Limitation Under Rule 68B Of Income Tax Act Does Not Apply To RDDB Act Proceedings: Kerala High Court

The Kerala High Court held that the limitation under Rule 68B of the second schedule to the Income Tax Act does not apply to RDDB Act (Recovery of Debts Due to Banks and Financial Institutions Act, 1993) proceedings. Justice Mohammed Nias C.P. stated that Rule 68B of the Second Schedule to the Income Tax Act, 1961, has no mandatory application to recovery proceedings under the RDDB Act. It is also relevant that under Sections 19(22) and 25 of the RDDB Act, the Recovery Officer derives jurisdiction to initiate recovery measures only after the recovery certificate attains finality. Hence, the time frame in Rule 68B, which is linked to the 'order giving rise to demand' under the Income Tax Act, cannot logically apply to proceedings initiated upon a recovery certificate under the RDDB Act. In this case, the 1st petitioner, as principal borrower, had availed a loan of Rs. 5,00,000/- from the 1st respondent bank, which was later enhanced to Rs. 20,00,000/ under an Over Draft-Cash Credit account, with the 2nd petitioner and M.A. Vincent, Lincy Binu and T.S. Joseph as co-obligants. T.S. Joseph again availed an Agricultural Medium-Term Loan (AMTL) of Rs. 2,75,000/- and the Federal Kisan Credit (FKC) of Rs. 85,000/-. Apart from the two items of property extended by the 1st petitioner as collateral security, property belonging to T.S. Joseph was also mortgaged to cover the 1st petitioner's liability. The liability under the account fell into arrears by January 2005, and, upon proceedings initiated before the Debt Recovery Tribunal, Ernakulam, a Recovery Certificate was issued for the recovery of Rs. 76,90,252.22/- from the properties described in Schedules A to C therein. The petitioners submit that the Recovery Officer issued the sale proclamation only on 24.05.2016. The sale proclamation contained one additional item of property, and this property was not included in the Recovery certificate, which was challenged before the DRT in Appeal and before DRAT and before the Kerala High Court, raising the issue on different grounds. They failed to obtain any favourable orders. Thereafter, an auction sale was conducted, wherein respondents 3 and 4 purchased items 3 and 2, for an amount of Rs. 75.6 lakhs and Rs. 30.2 lakhs, respectively. The property was handed over to the auction purchasers on 11.04.2025. The petitioners argued that the Recovery Certificate, having been issued on 11.01.2012, the financial year ended on 31.03.2012, and the three-year period expired on 31.03.2015. The proclamation of sale issued on 24.05.2016 and the auction conducted on 25.07.2016 were therefore more than one year beyond the statutory limit, rendering them illegal and void. The essential contention raised by the petitioners, challenging the sale dated 25.07.2016 conducted by the Federal Bank/1st respondent, is that the sale is vitiated as it was affected beyond the period prescribed under Rule 68B of the Second Schedule to the Income Tax Act, 1961. The bench, after analysing Rule 68B of the Second Schedule of the Income Tax Act, 1961, and a few judgments, observed that the RDDB Act itself provides for attachment and sale of properties under Section 25 without prescribing any time limit, and importing Rule 68B would run contrary to this scheme. The references in Rule 68B to “financial year,” “finality under Section 245-I,” and “Chapter XX” of the Income Tax Act are peculiar to tax recovery proceedings and wholly alien to the debt recovery mechanism under the RDDB Act. The bench observed that the proceedings under the Income Tax Act are between the revenue and the assessee, where the Tax Recovery Officer functions as an employee of the State, whereas proceedings under the RDDB Act are adversarial in nature, adjudicated by an independent Tribunal, and executed by a Recovery Officer. The bank or financial institution has no control over the actions or administrative functioning of the Recovery Officer, and hence it would be highly unjust to preclude recovery merely because the Officer was unable to complete the sale within the time frame contemplated under Rule 68B, added the bench. The bench agreed with the auction purchaser that the writ petition is to be dismissed on the principles of delay and laches as the sale took place on 25.07.2016, and the challenge to that on this ground is made only on filing this writ petition as on 26.05.2025. In view of the above, the bench dismissed the petition. Case Title: Binu Vincent v. The Federal Bank Ltd. Case Number: WP(C) NO. 19544 OF 2025Citation: 2025 LiveLaw (Ker) 663 Counsel for Petitioner/Assessee: Titus Mani Vettom, P.A. Jacob, Binny Thomas and Swaroop A.P. Counsel for Respondent/Department: Pranoy K. Kottaram Click Here To Read/Download The Order

Limitation Under Rule 68B Of Income Tax Act Does Not Apply To RDDB Act Proceedings: Kerala High Court

Mehak Dhiman

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