Supreme Court of India· 14 August 2026
Under the Income Tax Act, 1961, does the absence of notice under Rule 2 of the Second Schedule void a sale where the defaulter already had knowledge of the execution proceeding?
Sheela Gehlot v. Mohini Hardayal Singh & Ors
2026 INSC 863 · CIVIL APPEAL NO. 182 OF 2016
Coram: Alok Aradhe; Pamidighantam Sri Narasimha
Answer
No — the Second Schedule's Rule 61 permits a sale to be set aside for non-service of notice or irregularity only if the applicant has sustained substantial injury; where the defaulter and her children were already parties with actual knowledge of the execution, the absence of notice under Rule 2 does not render the execution or sale void.
Headnote
Recovery of Debts and Bankruptcy Act, 1993 — Section 31 — Section 29 — Code of Civil Procedure, 1908 — Order XXI Rule 22 — Section 60(1)(ccc) — Income Tax Act, 1961 — Second Schedule — Auction sale — Exemption — Attachment —
Recovery of Debts and Bankruptcy Act, 1993 — Section 31, Section 29 — Execution procedure after transfer to DRT —
Held: Once execution is transferred to the DRT under the 1993 Act, its own procedure applies in supersession of the Code. Order XXI Rule 22 of the Code therefore has no impact on the validity of the auction sale. (¶37)
Income Tax Act, 1961 — Second Schedule, Rule 2 and Rule 61 — Non-service of notice, substantial injury —
Held further: Absence of notice under Rule 2 of the Second Schedule does not void a sale where the defaulter had actual knowledge of the proceeding. A sale is set aside under Rule 61 only on proof of substantial injury from non-service or irregularity. (¶39, 40)
Code of Civil Procedure, 1908 — Section 60(1)(ccc) — Exemption personal to judgment-debtor —
Held further: The exemption of a main residential house from attachment under Section 60(1)(ccc) of the Code is personal to the judgment-debtor, not his legal representatives. The mixed question of law and fact cannot be raised for the first time in a writ petition. (¶43, 45)
Recovery of Debts and Bankruptcy Act, 1993 — Auction sale — Remand set aside, appeals disposed —
Held further: The High Court's remand for a fresh inquiry on these questions was therefore erroneous. The impugned judgment is set aside; the Auction-Purchaser's and the Bank's appeals are allowed, and the legal representative's appeal is dismissed, with no order as to costs. (¶47, 48)
In the Court's own words
Paragraph 39The Rule 2 of the Second Schedule to the 1961 Act, requires a notice of demand to be served upon a defaulter before recovery is levied against him. Rule 2 of the Second Schedule incorporates principles of natural justice to the procedure for recovery. However, it is to be noted that the Second Schedule also contains Rule 61 which supplies the consequences of and the remedy precisely for such a default, namely an application to set the sale aside on the ground of non-service of notice or of irregularity. Such an application has to be made within a period of 30 days from the sale and requires that sale shall be set aside only if an applicant has sustained substantial injury by reason of non-service or irregularity.
Paragraph 40Admittedly, no notice under Rule 2 of the Second Schedule was served either on respondent no. 1 or on her children. However, it is pertinent to note, respondent no. 1 and her children were already parties to the execution proceedings. The respondent no. 1 had notice about the auction of Delhi property as she had filed M.A. No. 65 of 2003 before DRT, Delhi seeking release of original title deeds of the Delhi property. In the said M.A. respondent no.1 had stated about pendency of execution proceeding. The respondent no.1 had also filed an application seeking recall of the order dated 20.09.2004 directing an auction. Therefore, the question of substantial injury being caused to respondent no. 1 and her children on account of non-service of notice under Rule 2 of the Second Schedule to the 1961 Act, does not arise. It is also pertinent to note that even after the sale, the legal representative did not take recourse to the remedy provided under Rule 61 of the Second Schedule of the 1961 Act. Therefore, in the facts and circumstance of the case, absence of notice under Rule 2 of the Second Schedule to the 1961 Act, does not render either the execution or the sale void. Accordingly, the second question is answered in the negative.
Acts & Sections
Section 31, Recovery of Debts and Bankruptcy Act, 1993Section 29, Recovery of Debts and Bankruptcy Act, 1993Section 22, Recovery of Debts and Bankruptcy Act, 1993Order XXI Rule 22, Code of Civil Procedure, 1908Section 60(1)(ccc), Code of Civil Procedure, 1908Rule 2 of the Second Schedule to the Income Tax Act, 1961Rule 10 of the Second Schedule to the Income Tax Act, 1961Rule 61 of the Second Schedule to the Income Tax Act, 1961Section 35, Punjab Relief of Indebtedness Act, 1934One judgment a day. That's the whole habit.
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