54 cents. The said vacant land measuring 2 Acres 69,54 cents was laid into a layout of housing plots in the year, 1986 and it was also approved by the Kodaikanal Municipality in approval number 104/86. The said land had been laid into 27 housing plots. The Mahalakshmi Textile Mills Limited had sold most of the housing plots before the property was attached by the Employees Fund Department and the Commercial Taxes Department. The property measuring 1 Acre 25.46 cents consisting of the bungalow and the appurtenant vacant site was not dealt with by Mahalakshmi Mills Limited after the order of attachment was passed. The said land remains intact and the said lot alone had been brought for auction by the Employees Provident Fund Organisation.".
36. As per the aforesaid paragraph 6, it is clear that the said land of 3.95 acres consists of two lots. The land with the bungalow situated in an extent of 1 acre and 25.46 cents was brought to sale by the Recovery Officer. The other part of the land, namely, 2 acres and 69.54 cents were said to have been laid into housing plots even before attachment and most of them were sold before the attachment. We are not concerned with that property, i.e, the said land measuring 2 acres and 69.54 cents is not in issue before this Court.
37. At this juncture, it is relevant to extract Sections 8-B, 8-C and 8-G of the EPF Act as hereunder: ".8-B. Issue of certificate to the Recovery Officer. (1) Where any amount is in arrear under section 8, the authorised officer may issue, to the Recovery Officer, a certificate under his signature specifying the amount of arrears and the Recovery Officer, on receipt of such certificate, shall proceed to recover the amount specified therein from the establishment or, as the case may be, the employer by one or more of the modes mentioned below:- (a) attachment and sale of the movable or immovable property of the establishment or, as the case may be, the employer; (b) arrest of the employer and his detention in prison; (c) appointing a receiver for the management of the movable or immovable properties of the establishment or, as the case may be, the employer: Provided that the attachment and sale of any property under this section shall first be effected against the properties of the establishment and where such attachment and sale is insufficient for recovery the whole of the amount of arrears specified in the certificate, the Recovery Officer may take such proceedings against the property of the employer for recovery of the whole or any part of such arrears. (2) The authorised officer may issue a certificate under sub-section (1), notwithstanding that proceedings for recovery of the arrears by any other mode have been taken. 8-C. Recovery officer to whom certificate is to be forwarded. (1) The authorised officer may forward the certificate referred to in section 8B to the Recovery Officer within whose jurisdiction the employer - (a) carries on his business or profession or within whose jurisdiction the principal place of his establishment is situated; or (b) resides or any movable or immovable property of the establishment or the employer is situated. (2) Where an establishment or the employer has property within the jurisdiction of more than one Recovery Officers and the Recovery Officer to whom a certificate is sent by the authorised officer - (a) is not able to recover the entire amount by the sale of the property movable or immovable, within his jurisdiction; or (b) is of the opinion that, for the purpose of expediting or securing the recovery of the whole or any part of the amount, it is necessary so to do, he may send the certificate or, where only a part of the amount is to be recovered, a copy of the certificate certified in the prescribed manner and specifying the amount to be recovered to the Recovery Officer within whose jurisdiction the establishment or the employer has property or the employer resides, and thereupon that Recovery Officer shall also proceed to recover the amount due under this section as if the certificate or the copy thereof had been the certificate sent to him by the authorised officer. 8-G. Application of certain provisions of Income-tax Act. The provisions of the Second and Third Schedules to the Income-tax Act, 1961 (43 of 1961) and the Income-tax Certificate Proceedings rules, 1962, as in force from time to time, shall apply with necessary modifications as if the said provisions and the rules referred to the arrears of the amount mentioned in section 8 of this Act instead of to the income-tax: Provided that any reference in the said provisions and the rules to the ".assessee". shall be construed as a reference to an employer as defined in this Act.".
38. Rules 2, 9, 12 and 16 of the Second Schedule to the Income Tax are relevant and those provisions are extracted hereunder: ".2. Issue of notice. When a certificate has been drawn up by the Tax Recovery Officer for the recovery of arrears under this Schedule, the Tax Recovery Officer shall cause to be served upon the defaulter a notice requiring the defaulter to pay the amount specified in the certificate within fifteen days from the date of service of the notice and intimating that in default steps would be taken to realise the amount under this Schedule.
9. General bar to jurisdiction of civil courts, save where fraud alleged. Except as otherwise expressly provided in this Act, every question arising between the Tax Recovery Officer and the defaulter or their representatives, relating to the execution, discharge or satisfaction of a certificate, or relating to the confirmation or setting aside by an order under this Act of a sale held in execution of such certificate, shall be determined, not by suit, but by order of the Tax Recovery Officer before whom such question arises : Provided that a suit may be brought in a civil court in respect of any such question upon the ground of fraud.
12. Removal of attachment on satisfaction or cancellation of certificate. Where- (a) the amount due, with costs and all charges and expenses resulting from the attachment of any property or incurred in order to hold a sale, are paid to the Tax Recovery Officer, or (b) the certificate is cancelled, the attachment shall be deemed to be withdrawn and, in the case of immovable property, the withdrawal shall, if the defaulter so desires, be proclaimed at his expense, and a copy of the proclamation shall be affixed in the manner provided by this Schedule for a proclamation of sale of immovable property.
16. Private alienation to be void in certain cases. (1) Where a notice has been served on a defaulter under rule 2, the defaulter or his representative in interest shall not be competent to mortgage, charge, lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer, nor shall any civil court issue any process against such property in execution of a decree for the payment of money. (2) Where an attachment has been made under this Schedule, any private transfer or delivery of the property attached or of any interest therein and any payment to the defaulter of any debt, dividend or other moneys contrary to such attachment, shall be void as against all claims enforceable under the attachment.".
39. Based on the certificate issued by the Authorized Officer under the EPF Act that an establishment is in arrear payable to EPFO, the Recovery Officer under the EPF Act is empowered statutorily to attach the immovable properties of the establishments and also to sell those immovable properties, in view of Sections 8-B and 8-G of the EPF Act read with the rules referred to above under the Second Schedule to the Income Tax Act.
40. The EPF Act is a beneficial legislation providing for various benefits to the workmen including pension. The EPF Act itself provides power to recover the amount from the defaulting establishments by attachment and sale of the properties of those establishments. The relevant provisions under Sections 8-B, 8-C and 8-G of the EPF Act in this regard are extracted above.
41. Those provisions make it very clear that the Recovery Officer can statutorily effect attachment and thereafter bring the property to sale. Though the entire property measuring 3.95 acres were attached by the Recovery Officer, EPFO, in the year 2003 itself, the properties measuring 1 acre and 25.46 cents alone were brought to sale by issuing the proclamation of sale dated 04.06.2010 and the public auction was fixed on 07.07.2010.
42. Clause (ii) of the said Proclamation of Sale fixed a reserve price at Rs.2,43,29,000/- (Rupees two crores forty three lakhs and twenty nine thousand only). The proclamation declared that the MTML was the defaulter and to pay Rs.1,88,03,061/- (Rupees one crore eighty eight lakhs three thousand and sixty one only).
43. Clauses (iv) and (vii) of the proclamation of sale are relevant and the same are extracted hereunder : ".(iv) The highest bidder shall be declared to be the purchaser of any lot provided always that his legally qualified to bid and provided further that ".the amount bide by him is not less than the reserve price". it shall be in the discretion of the undersigned to decline acceptance of the highest bid when the price offered appears so clearly inadequate so to make it inadvisable to do so. ...... (vii) In the case of immovable property, the person declared to be the purchaser shall pay immediately after such declaration a deposit of twenty five percent on the amount of his purchase money to be officer conducting the sale and in default of such deposit, the property shall forthwith be put up again and resold. The full amount of the purchase money payable shall be paid by the purchaser to the undersigned on or before 15 days from the date of the sale of the property, exclusive of such day, or if 15th day, be a Sunday or other holiday, then or the first office day after the 15th day. In default of payment within the period mentioned above, the property shall be resold, after the issue of fresh proclamation of sale. The deposit, after defraying the expenses of the sale, may, if the undersigned thinks fit, be forfeited to the Employees' Provident Fund and the defaulting purchaser shall forfeit all claims to the property or to any part of the sum for which it may subsequent be sold.".
44. As per Clauses (iv) and (vii) of the proclamation of sale, the highest bidder shall pay 25% of the bid amount immediately. He shall pay the balance amount on or before 15 days, otherwise, it is clearly stated that the property shall be resold after the issue of fresh proclamation of sale. The proclamation contains the schedule of property, wherein, the details of the property are mentioned that were brought to sale. As per the schedule, the property was the bungalow and the land measuring 125.46 cents of MTML in survey No.25/6/4 and 25/6/5 at Kodaikanal Taluk in the present ward C, Block 15 and T.S.No.21 and the boundaries of the land are also mentioned in the Schedule.
45. It is true that the fifth respondent was the highest bidder on the date of sale, i.e., 07.07.2010. He offered to buy at 2.48 crores. He also deposited Rs.87 lakhs immediately. For reasons best known to him, he admittedly did not deposit the balance purchase amount within 15 days from the date of sale, as mandated in the Clause (vii) of the Proclamation of Sale. Since he failed to comply with Clause (vii) of the Proclamation of Sale, he shall forfeit all his claims to the property. The property shall be brought to resale, in those circumstances. Reference can be made to the following judgments : (1)Himadri Coke & Petro Ltd., V. Soneko Developers (P) Ltd. And others reported in (2005) 12 SCC364 (2)C.N.Paramasivam and another v. Sunrise Plaza, rep. By its partner, Kalyanasundaram and others reported in 2010 (3) CTC372 (3)Sri Anbalayam Textiles Private Ltd., rep. By its Chairman P.Veerasamy V. The Chairman-cum-Managing Director, T.N. Industrial Investment Corporation Ltd. And others reported in 2011 (6) CTC858; and (4)P.Kumaran V. The Debts Recovery Appellate Tribunal and Others reported in 2011 (6) CTC349 46. The only impediment now is that the third respondent has executed two sale deeds in the meantime by selling some lands of MTML and in one of the sale deeds, 30 cents out of 125.46 cents was sold and as stated above, 125.46 cents was brought to sale by issuing proclamation of sale of 04.06.2010. The third respondent is the power agent of MTML. The general power of attorney dated 03.07.2009 was issued by Mr.AL.Lakshmanan, Managing Director, MTML. The recitals of the general power of attorney document is extracted hereunder: ".Whereas I am the Managing Director of M/s.Mahalakshmi Textile Mills Ltd., located at Pasumalai, Madurai-625 004, who is in physical possession of the Schedule mentioned properties for and on behalf of the Mills. And whereas this spinning Mill has been closed and the company has become defunct. And whereas since the Schedule property is located at Kodaikanal which is under attachment made by Employees Provident Fund Department, and also Tamilnadu State Sales Tax Department. And whereas there were heavy loans payable to the Tamil Nadu Industrial Investment Corporation Ltd., and as such the said corporation took over possession of the entire properties of the mill inclusive of the Schedule mentioned properties. And whereas all the Directors have left the management leaving the same to be dealt with by me and to clear the debts. And whereas I have cleared the entire dues payable to Tamil Nadu Industrial Investment Corporation Ltd., and in consideration of the same, the said Corporation has handed over all the properties to me as per their communication dated 20.12.2004. And whereas negotiations have to be initiated with Employees provident fund Department, Sales Tax Department, and other Departments of Central and State Government to arrive at the actual amount payable to them to them to get the schedule mentioned properties released. And whereas the schedule mentioned property has to be sold and from out of the sale consideration debts of the mill have to be cleared in proportion. Considering all the above requirements and since it is difficult for me to manage the schedule mentioned properties by residing at Madurai, I hereby constitute and nominate Mr.Vaigai Durai, S/o.P.Sundararaj residing at Door No.10-1-10F, Anna Nagar, Pattiveeran Patti, Nilakottai Taluk, Dindigul District as my Power of Attorney.".
47. The aforesaid recital makes it clear that the property of MTML suffered attachment at the hands of EPF Department. Further there were 12 duties were assigned to the power of agent as per the power deed. We are concerned with duties 1 to 5. Those duties, as mentioned in the power deed, are extracted hereunder: ".1. He shall manage the schedule mentioned properties by taking physical possession with immediate effect.
2. He shall negotiate with intending purchasers and finalise the sale negotiation. He can enter into sale agreements with intending purchasers and receive advance and pass on necessary receipts.
3. He shall execute the sale deed either in full or in part on behalf of the Mills and present the same for registration after receiving the entire sale consideration.
4. He shall pay the amount to I.C.I.C.I. Bank as settled by me and receive the documents connected with the schedule mentioned properties.
5. He shall pay the ascertained amount to the Employees provident fund and sales tax and get the schedule mentioned properties relieved from attachment.".
48. Therefore, the third respondent, power agent, was well aware of the fact that the property in respect of which he was given power was attached by the EPFO. That is, the properties covered by the power deed was attached by EPFO before the execution of power deed.
49. At this juncture, it is relevant to take note of the submission made by the learned counsel for the third respondent that MTML sold the properties that were attached by EPF and that therefore, the sale deeds executed by him in favour of his wife also could not be interfered with.
50. As stated above, MTML filed counter-affidavit that MTML did not sell any portion of 125.46 cents and sale was made by MTML only from 2 acres and 69.54 cents in 1987, i.e., before attachment. The paragraph 6 of the counter- affidavit of MTML was extracted hereinabove in this regard. We are not concerned with various sales that took place in respect of 2 acres 69.54 cents. We are concerned with 1 acre and 25.46 cents that were brought to sale by EPFO by issuing proclamation of sale on 04.06.2010. Therefore, the submission of the learned counsel for the third respondent has no merit.
51. The main crux of the submission of the learned counsel for the third respondent is that the writ petition is not maintainable and the only remedy available for the EPFO authorities seeking to cancel the sale deeds executed by the third respondent in favour of his wife is before the Civil Court. The submission of the learned counsel deserves to be rejected for more than one reason. The lands covered under the sale deeds executed by the third respondent in favour of his wife are already under attachment. This is not in dispute as the same is found even in the power deed. This attachment is not pursuant to an order by any civil court based on a decree of a civil court. On the other hand, the attachment was statutorily made under Sections 8-B, 8-C and 8-G of the EPF Act read with Second and Third Schedule to the Income Tax, 1961.
52. At this juncture, it is relevant to take note of Clause 9 of Second Schedule of the Income Tax Act. Clause 9 makes it clear that there is a bar for civil suit in the matter of recovery proceedings pursuant to the attachment and sale of the properties under the Second Schedule of the Income Tax Act. Therefore, the only remedy available to EPFO is to approach this Court questioning the action of any statutory violation by the parties.
53. Here, the third respondent sought to alienate the property that was attached under Sections 8-B, 8-C and 8-G of the EPF Act. By virtue of Section 8-G of the EPF Act, the Second Schedule to the Income Tax Act shall applicable to the recovery proceedings initiated by the Recovery Officer of the EPFO. As per Rule 12 of the Second Schedule to the Income Tax Act, which is extracted above, the only option open to the third respondent is to pay the dues to the Recovery Officer so as to get the attachment released. Without releasing attachment, the third respondent cannot sell the property, since such sale is void. But, the third respondent sought to effect sale in favour of his wife and sale proceeds were not admittedly paid to the EPF authorities or Sales Tax Department as mentioned in the power deed. 54.1. Since the attachment under Sections 8-B and 8-G of the EPF Act read with Rules under the Second Schedule to the Income Tax Act of the property measuring 125.46 cents was intact, the sale deeds executed by the third respondent in document No.2441 of 2009 for the lands measuring 30 cents out of 125.46 cents shall be void as declared by Rule 16(2) of the Second Schedule to the Income Tax, 1961. 54.2. In this regard, the following four decisions, namely, (I) Division Bench judgment of the Andhra Pradesh High Court in Kapurchand Shrimal vs Tax Recovery Officer, Hyderabad, reported in 1967 64 ITR1[AP]., (II) Judgment of the Apex Court in Nancy John Lyndon Vs. Prabhati Lal Chowdhury and others reported in (1987) 4 SCC78 (III) Judgment of this Court in Palani Gounder (Decd.) and Others V. Income Tax Revenue Department and others, reported in 1998 (229) ITR59(Mad.) and (IV) Judgment of this Court in Abdul Jamil and 5 Others Vs. The Secretary, Income-Tax, reported in 1998 (1) CTC547are dealt with hereunder: (I) A Division Bench of the Andhra Pradesh High Court in the judgment in Kapurchand Shrimal vs Tax Recovery Officer, Hyderabad, reported in 1967 64 ITR1[AP]. held in categorical terms that the alienation to the property under attachment shall be void as per Rule 16(2) of the Second Schedule to the Income Tax Act. In fact, it is held that even before the attachment, after the issuance of certificate by the Authorised Officer to the Recovery Officer, any dealing in relation to the property by the defaulter is prohibited by Rule 16(1) of the Second Schedule to the Income Tax Act. The objection of the defaulter raised therein that such a restriction would amount to infringement of the fundamental rights guaranteed under Article 19(1)(g) of the Constitution of India was rejected. The following passages in the said judgment is extracted in this regard: ".We, are, therefore, of the view that once a notice has been served and, as a matter of fact, even before any attachment is made, the defaulter cannot deal with his properties in any manner. If there is any dealing with the property, whether movable or immovable, after the receipt of the notice, the defaulter would be contravening the provisions of rule.
16. Any such private alienation made would be void in certain cases as is clear from the marginal note of rule 16 (1) : ".Private alienation to be void in certain cases".. Sub-rule (2), which is in similar language to section 64 of the Civil Procedure Code, makes the transfer or delivery of the property after the attachment void but it is only void against all claims enforceable under the attachment. To our minds, even the dealing with property under sub-rule (1) would appear to be void because, when a person is not competent to deal with the property, those transactions are void as against claims enforceable under the demand. This is made clear by a further provision in sub-rule (1) prohibiting civil courts from issuing any process against such property in execution of a decree for payment of money. The contention of Sri D. Narasa Raju, the learned counsel, is that this prohibition would fetter the right to carry on business or to hold property and would be repugnant to the fundamental rights guaranteed under article 19(1)(g) of the Constitution. We do not agree with the learned counsel. There is no prohibition under rule 16(1) for a defaulter to do business. What is prohibited is that the defaulter shall not dispose of his property without the permission of the Tax Recovery Officer. By this restriction it cannot be said that the appellant is totally prohibited from carrying on the business. The restriction placed under the rule is a reasonable restriction. The contention of Sri. D. Narasa Raju is that the restriction does not seem to be reasonable but is most unreasonable as the prohibition is indefinite, not restricted to any period, and there is no standard laid down when the permission is to be given and the authority has an absolute and uncontrolled power. From the mere fact that the prohibition is indefinite and some restriction are placed on dealing with the properties under this rule, it cannot be said that absolute and uncontrolled power is given to the authorities, when it has clearly laid down how and in what manner the power has to be exercised. Further, article 19(1)(g) refers to practicing any profession or carrying on any occupation, trade or business, and it is only if those rights are interfered with, the question of affecting the fundamental rights would arise. Rule 16(1) only refers to the competency of the defaulter in mortgaging or creating a charge, leasing or otherwise dealing with property belonging to him. There is, therefore, no question of the fundamental rights guaranteed under article 19(1)(g) being affected. Further, it may be noted that the right to carry on trade or to hold property or to do business is subject to the liability to pay the debts incurred by the persons, whether in the course of the business or otherwise. To hold that property cannot be attached or transfers cannot be interdicted by operation of law or by order of a court under any law intended for the protection of the rights of the creditors, would amount to conferring a new fundamental right, viz., freedom from discharging debts and obligations, which certainly could not have been envisaged by the framers of the Constitution. Take the case of an insolvent. Under section 28 of the Provincial Insolvency Act all the property of the insolvent vests in the official receiver who holds it for the benefit of the creditors. Can the insolvent challenge it on the ground that he, by the process of the property vesting in the official receiver, is not able to do his business or hold the property, and thus his fundamental rights are affected ?. Our answer is that he cannot challenge. Take another instance. On the allegation of a party to a litigation that the man in possession is committing waste a receiver is appointed under Order 40, rule 1, and he dispossesses the person in possession. Can the person dispossessed complain that by this process of the property being taken away by the receiver, his fundamental right of carrying on his business or occupation is affected ?. So also can a person against whom an injunction is issued under Order 39, rule 1, Civil Procedure Code, complain in a like manner ?. Our answer is a simple ".no".. Similarly, in execution of a decree, where property is attached by a court for its discharge, it will be too much to say that by so doing the fundamental right to the property is affected. The provisions contained in rule 16 are of a similar nature. The defaulter under the above rule is not prohibited from carrying on the business. What is prohibited is that he shall not dispose of his property without the permission of the Tax Recovery Officer when the demand is outstanding. As long as he meets these demands from out of the property, there is no question of imposing any fetter on his business or trade. What rule 16 enjoins is that, during the subsistence of these demands, the defaulter should not deal with property without the permission of the Tax Recovery Officer. In the view we are taking, we cannot accept the contention of the learned counsel, Sri. D. Narasa Raju, that rule 16 imposes an unreasonable restriction.". (II) The Apex Court judgment in Nancy John Lyndon Vs. Prabhati Lal Chowdhury and others reported in (1987) 4 SCC78 (i) This case does not arise out of the attachment or sale made under the rules of the Second Schedule to the Income Tax Act. It arose out of the sale of property made in contravention of Section 64 of the Code of Civil Procedure. The appellant before the Apex Court filed an execution petition before the First Sub Judge at Alipore in West Bengal on 31.07.1970, pursuant to a decree of a civil court, for attachment of the land belonging to the judgment-debtor. On 03.08.1970, the attachment of the property of the judgment-debtor was made by the executing court. Thereafter, on 14.09.1970 judgment-debtor sold a portion of the attached property to another person. The property was brought to sale by the execution court by issuing a proclamation of sale. At this juncture, the purchasers filed an application for release of the property from attachment. That application was rejected by the execution court on 11.08.1980. The matter was taken to the Calcutta High Court by way of appeal. The appeal was allowed on 16.03.1982. The appellant before the Apex Court is the Decree-holder, who filed the execution application. (ii) The plea was that in view of Section 64 of the Code of Civil Procedure, the sale by the judgment-debtor during the period of attachment is void. Accepting the same, the Apex Court reversed the order of the High Court and restored the order of the execution court. (iii) Rule 16(2) of the Second Schedule to the Income Tax Act and Section 64 of the Code of Civil Procedure are in pari materia. (iv) Therefore, the sale executed by the third respondent in this case shall be void as per the pronouncement of the Apex Court. (III) The judgment of this Court in Palani Gounder (Decd.) and Others V. Income Tax Revenue Department and others, reported in 1998 (229) ITR59(Mad.). (i) In this judgment, this Court has clearly held that the sale deed executed in contravention of Rule 16(2) of the Second Schedule to the Income Tax Act is void. (ii) The appellants in that case before this Court were the purchasers of the lands belonging to the defaulter and those lands of the defaulter were attached by the Recovery Officer of the Income Tax. The Recovery Officer sought to bring to sell those properties that were purchased by the appellants before this Court. The appellants, therefore, filed suit before the trial court for declaration to declare that the purchase of the suit properties on 28.09.1966 for a valid consideration from the defaulter by way of sale deed is not void. They also sought for an injunction restraining the Recovery Officer from proceeding against the property. The suit was dismissed. The first appellate court confirmed the same. This Court also dismissed the Second Appeal. (iii) It was contended by the appellants that there were no attachment made as on 28.09.1966 when the purchase was made by the appellants from the defaulter. (iv) The Recovery Officer contended that the sale took place after the certificate of arrears was issued by the Income Tax Officer to the Recovery Officer and notices were served based on those certificate on the defaulter. (v) In the circumstances, though no attachment of the property was made, this Court held that there is a prohibition under Rule 16(1) of the Second Schedule to the Income Tax Act that the defaulter shall not be competent to mortgage, charge or lease or otherwise deal with any property belonging to him except with the permission of the Recovery Officer, if notice was served on the defaulter to pay arrears. (vi) In this regard, the following passages from the said judgment in 1998 (229) ITR59(Mad.) are extracted hereunder : ".The Second Schedule to the Income-tax Act is a detailed and self- contained Schedule which deals fully with the modes for the recovery of tax arrears. Rule 2 of the Second Schedule provides that when a certificate is received by the Tax Recovery Officer from the Income-tax Officer for the recovery of arrears under the Schedule, the Tax Recovery Officer shall cause to be served upon the defaulter a notice requiring the defaulter to pay the amount specified in the certificate within 15 days from the date of service of the notice and intimating that in default steps would be taken to realise the amount under the Schedule. Rule 16(1) of the same Schedule provides that when a notice has been served on a defaulter under rule 2, the defaulter or his representative-in-interest shall not be competent to mortgage, charge or lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer, nor shall any civil court issue any process against such property in execution of a decree for the payment of money. ..... A reading of the above said rule shows that the Tax Recovery Officer has to serve a notice on the defaulter, requiring the defaulter to pay the amount specified in the certificate within 15 days from the date of the service of the notice and also intimating the defaulter that the steps will be taken to realise the amount under the Schedule. In other words, the rule mentioned above makes it clear that me nonce must contain one details of the arrears towards the income- tax and the time within which the amount to be paid. In order to given opportunity to the defaulter, all necessary things have to be mentioned in the notice under rule 2. In this respect, it is the contention of learned counsel for the respondents that though the notice under rule 2 has not been served prior to exhibit A-1, other notices mentioning the tax arrears and the time within which the defaulter has to settle the amount have been sent and as a matter of fact, the defaulter himself gave an undertaking before the officer that he would pay the tax amount, if sufficient time is granted. In other words, even though no specific notice under July 2 was given, the necessary ingredients mentioned in rule 2 have been fully satisfied by the Department by sending various notices prior to exhibit A-1. Hence, the contention of learned counsel for the appellants that the entire proceedings are vitiated because of non- compliance with rule 2 cannot be accepted.". (vii) The said case was covered under Rule 16(1) of the Second Schedule to the Income Tax Act, but this case is covered under Rule 16(2) as admittedly, attachment of the property was effected, which is now sold by the third respondent. Since, this case is covered by Rule 16(2), it is placed on a better footing than the case referred to above. (viii) In the above referred judgment, no attachment of the property was made. Even in those cases, this Court held that the defaulter cannot sell away the property, once the due was ascertained and certificate of due was issued. In this case, after issuing notice by the Authorised Officer, the Recovery Officer also effected attachment long back to the sale made by the third respondent. Therefore, the sale shall be void. (IV) The judgment of this Court in Abdul Jamil and 5 Others Vs. The Secretary, Income-Tax, reported in 1998 (1) CTC547: (i) This case is identical to the case reported in 1998 (229) ITR59(Mad.), referred to above. In that case, the person who purchased the property pleaded that he was an innocent purchaser from the defaulter and being the bonafide purchaser, the purchase made by him from the defaulter shall be protected due to Section 53 of the Transfer of Property Act. But the said contention was rejected by this Court. (ii) In that case, the purchaser purchased the property from the defaulter on 27.06.1968. Before the sale was effected, the certificate was issued by the Income Tax Officer for recovery on 17.02.1965 and three more certificate were issued on 20.01.1966, 16.03.1967 and 18.07.1968. As stated above, the purchase took place on 27.06.1968 long after the issue of certificate to the defaulter. On 28.12.1971, the Recovery Officer intimated to the defaulter about the illegal transfer of the properties. Subsequently, the properties were attached on 10.01.1972. Thereafter, the Recovery Officer issued an order on 01.06.1974 declaring that the sale is void. (iii) In those circumstances, the purchaser filed a suit before the Sub Court, Dindigul, for declaration that the purchase is not void and the purchaser sought for an injunction restraining the Recovery Officer from proceeding against the property. The purchaser also sought for declaration that the order of the Recovery Officer dated 01.06.1974 holding the said is void as illegal. (iv) The said suit was dismissed. The first appellate court confirmed the same. This Court also rejected the Second Appeal after extracting the above paragraph in the judgment in Palani Gounder (Decd.) and Others V. Income Tax Revenue Department and others, reported in 1998 (229) ITR59(Mad.) in paragraph 17. (v) In the said judgment in 1998 (1) CTC547 it is held in paragraph 18 as hereunder: ".18 In view of the well laid principles, I do not think it is necessary to deal with the contention elaborately, since I am entirely in agreement with the above said principles. In view of this, the contention of the counsel for the appellants cannot be countenanced.". (vi) In view of the aforesaid categorical pronouncement of this Court, in this case, there is no impediment for the Recovery Officer to proceed further with the property measuring 125.46 cents in Kodaikanal ignoring the sale deeds executed by the third respondent, since those sale deeds are void in view of Rule 16(2) of the Second Schedule to the Income Tax Act.
55. The reliance placed by the learned counsel for the third respondent on the Full Bench judgment in Latif Estate Line India Ltd. V. Hadeeja Ammal reported in (2011) 2 MLJ569is of no use to the third respondent. The issue arises for consideration before the Full Bench is relating to the sale deed pursuant to contractual obligations and the Full Bench had no occasion to consider the effect of statutory attachment and statutory sale as provided under the EPF Act or any other similar Act.
56. In my view, if the attachment and sale falls under the EPF Act, the only remedy available for the EPFO is before this Court and no remedy is available before the civil court, as there is a specific bar to approach the civil court in this regard. The relevant provisions are extracted above. Hence, the Full Bench judgment is of no use to the learned counsel for the third respondent.
57. In view of the aforesaid conclusions, it is not necessary for cancellation of those sale deeds and I have no hesitation to declare that those sale deeds are void following the judgments of the Apex Court, Andhra Pradesh High Court and this Court referred to above.
58. The Recovery Officer, in view of the settled position of law in those judgments, can proceed very well by issuing fresh proclamation of sale in relation to the property measuring 125.46 cents at Kodaikanal.
59. The submissions of the learned counsel for the petitioner/EPFO that the EPF authorities are willing to return the amount deposited by the fifth respondent, the highest bidder, at the time of fresh auction sale subsequent to proclamation of sale, after defraying the sale expenses that was incurred in the process of proclamation of sale dated 04.06.2010 and the EPF authorities would be satisfied that the sale deed registered in document No.2441 of 2009 is set aside enabling them to get lands to an extent of 125.46 cents at Kodaikanal for fresh auction sale and they are not pressing their claim in respect of document No.2442 of 2009, are recorded.
60. In view of the above discussions, both the writ petitions are disposed of with the following directions : (i) The sale deed executed by the third respondent in document No.2441 of 2009 in the office of the Sub Registrar, Kodaikanal, in favour of his wife, the fourth respondent in W.P.(MD)No.11726 of 2010 is void in view of Rule 16(2) of the Second Schedule to the Income Tax Act and the four judgments referred to above. (ii) The Recovery Officer, EPFO, Madurai, is directed to conduct fresh auction sale in respect of the property measuring 125.46 cents in old Survey Nos.25/6/4 and 25/6/5 and present Taluk Survey No.21, Block 15, Ward C of Kodaikanal Taluk belonging to MTML after fresh sale proclamation. (iii) The Recovery Officer, EPFO, Madurai, is directed to deposit the balance amount, after adjusting the dues payable to EPFO by the MTML from and out of sale consideration, before the Joint Commissioner of Labour, Madurai. (iv) The Joint Commissioner of Labour, Madurai, is directed to disburse the amount deposited by the Recovery Officer, EPFO, Madurai, proportionately to the workmen, by ascertaining the dues payable to the workmen by MTML. The Joint Commissioner of Labour, Madurai, is directed to involve MTML and all the registered trade unions exposing the cause of workers of MTML. (v) The Additional Central Provident Fund Commissioner, Tamil Nadu and Kerala, Chennai, is directed to suitably instruct the Recovery Officers throughout the region that they can ignore sale or alienation, if any, made by the defaulter establishment after certificate was issued by the Authorised Officer, in view of Rule 16 of the Second Schedule to the Income Tax Act declares such sale as void and also in view of the settled position of law as declared in the four judgments referred to above, namely, (I) Division Bench judgment of the Andhra Pradesh High Court in Kapurchand Shrimal vs Tax Recovery Officer, Hyderabad, reported in 1967 64 ITR1[AP]., (II) Judgment of the Apex Court in Nancy John Lyndon Vs. Prabhati Lal Chowdhury and others reported in (1987) 4 SCC78 (III) Judgment of this Court in Palani Gounder (Decd.) and Others V. Income Tax Revenue Department and others, reported in 1998 (229) ITR59(Mad.) and (IV) Judgment of this Court in Abdul Jamil and 5 Others Vs. The Secretary, Income-Tax, reported in 1998 (1) CTC547and that they can proceed further to bring the property to sale, etc., No costs. Consequently, connected miscellaneous petition M.P.(MD)No.2 of 2010 in W.P.(MD)No.11726 of 2010 and M.P.(MD)Nos.1 of 2012 in W.P.(MD)No.8972 of 2012 are closed. As stated above, M.P.(MD)Nos.2 to 6 of 2012 in W.P.(MD)No.8972 of 2012 are DISMISSED. gg To 1. The Inspector General of Registration, 100, Santhome High Road, Chennai - 600 028.
2. The Sub-Registrar, Sub-Registrar Office, Kodaikanal.
3. The Recovery Officer, Employees' Provident Fund Organization, Regional Office, Door No.1, Lady Doak College Road, Chokkikulam, Madurai 625 002.