The Kerala High Court (Ernakulam Bench) clarified that Rule 68B of the Second Schedule to the Income Tax Act does not mandatorily apply to recovery proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDB Act). The Court pointed out that since Section 29 of the RDDB Act adopts provisions of the Income Tax Rules only “as far as possible” and “with necessary modifications”, only procedural parts that aid recovery may apply, and not substantive restrictions that impede it.
Emphasising that the RDDB Act is a self-contained code enacted to secure speedy recovery of bank debts, the Court found that importing the time bar in Rule 68B would frustrate the statutory object. The Court added that even if there were procedural irregularities relating to timing, those do not render a sale, or consequent orders, void unless the adjudicating authority lacked inherent jurisdiction.
A Single Judge Bench of Justice Mohammed Nias C.P. examined Rule 68B and observed that its references to “financial year,” “finality under Section 245-I,” and “Chapter XX” are specific to the Income Tax regime, whereas the RDDB Act itself provides a complete framework for recovery under Sections 19(22) and 25 without prescribing any time limit.
The Bench emphasised that the legislative intent of the RDDB Act is to ensure the speedy recovery of debts due to banks and financial institutions, and subjecting recovery to a rigid limitation would defeat this purpose. Unlike the Income Tax regime, which involves recovery by the State, proceedings under the RDDB Act are adversarial, conducted by an independent Tribunal.
As delays could arise due to administrative or procedural reasons beyond a bank’s control, such as transfer of officers, tribunal vacancies, or obstruction by debtors, the Bench asserted that penalising banks for such delays would contradict the legislative purpose, and also highlighted that the limitation applicable to execution of Recovery Certificates is governed by Article 136 of the Limitation Act, 1963.
Finally, the Bench dismissed the petition, as being barred by delay and constructive res judicata, and concluded that Rule 68B has no mandatory application to RDDB Act recoveries; and any irregularity in timing shall not nullify the sale.
Briefly, in this case, the 1st petitioner, as principal borrower, had initially availed a loan of Rs. 5 lacs, which was later enhanced to an OD-CC (Overdraft-Cash Credit) facility up to Rs. 20 lacs. The loan account included several co-obligants, along with the 2nd petitioner. One of the co-obligants had also availed an Agricultural Medium-Term Loan (AMTL) of Rs. 2.75 lacs and a Federal Kisan Credit (FKC) of Rs. 85,000, and his land was also mortgaged to secure liabilities. The account fell into arrears, and proceedings culminated in a Recovery Certificate for Rs. 76.90 lacs.
Later, a sale proclamation was issued, which culminated in an auction, and the respondents 3 and 4 purchased certain lots therein. Now, the petitioners claimed that the proclamation and sale were void as having been conducted beyond the period prescribed under Rule 68B of the Second Schedule to the Income Tax Act. Essentially, the petitioners challenged the auction sale of properties mortgaged to Federal Bank Ltd. in execution of a Recovery Certificate issued by the Debt Recovery Tribunal (DRT), Ernakulam.
Appearances:
Advocates Titus Mani Vettom, P.A. Jacob, Binny Thomas, and Swaroop A.P., for the Petitioners
Advocates Pranoy K. Kottaram, Arun Thomas, George Mathews, Sivaraman P.L., Athul Babu, Cisly Grashious, Sreenand Udayan, Grashious Kuriakose, S. Kabeer, and Mohan Jacob George, for the Respondent
