Wardex Pharmaceuticals Pvt. Ltd. Vs. Commissioner of Income-tax - Court Judgment

Excerpt:
- securitisation & reconstruction of financial assets & enforcement of security interest act, 2002 [c.a. no. 54/2002]section 17; power of tribunal to impose condition relating to deposit for grant of stay of auction held, there is no specific provision made under section 17 of securitisation act or under any other provisions of the said act empowering the tribunal to pass any interim order. but under sub-section (12) of section 19 of the recovery of debts due to banks and financial institutions act, 1993, the tribunal has been empowered to pass various interim orders. if sub-section (7) of section 17 of securitisation act is read along with sub-section (12) of section 19 of recovery of debts due to bank is and financial institutions act, it would be clear that the tribunal also has jurisdiction to pass interim orders under section 17 of the securitisation act in appropriate cases. the tribunal is empowered to grant interim stay subject to such conditions as may be deemed proper including condition of deposit. even under section 69 of the transfer of property act, the only remedy of the borrower whose mortgage has invoked section 69 of the transfer of property act, is to file a civil suit and in such suit the court has power to grant injunction and to impose condition for the grant thereof--section 17; [a.p. shah c.j., f.m. ibrahim kalifulla & v. ramasubramanian, jj] proceedings under section 17 power of the tribunal to pass any interim order held, once the possession of the secured asset is taken, there would be no occasion for the tribunal to order redelivery of possession till final determination of the issue. in other words, it is only when the tribunal comes to the conclusion that any of the measures, referred to in section 13 (4) taken by the secured creditor are not in accordance with the provisions of the act and the rules made thereunder, then only the tribunal can restore possession of such secured assets to the borrower. by virtue of sub-section (7) of section 17 of the securitisation act read with section 19 (12) of the recovery of debts due to banks and financial institutions act the tribunal undoubtedly possess ancillary power to pass interim orders subject to the conditions as it may deems fit and proper to impose, but it does not in any way override the special provisions contained in section 17(3) of the securitisation act. the statutory scheme of the securitisation act is such that the borrower could take recourse to application under section 17 only if one or other measure is taken by the secured creditor, and the tribunal can restore the status quo ante only if it comes to the conclusion that any of the measure taken by the secured creditor is not in accordance with the provisions of the act. the scheme cannot be bypassed by issuing a mandatory order for redelivery of the possession before conclusion of the proceedings under section 17--sections 17, 13 (4); [a.p.shah, c.j., f.m. ibrahim kalifulia &v. ramasubramanian, jj] scope of enquiry under section 17 held, the main purpose of the securitisation act, and in particular section 13 thereof, is to enable and empower the secured creditors to take possession of their securities and to deal with them without the intervention of the court. therefore, in an application under section 17, the tribunal is concerned only with the validity of the acts of the secured creditor in taking possession of the securities and dealing with the same under section 13. all such grounds, which would render the action of the bank/financial institution illegal, can be raised before the tribunal in the proceedings under section 17. it is for the tribunal to decide in each case whether the action of the bank was in accordance with the provisions of the act and legally sustainable. however, while considering the question of validity of the action of the bank, it is not necessary for the tribunal to adjudicate the exact amount due to the secured creditors. in other words, the purpose of an application under section 17 is not the determination of the quantum of claim per se as the tribunal is concerned with the issue of the validity of the measures taken by the banks/financial institutions under section 13(4)--sections 17(4), 13(4) ; [a.p. shan c.j.,f.m.ibrahim kalifulla & v. ramasubramanian, jj] appeal right of bank held, the right of the bank is not automatically suspended upon filing of an appeal by borrower under section 17 of the securitisation act and the bank as secured creditor can proceed to auction secured asset where no stay is granted by the tribunal. there is nothing in section 17 of the securitisation act which would indicate that the legislature intended that there would be automatic stay of recovery proceedings by bank under section 13(4) on filing an appeal by borrower under section 17. use of the expressions if and then under section 17 would not mean that the bank can take one or more measures laid down under section 13(4) only if the tribunal declares that the action taken already is in accordance with the provisions of the securitisation act and the rules made thereunder. use of the word if does not connote a condition precedent. it is a recognised rule of interpretation of statutes that expressions used therein should ordinarily be understood in a sense in which they harmonized with the object of the statute and which effectuate the object of the legislature. the provisions of section 17 must, therefore, receive such construction at the hands of the court as would advance the object and at any event not thwart it. in other words, the principle of purposive interpretation should be applied while construing the said provisions. the securitisation act is enacted to provide a speedy and summary remedy for recovery of thousands of crores which were due to the banks and financial institutions. n.v. balasubramanian, j.1. the assessee is a company. in the previous year ended march 31, 1979, relevant to the assessment year 1979-80, the assessee had placed an order on april 6, 1978, with one kodiyar chemical corporation of bombay for a supply of 10 kgs. of vitamin b-12 crystals at rs. 85 per gram to be supplied during the month of november and december, 1978, and in january, 1979. the offer was also accepted on april 11, 1978. however, this contract was cancelled on october 30, 1978, on the ground that the assessee did not require the material at that time. by a letter dated november 4, 1978, the supplier protested against the concellation and on january 10, 1979, an agreement was reached, wherein, the assessee agreed to pay a compensation towards the breach at the rate of rs. 20 per gram and there was a debit of rs. 2 lakhs which was sent by a demand draft on march 31, 1979, and the supplier acknowledged-it onmay 9, 1979. it is also stated that there was another transaction by which the assessee agreed for purchase of goods on import entitlement of the value of rs. 10 lakhs for a premium of rs. 8 lakhs under an agreement dated august 7, 1978, with one ashwin trading company. on november 29, 1978, the assessee stated that it was arranging for funds and on december 19, 1978, this agreement was repudiated. this transaction was also settled by payment of rs. 3 lakhs on february 2, 1979, the amount being sent by a telegraphic transfer to the credit of ashwin trading company and acknowledged by it on may 15, 1979. it is relevant to note that the company is a proprietary concern of one mr. zatakia and when he was examined by the assistant director of inspection, he stated that the money was immediately drawn from the bank and handed over back to mr. mohanchand dada, the director of the assessee-company, and that he had received only a sum of rs. 10,000 as commission. the income-tax officer, on the basis of the material came to the conclusion that the payments were not genuine and he rejected the assessee's claim for deduction of the amount on the ground that the assessee had not established that the transactions were true and genuine. the commissioner of income-tax (appeals) was of the view that the statement of zatakia could not be believed as it was a self-serving statement, but however, he held that the deduction could not be allowed as the transaction was to be regarded as a speculative transaction.2. the assessee filed an appeal against the order of the commissioner and has produced documentary evidence in support of the two transactions to show the transmission of money through banking channels and that the assessee had incurred expenditure and there was no evidence contra to the statement of one zatakia that he withdrew the money from the bank and gave it back to a director of the assessee-company. the appellate tribunal found that this issue was not properly considered by marshalling the necessary evidence to test the veracity of the charge because the commissioner of income-tax (appeals) had brushed aside the statement of zatakia as a self-serving statement repudiating the receipt of money. mr. zatakia stood to gain as he need not pay tax on it. the tribunal felt that the statement of zatakia requires close scrutiny as there were contradictions in his statement and his income-tax returns and the manner in which he had received the amount were not clarified. there was also no clarification from the assessee. the tribunal also felt that the question whether the alleged suppliers were actually in the trade of supplying chemicals and the appellate tribunal therefore remitted the matter to the income-tax officer for fresh consideration in accordance with law.3. the assessee filed an application to state a case to this court and the appellate tribunal has stated a case and the following question of law has been referred to us for our consideration at the instance of the assessee :'whether, on the facts and in the circumstances of the case, the tribunal was right in setting aside the order of the commissioner of income-tax (appeals) and remitting the matter back to the income-tax officer for fresh disposal in respect of payments made by the applicant to ashwin trading company and kodiyar chemicals corporation, bombay, when the question of genuineness of the transactions had become final and accepted by the department and admittedly the department has neither filed appeal or any cross-objections ?'learned counsel for the assessee submitted that the payments to ashwin trading company and kodiyar chemical corporation ltd., have been accepted as genuine and the tribunal was not correct in remitting the matter back to the income-tax officer for fresh disposal. we are of the view that the tribunal is correct in directing the matter back to the income-tax officer for fresh disposal as the question whether the payments made by the assessee were genuine and certain aspects on the question regarding the payments were required to be examined. the tribunal came to the conclusion that the evidence of mr. zatakia required close scrutiny as the statement made by mr. zatakia was conflicting. the tribunal also felt that the transactions between the assessee and ashwin trading company and kodiyar chemicals corporation ltd., bombay, have not been looked into as to whether they received the commission or not. therefore, according to the tribunal, the question as to whether the transactions were genuine or not has to be decided and in this view, directed the income-tax officer to verify the question as to whether the transactions were genuine or not. in our opinion, the tribunal has exercised its discretion properly and directed the income-tax officer to consider the question afresh. the tribunal had before it the entire assessment and it is well-settled that it has the jurisdiction and powers to pass such orders thereon as the circumstances of the case would warrant. the question whether the payments should be allowed or not was the issue before it and the tribunal has the necessary jurisdiction to remit the matter to consider the question whether the payments can be regarded as genuine or not. in the circumstances of the case, the view of the tribunal that the entire transactions should be looked into including the question of genuineness cannot be faulted as it felt that there was no full and proper investigation of the facts. we find that there is no error in the order of the tribunal in remitting the matter back to the income-tax officer to consider the question afresh as to whether the transactions were genuine or not.4. accordingly, we answer the question of law referred to us in the affirmative and against the assessee. the revenue shall be entitled to costs in the sum of rs. 750 (rupees seven hundred and fifty only).