Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
(Querist) 28 July 2008
This query is : Resolved
A recovery certificate was issued by the Debts Recovery Tribunal. Thereafter the mortgaged property was auctioned by the Recovery Officer as provided under The Second Schedule to the Income Tax Act 1961 and as per the provisions of The Income Tax (Certificate proceedings) rules 1962.
The auction purchaser deposited the entire amount before the Recovery Officer. In the meanwhile, the mortgagor/borrowers filed writ petitions before the High court and the confirmation of sale was stayed.
In the meanwhile, the auction purchaser filed an application to deposit the bid amount in Interest bearing fixed deposit and the same was deposited in a Nationalised Bank.
The Writ petitions filed by the mortgagor/borrower were dismissed. The auction also confirmed by the Recovery Officer in favour of the auction purchaser.
The bank wanted to adjust the bid amount deposited with the accrued interest. The auction purchaser has filed an application seeking relief before the DRT stating that the interest amount has to be paid to the auction purchaser.
Whether the auction purchaser is entitled to the said relief. Any case laws on the said subject.
(Expert) 28 July 2008
Prima facie, the auction purchaser is not entitled to interest in the said facts. Had the WP been otherwise then , the bid amount would be the property of the auction purchaser and so would have been the interest.
(Expert) 02 August 2008
m not in agreement with Kotresh for the reason that the claim of the bank is just confined to the original amount which is to be recovered by the bank and unless and until the title is transfered to the auction purchaser the bank had no calim over the money.....during the pendency of litigation the auction purchaser did not get the fruits of the property so purchased. In my observation auction purchaser simply deposited the money with the bank for the time being....the moment the writs were dismissed, bank can stake claim over the original amount only. Till the dismissal of the writ petitions bank had no valid calim over the money so deposited.
(Expert) 02 August 2008
I am not accepting the version of my friend, Mr.Kiran Kumar, Because, As far as Bank needs debt recovery that too with interest, and Auction purchaser needs the property through auction. Though Auction purchaser did not get the fruits of the property, equally Bank has also sustained loss to that extent, due to dragging the matter, during pendincy of WP.
Main thing is Auction purchaser needs the property in his favour, when he participated in the Auction, obviously Bank needs money along with interest.
Whenever Recovery officer issued the Recovery Cirtificate, he is deemed to be the absolute owner, unless WP stands allowed.
So, Auction purchaser is not at all entitled to the extent of such interest portion.
(Querist) 03 August 2008
I am the author of the abovesaid querry. As per Rule 64 of The Second Schedule of Procedure For Recovery of Tax (appendix III) of the Recoveryof Debts Due to Banks and Financial Institutions Act,1993, the return of purchase money in certain cases arises to the auction purchaser together with penalty and such interest as the Tax Recovery officer may allow,shall be paid to the purchaser. Thus the auction purchaser is only entitled to interest only in case there is a return of the purchase money by the Recovery Officer. If the same is taken into consideration, in the present case, the purchase money is not returned to the auction purchaser. Then how the auction purchaser is entitled to inteest amount. In case you find any case laws or provision of law, the same may be provided.