Recovery Proceedings

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Recovery Proceedings
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MODES OF RECOVERY

• Attachment of movable property of
  defaulter(schedule II part II)
• Attachment of immovable property of
  defaulter(schedule II part III)
• Appointment of Receiver for management of
  defaulters property(schedule II part IV)
• Arrest of defaulter his detention in prison

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SERVICE OF NOTICE

• Most important
• TRI plays vital role.
• Improper service can vitiate proceedings
• Onus of service is on the Department
• Notices can be served by any of the modes
  prescribed u/s282(i) of the IT Act.

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DIFFERENT MODES OF SERVICE

• Service by post
• Service otherwise than by post.
• Service on person
• service by affixture
• substituted service

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ISSUE OF DEMAND NOTICE

• Issue of ITCP 1 sets in motion the recovery
  proceedings.
• Important that demand is verified before issue of
  notice
• D gets 15 days to pay demand.
• TRO can start further proceedings only after the
  period of 15 days

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• Notice should be sent by RPAD (SEC27Of General
  clauses Act
• Presumption of service if
• notice was properly addressed
• pre paid
• dispatched by registered post.
• Notice is also presumed to be served if the same
  is received back with the remark of postal
  Authorities--refused

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SERVICE OTHERWISE BY POST

• Service on person-
• served by notice Server/Any other officer
  authorised
• on the D or authorised person(orderVCPC rule1213
• Can be served on any adult family member residing
  with D.Servant not included.

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• Acknowledgment to be obtained.
• Despite service on person notice can also be
  required to served by RPAD IF TRO so considers.
• Tact resourcefulness necessary.

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SERVICE BY AFFIXTURE

• Can be resorted to if,
• D or his agent refuses to take notice
• serving officer after using all duereasonable
  diligence can not find D or his agent or any
  other member on whom service can be made.
• Procedure-copy of notice should be affixed on
• outer door(entrance) or any conspicuous part of
  the building

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• In which D ordinarily resides or carries on
  business or personally works for gain
• Original should be returned to the TRO with a
  repot giving i)circumstances under which it was
  resorted to, ii)procedure followed.iii)name
  address of person identifying the premises in
  whose presence notice was affixed iv) time of
  affixture.
• On receipt of report TRO should record
  satisfaction note should examine if affidavit
  not enclosed with report

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SUBSTITUTED SERVICE

• Can be resorted to if the D is avoiding service
• TRO has to pass order(rule 20) recording reasons
• copy of the notice to be affixed conspicuous
  part of TROs office or on notice board
• rest of the procedure same as in service by
  affixture
• Difference in two types of service

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• Mere knowledge of issue of notice not sufficient
• Irregularity in service of notice - considered
  material irregularity and auction sale can be
  cancelled on this ground
• Period of 15 days after service of notice -
  valuable right of defaulter. Consent or waiver on
  his part does not confer jurisdiction on TRO to
  proceed further in execution of the certificate

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Attachment Of Property

• TRI plays important role in attachment of movable
  / immovable property.
• Knowledge about procedure and intricacies
  involved is necessary.
• What is property ?
• No comprehensive definition in I.T.Act or
  transfer of property act, general clauses act.
• These acts give definition of certain types of
  property

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• There is distinction in Law between movable
  property and immovable property.
• What is immovable property ?
• Property which is rooted / embedded in earth
  e.g. Wall, Buildings etc.
• Factum of attachment to the earth though an
  important consideration is however not the sole
  consideration.

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• Degree and nature of attachment has also to be
  considered.
• If the attachment or embedding is required only
  when the property is in use, the property can be
  considered as movable e.g. touring cinema.
• Examples of immovable property.
• Land, Houses, Building
• Tenancy rights where the tenant has disposing
  power.
• The interest of a member in the Undivided
  Property of HUF.

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• Examples of movable property.
• Growing or standing crops
• Partners interest in partnership property.
• Property does not merely connote full ownership
  or proprietorship, but also includes any right or
  power in respect of the same.

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ATTACHMENT

• Not defined in the Act
• Dictionary meaning- to take or apprehend by
  commandment.
• In the context of recovery proceedings it means
  seizure by legal process
• Coercive method to force D to pay the demand

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• Power of attachment not unlimited.
• Rule 10 of II schedule exempts certain properties
• Houses and other buildings with the material
  and sites thereof and the land immediately
  appurtenant thereto and necessary for their
  enjoyment, and belonging to an agriculturist or a
  labourer domestic servant and occupied by him..
• Wearing apparel, cooking vessels, personal
  ornaments as in accordance with religious usage
  cannot be parted with by any woman.

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• Tools of artisans - implements of husbandry
  used by an agriculturists
• Provident Fund .
• Salary to the extent of first Rs.400/- and two
  thirds of the reminder.
• An expectancy of succession by survivor- ship or
  other merely contingent or possible right or
  interest.
• A right to future maintenance.

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• Properties which can be attached.
• Section 60 of the CPC lays down that the
  following properties are liable to attachment
• Land, Houses or other Buildings,Goods,
• Money, Bank notes, cheques, bills of exchange
  Hundies, Govt. Securities, Bond or other
  securities for money , debts, shares in a
  corporation, all other salable property.
• The term property is used in a wide sense. Even
  if a property does not belong to the defaulter,
  any right or power in respect of the same which
  the defaulter may have

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• Acquired for his benefit can be seized and sold.
• Salable property means salable at a compulsory
  court sale and not merely transferable by acts of
  parties.

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ATTACHMENT OF MOVABLE PROPERTY

• Warrant of attachment of movable property can be
  issued when
• defaulter fails to pay demand within 15 days of
  service of notice.
• Should be in writing and signed by TRO
• should specify the name of the defaulter and the
  amount to be realised.
• Should state the place where the movables should
  be attached.

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• Service of warrant on the defaulter.
• Being coercive action should not be served on
  any other family member.
• Attachment of property if amount not paid
  forthwith.
• Attachment should be after sun rise and before
  sun set.
• Power to break open outer/inner doors of the
  house. No power to search or break open doors of
  Almirah etc.

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• Inventory of articles attached
• valuables like jewellery should be got valued.
• Attached articles should be transported to the
  Office of TRO for safe custody.
• Role of TRI in the above process.
• Considering the onerous nature of the duties the
  TRI has to be methodical meticulous.

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• materials to be carried should be checked as per
  check-list.
• Attachment of agricultural produce.
• Copy of the warrant to be affixed on the land.
• On the outer door or conspicuous part of the
  house of D.
• Attachment of other movable property can be made
  by issue of prohibitory orders.

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ATTACHMENT OF IMMOVABLE PROPERTY

• Attachment order is issued in Form No.ITCP 16.
• Service of order on defaulter
• Fact of attachment to be proclaimed.
• Copy of order to be affixed-property of Din the
  o/o TRO
• panchnama to be prepared.

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• Report of attachment to given to TRO
• TRI should collect all details of property from
  office records. should carry necessary forms
  other material should make necessary arrangement
  for proclamation
• Arrange for witnesses
• collect relevant details from Municipal
  Authorities.

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PROCLAMATION OF SALE

• ITCP12 warrant in favour of TRI
• Issue of proclamation of saleITCP13
• In local language
• time place of sale
• should state whether subject to confirmation
• proper description of property.
• In case of more than one property order of sale
  should be mentioned

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Movable Property

• Attached property to be sold by public auction
• Sale after 15 days from proclamation
• Exceptions-d agrees ,cost of storage likely to
  be excessive, property subject to natural decay
• Special procedure for agricultural produce
• Valuables-sale can be subject to confirmation

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• Sale of agricultural produce R-41
• Growing crop-at or near the land
• If produce or gathered-at or near threshing floor
  or market plce
• Sale can be postponed only once-offer not fair in
  the opinion of auctioneer or d requests on the
  same ground
• To sale next date at what ever that is offered
• R-42 sale to be held when ?

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• Immovable property
• TRI should carry necessary kit for
• proclamation
• service of notice ,affixture on property ,
  proclamation, panchanama report are some of the
  important points to be remembered.
• Settlement of sale proclamation -
• Before ITCP-13 - ITCP-17 is issued.

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• Check list to be kept by TRI.
• Particulars applicable to movable/immovable
  property.
• Form No.12, 13 whether filled correctly.
• Correct arrears.
• Details of property.
• Name of Inspector
• Place of auction.
• Date time of auction.
• Value of property.

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AUCTIONS

• Preparation for auction
• How to conduct Auction
• 1) One of the important function -
• 2) Requires leadership, tact, ability to
  organise, capacity to deal with public, tenacity,
  patience and above all public relations.
• 3) Lot of preliminary work involved

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• (i) Advertisement in local newspapers.
• (ii) Particulars of movable / immovable property.
  e.g. a) Motor Car - taxes paid, year of
  Registration, Condition etc. b) Building -
  Details as Municipal record, Title deed,
  Encumbrance, Taxes, Plan of property etc.
• (iii) Terms Conditions of Auction to be
  prepared carefully - copies given to bidders.
• (iv) Reserve price - fixation.
• (v) Venue of Auction .
• (vi) Proper arrangement - Drinking water, tea,
  snacks, sealing arrangement etc.

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• 4) Before Commencing Auction -
• Public address system - Adequate manpower for
  assistance.
• i) Bidders list, collection of amount as
  security.
• ii)Authority letter from bidders - bidding on
  behalf of other person.
• iii) Allow inspection of property by bidders.
• iv) Read conditions of sale, rate of bid.

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• v) During auction - Name of bidder amount of
  bid - announce loudly clearly. In case -
  Adjournment - Signature of bidder - vi)
  Knocking down of property - Signature of bidders.
• vii) Movable / Immovable Property - On
  collecting money - poundage fee, Certificate of
  sale to be given.
• Confirmation of sale of immovable property
• can be done only If no application for setting
  aside sale
• rule60,61 62

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• Rule60-application by Dor person whose
  interests are affected. Payment as per sale
  proclamation,plus 5of purchase money for payment
  to purchaser.
• 61-On the grounds of material irregularity -ao or
  person whose interests are affected.or defaulter.
• Sale to be set aside only if substantial injury
  caused.
• Application by d only on payment.

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DELIVERY OF POSSESSION OF PROPERTY

• A) Movable -
• Delivery is complete - property actually handed
  over to the purchaser.
• Share in a Company -
• TRO makes order prohibiting D from transferring
  to anyone except to the purchaser -
• Alternative - Duplicate share certificate to be
  obtained.

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• B) Immovable property -
• Rule 30 to 45 of ITCP Rules -
• TRO has powers to eject the D/ Occupant.
• Procedure for delivering possession
• i) TRO issues Warrant in the name of TRI -
• ii)TRI serves Warrant on D / Occupant.
• iii)Reasonable time to vacate to be given.
• iv)TRI to be present till complete vacation.
• v) Record panchanama in presence of two
  witnesses.

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• vi) Call purchaser - hand over vacant possession.
• vii) Obtain statement from purchaser /
  representative - possession has been taken.
• viii) Report to TRO.
• Physical removal of the occupant -
• Symbolic delivery - where the property is in
  possession of the tenant.
• Time limit for sale of attached property-

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APPOINTMENT OF RECEIVER

• Rules 69 to 72 second schedule
• property of D consists of business -business can
  be attached -receiver for appointment of
  business.
• Attachment by prohibiting D from transferring his
  business.
• 70- where immovable property is attached receiver
  can be appointed instead of sale.

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• Receiver has necessary powers for management of
  property realisation of profit
• After deducting expenses remaining amount to be
  adjusted against dues of D.
• Rule 72withdrawal at the discretion of TRO.or on
  full realisation of arrears.

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ITCP RULES 48 TO 52

• Rule 48-powers of receiver
• Bringing in defending suits
• Powers of realisation management, protection,
  preservation of property collection of
  rents/profits execution of documents as the owner
  has. or such of these as TRO deems it fit
• Rule 49 remuneration TRO to fix it

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• Duties of receiver-R-50(1)
• Furnish security
• Submit periodical accounts as directed
• Pay amount due from him to TRO
• Be responsible for any loss due to to his
  negligence or willful default
• Rule 50(2)maintainance of ledger, cash book
  counterfoil receipt book

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• Rule 50(3)- bank account transaction through bank
• Rule 50(4) accounts every three months or as
  directed
• Rule 51 enforcement of duties-
• Receiver fails to submit accounts-property can b
  attached
• TRO can make enquiry-whether payments due from
  receiver are received whether any loss due to
  negligence etc if so direct payment in specified
  time

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• 51(3) failure to pay amount due recovery out
  of security or attachment sale of property of
  receiver
• Failure to render accounts or unlawful retention
  of money-whole or part of remuneration can be
  disallowed
• Rule 52 appointment of receiver form ITCP 24