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Report No. 178

5. Revenue Recovery Act, 1890: Purchase by Government where bidders are not forth coming when immovable property is put to public auction:

Where there are arrears of land revenue or a sum recoverable as arrear of land revenue is due, the same can be recovered under the Revenue Recovery Act, 1890. The Act is a Central enactment. The Act extends to the whole of India.

The Commission proposes to deal with a peculiar problem which is sometimes faced where, when properties belonging to certain individuals are brought to sale by the Collectors for collection of money recoverable as arrears as land revenue, there are no bidders forthcoming. That happens sometimes when the person whose properties are proceeded against is powerful and he is able to prevent anybody bidding at the public auction.

In such a situation, can the Government or the public officer or local authority or other body to which the amounts are due, itself purchase the property? If so, can they purchase at a nominal price and, if not, what is the reasonable procedure that is to be followed by the Collector?

In Rama Rao v. State of Bombay (AIR 1963 SC 827) arrears of revenue payable by an excise contractor to the State Government were sought to be recovered under the Bombay Land Revenue Code (Act 5 of 1879). Certain items of property of the defaulter were brought to sale under 35 that Act and the State of Bombay purchased two items for rupee one each. These sales were challenged in a declaratory suit filed by the defaulter. The trial Judge held that the sales were not in accordance with the procedure under the Act. The High Court set aside the judgment and dismissed the suit but the Supreme Court set aside the judgment of the High Court and restored the judgment of the trial Court.

Various sections of the Bombay Land Revenue Code such as sections 155, 165, 171, 172, 173, 175, 178, 179, 182 governed the procedure for sale. The procedure for sale prescribed under the Act is one by way of "public auction" by the Collector or by an Officer designated by him. Rule 128 required the Officer to fix an 'upset' price. The proviso to the said Rule stated that 'where in the opinion of the Collector, difficulty is likely to be experienced in effecting speedy recovery of the arrears or bidders are likely to be deterred from offering bids, no such upset price shall be placed'.

But, the problem arose because of sub Rule (4) of Rule 129. That Rule while permitting the Collector or his nominee to bid in such circumstances provided that he may "purchase the land or other property for a bid of rupee one."

In the above case, the Supreme Court did not go into the question whether Rule 129(4) was arbitrary (see para 25), but proceeded to examine whether the Rule was consistent with the provisions of Section 167 of the Code which 36 required that the 'sale shall be by public auction by such person as the Collector may direct'.

The Supreme Court pointed out that in Bengal under Section 58 of the Revenue Sale Law of the Bengal (Act 11 of 1859), the statute itself provided for a purchase by the Collector or other officer, on account of the Government, for one rupee, where no bids were forthcoming. But in Bombay there was no such provision in the Code but provision was contained only in the Rules.

The Court, therefore, confined itself to the limited question whether under Section 167 of the Bombay Land Revenue Code which required sale by public auction, a Rule could be prescribed stating that the sale in favour of the officer could be for one rupee, whenever there were no bids forthcoming. The Court held that the sale for a pre-determined sum of one rupee could not be treated as a sale by public auction and declared the sale as void.

In the light of the above judgment, we shall examine the Revenue Recovery Act, 1890.

The first question is whether the Revenue Recovery Act, 1890 prescribes a sale by public auction. Section 6 of the Act bears the heading: "Property liable to be sold under this Act". Sub section (1) of Section 6 permits the Collector to issue a proclamation prohibiting transfer etc. by the defaulter. Sub section (2) permits the proclamation to be withdrawn in case the amount is recovered (i.e. otherwise than by sale) or

"the property has been sold for the recovery of that amount."

Sub section (3) makes all private sales after the proclamation void as against the State or against "any person who may purchase the property at a sale for the recovery of the amount stated in the certificate." Sub section (5) states "the proclamation under the section shall be made by beat of drum or other customary method and by pasting a copy thereof on a conspicuous place in or near the property to which it relates".

Though there is no express provision that the sale is to be by public auction, a reading of the various sub sections of section 6 in our view indicates that the sale is by public auction. At any rate, the Act does not say that the Government or the public officer or the local authority or the body to which the money is due, can purchase the property for one rupee if no bidders are forthcoming.

It is, however, necessary to prescribe, for purposes of the Revenue Recovery Act, 1890, a procedure for sale which will enable the immovable property to fetch a reasonable price. It is further necessary to provide for situations where no bids are forthcoming. Such a situation may arise not only under normal conditions but also where bidders are deterred by the defaulters whose properties are brought to sale. In such a situation the Government, or the public officer or the local authority or the body to which the money is due, is unable to recover the money due to it by conducting the 38 public auction contemplated under the provisions of the Revenue Recovery Act.

In as much as there are no provisions in the Act to cover such a situation it is proposed to make a provision similar to the one contained in Schedule 2 of the Indian Income Tax, 1961. Under the rules contained in Schedule 2 of that Act it is provided that the sale officer shall indicate, in the sale proclamation, a reserve price below which no bid will be accepted.

In case there are no bidders who are prepared to offer a bid above the reserve price, the sale officer is permitted, under the rules, to give an option to the Assessing Officer to purchase the property subject to such officer obtaining the prior sanction of the Chief Commissioner or Commissioner of Income Tax. Obviously, the Assessing Officer must take the property by paying the amount specified as a reserve price. It is normally expected that the reserve price will be reasonable minimum price for which the property can be sold.

We propose however that under provisions of the Revenue Recovery Act, the Collector should, after the proclamation for sale, put the immovable property to public auction at least on two occasions and if there are no bidders on each of the two occasions offering a bid equal to or above the reserve price, only in those circumstances can the Collector permit the concerned Government or public officer, or local authority or body, to which the moneys are due to purchase at the reserve price.

Under Section 6 of the Revenue Recovery Act, 1890 various provisions are made with regard to the sale of the property of the defaulter. Sub section (1) of Section 6 refers to the issue of the proclamation prohibiting the defaulter 39 from transferring or charging any property. Sub section (2) thereof permits withdrawal of such a proclamation in certain situations. Sub section (3) states that transactions, if any, entered into by the defaulter after the above proclamation will be void as against the Government and also as against any subsequent purchaser. Sub section (4) provides that the sale shall be in relation to the interest of the defaulter alone, in the property proposed to be sold. Sub section (5) of Section 6 is relevant for the present purpose and it reads as follows:

"Section 6(5): A proclamation under this section shall be made by beat of drum or other customary method or by the pasting of a copy thereof on a conspicuous place in or near the property to which it relates".

There is no section in the Act which requires the sale officers to fix reserve price nor is there any procedure prescribed enabling the concerned Government, public officer or local authority or body, to which the monies are due, to purchase the property at the reserve price in the event of there being no bidders forthcoming to purchase the property. We, therefore, propose to prescribe the procedure by introducing sub sections (7), (8) and (9) in Section 6 of the Act and also by adding Section 6A as follows:

(a) in section 6, after sub-section (6), the following sub-sections shall be inserted, namely :-

"(7): The sale proclamation shall specify, as fairly and accurately as possibl.-

(a) the property to be sold;

(b) the revenue or tax levied by any local authority upon the property or any part thereof;

(c) the amount for the recovery of which the sale is ordered;

(d) the reserve price below which the property may not be sold; and

(e) any other fact which the Collector considers it material for a purchaser to know, in order to judge the nature and value of the property:

Provided that where the property is divided into lots for the purpose of being sold separately, it shall not be necessary to make a separate proclamation for each lot, unless proper notice of the sale cannot, in the opinion of the Collector, otherwise be given.

(8) No sale of immovable property shall, without the consent in writing of the defaulter, take place until after the expiration of at least 30 days calculated from the date on which proclamation is made under sub-section (5).

Provided that if the sale is adjourned for want of bidders or for any other reason for a period longer than 30 days, a fresh proclamation of sale shall be issued as specified in this section unless the defaulter consents to waive it.

(9) The sale shall be by public auction to the highest bidder and shall be subject to confirmation by the Collector:

Provided that no bid under this section shall be accepted if the amount bid by the highest bidder is less than the reserve price specified in clause (d) of sub-section (7)."

(b) after section 6, the following section shall be inserted, namely :- 41

"6A.Government, local authority etc to bid at reserve price in certain case.- Notwithstanding anything in section 6, where the sale of immovable property for which a reserve price has been fixed under clause (d) of sub-section (7) of section 6, has been postponed on two occasions for want of a bid or due to the fact that the bid was below the reserve price, it shall be lawful for the Collector to permit the concerned Government, public authority, public officer or local authority, to which the monies are due from the defaulter, to bid for the property at any subsequent sale, at the reserve price afore mentioned."

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