The right available to the judgment debtor to save the property should not be affected by an honest mistake

The Supreme Court observed that the judgment debtor’s right to safeguard his assets must not be affected by a technical reason and/or an error of good faith for which he is not responsible.

“Thus, the right available to the judgment debtor under Rule 60 is a most valuable right available and it must not be allowed to be affected for any technical reason and/or bona fide mistake for which one can’t say it’s failing.”, the bench Justice Mr. Shah and Justice B.V. Nagarathna.

Notably, the provisions of the statute and the legislative intent embodied in Rule 60 of the Second Schedule to the Income Tax Act 1961 provide a last resort to the judgment debtor to save his property.

In this case, a bank, namely IndusInd Bank Ltd, filed a claim with the Ahmedabad Debt Recovery Court (DRT) for debt recovery and enforcement of security against the original borrowers. A recovery certificate has been issued in favor of the Bank for the recovery of an amount of Rs.71,88,819.87/- recoverable from the original borrowers.

Their real estate properties were also seized under the above recovery order/certificate.

A proclamation of sale of the properties was issued by the debt collector and according to the proclamation the amount due and payable was Rs.1,27,30,527/- including interest. At the auction, the original plaintiffs’ bid for the writ being the highest bid was accepted by the debt collector.

The original borrowers then filed a request under Rule 60 to cancel the above auction and submitted a draft request for an amount of Rs.1,27,30,527/- as specified in the proclamation of sale.

The Bank alleged that there was a shortfall in the amount deposited by the borrower, but no spreadsheet was attached to the response.

When the spreadsheet was submitted in accordance with it, one of the borrowers – deposited an additional sum of Rs.77,647/- with the debt collector, which was more than Rs. 2.80 lakhs deposited .

The debt collector then issued an order granting the borrower’s claim finding that the borrower had deposited the amount required to reverse the sale. Consequently, the sale of the buildings in question has been cancelled. Immediately thereafter, the borrowers signed two deeds of sale in favor of the appellant for a sale consideration of Rs.1,40,89,855/-.

The buyers of the auction preferred to appeal to the DRT of Ahmedabad which canceled the order passed by the Recovery Officer. The appeal against this order was allowed and the auction was canceled by the DRAT.

The auction buyers went to the High Court and the High Court quashed the DRAT order and therefore upheld the sale in favor of the auction buyers.

Feeling aggrieved by the subsequent buyer – Respondent No.5 – M/s. RS Infra-Transmission Ltd. went to the Supreme Court.

Senior Advocate Guru Krishnakumar appeared for the appellant while Lawyer Neeraj Shekhar appeared for the respondents.

The Court observed that the error on the part of the collection agent resulted in a shortfall in the deposit of the amount, which was intended for interest for the period from June 30, 2006 to January 8, 2007. The Court observed otherwise, the judgment debtor had substantially complied with section 60.

“If the debt collector had been accurate in submitting the correct amount in the Proclamation of Sale due and payable on the date of the Proclamation of Sale, then the contingency that occurred in the present case would not have occurred. . There has been an absurd fault on the part of the Collections Officer for which the judgment debtor must not be made to suffer.”, the Court has spoken.

The Court held that the right available to the judgment debtor under Rule 60 is a most valuable right and should not be permitted to be affected for any technical reason and/or bona fide mistake for which he cannot be held to be at fault.

The Court noted that the High Court failed to appreciate and consider the fact that for inaccuracy and/or error on the part of the debt collector, the judgment debtor cannot be made suffer through no fault of His part.

“As observed and held above, when the substantial amount was filed, there was no reason for the judgment debtor not to file the shortfall, which as such can be considered a very meager amount .”observed the court.

Accordingly, the Court quashed the High Court’s order and reinstated the DRAT’s order quashing the auction.

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