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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

rule12&13

• 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 due&reasonable

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 D&in 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 ‘D’or person whose interests are affected. Payment as per sale proclamation,plus 5%of 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