M. Ramachandran, J. 1. The original petition has been filed by Smt. Moni Senan, who is the wife of Mr. Chandrasenan, an assessee under the Income-tax Act (PAN 46-011-PZ-9065). For the assessment years 1982-83 to 1987-88, there was non-remittance of tax. In respect of those years, the Settlement Commission on September 28, 1994, ordered that an amount of Rs. 34,16,388 is payable in four instalments- The amount was not paid and the Department had levied interest under Section 220(2) of the Income-tax Act, 1961. It comes to Rs. 84,64,563 and the total arrears aggregated to Rs. 1,18,80,951. Exhibit P-3 addressed to the petitioner is the notice issued by the Tax Recovery Officer whereby the petitioner was directed to pay the amount within 15 days of the receipt of the notice. Following exhibit P-3, as there was no payment made, notices had been issued proclaiming sale of immovable properties, jointly owned and possessed by the petitioner and Sri Chandrasenan. Item No. 1 was an extent of 25.452 cents of land, item No. 2, 6.508 cents, item No. 3, 7.867 cents and item No. 4, 4.69 cents. The first two items were proposed to be sold on February 22, 2000, and the rest, on the following day. The petitioner's husband had objected to the proposal on two grounds, viz., that the sale was bad as the proclamation was not in accordance with Rule 53(cc) of the Second Schedule to the Income-tax Act, and there was delay in bringing the properties for sale, and the proceedings were vitiated by limitation. Exhibit P-8 is the letter of objections.
2. By way of reply, it had been pointed out that a corrigendum had been issued in respect of two items of properties. The point of limitation also had been disputed. The text of the letter dated February 16, 2000, marked as exhibit P-9, is reproduced below :
"This is to intimate that the contentions raised in your above letter have been carefully considered by this office.
Please note that the income included in your total income is by way of your own income as well as the share income from the firm, Three Star Bottling Co. So far as share income is concerned, it has become final in terms of Rule 68B of the Second Schedule only when the Tribunal passed its appellate order dated April 17, 1995.
As regards reserve price, it is to be mentioned only when it has been fixed. As per departmental instructions, it can be kept as confidential. In any case, a corrigendum has already been issued in respect of two items of properties to be auctioned on February 22, 2000.
For the reasons stated the cancellation of proposed auction sale of properties does not arise."
3. The objection raised by the husband of the petitioner, therefore, was not reckoned and the original petition had been filed by the petitioner in the aforesaid circumstances. It had been stated that she was interested in the issue since the properties sought to be attached belonged to her and her husband was too ill, and hospitalised, and therefore, he was not in a position to make arrangements for filing an original petition.
4. Though an application for stay of the auction had been filed, no interim orders had been granted at that time, and the process had gone on. From the sale of three times it was possible to fetch a sum of Rs. 41 lakhs. The interlocutory application had come up for further hearing on March 21, 2000. Noticing the development, this court had ordered that in respect of the third item of property, viz., 7.867 cents of land, adjacent to M. G. Road, Ernakulam, the confirmation will be stayed for the time being as it had been reported that the highest bid was only Rs. 36.25 lakhs. The amount received in respect of the above was directed to be deposited in a public sector bank, on a fixed deposit. Therefore, the present scope of the original petition concerns only as to the legality of the auction that had been held in respect of item No. 3 of the properties, consequent to exhibit P-3.
5. In the meanwhile, one Thomas Vayalat had filed C. M. P. No. 18761 of 2000, for getting himself impleaded in the proceedings. He had been the auction purchaser of one of the said items which had been sold (item No. 3), and as the confirmation stood stayed, he too became a necessary party to the proceedings and was impleaded.
6. Counsel for the petitioner confined his arguments on the following points :
(a) The sale proclamations were illegal and could not have been acted upon.
(b) There was violation of Rule 53 of the Second Schedule of the Income-tax Act.
(c) In view of the above defect, she has been subjected to undue hardship and loss.
(d) The liabilities of Sri Chandrasenan were unrealistically boosted up, and properties far in excess of requirements have been brought to revenue sales, which was illegal.
7. As regards the contention on the issue of limitation, counsel had not made any submissions. Therefore, I am confining myself only as regards the validity of the sale proclamations and the effect thereof on the consequent sale.
8. As noticed earlier, the petitioner confined her submissions to the sale of item No. 3 alone. It was not the first time that the said property had been brought to sale. It is pointed out that the property admeasuring about seven cents lay in the heart of Ernakulam and on a previous occasion the upset price shown in the proclamation was in the region of 1.3 crores of rupees. The petitioner complains that in exhibit P-6 sufficient details had not been shown including the upset price, and there were only two participants in the auction. As a result, the property was auctioned for a ludicrously small amount of Rs. 36.25 lakhs. The suggestion is that this was even less than one-fourth of the market price of the said prime land.
9. According to counsel, the proclamation of sale, under Rule 53, should have incorporated all details that had been laid down, and there should have been strict adherence to the procedure prescribed, as the civil rights of parties were involved. In so far as a short work had been attempted to, the proclamation which preceded the sale was irregular, and consequently the sale carried out was unenforceable.
10. Mr. P.K. Raveendranatha Menon, senior standing counsel, points out that exhibit P-6 is the sale proclamation. That is dated January 17, 2000, and it conforms to the form prescribed. Reference is made to Rules 38 and 52(2) of the Second Schedule to the Income-tax Act, 1961. It describes the defaulter, the certificate number, and the order authorising the sale. The dues as on the date of the proposed sale, viz., February 23, 2000, are also incorporated therein. The place of sale also is specified, as the conference hall of the Central revenue building. General conditions are also prescribed, which, inter alia, prescribe that if the reserve price has been fixed, it will be taken care of. It is also stated that further details in respect of the property could be had from the Tax Recovery Officer, on any working day. The annexure to the notice gives the details of the property, and other details of encumbrances. According to him, the objections raised are unwarranted, if not frivolous. It is in this background that I have to examine whether the sale proclamation is defective.
11. The petitioner submits that it was a case of harassment by the Income-tax Department for over a decade. The property concerned was brought under attachment in the year 1984. During the period the property could have brought a handsome price, and the petitioner particularly points out that on an earlier occasion, the upset price had been put as Rs. 120 lakhs. This disclosed the range of the probable worth, and as the petitioner was totally restrained from negotiating, the present predicament had resulted. When a single item of property would have adequately wiped out the liabilities, the unrelenting attitude of the Department had directly resulted in prejudice. There was inaction all through out, and the petitioner points out that when the Department had security, the delay only helped them, as the interest in the meanwhile was mounting up. The petitioner could not enjoy the properties, nor could it be negotiated. The real estate prices had marginally come down, but none the less as the sale proclamation did not point out the upset price, the property has now been sold away for a fraction of its real worth, and the reason for the low price could directly therefore be attributable to the defective proclamation, and the oversight of the Department and there is direct violation of Rule 53 of the Second Schedule to the Income-tax Act.
12. The senior standing counsel for the Revenue had strongly justified the stand of the Revenue. In view of the default, an attachment of the properties was imperative and the consequential hardship was unavoidable, he submits. Repeated attempts were made to sell away the properties, and because of the objections raised by the petitioner, every time, the sale could not be carried out. It was admitted that on one occasion, honouring the wishes of the defaulter, the upset price of the item was notified as Rs. 120 lakhs. But there were no bidders. The petitioner was to thank herself for the present debacle experienced. The predicament pleaded was nothing new, as a defaulter invited prejudices automatically. He also submitted that the bidding in the latest auction was fair, there was sufficient publicity and apart from the officers of the Department, there were ten participants. The price quoted by the fourth respondent was assessed as reasonable, and it was in the above circumstances, that his bid was accepted.
13. The standing counsel also referred to the contentions raised in regard to Rule 53. He pointed out that the said rule could not be interpreted as suggested by the petitioner. It was not a mandatory requirement under the rule to show the upset price in every sale proclamation. Especially in respect of the properties which were in the higher brackets of prices, it had been generally found that the incorporation of an upset price, in fact never went to help the defaulter. He highlighted that the petitioner herself had experienced it on the earlier occasions. Counsel submitted that the delay on all occasions had been caused by the tactics employed by the petitioner, and there was no reason for blaming the Revenue for her present predicament.
14. The petitioner had reiterated the various instances whereunder, according to her, the burden of liability cast on the assessee had grown unbearable.
15. The foundation of the claim for declaring the Revenue sale as illegal is on the alleged defective sale proclamation made. I may extract Rule 53 of the Second Schedule to the Income-tax Act as following :
"53. A proclamation of sale of immovable property shall be drawn up after notice to the defaulter, and shall state the time and place of sale, and shall specify, as fairly and accurately as possible,--
(a) the property to be sold ;
(b) the revenue, if any, assessed upon the property or any part thereof ;
(c) the amount for the recovery of which the sale is ordered ;
(cc) the reserve price, if any, below which the property may not be sold ; and
(d) any other thing which the Tax Recovery Officer considers it material for a purchaser to know, in order to judge the nature and value of the property."
16. The statement about reserve price, coming under Clause (cc) cannot be treated as a mandatory requirement, by the terms of the rules, submits the senior standing counsel. On a plain reading, the submission of counsel may appear to be justified. Before going to the above provisions, in view of the submissions that have been made, I may examine the contentions in some more detail.
17. The Second Schedule prescribing procedure for recovery of tax is drawn in exercise of the mandate given by Sections 222 and 276 of the Income-tax Act. Part I of the rules refers to general provisions. Rule 2 speaks about the duty to issue notice. Exhibit P-3 evidently had been issued by the Tax Recovery Officer in exercise of this power. This is dated January 6, 2000. The petitioner in the original petition has referred to it as notice under Rule 117B of the Income-tax Rules, but I am of the opinion that it is in fact issued under Rule 2 of the Second Schedule.
18. Though not specifically highlighted, on going through the documents produced, I find that a lapse has been committed, vitiating the procedure. Steps to be taken after notice are contemplated by Rule 4. If the amount is not paid within the time specified or further time granted, the officer is obliged to proceed to realise the amount by one or more of the modes prescribed. Clause (b), viz., attachment and sale of immovable property has been adopted in this case. The attachment however had already been brought about. Attachment and sale are two distinct and independent steps, though interconnected. The officer while exercising powers has to bear in mind the import of Rule 3 as well. No step in execution of a certificate shall be taken until the period of 15 days has elapsed, since the date of the service of the notice, referred to in Rule 2. The bar is in absolute terms. Therefore, even if the date of exhibit P-3 is taken as the date of the service, then also any steps for execution could have been resorted to only by January 22, 2000.
19. Exhibit P-6 undoubtedly is a step in an execution of the order. This, however, bears the date of January 17, 2000. Exhibit P-6 although refers to a certificate dated February 9, 1995, as TR-3/94-95, and the property is stated as attached, does not directly make reference to exhibit P-3. The sum recoverable is shown as Rs. 89,08,770 and the figures shown in exhibit P-3 are incorporated in the body of the order, as Rs. 1,18,80,951. There is no case that exhibit P-3 is not a certificate as envisaged by the Rule issued under Rule 2. It bears the number TR.98/T/99. When exhibit P-3 had been passed and follow up action was being initiated, for realising a sum referred to therein, it should have been ensured that the mandate of the rule was observed. The proximity of the certificate with reference to proclamation and the figures do show that the sale was on the authority of the said certificate as well. If that be so, I have to hold that exhibit P-6 was invalid, and could not have been acted upon. When the statute prescribes a procedure, the authorities have no right or jurisdiction to adopt a procedure at their discretion, as rights of third parties are involved. Though the pleadings did not highlight the above, when the contentions urged in the original petition are that there were procedural irregularities which tainted the sale, and when I find this defect in the proclamation, it is unfair to leave the irregularity unnoticed. The certificate issued in 1995 was not the immediate authority for exhibit P-6, it was definitely exhibit P-3, and as the stipulation of minimum notice has not been adhered to, the further proceedings are invalid from such point. Rule 3 states that no step (underlining supplied) in the execution of a certificate shall be taken until the lapse of 15 days. The proviso to the rule only referred to the right of attachment permissible in certain contingencies before the dead line. In so far as a new certificate was drawn up on January 6, 2000, the defaulter could not have been dented the benefit of the procedures directed to be followed by the rule. I am aware of Rule 61. But nevertheless, since the petitioner had approached this court well before the sale, the procedure prescribed for setting aside the sale, by permitting a deposit may not confer justice on the facts of the case. Also only on the satisfaction of the Tax Recovery Officer the above procedure need be followed. If the justification for proclamation was the certificate of 1995, it can well be contended that irrespective of exhibit P-3, the officer need not have waited for 15 days. But the above will be highly arbitrary, since the figures shown as arrears specifically refer to the sums drawn up in exhibit P-3 certificate. True, the properties may be under attachment, and what had been added was the interest element which accrued after 1995. But in that case, a fresh certificate might have been superfluous. Obviously, exhibit P-3 is intended to be acted upon, I cannot ignore the impact thereof when it preceded exhibit P-6, and reference thereto had also been made.
20. Now I may also deal within the contention of the petitioner that there is violation of Rule 53(cc). The rule has already been extracted earlier. On an examination, it is seen that reference to the said rule is made in two other places in the Second Schedule. This is Rule 56 and Rule 59. An isolated examination of the impact of a provision as contained in a rule, when the expression has been used in more than one place in the statute also may not be advisable, since a comprehensive view as regards the scope and purport may not be obtained by such approach. Rule 56 prohibits a confirmation if the bid is below the reserve price fixed if any. Rule 59 gives a right to the Central Government to bid for the property in any subsequent sale. Reading Rules 53 and Rule 59 together, it has to be noticed that once a reserve price is fixed, a special procedure is mandatorily to follow. The rule also does not give any power to put the property for sale, and sell it away, once a tag of reserve price has been fixed. The Government also has not been given power to under-quote the original price specified, as Rule 59 is silent on this matter. The right of the Government to participate in auction, does not ipso facto do away with the rights of the defaulter. It also does not authorise a sale for a lower price to a new bidder. The rule is intended, according to me, for the safety of the defaulter, expressing an anxiety that the property is not lost to him for the only reason that there were no adequate offer. A defaulter may be in an unenviable position, and may be passing through a phase of distress. The State as the protector of rights of ail citizens, who may include criminals, defaulters, or undesirables, have to give them equal protection of law. The rights of property of a defaulter are also to be safeguarded, and he is not to be viewed as a fugitive nor can he be placed in a disadvantageous position. The right of the Government to participate in the auction is to rejuvenate the bids and intended to give a protective shield to the defaulter and the upset price can neither be ignored nor done away with. Scanning through the Certificate Rules, it was not possible to come to a finding that the method adopted was valid and proper.
21. Mr. Sreedharan, counsel for the petitioner, had invited my attention to a decision reported in Elumalai Naicker v. Kishtambul Ammal, AIR 1988 Mad 106. This was a case where the upset price had been reduced at the instance of the decree holder. The court has, in the said decision, made the observations, which I think are relevant, as extracted hereinbelow (page 108) :
"As observed above, when the court fixes the upset price that fixation is only for facilitating the conduct of the sale and to safeguard the interests of the judgment-debtor by fixing a reserve price. The object of fixing the upset price is to fix the lowest sum for which the property which is being auctioned will be sold or in other words, it is the sum from which the bidding may start. The upset price, therefore, has some relation to the price which the property intended to be sold in the auction is expected to fetch. When the court gives the upset price, it cannot do so merely on the ipse dixit of either the judgment-debtor or the decree-holder. What should be the amount to be fixed as the upset price must, therefore, be determined after an objective consideration of all the relevant facts to which the court must apply its mind, so as to safeguard the interests of the judgment-debtor. It is true that for fixing the upset price, no elaborate enquiry may be required to be made, but the upset price cannot also be any figure having no relation whatsoever to the minimum price which the property intended to be sold is expected to fetch at the auction sale."
22. Mr. Menon, senior standing counsel, however, pointed out that Rule 53(cc) does not at all in mandatory terms require the authority to fix a reserve price, and the expression used is "if any" which has a definite connotation. But this has to be examined from yet a different angle. The rule, according to me, has to be strictly construed. A proclamation of sale has to be drawn up only after notice to the defaulter. The expression can be understood as the procedure to be followed. It is not a simple notice. As regards fixation of the upset price, the views of the defaulter also is to be given due importance. What is postulated is definitely not a notice about the proclamation to the defaulter. But notice is to be given before the proclamation is drawn up. This, according to me, is the quintessence of the rule prescribing the procedure. When the defaulter gets an opportunity as above, he has the option to suggest the reserve price. He has to be realistic and normally cannot afford to be casual as it is in his interest to discharge the liability at the earliest point of time, once the properties have parted from his hands. The Department also is able to get the views of the defaulter and the reserve price is thus fixed. Therefore, there is an inbuilt safety mechanism for minimising arbitrariness. Viewed from this point, 1 have to find that the condition for a reserve price becomes automatically relevant. Only because the rule has referred to the procedure as "if any" the discretion arising from the procedure cannot be ignored. If there is a failure for giving notice of drawing up of proclamation, I am of the opinion that there is procedural irregularity. In the present case, as a reserve price in respect of the property at the time of previous occasion was specified, a sale proclamation not incorporating the above at least, was irregular. It should have found a place as a condition coming under Rule 53(d) as well. As there was no notice giving the defaulter about the drawing up of the proclamation, the consequent steps cannot be held as valid and binding. Exhibit P-6 was unsustainable for this reason as well.
23. In this view, I hold that the proclamation, evidenced by exhibit P-6, and the sale in favour of the fifth respondent was in violation of the statutory prescriptions. As a consequence, the sale was invalid and did not give any right to the purchaser over the properties. He will be entitled to get back the amount remitted, together with interest. The petitioner is entitled to insist that item No. 3 could be put in auction only after compliance with the statutory formalities to be observed. The original petition to this extent is allowed. The Department would be free to resort to further steps for enforcing recoveries as authorised by law and as the issue of limitation is looming large, I am of the opinion that the Department would be justified if further auction is carried out within a period of three months from today. There will be no order as to costs.